NETWORK SOLUTIONS INC /DE/, 424B1, 2000-02-08

NETWORK SOLUTIONS INC /DE/
424B1, 2000-02-08
PREPACKAGED SOFTWARE

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<PAGE> 1

PROSPECTUS
7,730,000 Shares

[NETWORK SOLUTIONS LOGO]
Common Stock

We are offering 1,000,000 shares of our common stock, SAIC Venture Capital
Corporation, a wholly-owned subsidiary of Science Applications International
Corporation, is selling 6,700,000 shares of our common stock and the other
selling stockholders identified in this prospectus are offering 30,000 shares of
our common stock.

Our common stock is traded on the Nasdaq National Market under the symbol NSOL.
On February 7, 2000, the reported last sale price of our common stock was
$249.125 per share.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PROCEEDS TO PROCEEDS TO
PRICE TO UNDERWRITING NETWORK THE SELLING
PUBLIC DISCOUNT SOLUTIONS STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $247.00 $9.75 $237.25 $237.25
- -----------------------------------------------------------------------------------------------------------------
Total $1,909,310,000 $75,367,500 $237,250,000 $1,596,692,500
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

We have granted the underwriters the right to purchase up to an additional
1,159,500 shares of common stock to cover over-allotments.

J.P. MORGAN & CO. MORGAN STANLEY DEAN WITTER

CHASE H&Q
PAINEWEBBER INCORPORATED
ROBERTSON STEPHENS
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES

February 7, 2000
<PAGE> 2

[INSIDE FRONT COVER]

.com Drives Net Registration Growth

[Bar graph depicting number of .com, .net, .org and .edu net registrations on a
quarterly basis from December 1995 through September 1999]
<PAGE> 3

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

TABLE OF CONTENTS

<TABLE>
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Page
<S> <C>
Prospectus Summary..................... 1
Risk Factors........................... 6
Price Range of Common Stock and
Dividend Policy................... 14
Use of Proceeds........................ 14
Capitalization......................... 15
Selected Financial Information......... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................ 18
</TABLE>

<TABLE>
<CAPTION>
Page
<S> <C>
Business............................... 29
Management............................. 42
Selling Stockholders................... 45
Description of Capital Stock........... 46
Underwriting........................... 49
Legal Matters.......................... 51
Experts................................ 51
Where You Can Find More Information.... 51
Index to Financial Statements.......... F-1
</TABLE>

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

Our primary web sites are www.networksolutions.com and www.nsiregistry.net. The
information on our web sites is not incorporated by reference into this
prospectus.

We own or have rights to various copyrights, trademarks and trade names used in
our business. These include Network Solutions, Inc.(R), dot com mail(TM), dot
com toolkit(TM), dot com biz card(TM), dot com directory(TM), dot com
promotions(TM), dot com people(TM), dot com essentials(TM), ImageCafe(TM) and
idNames(TM). This prospectus also includes trademarks, service marks and trade
names of other companies.

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

ON DECEMBER 21, 1999, OUR BOARD OF DIRECTORS APPROVED A 2-FOR-1 STOCK SPLIT OF
THE SHARES OF COMMON STOCK, TO BE EFFECTED IN THE FORM OF A STOCK DIVIDEND ON
SHARES OF COMMON STOCK. THE RECORD AND DISTRIBUTION DATES FOR THE STOCK DIVIDEND
HAVE NOT YET BEEN DETERMINED BUT WILL OCCUR AFTER COMPLETION OF THIS OFFERING.
EXCEPT AS OTHERWISE NOTED, NO SHARE OR PER SHARE INFORMATION IN THIS PROSPECTUS
HAS BEEN ADJUSTED TO REFLECT THE 2-FOR-1 STOCK SPLIT. ALSO, EXCEPT AS OTHERWISE
NOTED, INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION.

-i-
<PAGE> 4

PROSPECTUS SUMMARY

This summary highlights certain of the information contained elsewhere in this
prospectus. To understand this offering fully, you should read the entire
prospectus carefully, including the risk factors, the financial statements and
the information incorporated by reference in this prospectus.

NETWORK SOLUTIONS, INC.

We are a leading provider of web identity services worldwide. Our web identity
offerings include Internet domain name registration services, for which we are
the global leader, and related value-added products and services.

Internet domain names are unique identities which enable businesses, other
organizations and individuals to communicate and conduct commerce on the
Internet. An Internet domain name is made up of a top level domain and a second
level domain. For example, in the domain name "companyX.com," ".com" is the top
level domain and "companyX" is the second level domain. We are the exclusive
registry and the leading registrar for second level domain names within the
.com, .net and .org top level domains. As a registry, we maintain the master
directory of all second level domain names in the .com, .net and .org top level
domains. We own and maintain the shared registration system that allows all
registrars, including us, to enter new second level domain names into the master
directory and to submit modifications, transfers, re-registrations and deletions
for existing second level domain names. As a registrar, we market second level
domain name registration services that enable our customers to establish their
identities on the web. In addition, we market a portfolio of value-added
products and services to help our customers maximize the value of those
identities throughout their life cycles.

Net registrations through our registrar services increased by 135% from
2,777,000 second level domain names registered as of September 30, 1998 to
6,528,000 second level domain names registered as of September 30, 1999. An
additional 223,000 second level domain names have been registered through our
registry services in the .com, .net and .org top level domains by competing
registrars as of September 30, 1999. Consequently, our registrar services
accounted for approximately 97% of the total 6,751,000 net registrations in the
.com, .net and .org, as well as .edu, top level domains as of that date. Net new
registrations through our registrar services increased by 160% from 507,000
second level domain names for the three months ended September 30, 1998 to
1,318,000 second level domain names for the three months ended September 30,
1999. An additional 193,000 second level domain names were registered during the
three months ended September 30, 1999 through our registry services by other
registrars competing in the .com, .net and .org top level domains.

On November 10, 1999, we, the Department of Commerce and the Internet
Corporation for Assigned Names and Numbers, commonly known as ICANN, entered
into a series of wide-ranging agreements relating to the domain name system.
These agreements, which furthered the transition of the domain name system to a
shared, or competitive, registration system in the .com, .net and .org top level
domains, removed a substantial amount of uncertainty regarding administration of
the domain name system and our role in that system going forward. Among other
things, the agreements provide that multiple registrars may register second
level domain names with us as exclusive registry. Under these agreements:

- We agreed to operate the registry in accordance with the provisions of
the registry agreement and the consensus policies established by ICANN.
The term of the registry agreement extends until November 2003 or, if
ownership of our registry and registrar operations is separated by May
2001 in accordance with the agreement, until November 2007. We intend to
engage financial advisors to review alternatives for our registrar and
registry services.

- We, as the registry, charge all registrars $6 per registration per year,
unless increased to cover higher registry costs under the circumstances
described in the registry agreement.

- We became an ICANN-accredited registrar. The term of our registrar
accreditation agreement extends until November 2004 with a right to renew
indefinitely in accordance with the agreement.

1
<PAGE> 5

- We, and all other registrars, are permitted to offer variable
registration terms, up to 10 years, and have discretion on pricing of
registration services. As a registrar, we currently charge $35 per
registration per year for our basic domain name registration service.

We believe that our experience and our position as a leading provider of web
identity services worldwide give us several competitive strengths including:

As a company:

- We are a trusted, reliable, and secure provider of web identity services
with strong brand recognition as Network Solutions and as the dot com
people.

- We have the financial strength to continue to implement and expand our
sales, marketing, product development and acquisition efforts.

- We have proprietary software and systems, long standing experience and
technical expertise in the web identity services business.

As a registry:

- We are the exclusive registry for the .com, .net and .org top level
domains until at least November 2003.

- We own the infrastructure, technology and protocols underlying the shared
registration system and we have the right to deploy and control the
infrastructure and technology underlying the top level domain name server
system for the .com, .net and .org top level domains.

As a registrar:

- We are the leading registrar, with over 6,500,000 net second level domain
name registrations. We meet our customers at a very early point in the
establishment of their web identities, at a time when they are disposed
to buy.

- We offer an expanding set of value-added products and services that can
extend our relationship with our customers as we help them maximize the
value of their web identities over time. We sold value-added products and
services along with approximately 15% of our 1,318,000 net new
registrations in the third quarter of 1999.

- We have strategic wholesale and retail marketing agreements with over 260
companies around the world, including leading portals such as Yahoo! and
Microsoft/LinkExchange.

We believe that the potential for continued growth of domain name registrations
and other web identity services is substantial. We are expanding our position as
a leading provider of web identity services worldwide by:

- expanding our wholesale and retail marketing and other strategic
relationships,

- continuing to enhance our one-stop shop of registration services and
value-added products and services,

- continuing to invest in improving the purchase and support experience for
our customers as evidenced by our recent introduction of a storefront
design on our web site,

- promoting the use of .com, .net and .org top level domains as the
preferred Internet identities,

- maintaining technology leadership, and

- seeking to expand our registry services by operating additional
registries, providing new domain name system functionality and offering
additional trusted third party services for e-commerce.

We also provide Internet technology services that focus on network engineering,
network and systems security and network management.

2
<PAGE> 6

THE OFFERING

The following information is based on 33,883,707 shares of common stock
outstanding on December 15, 1999. This number excludes 3,807,480 shares of
common stock issuable upon the exercise of stock options outstanding on December
15, 1999 at a weighted average exercise price of $52.370 per share. It also
excludes an additional 2,699,921 shares of common stock reserved for future
issuance under our employee benefit plans.

COMMON STOCK OFFERED BY
NETWORK SOLUTIONS............. 1,000,000 shares

COMMON STOCK OFFERED BY
SELLING STOCKHOLDERS:
SAIC Venture Capital
Corporation.............. 6,700,000 shares
Members of our management... 30,000 shares

TOTAL OFFERING................ 7,730,000 shares

COMMON STOCK OUTSTANDING AFTER
THE OFFERING.................. 34,913,707 shares; 36,073,207 shares if the
entire over-allotment option is exercised

OVER-ALLOTMENT OPTION......... 1,159,500 shares from Network Solutions

USE OF PROCEEDS............... For general corporate purposes and possibly for
acquisitions and investments. We will not
receive any proceeds from the sale of shares of
common stock in this offering by the selling
stockholders.

NASDAQ NATIONAL MARKET
SYMBOL........................ NSOL

Network Solutions is incorporated in Delaware. Our executive offices are located
at 505 Huntmar Park Drive, Herndon, Virginia 20170 and our telephone number is
(703) 742-0400.

3
<PAGE> 7

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
------------------------------------------------------------
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Net revenue.............................. $18,862 $45,326 $93,652 $62,395 $144,885
Net income (loss)........................ (1,625) 4,231 11,235 7,517 17,871
Basic net income (loss) per share........ (0.07) 0.16 0.35 0.24 0.54
Diluted net income (loss) per share...... (0.07) 0.16 0.34 0.23 0.51
OTHER OPERATING DATA:
Net new registrations.................... 489 960 1,911 1,290 3,420
Registrations not re-registered.......... 39 46 90 54 254
Net registrations at period end.......... 627 1,541 3,362 2,777 6,528
</TABLE>

<TABLE>
<CAPTION>
----------------------
SEPTEMBER 30, 1999
----------------------
In thousands ACTUAL AS ADJUSTED
BALANCE SHEET DATA: -------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 98,863 $335,126
Total marketable securities................................. 121,205 121,205
Working capital, including $200,160 of current deferred
revenue................................................... 81,280 317,543
Total assets................................................ 459,988 696,251
Deferred revenue, net....................................... 282,939 282,939
Capital lease obligations................................... 436 436
Total stockholders' equity.................................. 119,418 355,681
</TABLE>

- ---------------
Net new registrations shown above under "Other Operating Data" for each period
include gross new registrations less an estimate of registrations that are
uncollectible for our registrar services. Net registrations at period end
include net new registrations less management's estimate of registrations not
re-registered.

The as adjusted consolidated balance sheet data presented above gives effect to
the issuance of 1,000,000 shares of common stock by Network Solutions and the
receipt of approximately $213,000 in proceeds from the exercise of options by
members of our management who are selling stockholders.

SUMMARY QUARTERLY FINANCIAL DATA

4
<PAGE> 8

RELATIONSHIP WITH SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Prior to our initial public offering in October 1997, we were a wholly-owned
subsidiary of Science Applications International Corporation, commonly known as
SAIC. SAIC provides diversified professional and technical services and designs,
develops and manufactures high-technology products.

SAIC Venture Capital Corporation, a wholly-owned subsidiary of SAIC, holds in
the aggregate 14,850,000 shares or approximately 44% of our common stock. After
this offering, SAIC Venture Capital Corporation will own 8,150,000 shares or
approximately 23% of our common stock.

Several officers and employees of SAIC currently serve as directors of Network
Solutions. As anticipated, effective December 21, 1999, John E. Glancy, an
officer of SAIC, and Donald N. Telage, a former officer of SAIC, resigned as
directors of Network Solutions. We anticipate that the composition of our board
of directors may further change in connection with the decrease in percentage
ownership of SAIC Venture Capital Corporation. SAIC Venture Capital Corporation
will, however, continue to be our largest stockholder immediately after this
offering and SAIC Venture Capital Corporation and SAIC may be able to exercise
significant influence over us.

SAIC Venture Capital Corporation is not under any obligation to retain its
remaining interest, except that SAIC Venture Capital Corporation has agreed not
to sell or otherwise dispose of any shares of common stock for 90 days after the
date of this prospectus without the prior written consent of J.P. Morgan
Securities Inc.

SAIC continues to provide us certain services, and we and SAIC have entered into
agreements, and may enter into additional agreements in the future, relating to
these services and other matters. Our certificate of incorporation includes
provisions relating to competition by SAIC with us, allocations of corporate
opportunities, transactions with interested parties and intercompany agreements
and provisions limiting the liability of certain people. These provisions will
remain in effect after this offering. See "Description of Capital Stock."

5
<PAGE> 9

RISK FACTORS

You should carefully consider the risks and uncertainties described below and
the other information in this prospectus or incorporated by reference before
deciding to invest in shares of our common stock. These are not the only risks
and uncertainties that we face. If any of these risks or uncertainties actually
occur, our business, financial condition, operating results and cash flows could
be materially harmed. In that case, the trading price of our common stock could
decline and you could lose all or part of your investment.

INDUSTRY RISKS

INCREASED COMPETITION COULD HARM OUR DOMAIN NAME REGISTRATION BUSINESS

The introduction of additional competition into the domain name registration
business could harm our business. This includes, in particular, competition
among registrars within a single top level domain, such as .com, and competition
among registrars and registries of existing and potential new top level domains.
We currently face competition in the domain name registration business from
other registrars in the top level domains for which we act as registry, third
level domain name providers such as Internet access providers and registrars and
registries of top level domains other than those top level domains for which we
act as registry. As of January 27, 2000, 26 accredited registrars (in addition
to us) in the .com, .net and .org top level domains used our shared registration
system to register domain names. ICANN has accredited 83 additional registrars,
as of that date. We expect these and additional accredited registrars to offer
competing registration services in these top level domains in the near future.

The accredited registrars include, among others, AT&T, America Online, CORE or
Internet Council of Registrars, Deutsche Telekom, France Telecom Oleane,
iDirections, interQ, Melbourne IT, NameSecure.com, NetBenefit, PSINet,
Register.com, Talk.com and Verio. For the quarter ended September 30, 1999, we
registered 1,318,000 net new second level domain names and competing accredited
registrars registered 193,000 second level domain names.

Future competition in the domain name registration business as a registry or
registrar could come from many different companies, including:

- domain name registration resellers,

- country code registries,

- Internet access providers and

- major telecommunications firms.

Many of these entities have core capabilities to deliver registry and/or
registrar services, such as help desks, billing services and network management,
along with strong name recognition and Internet industry experience. The recent
agreements among ICANN, the Department of Commerce, us and other registrars
permit flexibility in pricing for and term of registrations. Our revenue,
therefore, could be reduced due to pricing pressures, bundled service offerings
and variable terms resulting from increased competition. Some registrars and
resellers in the .com, .net and .org top level domains are already charging
lower prices for domain name registration services in those domains. In
addition, other entities are bundling, and may in the future bundle, domain name
registrations with other products or services at reduced rates or for free.

ISSUES ARISING FROM IMPLEMENTATION OF OUR AGREEMENTS WITH ICANN AND THE
DEPARTMENT OF COMMERCE COULD HARM OUR REGISTRATION BUSINESS

The Department of Commerce has adopted a plan for a phased transition of the
Department of Commerce's responsibilities for the domain name system to ICANN by
September 30, 2000. We face risks from this transition, including:

- ICANN could adopt or promote policies, procedures or programs that are
unfavorable to our role in the registration of domain names or that are
inconsistent with our current or future plans,

6
<PAGE> 10

- The Department of Commerce or ICANN could terminate our agreements to be
the registry and/or a registrar in the .com, .net and .org top level
domains if they find that we are in violation of our agreements with
them,

- If we do not separate ownership of our registry and registrar by May 2001
in accordance with the registry agreement, the term of the registry
agreement will expire in four years and we may not be chosen as the
successor registry,

- The terms of the registrar accreditation contract could change, as a
result of an ICANN-adopted policy, in a manner which is unfavorable to
us,

- The Department of Commerce's or ICANN's interpretation of provisions of
our agreements with either of them above could differ from ours,

- The Department of Commerce could revoke its recognition of ICANN, as a
result of which the Department of Commerce would take the place of ICANN
for purposes of the various agreements described above, and could take
actions which are harmful to us,

- ICANN may approve new top level domains and we may not be selected to act
as a registrar or registry with respect to those top level domains,

- The U.S. Government could refuse to transfer certain responsibilities for
domain name system administration to ICANN due to security, stability or
other reasons, resulting in fragmentation or other instability in domain
name system administration, and

- Our registry business could face legal or other challenges resulting from
the activities of other registrars.

CHALLENGES TO ONGOING PRIVATIZATION OF INTERNET ADMINISTRATION COULD HARM OUR
REGISTRATION BUSINESS

Risks we face from challenges by third parties, including other domestic and
foreign governmental authorities, to our role in the ongoing privatization of
the Internet include:

- Legal, regulatory or other challenges, including challenges to the
agreements governing our relationship with, or to the legal authority
underlying the roles and actions of, the Department of Commerce, ICANN
and/or us, could be brought,

- Congress has held two hearings in which various issues about the domain
name system have been raised and Congress could take action which is
unfavorable to us,

- ICANN could fail to maintain legitimacy resulting in instability in
domain name system administration, and

- Some foreign governments and governmental authorities have in the past
disagreed with, and may in the future disagree with, the actions,
policies or programs of ICANN, the U.S. Government and Network Solutions
relating to the domain name system. These foreign governments or
governmental authorities may take actions or adopt policies or programs
which are harmful to our business.

WE DEPEND ON FUTURE GROWTH OF THE INTERNET AND INTERNET INFRASTRUCTURE

Our future success substantially depends on the continued growth in the use of
the Internet. If the use of and interest in the Internet does not continue to
grow, our business would be harmed. Continued growth of the Internet could be
slowed by:

- inadequate infrastructure,

- lack of availability of cost-effective, high speed systems and service,

- delays in developing or adopting new standards and protocols to handle
increased levels of Internet activity or

- government regulation.

7
<PAGE> 11

WE RELY ON THIRD PARTIES WHO MAINTAIN AND CONTROL ROOT ZONE AND TOP LEVEL DOMAIN
ZONE SERVERS

We currently administer and operate only two of the 13 root zone servers and
four top level domain zone servers. The others are administered and operated by
independent operators on a volunteer basis. Because of the importance to the
functioning of the Internet of these root zone servers and top level domain zone
servers, our registration business could be harmed if these volunteer operators
fail to properly maintain such servers or abandon such servers.

Further, our registration business could be harmed if any of these volunteer
operators fail to include or provide accessibility to the data that we maintain
in the root zone servers and the top level domain zone servers that we control.

In the event and to the extent that ICANN is authorized to set policy with
regard to an authoritative root server system, as provided in the registry
agreement, it is required to ensure that the authoritative root will point to
the top level domain zone servers designated by us. If ICANN does not do this,
our business could be harmed.

WE RELY ON INTERNET SERVICE PROVIDERS

Our registration business could be harmed if a significant number of Internet
service providers decided not to route Internet communications to or from domain
names registered by us or if a significant number of Internet service providers
decided to provide routing to a set of domain name servers which did not point
to our top level domain zone servers.

WE MAY LOSE REVENUE OR INCUR SIGNIFICANT COSTS IF YEAR 2000 COMPLIANCE ISSUES
ARE NOT PROPERLY ADDRESSED

Our failure, or the failure of third parties on which we rely, to adequately
address Year 2000 compliance issues may cause us to lose revenue or to incur
significant costs. The primary risks that we face with regard to Year 2000
failures are those which impact our domain name registration business. These
risks include:

- significant and protracted interruption of electrical power to systems in
our engineering and customer service facilities,

- significant and protracted interruption of telecommunications and data
network services in any of our headquarters, engineering or customer
service facilities,

- the failure of components of our current back office and domain name
registration related systems,

- the occurrence of a Year 2000 problem with respect to third-party
suppliers', vendors' and outsourcing service providers' products and
services, and

- the occurrence of a Year 2000 problem with respect to one of the other
registrars' use of the shared registration system.

If we fail to solve a Year 2000 compliance problem with our mission critical
business systems and processes, including the domain name servers under our
control, telecommunications systems, facilities, data-networking infrastructure,
commercial-off-the-shelf hardware or software and components used by our
employees, the result could be a failure of or interruption to normal business
operations. Furthermore, our business depends on the continued operation of, and
widespread access to, the Internet. This, in turn, depends to a large extent on
the software and systems of third parties on which our systems rely or to which
they are connected. These third parties include, among others, Internet-related
companies, including Internet web hosting companies, Internet access providers
and Internet domain name server operators.

We have no responsibility for, nor control over, other Internet domain name
server operators that are critical to the efficient operation of the Internet.
We do not know whether such domain name server operators have hardware, software
or firmware that is Year 2000 compliant.

8
<PAGE> 12

COMPANY RISKS

OUR NEAR TERM SUCCESS DEPENDS ON THE GROWTH OF OUR DOMAIN NAME REGISTRATION
BUSINESS

We may not be able to sustain the revenue growth we have experienced in recent
periods. In addition, past revenue growth may not be indicative of future
operating results. If we do not successfully maintain our current position as a
leading provider of domain name registration services or develop or market
additional value-added products and services, our business could be harmed.

Our domain name registration services business generates over 90% of our revenue
and is expected to continue to account for a very significant portion of our
revenue in at least the near term. Our future success will depend largely on:

- the continued increase in domain name registrations,

- re-registration rates of our customers,

- our ability to maintain our current position as a leading registrar of
domain names,

- the successful development, introduction and market acceptance of new
services that address the demands of Internet users,

- our ability to provide robust domain name registration systems, and

- our ability to provide a superior customer service infrastructure as a
registry and registrar.

The contractual requirement that we provide bulk access to customer data could
hurt our ability to market and sell other value-added services in addition to
domain name registration services.

SYSTEM FAILURE OR INTERRUPTION, SECURITY BREACHES OR OUR FAILURE TO MEET
INCREASING DEMANDS ON OUR SYSTEMS COULD HARM OUR BUSINESS

Any significant problem, including any security breach, with our systems or
operations could result in lost revenue, customer dissatisfaction or lawsuits
against us. A failure in the operation of our registration systems or other
events could result in deletion of one or more domain names from the Internet
for a period of time. A failure in the operation of our shared registration
system could result in the inability of one or more other registrars to register
and maintain domain names for a period of time. A failure in the operation or
update of the master database that we maintain could result in deletion of one
or more top level domains from the Internet and the discontinuation of second
level domain names in those top level domains for a period of time. The
inability of our registrar systems, including our back office billing and
collections infrastructure, and telecommunications systems to meet the demands
of the increasing number of domain name registration requests and corresponding
customer e-mails and telephone calls, including speculative, otherwise abusive
and repetitive e-mail domain name registration and modification requests, could
result in substantial degradation in our customer support service and our
ability to process, bill and collect registration requests in a timely manner.

We recently completed a physical separation of our registrar and registry
computer systems and have run the operations of our new systems separately for
only a limited time. Any data integrity, non-compatability or other issues that
may arise from this separation could materially harm our business.

Our operations depend on our ability to maintain our computer and
telecommunications equipment in effective working order and to reasonably
protect our systems against interruption and potentially on such maintenance and
protection by other registrars in the shared registration system. The root zone
servers and top level domain zone servers that we operate are critical hardware
to our operations. Interruptions could result from:

- fire, natural disaster, sabotage, power loss, telecommunications failure,
human error or similar events,

- computer viruses, hackers or similar disruptive problems caused by
employees, customers or other Internet users, and

- systems strain caused by the growth of our customer base and our
inability to sufficiently maintain or upgrade our systems.
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<PAGE> 13

WE MUST ATTRACT, INTEGRATE, TRAIN AND RETAIN KEY PERSONNEL KNOWLEDGEABLE ABOUT
OUR BUSINESS

We face intense competition for the limited supply of people qualified to work
for us. Our future success depends on the continued service of key engineering,
sales, marketing, executive and administrative personnel, and our ability to
identify, attract, hire, integrate, train and retain such personnel. Competition
for engineering, sales, marketing and executive personnel is intense,
particularly in the technology and Internet sectors and in the regions where our
facilities are located. We may be unable to retain existing personnel or
attract, hire or retain additional qualified personnel. The loss of the services
of any of our senior management team or other key employees or our failure to
attract, integrate, train and retain additional key employees could harm our
business.

WE MUST EFFECTIVELY MANAGE OUR MARKETING ORGANIZATION AND ESTABLISH AND MAINTAIN
DISTRIBUTION CHANNELS

We will need to effectively manage our growing sales and marketing organization
if we want to achieve future revenue growth. We do not know if we will be able
to identify, attract and retain experienced sales and marketing personnel with
relevant experience. Further, our sales and marketing organization may not be
able to successfully compete against the significantly more extensive and
well-funded sales and marketing operations of our current or potential
competitors for registration or Internet technology services.

Our ability to achieve future revenue growth will also depend on our ability to
continue to establish direct sales channels and to develop multiple distribution
channels. To do this we must maintain relationships with Internet access
providers and other third parties.

WE HAVE A HIGH LEVEL OF UNCOLLECTIBLE RECEIVABLES

Because of our high level of uncollectible receivables, we continually review
our billing practices. Any modifications that we may implement as a result of
these reviews, including prepayment or pre-approved credit limits for new
registration orders could have unanticipated harmful consequences to our
business. We have begun to phase in the implementation of prepayment or
pre-approved credit terms which are required by our agreements with ICANN to be
in place by March 9, 2000. We believe we have experienced a high level of
uncollectible receivables due to, among other factors, the large number of
individuals and corporations that have registered multiple domain names with the
apparent intention of transferring such names at a profit. Our experience has
been that such speculative resellers have a greater tendency than other
customers to default on their services fees. We have established a provision for
uncollectible accounts which we believe to be adequate to cover anticipated
uncollectible receivables; however, actual results could differ from our
estimates.

WE ARE PARTY TO LEGAL PROCEEDINGS WHICH COULD HAVE A NEGATIVE FINANCIAL IMPACT
ON US

We are involved in a number of legal proceedings. We cannot reasonably estimate
the potential impact of any of these proceedings. An adverse determination in
any of these proceedings, however, could harm our business. Legal proceedings in
which we are involved are expensive and divert the attention of our personnel.
See "Business -- Legal Proceedings."

WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND PROPRIETARY
INFORMATION OR WE MAY BE SUBJECT TO CLAIMS OF INFRINGEMENT OF THIRD PARTY
INTELLECTUAL PROPERTY RIGHTS

We rely on a combination of nondisclosure and other contractual arrangements
with the U.S. Government, our employees, and third parties, as well as
copyright, privacy and trade secret laws, to protect and limit the distribution
of our proprietary data, computer software, documentation, and processes used in
conducting our domain name registration and other businesses. If we fail to
adequately protect our intellectual property rights and proprietary information,
or if we are subject to adverse results in litigation relating to our
intellectual property rights and proprietary information, our business could be
harmed. Any actions we take may not be adequate to protect our intellectual
property rights and proprietary information. Other companies may develop
competing technology that is similar or superior to our technology. Although we
have no reason to believe that
10
<PAGE> 14

our domain name registration business activities infringe on the intellectual
property rights of others, and we believe that we have all rights needed to
conduct our business, it is possible that we could become subject to claims
alleging infringement of third party intellectual property rights. Any of these
claims could subject us to costly litigation, and any adverse final rulings on
any of these claims could require us to pay damages, seek to develop alternative
technology, and/or seek to acquire licenses to the intellectual property that is
the subject of any alleged infringement, and any rulings not in our favor could
harm our business.

FUTURE ACQUISITIONS AND INVESTMENTS COULD DECREASE OPERATING INCOME, CAUSE
OPERATIONAL PROBLEMS OR OTHERWISE DISRUPT OUR BUSINESS

We evaluate potential acquisitions and investments on an ongoing basis for
various reasons including, among others, diversification of our domain name
registration services and Internet technology services businesses. Our
acquisition and investment strategy poses many risks, including:

- we may not be able to compete successfully for available acquisition
candidates, complete future acquisitions and investments or accurately
estimate the financial effect on our company of any businesses we acquire
or investments we make,

- future acquisitions and investments may require us to spend significant
cash amounts or may decrease our operating income,

- we may have trouble integrating the acquired business and retaining
personnel,

- acquisitions or investments may disrupt our business and distract our
management from other responsibilities,

- to the extent that any of the companies which we acquire or in which we
invest fail, our business could be harmed, and

- we may not identify appropriate acquisition targets.

WE FACE INCREASING RISKS ASSOCIATED WITH OUR INTERNATIONAL BUSINESS

While substantially all of our operations, facilities, and personnel are located
within the United States, our revenues from sources outside the United States
have increased significantly and may continue to increase in the future. As a
result, we are subject to the risks of conducting business internationally,
including unexpected changes in regulatory requirements, competition from
foreign companies, fluctuations in the U.S. dollar, tariffs and other barriers
and restrictions and the burdens of complying with a variety of foreign laws. We
do not know what the impact of such regulatory, geopolitical and other factors
will be on our business in the future or if we will have to modify our business
practices. In addition, the laws of certain foreign countries may not protect
our proprietary rights to the same extent as do the laws of the United States.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE; OUR FUTURE REVENUE AND
PROFITABILITY ARE UNCERTAIN

Our quarterly operating results may fluctuate significantly in the future due to
a variety of factors, some of which are beyond our control. Factors that may
affect our revenue include:

- variations in the number of requests for domain name registrations or
demand for our services,

- successful competition by others,

- termination or completion of contracts in our Internet technology
services business or failure to obtain additional contracts in that
business, and

- market acceptance of new service offerings.

11
<PAGE> 15

In addition, we expect a significant increase in our operating expenses as we:

- increase our sales and marketing operations and activities, and

- continue to update our systems and infrastructure.

If the increase in our expenses is not followed by a corresponding increase in
our revenue, our operating results will suffer. The fact that in the past our
revenue has increased and we have been profitable on a quarterly and annual
basis is not indicative of whether our revenue will increase or whether we will
be profitable on a quarterly or annual basis in the future.

OFFERING RISKS

OUR STOCK PRICE, LIKE THAT OF MANY INTERNET COMPANIES, IS HIGHLY VOLATILE

The market price of our common stock has been and is likely to continue to be
highly volatile and significantly affected by factors such as:

- general market and economic conditions and market conditions affecting
technology and Internet stocks generally,

- actual or anticipated fluctuations in our quarterly or annual
registrations or operating results,

- announcements of technological innovations, acquisitions or investments,
developments in Internet governance or corporate actions such as stock
splits, and

- industry conditions and trends.

The stock market has experienced significant price and volume fluctuations that
have particularly affected the market prices of the stocks of technology
companies, especially Internet-related companies. These broad market or
technology or Internet sector fluctuations may adversely affect the market price
of our common stock. Recently, the market price of our common stock, like that
of many Internet-related companies, has experienced significant fluctuations.
For instance, between January 1, 1999 and February 7, 2000, the reported last
sale price for our common stock ranged from $51.75 per share to $280.313 per
share. On February 7, 2000, the reported last sale price of our common stock was
$249.125 per share.

The market price of our common stock also has been and is likely to continue to
be significantly affected by expectations of analysts and investors. Reports and
statements of analysts do not necessarily reflect our views. The fact that we
have in the past met or exceeded analyst or investor expectations does not
necessarily mean that we will do so in the future.

In the past, securities class action lawsuits have often followed periods of
volatility in the market price of a particular company's securities. This type
of litigation could result in substantial costs and a diversion of our
management's attention and resources.

FUTURE ISSUANCES OR SALES OF COMMON STOCK COULD CAUSE OUR STOCK PRICE TO
DECREASE

We may in the future issue shares of common stock in connection with
acquisitions or other strategic investments. Also, after this offering, SAIC
Venture Capital Corporation, a wholly-owned subsidiary of SAIC, will own
8,150,000 shares of our common stock. A decision by us to issue shares of common
stock or by SAIC Venture Capital Corporation or other stockholders to sell our
common stock could depress the market price of the common stock.

BECAUSE USE OF PROCEEDS IS UNSPECIFIED, IF PROCEEDS ARE NOT INVESTED TO YIELD A
FAVORABLE RETURN, THE PRICE OF OUR COMMON STOCK COULD DECREASE

We plan to use the proceeds which we receive from this offering for general
corporate purposes and possibly for acquisitions and investments. Therefore, we
will have discretion in spending the proceeds of this offering and our
stockholders may not agree with our decisions as to these uses. We cannot
predict that the proceeds will be

12
<PAGE> 16

invested to yield a favorable return. If the proceeds are not invested to yield
a favorable return, there could be an adverse effect on the price of our common
stock.

SAIC MAY MAINTAIN SIGNIFICANT INFLUENCE OVER US

After this offering, SAIC Venture Capital Corporation, a wholly-owned subsidiary
of SAIC, will own approximately 23% of our common stock and will remain our
largest stockholder. Matters requiring approval by our stockholders, including
the election of members of our board of directors, changes in the size and
composition of the board of directors and a change in control, may need the
approval of SAIC Venture Capital Corporation to be effected. We do not have an
agreement with either SAIC or SAIC Venture Capital Corporation which restricts
SAIC Venture Capital Corporation's rights to distribute or sell its shares of
our common stock.

SOME OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST

Some of our directors currently serve as directors, officers and employees of
SAIC. Therefore, there may be various conflicts of interest or conflicting
duties for these individuals. Since our directors and officers may also own
stock of SAIC, there may be conflicts of interest when directors and officers
are faced with decisions that could have different implications for us and SAIC.

WE RELY ON SAIC FOR CORPORATE SERVICES AND EMPLOYEE BENEFITS

We currently receive corporate services under an agreement with SAIC. If SAIC
were to terminate these services, we might not be able to secure alternative
sources for such services or such services might only be available to us at
prices higher than those charged by SAIC.

Our employees are currently eligible to participate in some of SAIC's employee
benefit plans through the end of calendar year 2000. However, since SAIC now
indirectly owns less than 50% of our common stock, we will have to establish
certain employee benefit plans of our own which could result in incremental
costs to us.

OUR CERTIFICATE OF INCORPORATION CONTAINS PROVISIONS RELATING TO SAIC THAT MAY
ADVERSELY AFFECT US OR OUR STOCKHOLDERS

Our certificate of incorporation includes provisions relating to competition by
SAIC with us, allocations of corporate opportunities, transactions with
interested parties and intercompany agreements and provisions limiting the
liability of certain people. It is unclear whether such provisions are
enforceable under Delaware corporate law. Our certificate of incorporation
provides that any person purchasing or acquiring an interest in shares of our
capital stock shall be deemed to have consented to the provisions in the
certificate of incorporation relating to competition with SAIC, conflicts of
interest, corporate opportunities and intercompany agreements, and such consent
may restrict such person's ability to challenge transactions carried out in
compliance with such provisions. The corporate charter of SAIC does not include
similar provisions. Therefore, persons who are directors and/or officers of ours
and who are also directors and/or officers of SAIC may choose to take action in
reliance on such provisions rather than act in a manner that might be favorable
to us but adverse to SAIC.

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

This prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions. These statements may be identified by the use of
words such as "expects," "anticipates," "intends" and "plans" and similar
expressions. Our actual results could differ materially from those discussed in
these statements. Factors that could contribute to such differences include, but
are not limited to, those discussed above and elsewhere in this prospectus.

13
<PAGE> 17

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The following table sets forth the high and low reported last sales prices for
the common stock on the Nasdaq National Market for the periods indicated.

<TABLE>
<CAPTION>
----------------------
HIGH LOW
-------- --------
<S> <C> <C>
Year Ended December 31, 1997:
Fourth Quarter from September 26, 1997.................... $ 12.063 $ 6.094
Year Ended December 31, 1998:
First Quarter............................................. $ 18.563 $ 6.469
Second Quarter............................................ 27.500 16.250
Third Quarter............................................. 23.156 12.875
Fourth Quarter............................................ 82.359 14.188
Year Ended December 31, 1999:
First Quarter............................................. $144.000 $ 70.000
Second Quarter............................................ 115.500 51.750
Third Quarter............................................. 95.063 54.125
Fourth Quarter............................................ 272.250 85.125
Year Ending December 31, 2000:
First Quarter through February 7, 2000.................... $280.313 $197.938
</TABLE>

We do not presently intend to pay cash dividends on our common stock. We
currently plan to retain any earnings for use in the operation of our business.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the 1,000,000 shares of our
common stock offered by us will be approximately $236.0 million, after deducting
underwriting discounts and estimated offering expenses. We will not receive any
of the proceeds from the sale of the shares of common stock in this offering by
the selling stockholders. If the underwriters' option to purchase an additional
1,159,500 shares of common stock is exercised in full, we estimate that
additional net proceeds to us will be approximately $275.1 million after
deducting underwriting discounts. We will also receive proceeds of approximately
$213,000 upon the exercise of options by members of our management who are
selling stockholders.

We intend to use the net proceeds we receive from this offering primarily for
general corporate purposes. We may also use a portion of the proceeds to acquire
or invest in businesses, technologies, product lines or service offerings that
are complementary to our business. We have no present commitments with respect
to such transactions. As a result, we will have significant discretion as to the
use of the proceeds. Pending such uses, we intend to invest the proceeds in
interest-bearing, investment-grade securities. See "Risk Factors -- Unsuccessful
future acquisitions and investments could decrease operating income, cause
operational problems or otherwise disrupt our business" and "Risk
Factors -- Because use of proceeds is unspecified, if proceeds are not invested
to yield a favorable return, there could be an adverse effect on the price of
our common stock."

14
<PAGE> 18

CAPITALIZATION

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

- on an actual basis; and

- as adjusted to reflect our receipt of the estimated net proceeds from our
sale of 1,000,000 shares of common stock in this offering and the
proceeds from the exercise of options by members of our management who
are selling stockholders:

<TABLE>
<CAPTION>
---------------------------
AS OF SEPTEMBER 30, 1999
---------------------------
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Preferred stock, $.001 par value, authorized 10,000,000
shares; none issued and outstanding.................... $ -- $ --
Common stock, $.001 par value, authorized 210,000,000
shares; 33,381,167 shares issued and outstanding
actual; 34,411,167 shares issued and outstanding as
adjusted............................................... 33,000 34,000
Additional paid-in capital............................... 86,783,000 323,045,000
Retained earnings........................................ 20,278,000 20,278,000
Accumulated other comprehensive income................... 12,324,000 12,324,000
------------ ------------
Total stockholders' equity..................... 119,418,000 355,681,000
------------ ------------
Total capitalization........................... $119,418,000 $355,681,000
============ ============
</TABLE>

The outstanding share information is based on our shares outstanding as of
September 30, 1999. The information excludes:

- 3,921,549 shares of common stock issuable upon exercise of options
outstanding on September 30, 1999, except those options exercised as part
of this offering by selling stockholders, with a weighted average
exercise price of $40.21 per share, and

- 1,081,392 shares of common stock reserved for issuance under our employee
benefit plans.

15
<PAGE> 19

SELECTED FINANCIAL INFORMATION

The following table sets forth selected financial and operating data of Network
Solutions for the periods indicated and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Financial Statements and the Notes related thereto included
elsewhere and incorporated by reference in this prospectus. The Statements of
Operations Data and Balance Sheet Data as of and for the years ended December
31, 1996, 1997 and 1998 were derived from Network Solutions' audited financial
statements. The selected financial data for the year ended December 31, 1995
were derived by combining Network Solutions' results of operations for the
period January 1, 1995 through March 10, 1995 and the period March 11, 1995
through December 31, 1995, both as derived from Network Solutions' audited
financial statements. Comparability of pre-acquisition periods to
post-acquisition periods is limited because the financial statements have been
prepared on differing bases of accounting as a result of the acquisition by SAIC
on March 10, 1995. The Statements of Operations Data and Balance Sheet Data as
of and for the year ended December 31, 1994 and for the nine months ended
September 30, 1998 and 1999 is derived from Network Solutions' unaudited
financial statements which, in the opinion of management, reflect all
adjustments (consisting only of normal recurring items) necessary to present
fairly the financial position and results of operations for the periods then
ended. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview -- Registration Services."

<TABLE>
<CAPTION>
---------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Net revenue............................................... $ 5,029 $ 6,486 $18,862 $45,326 $ 93,652 $62,395 $144,885
Cost of revenue........................................... 3,073 5,704 14,666 25,798 38,530 26,451 54,040
------- ------- ------- ------- -------- ------- --------
Gross profit.............................................. 1,956 782 4,196 19,528 55,122 35,944 90,845
Research and development expenses......................... -- -- 680 1,653 4,821 2,893 7,365
Selling, general and administrative expenses.............. 1,544 2,394 6,280 12,268 37,144 24,438 59,581
Interest income........................................... -- -- (496) (2,211) (6,303) (4,423) (6,312)
Other expenses............................................ 109 61 -- 116 116 93 45
------- ------- ------- ------- -------- ------- --------
Income (loss) from continuing operations before income
taxes and cumulative effect of a change in accounting
principle............................................... 303 (1,673) (2,268) 7,702 19,344 12,943 30,166
Provision (benefit) for income taxes...................... 114 (239) (643) 3,471 8,109 5,426 12,295
------- ------- ------- ------- -------- ------- --------
Income (loss) from continuing operations.................. 189 (1,434) (1,625) 4,231 11,235 7,517 17,871
Loss from discontinued operations, net of income taxes.... (1,169) (1,403) -- -- -- -- --
------- ------- ------- ------- -------- ------- --------
Net income (loss)......................................... $ (980) $(2,837) $(1,625) $ 4,231 $ 11,235 $ 7,517 $ 17,871
======= ======= ======= ======= ======== ======= ========

Basic earnings per share:
Income (loss) from continuing operations.............. $ 0.09 $ (0.07) $ (0.07) $ 0.16 $ 0.35 $ 0.24 $ 0.54
Loss from discontinued operations..................... (0.56) (0.07) -- -- -- -- --
------- ------- ------- ------- -------- ------- --------
Net income (loss)..................................... $ (0.47) $ (0.14) $ (0.07) $ 0.16 $ 0.35 $ 0.24 $ 0.54
======= ======= ======= ======= ======== ======= ========
Weighted average shares................................... 2,084 20,670 25,000 26,610 31,957 31,776 33,251

Diluted earnings per share:
Income (loss) from continuing operations.............. $ 0.09 $ (0.07) $ (0.07) $ 0.16 $ 0.34 $ 0.23 $ 0.51
Loss from discontinued operations..................... (0.56) (0.07) -- -- -- -- --
------- ------- ------- ------- -------- ------- --------
Net income (loss)..................................... $ (0.47) $ (0.14) $ (0.07) $ 0.16 $ 0.34 $ 0.23 $ 0.51
======= ======= ======= ======= ======== ======= ========
Weighted average shares................................... 2,094 20,670 25,000 26,966 33,397 33,088 34,727
</TABLE>

16
<PAGE> 20

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands
OTHER OPERATING DATA:
Net new registrations................................... 24 141 489 960 1,911 1,290 3,420
Registrations not re-registered......................... -- 1 39 46 90 54 254
Net registrations as of period end...................... 37 177 627 1,541 3,362 2,777 6,528
</TABLE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 136 $ 5 $15,540 $ 41,146 $ 12,862 $ 9,124 $ 98,863
Total marketable securities............................. -- -- -- 40,200 128,098 114,148 121,205
Working capital......................................... (1,340) (559) 1,362 50,947 65,791 63,506 81,280
Total assets............................................ 2,448 11,748 66,118 149,620 243,867 191,915 459,988
Restricted assets included in total assets.............. -- 1,408 17,453 25,873 -- 627 --
Deferred revenue, net................................... 137 3,346 29.352 61,451 129,194 106,730 282,939
Long-term obligations, excluding current portion........ 81 1,353 9,440 18,743 35,721 29,400 82,779
Total stockholders' equity.............................. 252 3,062 1,437 47,655 75,130 62,019 119,418
</TABLE>

Net new registrations shown above under "Other Operating Data" for each period
include gross new registrations less an estimate of registrations that are
uncollectible for our registrar services. Net registrations at period end
include net new registrations less management's estimate of registrations not
re-registered. Prior to September 14, 1995, net registrations equaled gross
registrations because Network Solutions was reimbursed by the National Science
Foundation for all registrations under a cost plus fixed-fee contract.

17
<PAGE> 21

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

The following discussion and analysis should be read in conjunction with
"Selected Financial Information" and Network Solutions' Financial Statements and
Notes thereto included elsewhere and incorporated by reference in this
prospectus. Except for the historical information contained and incorporated by
reference in this prospectus, the discussion in this prospectus contains certain
forward-looking statements that involve risks and uncertainties, such as
statements of Network Solutions' plans, objectives, expectations and intentions.
The cautionary statements made in this prospectus should be read as being
applicable to all related forward-looking statements wherever they appear in
this prospectus. Network Solutions' actual results may differ materially from
the results discussed in the forward-looking statements as a result of certain
factors, including, but not limited to, those discussed in "Risk Factors" and
elsewhere in this prospectus and from time to time in Network Solutions'
periodic reports. Unless otherwise indicated, the accompanying financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for all periods presented for continuing operations
reflect the financial position and results of operations of Network Solutions'
commercial business, which includes registration services and consulting
services.

OVERVIEW

Network Solutions, Inc.

Network Solutions is the exclusive registry and the leading registrar for second
level domain names within the .com, .net and .org top level domains pursuant to
agreements with ICANN and the Department of Commerce. Internet domain names are
unique identities which enable businesses, other organizations and individuals
to communicate and conduct commerce on the Internet. As a registry, we maintain
the master directory of all second level domain names in the .com, .net and .org
top level domains. We own and maintain the shared registration system that
allows all registrars, including us, to enter new second level domain names into
the master directory and to submit modifications, transfers, re-registrations
and deletions for existing second level domain names. As a registrar, we market
second level domain name registration services that enable our customers to
establish their identities on the web. In addition, we market a portfolio of
value-added products and services to help our customers maximize the value of
those identities throughout their life cycles. Network Solutions also provides
Internet technology services that focus on network engineering, network and
systems security and network management solutions.

Registration Services

In December 1992, Network Solutions entered into the cooperative agreement with
the National Science Foundation under which Network Solutions was to provide
Internet domain name registration services for five top level domains: .com,
.net, .org, .edu and .gov. These registration services include the initial two
year domain name registration and annual re-registration, and throughout the
registration term, maintenance of and unlimited modifications to individual
domain name records and updates to the master file of domain names. The
cooperative agreement became effective January 1, 1993. It included a
three-month phase-in period, a five-year operational period, commencing April 1,
1993 and ending March 31, 1998, and a six-month flexibility period through
September 30, 1998. Effective September 9, 1998, the Department of Commerce took
over the administration of the cooperative agreement from the National Science
Foundation. In October 1998, the cooperative agreement was amended to extend the
flexibility period until September 30, 2000 and to transition to a shared
registration system. In November 1999, we entered into a series of agreements
with ICANN and the Department of Commerce relating to our Internet domain name
registration services.

18
<PAGE> 22

the registration fees for domain names within the .edu and .gov top level
domains through March 31, 1997. Commencing April 1, 1997, Network Solutions
agreed with the National Science Foundation to provide domain name registration
services within the .edu and .gov top level domains free of charge. As of
October 1, 1997, Network Solutions ceased to register or administer domain names
in the .gov top level domain.

On March 12, 1998, the National Science Foundation and Network Solutions amended
the cooperative agreement to eliminate the 30% set aside requirement effective
April 1, 1998 and to reduce the registration fees by a corresponding amount.
Initial registrations on and after April 1, 1998 are charged $70 for two years
of registration services and an annual re-registration fee of $35 per year
thereafter. This amendment had no effect on the revenue recognized on each
registration ($70 for initial registrations and $35 for re-registrations) since
Network Solutions previously did not recognize revenue on the 30% set aside
funds. Accordingly, while the revenue to Network Solutions on a per registration
basis did not change, the amount charged to customers declined.

In order to provide prompt access to new domain names on the Internet, Network
Solutions has historically invoiced customers and permitted them to pay their
registration fees after their domain names are registered. Network Solutions'
experience has been that, for the period from September 1995 through September
1999, approximately 35% of registrations have ultimately been deactivated for
non-payment. Network Solutions believes that this level of uncollectible
receivables is due to, among other factors, the large number of individuals and
corporations that have registered multiple domain names with the apparent
intention of transferring registration for such names at a profit. Network
Solutions believes such speculative resellers have a greater tendency than other
customers to default on their registration fees. As a consequence, Network
Solutions has recorded a comparable provision for uncollectible accounts in
determining net registration revenue.

Registration fees charged to customers for registration services are recognized
as revenue evenly over the registration term. Accordingly, Network Solutions
recognizes $70 on a straight-line basis over the two-year service period for
each $70 initial domain name registration, equivalent to $35 per year. Annual
re-registrations of domain names are recorded as revenue based upon $35
recognized on a straight-line basis over the one-year service period. This
subscription-based model defers revenue recognition until Network Solutions
provides the registration services, including maintenance of and unlimited
modifications to individual domain name records, over the respective
registration terms. At September 30, 1999, Network Solutions had net deferred
revenue of $283 million.

On November 10, 1999 we, the Department of Commerce and ICANN entered into a
series of wide-ranging agreements relating to the domain name system. Under
these agreements, Network Solutions is entitled to establish our own prices for
registrar services and after March 9, 2000, Network Solutions is required not to
accept the registration of a domain name unless it is satisfied that it has
received reasonable assurance of payment of the registration fee. As part of our
registry services, Network Solutions charges $6 per registration per year unless
increased to cover increases in registry costs under the circumstances described
in the registry agreement. Network Solutions has modified the shared
registration system to enable registrars to accept registrations and
re-registrations in one year increments up to a ten year term.

Internet Technology Services

Substantially all of Network Solutions' Internet technology services revenue is
derived from professional services which are generally provided to clients on a
time and expense basis and is recognized as services are performed.

19
<PAGE> 23

The majority of Network Solutions' Internet technology services are provided to
customers in the financial services industry. Bank of America, formerly
NationsBanc, is currently Network Solutions' largest Internet technology
services client, accounting for 39.3% of Network Solutions' Internet technology
services business net revenue and 2.4% of Network Solutions' total net revenue
during the nine months ended September 30, 1999. NationsBanc originally
contracted with Network Solutions in 1993 and Network Solutions currently
provides network design and engineering services as well as a variety of project
specific services under the contract.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship to net revenue of certain items in Network Solutions' Statements of
Operations.

<TABLE>
<CAPTION>
-----------------------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------- --------------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Percentage of net revenue
Net revenue...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.................................. 77.8 56.9 41.1 42.4 37.3
----- ----- ----- ----- -----
Gross profit..................................... 22.2 43.1 58.9 57.6 62.7
Research and development expenses................ 3.6 3.6 5.1 4.6 5.1
Selling, general and administrative expenses..... 33.3 27.1 39.7 39.2 41.1
Interest and other expense (income).............. (2.7) (4.6) (6.6) (6.9) (4.3)
----- ----- ----- ----- -----
Income (loss) before income taxes................ (12.0) 17.0 20.7 20.7 20.8
Provision (benefit) for income taxes............. (3.4) 7.7 8.7 8.7 8.5
----- ----- ----- ----- -----
Net income (loss)................................ (8.6)% 9.3% 12.0% 12.0% 12.3%
===== ===== ===== ===== =====
</TABLE>

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999

Net Revenue

Net revenue increased 132% from $62.4 million for the nine months ended
September 30, 1998 to $144.9 million for the nine months ended September 30,
1999. This increase in net revenue was primarily attributable to the increase in
the number of domain name registrations, principally in the .com top level
domain. Net revenue from registration services increased 136% from $57.7 million
for the nine months ended September 30, 1998 to $136.1 million for the nine
months ended September 30, 1999.

Net new registrations for Network Solutions' registrar services, or NSI
registrar, during the nine month period ended September 30, 1999 were 3,420,000
as compared to 1,290,000 during the nine month period ended September 30, 1998,
an increase of 162%. Due in part to the addition of nearly 40 international
partners, 1,004,000, or 30%, of net new registrations were international
registrations for the nine months ended September 30, 1999. This is an increase
in international registrations of 176% over the 364,000 net new registrations
for the nine months ended September 30, 1998. Non-NSI registrars registered an
additional 223,000 names through our registry services, bringing the total net
new registrations for the nine months ended September 30, 1999 in .com, .net and
.org top level domains to 3,643,000.

Growth in net registrations continues to be driven by the widespread use and
adoption by businesses of the Internet and intranets on a global basis. In
addition, value-added services were sold along with approximately 15% of NSI
registrar's 1,318,000 net new registrations in the third quarter. These
value-added services present potential growth areas for Network Solutions.
Cumulative net registrations for the NSI registrar as of September 30, 1998 were
2,777,000 as compared to 6,528,000 as of September 30, 1999, for a 135%
increase. In addition, this growth in cumulative net registrations represents a
23% increase in NSI registrar's entire customer base since June 30, 1999.

20
<PAGE> 24

Net revenue from Internet technology services increased 89% from $4.7 million
for the nine months ended September 30, 1998 to $8.9 million for the nine months
ended September 30, 1999. This was primarily attributable to an increase in
business from Bank of America and other financial services customers. Bank of
America accounted for $3.5 million or 2.4% of Network Solutions' total net
revenue for the nine months ended September 30, 1999, and $2.3 million or 3.7%
for nine months ended September 30, 1998.

Cost of Revenue

Cost of revenue consists primarily of salaries and employee benefits, fees paid
to subcontractors for work performed in connection with revenue producing
projects, depreciation and equipment costs, lease costs of the operations
infrastructure and the associated operating overhead. Cost of revenue increased
104% from $26.5 million for the nine months ended September 30, 1998 to $54.0
million for the nine months ended September 30, 1999. This increase was driven
by a $10.1 million increase in outsourcing costs and $6.0 million in additional
depreciation charges and equipment expenditures and additional direct labor
charges of $7.6 million related to systems engineering and operations primarily
associated with supporting the growth of Network Solutions' registration
services business.

As a percentage of net revenue, cost of revenue decreased from 42.4% for the
nine months ended September 30, 1998 to 37.3% for the nine months ended
September 30, 1999 reflecting economies of scale achieved in Network Solutions'
registration business. In the near term, the continued need for back office
investments is expected to partially offset future margin improvements arising
from economies of scale.

Research and Development Expenses

Research and development expenses consist primarily of compensation expenses to
support the creation, development and enhancement of Network Solutions' products
and technologies. Research and development expenses increased 155% from $2.9
million for the nine months ended September 30, 1998 to $7.4 million for the
nine months ended September 30, 1999. As a percentage of net revenue, research
and development expenses increased from 4.6% for the nine months ended September
30, 1998 to 5.1% for the nine months ended September 30, 1999. Network Solutions
expects that the level of research and development expenses will continue to
increase in the near future in absolute dollars as Network Solutions invests in
developing new product and service offerings.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of salaries of
business development, general management, administrative and financial
personnel, marketing expenses, corporate services from SAIC, legal and other
professional costs. Selling, general and administrative expenses increased 144%
from $24.4 million for the nine months ended September 30, 1998 to $59.6 million
for the nine months ended September 30, 1999. This increase was primarily
attributable to a $22.4 million increase in marketing and business development
expenses including Internet banner advertising and targeted direct mail
campaigns, increased staffing expenses of $4.3 million and an increase of other
professional costs of $5.0 million.

As a percentage of net revenue, selling, general and administrative expenses
increased from 39.2% for the nine months ended September 30, 1998 to 41.1% for
the nine months ended September 30, 1999.

Network Solutions expects that the level of selling, general and administrative
expenses will continue to increase significantly in the near future in terms of
absolute dollars as operations continue to expand. In particular, sales,
marketing and business development expenses will increase as NSI registrar
continues to promote the value of a .com web address and new value-added
services including web site design and enhanced service offerings. NSI registrar
also plans to continue to develop and enhance its extensive partner and
distribution channels, both domestically and internationally in light of the new
competitive environment.

21
<PAGE> 25

Interest Income

Network Solutions had net interest income of $4.4 million for the nine months
ended September 30, 1998 as compared to $6.3 million for the nine months ended
September 30, 1999. The increase is attributable to the investment of cash
generated from operating activities.

Income Taxes

The provision for income taxes was 42% of pre-tax earnings or $5.4 million for
the nine months ended September 30, 1998, and 41% or $12.3 million for the nine
months ended September 30, 1999. The difference between the effective rates and
the statutory rate is principally attributable to the relative impact that non-
deductible goodwill had on pretax operating income. Goodwill is being amortized
by Network Solutions over five years and is associated with the acquisition of
Network Solutions by SAIC in 1995.

COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1998

Net Revenue

Net revenue increased 107% from $45.3 million for the year ended December 31,
1997 to $93.7 million for the year ended December 31, 1998. This increase in net
revenue was primarily attributable to the increase in the number of domain name
registrations, principally in the .com top level domain. Net revenue from
registration services increased 121% from $38.8 million for the year ended
December 31, 1997 to $85.7 million for the year ended December 31, 1998. Net new
registrations increased 99% from 960,000 for the year ended December 31, 1997 to
1,911,000 for the year ended December 31, 1998. Growth in net registrations
continues to be driven by the widespread use and adoption by businesses of the
Internet and intranets on a global basis. Cumulative net registrations as of
December 31, 1997 were 1,541,000 as compared to 3,362,000 as of December 31,
1998 for a 118% increase.

Net revenue from Internet technology services increased 22% from $6.5 million
for the year ended December 31, 1997 to $8.0 million for the year ended December
31, 1998. Further, the fourth quarter reflected an increase of 117% over the
same quarter last year and a 47% increase over the third quarter of 1998.
NationsBanc accounted for $1.9 million or 4% of Network Solutions' total net
revenue for the year ended December 31, 1997 and $3.2 million or 3% for the year
ended December 31, 1998.

During the year ended December 31, 1998, the Internet technology services
division added new leadership in sales and operations and hired additional
technical consultants. In addition, the division continued to emphasize its
efforts targeted at lead generation and regional sales and marketing programs by
opening offices in New York City and Atlanta, Georgia.

Cost of Revenue

Cost of revenue increased from $25.8 million for the year ended December 31,
1997 to $38.5 million for the year ended December 31, 1998. This 49% increase
was driven by a $3.0 million increase in labor, a $6.4 million increase in
outsourcing costs and $2.7 million increase in additional depreciation charges
and equipment expenditures primarily associated with supporting the growth of
Network Solutions' registration services business.

As a percentage of net revenue, cost of revenue decreased from 56.9% for the
year ended December 31, 1997 to 41.1% for the year ended December 31, 1998
principally reflecting economies of scale and other operational efficiencies
achieved in Network Solutions' registration business.

Research and Development Expenses

Research and development expenses increased 192% from $1.7 million for the year
ended December 31, 1997 to $4.8 million for the year ended December 31, 1998. As
a percentage of net revenue, research and development expenses increased from
3.6% for the year ended December 31, 1997 to 5.1% for the year ended December
31, 1998.

22
<PAGE> 26

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 203% from $12.3 million
for the year ended December 31, 1997 to $37.1 million for the year ended
December 31, 1998. The increase was attributable to a $16.9 million increase in
marketing and business development expenses including television, Internet
banner advertising and targeted direct mail campaigns, increased staffing
expenses of $1.8 million and an increase in legal and other professional costs
of $2.6 million. As a percentage of net revenue, selling, general and
administrative expenses increased from 27.1% for the year ended December 31,
1997 to 39.7% for the year ended December 31, 1998.

Interest Income

Network Solutions had net interest income of $2.2 million for the year ended
December 31, 1997 as compared to $6.3 million for the year ended December 31,
1998. The increase is attributable to the investment of the positive cash flow
resulting primarily from increasing domain name registrations and the net
proceeds of Network Solutions' initial public offering.

Income Taxes

The provision for income taxes was 45% of pretax earnings, or $3.5 million for
the year ended December 31, 1997, and 42%, or $8.1 million for the year ended
December 31, 1998. The difference between the effective rates for both periods
presented is principally attributable to the relative impact that non-deductible
goodwill had on pretax operating income. Goodwill is being amortized by Network
Solutions over five years and is associated with the acquisition of Network
Solutions by SAIC in 1995.

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1997

Net Revenue

Net revenue increased 140% from $18.9 million for the year ended December 31,
1996 to $45.3 million for the year ended December 31, 1997. This increase in net
revenue was primarily attributable to the increase in the number of domain name
registrations, principally in the .com top level domain. Net revenue from
registration services increased 246% from $11.2 million for the year ended
December 31, 1996 to $38.8 million for the year ended December 31, 1997. Net new
registrations increased 96% from 489,000 for the year ended December 31, 1996 to
960,000 for the year ended December 31, 1997. Growth in net registrations was
driven by the widespread use and adoption by businesses of the Internet and
intranets on a global basis. Cumulative net registrations as of December 31,
1996 were 627,000 as compared to 1,541,000 as of December 31, 1997, for a 146%
increase.

Net revenue from Internet technology services decreased 16% from $7.7 million
for the year ended December 31, 1996 to $6.5 million for the year ended December
31, 1997. This decrease was primarily attributable to a decrease in business
from NationsBanc. NationsBanc, Network Solutions' largest Internet technology
services client, accounted for $3.7 million or 20% of Network Solutions' total
net revenue in 1996 and $1.9 million or 4% of Network Solutions' total net
revenue in 1997.

Cost of Revenue

Cost of revenue increased 76% from $14.7 million for the year ended December 31,
1996 to $25.8 million for the year ended December 31, 1997. The increase was
primarily driven by the growth of Network Solutions' registration business which
experienced additional labor costs of $4.2 million and additional outsourcing
costs of $1.6 million in support of Network Solutions' invoicing, collection and
processing activities. In June 1997, Network Solutions opened a 31,200 square
foot facility to support its Internet business operations and in January 1998,
Network Solutions signed an agreement to lease an additional 9,100 square feet
at the same location. This leased facility was designed to meet current
registration services customer support needs as well as to provide expansion
capability for future business.

23
<PAGE> 27

As a percentage of net revenue, cost of revenue decreased from 77.8% for the
year ended December 31, 1996 to 56.9% for the year ended December 31, 1997. This
decrease primarily reflects economies of scale that Network Solutions achieved
due to the growth of its subscription-based domain name registration business.

Research and Development Expenses

Research and development expenses increased 150% from $680,000 for the year
ended December 31, 1996 to $1.7 million for the year ended December 31, 1997. As
a percentage of net revenue, research and development expenses were 3.6% for
both the year ended December 31, 1996 and the year ended December 31, 1997.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 95% from $6.3 million for
the year ended December 31, 1996 to $12.3 million for the year ended December
31, 1997. The increase is primarily attributable to increased management and
administrative labor expenses of $1.8 million, business development expenses of
$1.3 million and an increase in legal costs of $1.0 million.

As a percentage of net revenue, selling, general and administrative expenses
decreased from 33.3% for the year ended December 31, 1996 to 27.1% for the year
ended December 31, 1997. The decrease in percentage of net revenue reflects
economies of scale Network Solutions achieved due primarily to the growth of its
domain name registration business.

Interest Income

Network Solutions had net interest income of $496,000 for the year ended
December 31, 1996 as compared to $2.1 million for the year ended December 31,
1997. The increase is attributable to the investment of the net proceeds of
Network Solutions' stock offering as well as improved cash flow resulting from
the increase in domain name registrations.

Income Taxes (Benefit)

The income tax benefit was $643,000 for the year ended December 31, 1996 as
compared to an income tax expense of $3.5 million for the year ended December
31, 1997. The effective tax rate changed from 28% for the year ended December
31, 1996 to 45% for the year ended December 31, 1997. The difference between the
effective rates is principally attributable to the relative impact that
non-deductible goodwill had on pretax operating income or loss for the year.
Goodwill is being amortized by Network Solutions over five years and is
associated with the acquisition of Network Solutions by SAIC in 1995.

24
<PAGE> 28

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited quarterly financial information
for each of the eight quarters in the period ended September 30, 1999. In the
opinion of management, this information has been presented on the same basis as
the audited financial statements appearing elsewhere and incorporated by
reference in this prospectus, and all necessary adjustments (consisting only of
normal recurring adjustments) have been included in the amounts stated below to
present fairly the unaudited quarterly results when read in conjunction with the
audited financial statements of Network Solutions and notes thereto. Interest
income shown in the table below is net of other expenses, which were not
significant. The operating results for any quarter are not necessarily
indicative of results for any future period.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
QUARTER ENDED
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1997 1998 1998 1998 1998 1999 1999 1999
-------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
In thousands
Net revenue............... $14,430 $16,492 $20,476 $25,427 $31,257 $38,132 $47,499 $59,254
Cost of revenue........... 7,330 7,348 8,791 10,312 12,079 14,541 17,711 21,788
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.............. 7,100 9,144 11,685 15,115 19,178 23,591 29,788 37,466
Research and development
expenses................ 558 725 815 1,353 1,928 2,035 2,460 2,870
Selling, general and
administrative
expenses................ 4,375 6,182 8,008 10,248 12,706 15,265 19,395 24,921
Interest income........... (1,041) (1,292) (1,384) (1,654) (1,857) (1,911) (1,912) (2,444)
------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes................... 3,208 3,529 4,246 5,168 6,401 8,202 9,845 12,119
Provision for income
taxes................... 1,465 1,480 1,783 2,163 2,683 3,404 4,050 4,841
------- ------- ------- ------- ------- ------- ------- -------
Net income................ $ 1,743 $ 2,049 $ 2,463 $ 3,005 $ 3,718 $ 4,798 $ 5,795 $ 7,278
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
QUARTER ENDED
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1997 1998 1998 1998 1998 1999 1999 1999
-------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage of net revenue
Net revenue............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........... 50.8 44.6 42.9 40.6 38.6 38.1 37.3 36.8
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.............. 49.2 55.4 57.1 59.4 61.4 61.9 62.7 63.2
Research and development
expenses................ 3.9 4.4 4.0 5.3 6.1 5.3 5.2 4.8
Selling, general and
administrative
expenses................ 30.3 37.4 39.1 40.3 40.7 40.0 40.8 42.1
Interest income........... (7.2) (7.8) (6.7) (6.5) (5.9) (4.9) (4.0) (4.2)
------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes................... 22.2 21.4 20.7 20.3 20.5 21.5 20.7 20.5
Provision for income
taxes................... 10.1 9.0 8.7 8.5 8.6 8.9 8.5 8.2
------- ------- ------- ------- ------- ------- ------- -------
Net income................ 12.1% 12.4% 12.0% 11.8% 11.9% 12.6% 12.2% 12.3%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

25
<PAGE> 29

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1999, Network Solutions' principal source of liquidity was its
cash and cash equivalents of $98.9 million and its short-term investments of
$99.1 million, which when combined represent an increase of $66.3 million from
its December 31, 1998 balances in those accounts. Network Solutions also has
$22.1 million of marketable securities held as long term investments as of
September 30, 1999.

At September 30, 1999, Network Solutions' cumulative net obligation to SAIC for
intercompany activity was $6.6 million. Intercompany activity is primarily
comprised of salaries and benefits paid by SAIC on behalf of Network Solutions.
Network Solutions currently reimburses SAIC for intercompany activity on a
monthly basis. Pursuant to the Tax Sharing Agreement dated September 26, 1997,
Network Solutions remits income tax payments directly to tax authorities as it
no longer is part of SAIC's consolidated group for income tax purposes.

Cash provided by operations was $108.3 million for the nine months ended
September 30, 1999. This amount is principally attributed to net income plus the
increase in deferred revenue reflecting cash collected in advance of
registration services revenue recognition which occurs ratably over the two-and
one-year registration terms. Partially offsetting this amount is an increase in
deferred tax assets resulting from accelerated revenue recognition for tax
purposes and the associated tax liabilities, generally paid on a quarterly
basis.

Cash used in investing activities totaled $27.2 million for the nine months
ended September 30, 1999. Capital expenditures of $44.7 million and net
long-term investment purchases of $3.7 million were partially offset by the
redemption of $21.2 million of short-term investments. Investments during the
period include a $2.0 million investment in Critical Path, a strategic business
partner, which subsequently consummated its initial public offering during the
period. Also during the period, a $9.7 million investment was made in RealNames
Corporation, a strategic business partner. Critical Path provides outsourced
e-mail services in support of Network Solutions' value-added e-mail product
offerings. RealNames provides an Internet keyword service that Network Solutions
promotes in its value-added product offerings.

Capital expenditures for the nine months ended September 30, 1999 were $44.7
million, primarily for computer equipment and software to support Network
Solutions' registry and registrar efforts, as well as costs related to the
opening of Network Solutions' new call center. Network Solutions will continue
to invest in the back office infrastructure in advance of continued growth in
domain name registrations including investments in the shared registration
system in accordance with the agreements between us, the Department of Commerce
and ICANN.

Network Solutions believes that its existing cash balance, investments and cash
flows expected from future operations will be sufficient to meet Network
Solutions' capital requirements for at least the next 12 months.

YEAR 2000 COMPLIANCE

Network Solutions is continually assessing the potential effects of the "Year
2000" millennium change on Network Solutions' business systems and processes.
Network Solutions' Year 2000 project is proceeding on schedule. The project goal
is to ensure that Network Solutions' business is not impacted by the date
transitions associated with the Year 2000.

Network Solutions' Year 2000 project plan is coordinated by a team that reports
directly to senior management. Network Solutions' Year 2000 compliance efforts
consisted of evaluating the Year 2000 compliance of Network Solutions' business
systems and processes, including the Internet domain name servers under Network
Solutions' control, telecommunications systems, facilities, data-networking
infrastructure, commercial-off-the-shelf hardware, software and components used
by its employees and its outsourcing vendors who provide services relating to
Network Solutions' domain name registration business. Network Solutions' Year
2000 project was comprised of the following parallel phases all of which have
been completed:

- Phase 1 -- Inventory of all of Network Solutions' business systems and
processes in order to assign priorities to potentially impacted systems
and services;

- Phase 2 -- Assessment of the Year 2000 compliance of all inventoried
business systems and processes and determination of whether to renovate
or replace any non-Year 2000 compliant systems and services;

26
<PAGE> 30

- Phase 3 -- Remediation or retirement of any non-Year 2000 compliant
business systems and processes and procurements to replace any other
non-Year 2000 compliant business systems and processes that were not
remediated or were retired;

- Phase 4 -- Testing and validation of remediated systems to ensure
inter-system compliance and mission critical system functionality;

- Phase 5 -- Deployment and implementation of remediated and replacement
systems after the completion of successful testing and validation; and

- Phase 6 -- Design of contingency and business continuation plans in the
event of the failure of business systems and processes due to the Year
2000 millennium change.

Based on its inventory and assessment, Network Solutions found that less than
one-half of one percent of the software code of its mission critical systems
needed to be remediated to be made Year 2000 compliant. However, Network
Solutions, in its normal course of business, replaced or upgraded, prior to the
millennium change, portions of these systems with new Year 2000 compliant
systems.

Based on its inventory and assessment, Network Solutions found no material Year
2000 problems with its facilities and telecommunications systems. Network
Solutions conducted detailed assessments and tested the components of its
telecommunications infrastructure. In addition, Network Solutions sought
assurances from its facilities' landlords and telecommunications equipment
vendors and data circuit providers regarding the Year 2000 compliance of their
facilities and equipment and deployed back-up power systems capable of operating
its core business indefinitely.

Network Solutions' incremental remediation costs to make its business systems
and processes Year 2000 compliant were approximately $3.0 million over the life
of the Year 2000 project.

Network Solutions is maintaining contact with its hardware and software vendors,
significant suppliers, outsourcing service providers and contracting parties to
monitor the extent to which Network Solutions is vulnerable to any such third
party's failure to achieve Year 2000 compliance for its own systems. At the
present time, Network Solutions does not expect Year 2000 issues of any such
third parties to materially affect Network Solutions' business. Furthermore,
Network Solutions' business depends on the continued operation of, and
widespread access to, the Internet. This, in turn, depends to a large extent on
the software and systems of third parties on which Network Solutions' systems
rely or to which they are connected. These third parties include, among others,
Internet-related companies, including Internet web hosting companies, Internet
access providers and Internet domain name server operators. Network Solutions
can give no assurances that the software or systems of such third parties will
be Year 2000 compliant or that the failure of such third parties to achieve Year
2000 compliance will not have a material adverse effect on Network Solutions. To
the extent that the normal operation of the Internet is disrupted by the Year
2000 millennium change, Network Solutions' business, financial condition or
results of operations could be materially and adversely affected.

Should Network Solutions fail to solve any subsequent Year 2000 compliance
problem related to its mission critical business systems and processes the
result could be a failure of or interruption to normal business operations.
Network Solutions' primary risks with regard to Year 2000 failures are those
which impact its domain name registration business. The reasonably likely worst
case risks inherent in Network Solutions' business are as follows:

- Significant and protracted interruption of electrical power to data and
systems in Network Solutions' engineering and customer support facilities
could materially and negatively impact Network Solutions' ability to
provide data and call-center operations. To mitigate this risk, Network
Solutions has deployed back-up power systems capable of operating
indefinitely. However, electrical power interruptions that impact
Internet connectivity providers could adversely impact Network Solutions
because of Network Solutions' reliance upon Internet-based, value-added
operations for its day to day business.

- Significant and protracted interruption of telecommunications and data
network services in any of Network Solutions' headquarters, engineering
or customer support facilities could materially and

27
<PAGE> 31

negatively impact Network Solutions' ability to provide data and
call-center operations. Network Solutions has conducted detailed
assessments of the components of its telecommunications infrastructure
and tested those systems. As part of its technical assessment, Network
Solutions identified the compliance status of its data networking
infrastructure and implemented remediation.

- The failure of components of Network Solutions' current "back office" and
domain name registration related systems could materially and negatively
impact Network Solutions' business. As a contingency planning measure,
Network Solutions conducted a technical assessment of the current systems
and their software applications, took corrective action where necessary,
tested those changes, and deployed into production the remediated
software.

- Despite the assurances of Network Solutions' third-party suppliers,
hardware and software vendors, and outsourcing service providers
regarding the Year 2000 compliance of their products and services, the
potential exists that a Year 2000 problem relating to such third-party
suppliers, vendors and outsourcing service providers' products and
services could have a material impact on Network Solutions' business.

Although Network Solutions found that it only had to remediate a small portion
of its software code in its internal mission critical systems and despite
Network Solutions' finding that its enhancement effort resulted in Year 2000
compliant "back-office" and registration-related systems and software relating
to its core domain name registration services business, Network Solutions
developed a business continuity plan and performed a test on the existing core
registration-related systems that were upgraded. The test was performed by
conducting end-to-end testing of the existing core registration-related systems
in a test environment mirroring the production system environment.

Although Network Solutions is taking appropriate steps so that Network
Solutions' business is not impacted by the date transitions associated with the
Year 2000, Network Solutions has no responsibility for, nor control over other
Internet domain name server operators or tens of thousands of lower level domain
name system server operators that are critical to the efficient operation of the
Internet. Network Solutions has not determined whether such domain name server
operators or other server operators have hardware, software or firmware that is
Year 2000 compliant. Network Solutions has notified the Department of Commerce
of this issue. Network Solutions is aware that many companies that have their
own DNS servers are running older copies of BIND software which are not
certified Year 2000 compliant, although the current version of BIND, version
8.x, is so certified. BIND is the most commonly used program for DNS resolution
at the server level and is created and distributed by the Internet Software
Consortium. Network Solutions has not determined whether the older versions of
BIND could present a significant Year 2000 problem. Network Solutions has made
available test support materials to aid DNS operators in their evaluation of
their local compliance.

Forward-Looking Statements

The foregoing Year 2000 discussion and the information contained herein is
provided as a "Year 2000 Readiness Disclosure" as defined in the Year 2000
Information and Readiness Disclosure Act of 1998 (Public Law 105-271, 112 Stat.
2386) enacted on October 19, 1998 and contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements, including without limitation, anticipated costs, are based on
management's best current estimates, which were derived utilizing numerous
assumptions about future events, including the continued availability of certain
resources, representations received from third parties and other factors.
However, there can be no guarantee that these estimates will be achieved, and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
ability to identify and remediate all relevant systems, results of Year 2000
testing, adequate resolution of Year 2000 issues by governmental agencies,
businesses and other third parties who are outsourcing service providers,
suppliers, and vendors of Network Solutions, unanticipated system costs, the
adequacy of and ability to implement contingency plans and similar
uncertainties. The "forward-looking statements" made in the foregoing Year 2000
discussion speak only as of the date on which such statements are made, and
Network Solutions undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events.

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BUSINESS

The following discussion contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements as a result of certain factors
including, but not limited to, those discussed in "Risk Factors" and elsewhere
in the prospectus.

We are a leading provider of web identity services worldwide. Our web identity
offerings include domain name registration services, for which we are the global
leader, and related value-added products and services. We are the exclusive
registry and the leading registrar for second level domain names within the
.com, .net and .org top level domains. We also facilitate global registration of
domain names in other existing top level domains, including country code top
level domains. By registering Internet domain names, we enable businesses, other
organizations and individuals to establish unique web identities from which to
communicate and conduct e-commerce. We also provide Internet technology services
that focus on network engineering, network and systems security and network
management.

Net registrations through our registrar services increased by 135% from
2,777,000 second level domain names registered as of September 30, 1998 to
6,528,000 second level domain names registered as of September 30, 1999. An
additional 223,000 second level domain names have been registered through our
registry services in the .com, .net and .org top level domains through competing
registrars as of September 30, 1999. Consequently, our registrar services
accounted for approximately 97% of the total 6,751,000 net registrations in the
.com, .net and .org, as well as .edu, top level domains, as of that date. In
addition to domain name registration, we sold value-added services along with
approximately 15% of our 1,318,000 net new registrations in the third quarter
ended September 30, 1999. We believe that commercial enterprises and individual
Internet users domestically and worldwide recognize the .com top level domain as
the desirable address for commercial presence on the Internet. Net registrations
in the .com top level domain represent 78% of our total net registrations as of
September 30, 1999. Net revenue from Internet domain name registrations
accounted for 94% of our net revenue for the nine months ended September 30,
1999. We believe that the potential for continued growth of domain name
registrations and other web identity services is substantial.

INDUSTRY BACKGROUND

The Internet is a global network of millions of interconnected computers and
computer networks that allow businesses, other organizations and individuals to
communicate. A broad range of commercial organizations and individuals are using
the Internet to communicate electronically, to distribute and retrieve
information and to conduct e-commerce. Advances in technology, low-cost Internet
access and an increasing corporate reliance on distributed information
environments have fueled the rapid growth of the Internet.

We believe that in order to support the demands placed on this evolving and
rapidly growing medium of commerce and information exchange, a wide range of
products and services will need to be developed and continually enhanced and
expanded, including:

- registration services,

- value-added products and services, and

- Internet technology services.

Registration Services

With the increased commercialization of the Internet, large corporations and
other users, including small businesses, organizations and individuals, on both
a domestic and international basis, are increasingly establishing their web
identities by registering domain names. The most popular top level domain
continues to be .com. Users are registering domain names to establish web
identities and for other purposes such as trademarks, brands, products and
events. We are the exclusive registry and the leading registrar in the .com,
.net and .org top level domains. There are also approximately 240 two letter
country code top level domains that are each administered by other exclusive
registries. Examples are .uk for the United Kingdom and .de for

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Germany. A growing number of large corporations with multiple web identities is
also seeking solutions through which a single provider can register and manage
their domain names in the various top level domains.

Value-Added Products and Services

The increase in the number of Internet users provides companies, other
organizations and individuals with new ways to conduct business. In order to
establish and promote a strong web identity and to conduct e-commerce, Internet
users seek value-added products and services, such as directory, communications,
security, privacy, data and research and identity promotion services. We believe
there will be opportunities for entities which can facilitate, develop and
distribute such products and services and make them more accessible and easy to
use.

Internet Technology Services

As more businesses establish or expand their Internet presence and begin to
deploy more sophisticated e-commerce based network infrastructures, we believe
there will be an increasing demand for Internet technology services. We believe
that networks are becoming increasingly sophisticated and are requiring business
to possess increased capabilities and improved access to information. As a
result, their businesses are increasingly seeking experienced network consulting
firms to provide sophisticated network services.

OUR SOLUTION

We are the exclusive registry and the leading registrar for second level domain
names within the .com, .net and .org top level domains. We are a trusted,
reliable and secure provider of web identity services including domain name
registration services in the .com, .net and .org top level domains, as well as
country code top level domains. We own the infrastructure, technology and
protocols underlying the shared registration system and we have the right to
deploy and control the infrastructure and technology underlying the top level
domain name server system for the .com, .net and .org top level domains. We
offer value-added products and services through our web site which serves as a
one-stop shop for our customers at a very early point in the establishment of
their web identity. We also provide Internet technology services that focus on
network engineering, network and systems security and network management.

OUR BUSINESSES

We are the leading registrar and the exclusive registry for second level domain
names within the .com, .net and .org top level domains and we provide Internet
technology services. As a leading provider of web identity services worldwide,
we believe that we have several competitive advantages:

- We are a trusted, reliable and secure provider of web identity services
with strong brand recognition as Network Solutions as well as the dot com
people.

- We have the financial strength to continue to implement and expand our
sales, marketing, product development and acquisition efforts. As an
example, in November 1999, we acquired ImageCafe, Inc. in a substantially
all-cash transaction. Our balance sheet at September 30, 1999 consisted
of no long-term debt and a cash and marketable securities balance of
approximately $220 million.

- We are investing significant technical and financial resources to improve
and expand our registration business. A substantial portion of our
registration software is custom-developed and proprietary.

Registration Services

REGISTRAR SERVICES. Domain name registration services are our core business.
Through our registrar services we register second level domain names in the
.com, .net and .org top level domains, enabling registrants to establish a
unique identity on the Internet. Our customers apply to register second level
domain names either directly through our web sites and e-mail-based registration
templates or indirectly through Internet access providers and others. Currently,
we charge a two-year services fee of $70 for initial registrations and $35 per
year for re-registrations for our basic registration service. We also accept
registrations and re-registrations in one-year increments, provided that the
unexpired term of any registration may not exceed ten years.
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Our customers can submit applications for the registration of second level
domain names via e-mail through the Internet. We process the application and
either register the requested domain name in the requested top level domain or
reject the application. Upon registration or rejection, we notify the customer
via e-mail. For domain names which are registered, we either require customers
to pay through our online payment process or we invoice the customers and permit
them to pay the registration services fee after the domain name is registered.
As of March 9, 2000, we will require pre-payment or some other reasonable
assurance of payment at the time of registration. We perform internally our core
proprietary automated registration process and associated security functions.

We also offer a web-based domain name registration process through our new
storefront web site. As part of our web-based registration process, we offer the
option of registering a domain name and activating it later by providing domain
name record hosting and a suite of other services including dot com biz card and
dot com mail. Customers that select this option currently pay a two-year
services fee of $119 for registration of a domain name and a one page dot com
biz card web site. We believe that ease of use is becoming more important to the
increasing number of less technically sophisticated Internet users. This
web-based process also simplifies the user payment process by validating and
accepting credit card payments and providing a customer confirmation number via
our secure web-based online payment system.

Through our idNames services, we have continued to expand our registration
services to the country code top level domains. We provide search and
registration services for domain names in country code top level domains around
the world. With the idNames services, we make it easier for companies to protect
their brands both globally and in local markets. In November 1999, we expanded
our idNames services to meet the growing needs of large and Internet focused
businesses worldwide. These services include a confidential domain name
reservation service, a domain name modification assistance service and a
multi-year domain name maintenance program in the .com, .net and .org top level
domains and in many of the available country code top level domains. We intend
to continue to introduce new idNames services to meet the needs of this market.

We have made significant investments in registrar services. We believe that we
currently have the following competitive advantages in registrar services:

- Large, Established Customer Base. We are the leading registrar with over
6,500,000 net second level domain name registrations. We meet our
customers at a very early point in the establishment of their web
identities, at a time when they are disposed to buy. As a result, we
believe we have the infrastructure needed to achieve significant scale
efficiencies in the registration process. As customers invest in their
web sites for advertising, branding and other business-critical
activities, we believe that they will be inclined to re-register their
domain names with us.

- Global Recognition of Network Solutions as the dot com people. We
believe that the .com top level domain, for which we are currently the
leading registrar, has perceived value on a global basis to commercial
and other users on the Internet. We are building strong brand recognition
as the dot com people. We believe that this will be a key factor in
maintaining and broadening our customer base.

- Quality Customer Support. We believe that high quality customer support
is vital to customer satisfaction. We have continually improved customer
service and account handling and expanded our capacity to service larger
volumes of registrants. Customer access to our customer support services
includes a 24 hour 7 day a week telephone help desk, an e-mail processing
facility for account information updates and other services.

- One-Stop Shop for Value-Added Products and Services. We provide
value-added products and services through our web site which serves as a
one-stop shop for our customers at a very early point in the
establishment of their web identities. We offer an expanding set of
value-added products and services that can extend our relationship with
our customers as we help them maximize the value of their web identities
over time. We sold value-added products and services along with
approximately 15% of our

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1,318,000 net new registrations in the third quarter of 1999. These
value-added products and services include:

-- dot com directory, an Internet "find engine" which allows users to
quickly locate, research and do business with companies that have
registered domain names through us in the .com, .net and .org top level
domains,

-- ImageCafe, an automated tool which allows users to build web sites
efficiently at an attractive price point,

-- dot com biz card, a one page web site that can be used as a "virtual
business card" to promote businesses on the Internet,

-- dot com forwarding, a service that enables our customers to "point" or
forward users from multiple domain names to one web site,

-- RealNames, an Internet keyword service that offers companies, brand
managers, and trademark owners a way to enhance their identities on the
Internet,

-- dot com mail, a portable, personalized e-mail service designed
primarily for small businesses,

-- dot com toolkit, a small business resource center that provides access
to tools and services for setting up a web site and conducting business
on the Internet, and

-- dot com promotions, a service through which a domain name registrant
can link to and subscribe to various services provided by
Microsoft/LinkExchange.

- Strategic Agreements. To strengthen our distribution channels, we have
entered into strategic agreements with over 260 companies around the
world including leading portals such as Yahoo! and
Microsoft/LinkExchange. We have entered into strategic wholesale
agreements with companies who register a significant number of second
level domain names with us on behalf of their customers. Additionally, we
have structured retail marketing agreements with channel partners
designed to take advantage of their complementary marketing capabilities.

In addition, we are continuing to expand our registrar services and improve the
registration process by:

- Expanding Marketing and Distribution Agreements. Through our Alliance
Program and other programs, we are expanding our relationships with
certain Internet access providers who participate in our Premier Program.
These wholesale agreements are designed to provide enhanced services to
partners who register a significant number of second level domain names
with us on behalf of our customers. Through our retail marketing
agreements, we are developing and expanding our relationships with some
of the smaller Internet access providers and other companies by providing
such companies additional revenues through the payment of referral fees.
Through these relationships, we believe we will be able to deliver
enhanced registration services and identify additional opportunities to
expand our registrar services. Additionally, we are establishing and
expanding relationships with companies worldwide to promote our services,
penetrate new customer bases and integrate third party products and
services.

- Continuing to Enhance Our Offerings. We have introduced a portfolio of
value-added products and services and intend to develop additional
value-added products and services that allow us to build upon our
position as the leading registrar and make use of our customer data.

- Pursue Strategic Acquisitions and Investments. We intend to continue to
identify and, where appropriate, pursue additional strategic acquisition
and investment opportunities which would provide our customers with
complementary products, services and technologies including, among
others, those which enhance web identity, communications and e-commerce.

- Continuing to Improve the Customer Experience. We are continuing to
invest in improving the purchase and support experience for our customers
as evidenced by our recent introduction of a storefront design on our web
site. Our newly redesigned and enhanced web site, launched in December
1999, offers increased functionality, ease of use, and customer account
management.
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- Promoting the Use of .com, .net and .org Worldwide. We believe that we
can continue to grow our registrar services by promoting global
recognition of the .com, .net and .org top level domains. We are
promoting the use of such top level domains to establish them as the most
recognized domains for individuals and organizations conducting business
on the Internet.

- Maintaining Technology Leadership. We have continued to build on our
experience to develop enabling technologies which support the continued
enhancement of infrastructure flexibility and scalability and customer
ease of use. A substantial portion of our registrar software is
custom-developed and proprietary.

Marketing and Distribution Relationships. We have relationships with many
companies worldwide to promote our registrar services, penetrate new customer
bases and integrate third party products and services.

- Strategic Programs with Internet Access Providers and Others. We have
entered into wholesale agreements to provide enhanced services to certain
Internet access providers, including Internet service providers, or ISPs,
both in the United States and in other countries, who register a
significant number of second level domain names with us on behalf of
their customers.

-- Premier Program. Our Premier Domain Registration Service Program
provides participating Internet access providers with personalized
account management, customized billing and financial reports, private
e-mail boxes and other customized features. As of December 10, 1999,
we had entered into agreements with over 240 companies under the
Premier Program which include agreements with approximately 100
companies located in the United States and 140 companies located in
Canada, Australia, New Zealand and the European, South American and
Asia-Pacific regions. These companies include: EarthLink Network,
Deutsche Telekom, Hong Kong Telecom, Interland, Interliant (formerly
Sage Networks) and Singapore Telecommunications.

-- Alliance Program. The Alliance Program is available to members of
the Premier Program who have participated in the program for a
minimum of one year and who have registered a significant number of
second level domain names with us. The Alliance Program is designed
to enable us and our participating companies to provide reciprocal
links and referrals to the other party's distribution channels for
each other's complementary services. Through these relationships with
EarthLink, Interliant and Interland, we seek to deliver our enhanced
registration services and identify additional opportunities to expand
our registrar services.

- Distribution Channel Marketing Agreements. We are developing
co-marketing programs with retail channel partners designed to take
advantage of their complementary marketing capabilities.

-- Affiliate Program. Our Affiliate Program provides an easy way for
small Internet access providers and other companies and individuals
to establish a link to our enhanced domain name registration process,
enabling them to earn additional revenue and add value for their web
site visitors. The Affiliate Program is designed for participation by
the thousands of Internet access providers, web hosting companies,
and web site design companies that currently register their
customers' domain names through us, as well as other companies and
individuals who could benefit from providing this service to their
customers. As of December 10, 1999, we had approximately 35,000
members in our Affiliate Program.

-- Domestic Agreements. In 1999, we entered into strategic agreements
with Go2Net, IBM and Microsoft and expanded our agreement with
RealNames (formerly Centraal Corporation) for the marketing and
development of products and services to meet the future needs of the
business marketplace.

- Our agreement with Go2Net provides members of Go2Net's HyperMart
and Virtual Avenue business hosting services with access to our
domain name registration and dot com directory services. Go2Net is
a network of branded, technology and community-driven web sites
focused on personal finance, search and directory, commerce and
business services, and games.

- Under our agreement with IBM, IBM provides a hypertext link to our
domain name registration and dot com directory services from its
HomePage Creator e-business web site and we provide
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a hypertext link to the IBM HomePage Creator for e-business small
business resource center from our dot com toolkit.

- Under the Microsoft/LinkExchange agreement, we are promoting the
Microsoft/LinkExchange suite of marketing services designed to help
small businesses increase their online traffic and sales through
our dot com toolkit resource center and Microsoft is offering our
domain name registration services through a service offering
co-branded as SiteRegistration. This new offering is being promoted
throughout the LinkExchange web site and on the LinkExchange
BannerNetwork.

- Other Channel Agreements. Under our agreement with RealNames, we
have executed agreements with 14 channel distributors that act as
our sales representatives in marketing RealNames Internet Keyword
subscriptions. The Internet Keyword service is a web navigation
service that offers companies, brand managers and trademark owners
a way to enhance their identities on the Internet and is
complementary to our domain name registration services.

-- International Agreements. We have also established additional
international distribution channels through Orientation.com and
Yupi.com.

- The agreement with Orientation.com provides a distribution channel
for our domain name registration and dot com directory services
through Orientation.com's extensive network of multilingual portal
sites with content that target specific regions and countries
including Asia, Africa, Central/Eastern Europe, Latin
America/Caribbean, the Middle East and Oceania.

- Our agreement with Yupi.com promotes our domain name registration
services to Spanish speaking Internet users throughout Latin
America.

We intend to continue to establish additional distribution alliances for our
domain name registration services in other regions and countries and in
different languages.

Advertising. In 1999, we have expanded our advertising and marketing through
various targeted print and on-line advertising campaigns. We also launched
several major multi-piece direct mail, print and web site banner advertising
campaigns announcing our new products and services.

In November 1999, we extended our global marketing agreement with Yahoo! under
which we purchased advertising to broadly promote our domain name registration
services and other services on certain Yahoo! web sites during 2000. Under this
agreement we will expand our promotions for domain name registration services in
the .com, .net and .org top level domains globally and expect to extend the
reach of the Network Solutions' brand to the global Internet community.

Starting in 1999 we have also begun selling advertising and sponsorships for
complementary services on our web sites and we are working with DoubleClick, a
leading web advertising broker.

Direct Sales. Our services are marketed and distributed directly through our
web sites. We are continuing to target additional channel and distribution
partners to offer our registration services electronically through existing web
sites and through other direct channels, such as direct mail and telemarketing.
Through our direct sales efforts we are seeking to expand the number of
registrations in targeted customer segments both domestically and
internationally. We are targeting customer segments such as small business
users, individuals, holders of trademarks, service marks and product marks and
event sponsors.

REGISTRY SERVICES. We are the exclusive registry for .com, .net and .org top
level domains until at least November 2003. If the ownership of our registry and
registrar is separated by May 2001, in accordance with the registry agreement,
the exclusivity for the registry will extend to November 2007. We intend to
engage financial advisors to review alternatives for possible separation.
Competing registrars, including our registrar, submit .com, .net and .org second
level domain name registrations through our proprietary shared registration
system which hosts the master database. The annual registry fee for a domain
name is $6, unless increased to cover higher registry costs under circumstances
described in the registry agreement. We own the infrastructure, technology

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and protocols underlying the shared registration system for the .com, .net and
.org top level domains. We maintain the master database of domain names for the
.com, .net and .org top level domains.

As of January 27, 2000, there were 26 ICANN-accredited registrars (in addition
to us) submitting domain name registrations to us through the shared
registration system. An additional 32 accredited registrars, as of such date,
were testing in our pre-production environment and 51 other entities have
received accreditation status. Once a registrar achieves its accreditation we
enter into an agreement with such registrar and license our software development
toolkit, protocol and application programmers interface to our system to each
registrar to enable it to develop its front-end domain name registration
systems. We receive a one-time $10,000 license fee from each registrar.

We have made significant investments in our registry developing the shared
registration system and building our system infrastructure. We believe that we
have the following competitive advantages in the registry business versus
competing registries for the existing and any new top level domains:

- Recognition of the .com, .net and .org Top Level Domains
Worldwide. Commercial enterprises and individual users domestically and
worldwide recognize the .com top level domain as the most desirable
address for commercial presence on the Internet. We believe that we can
continue to grow our registry by promoting global recognition of the
.com, .net and .org top level domains. We are promoting the use of such
top level domains to establish them as the most recognized domains for
individuals and organizations conducting business on the Internet.

- Customer Support/Technical Assistance Services. We believe that high
quality customer support/technical assistance is vital to our customers',
the registrars', satisfaction. We have developed an operational test and
evaluation environment for registrars to test their systems prior to
going into a production environment. We have assigned one point of
contact to each registrar to help resolve issues. We have a trained team
of engineers on standby to address any operational issues that adversely
impact the registrars. Finally, we are in the process of developing
service level agreements with the registrars to provide high quality
service that the registrars can count on.

- Technical Infrastructure Support. We have invested and are continuing to
invest significant technical and financial resources in our registry
infrastructure. Our shared registration system is custom-developed and
proprietary. We intend to deploy new top level domain name servers in 15
locations worldwide under agreements with service level obligations to
increase the robustness of the .com, .net and .org top level domain
system. This will be a significant improvement to the current domain name
server infrastructure, in which nine of the 13 existing top level domain
name servers are operated by volunteer organizations with no contractual
or legal obligations. Our deployment should also enhance reliability,
speed and scalability. We believe that significant engineering talent is
required to create a registry capability and that knowledge of domain
name system structures, Internet security, data routing and routing
protocols is critical to creating and enhancing registry capabilities. We
believe that engineers skilled in protocol development are difficult to
identify, hire and retain and thus our staff of engineers represents a
valuable resource.

We are working to expand our registry business through the operation of
additional registries, by providing new domain name system functionality and by
offering additional trusted third party services for e-commerce.

COMPETITION IN REGISTRATION SERVICES. We currently face competition among
registrars within a single top level domain like .com, and could in the future
face competition among registrars within potential new top level domains. As of
January 27, 2000, there were 110 ICANN-accredited registrars, including AT&T,
America Online, CORE or "Internet Council of Registrars," Deutsche Telekom,
France Telecom Oleane, iDirections, interQ Incorporated, Melbourne IT,
NameSecure.com, NetBenefit, PSINet, Register.com, Talk.com and Verio. As of
January 27, 2000, our shared registration system was being used by 26 accredited
registrars, in addition to ourselves, in the .com, .net and .org top level
domains to register second level domain names. We also face competition from
third level domain name providers such as Internet access providers and
registrars of top level domains other than those top level domains for which we
act as exclusive registry. Although we currently act as

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the exclusive registry for second level domain names within the .com, .net and
.org top level domains, we face competition from registries of country code top
level domains as well as potential new top level domains.

Future competition in domain name registration services could come from many
different companies. Many of these companies have core capabilities to deliver
registration services such as help desks, billing services and network
management, along with strong name recognition and Internet industry experience.
Examples of these types of companies include:

- domain name registration resellers,

- country code registries,

- Internet access providers, and

- major telecommunications firms.

INTERNET TECHNOLOGY SERVICES

We deliver Internet technology services to some of the world's leading
businesses that are utilizing Internet technologies for their internal
enterprise networks, or intranets. Our engineers have extensive knowledge and
experience in network engineering, network security and network management. By
leveraging this knowledge and experience, we are able to provide solutions to
clients' complex network needs.

- Network Engineering. We offer a line of services to help develop and
integrate enterprise network solutions in a manner tailored to individual
clients' needs. All of these services are focused on building a strong
network foundation for the enterprise.

- Network and System Security. We provide a range of security consulting
services to allow clients to protect their data and systems. We develop
access and protection controls that permit internal and remote users to
access computer systems, databases and applications on the network, while
protecting against unauthorized access to information or misuse of
systems.

- Network Management. We provide a range of services that allow clients to
monitor, control and improve their network performance. We also provide
planning and analysis to implement disaster recovery and contingencies
for network system failures.

During 1999, we provided Internet technology consulting services to more than 20
large companies. Our Internet technology services are generally provided to
clients on a time and expense basis. We also perform some engagements on a
fixed-price basis.

Most of our Internet technology services customers are in the financial services
industry. Bank of America, formerly NationsBanc, is currently our largest
consulting services client, accounting for 39.3% of our Internet technology
services net revenue and 2.4% of our total net revenue in the nine months ended
September 30, 1999. NationsBanc originally contracted with us in 1993 and we
currently provide network design and engineering services as well as a variety
of project specific services under the contract.

Companies with Internet expertise are current or potential competitors to our
Internet technology services. These companies include systems integrators and
consulting firms, such as Andersen Consulting, IBM Global Services and Lucent
NetCare. We also compete with certain companies that have developed products
that automate the management of Internet protocol addresses and name maps
throughout enterprise-wide intranets, and with companies with
internally-developed systems integration efforts. A number of these competitors
and potential competitors have longer operating histories and greater name
recognition and significantly greater financial, technical, marketing,
distribution and other resources than we do.

OPERATIONS

We have operating facilities to support our current registration operations and
customer support needs as well as to provide expansion capability for future
business. One facility houses our call center, a training center equipped for
both computer and telephone training and a new computer room with expanded
systems and

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telecommunications services. Another facility houses our registry systems and
our primary computer room and telecommunications systems. In addition, we
contract for a back-up facility to a third party's secure facility in California
to provide redundancy and enhanced reliability for our Internet root zone
administration. It is our intention to develop a live redundant site for the
registry during the first half of 2000.

Our systems have periodically been subject to large numbers of speculative and
repetitive e-mail domain name registration and modification requests from domain
name speculators and other abusers. Such abuses of our systems have resulted in
processing delays. We have taken, and are continuing to take, actions to combat
these delays and abusive e-mails to minimize the impact of such system abuses.

In the latter part of 1999, the operations infrastructure was significantly
augmented to reflect the creation of the shared registration system to implement
the terms of our agreements with ICANN and the Department of Commerce.
Throughout 1999 new hardware configurations were added for the registration and
billing databases to both the registrar and registry systems. Bandwith
connections to multiple Internet service providers were increased threefold.
State of the art storage technology was added to both systems. The overall
systems management and monitoring was improved with the addition of a 24 hour, 7
day a week network operations center function. All of the infrastructure
enhancements were integrated into an improved state-of-the-art network
management system. Many legacy systems were upgraded to resolve potential year
2000 issues. All production systems were successfully remediated.

In December 1999, our registrar system web servers were upgraded to provide a
storefront ability and our online payment system was replaced. Additionally,
our customer service technical support infrastructure was improved with the
installation of a new Nortel 81C telephone switch.

The internal telecommunications infrastructure between our multiple locations
was upgraded to support increasing business requirements in both the registry
and registrar.

ONGOING PRIVATIZATION OF INTERNET ADMINISTRATION

With the onset of increased commercial growth of the Internet, the U.S.
Government initiated an activity directed at increased privatization of the
policy making and central administration of the Internet. Within the U.S.
Government, leadership for the continued privatization of Internet
administration is currently provided by the Department of Commerce. On June 10,
1998, the Department of Commerce published in the Federal Register a plan
referred to as the Statement of Policy or White Paper, calling for increased
competition and the formation of a corporation to assume certain
responsibilities relating to the domain name system.

The process initiated by the Statement of Policy resulted in the entry by the
U.S. Government into a Memorandum of Understanding, or MOU, with ICANN, a U.S.
based private not-for-profit corporation with an international board of
directors. The U.S. Government has recognized ICANN as the corporation described
in the cooperative agreement, in the performance of ICANN's obligations under
the MOU, and until such time as the MOU is terminated.

Currently, the technical structure of the Internet only permits one registry for
each top level domain. A registrar acts as the interface between the registry
and the end-user domain name registrants. Registrars submit to the registry
certain limited information for each of their customers that has a second level
domain name in that top level domain. A registrar can provide value-added
products and services in addition to its basic registration service. Numerous
registrars will be able to operate within each top level domain. We currently
are the exclusive registry in the .com, .net and .org top level domains and the
leading registrar in those domains.

On November 10, 1999, a series of wide-ranging agreements were entered into
which removed a substantial amount of uncertainty regarding the administration
of the domain name system and our role in that system going forward. These
agreements include the following:

- A registry agreement between us and ICANN under which we will continue to
act as the exclusive registry for the .com, .net and .org top level
domains for at least four more years,

- A revised registrar accreditation agreement between ICANN and all
registrars registering names in the .com, .net and .org domains,
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<PAGE> 41

- A revised registrar license and agreement between us as registry and all
registrars registering names in the .com, .net and .org domains using our
proprietary shared registration system,

- An amendment to the cooperative agreement, and

- An amendment to the MOU.

Under these agreements we have recognized ICANN as the not-for-profit
corporation described in amendment 11 to the cooperative agreement, have become
an ICANN-accredited registrar and have agreed to operate the registry in
accordance with the provisions of the registry agreement and the consensus
policies established by ICANN in accordance with the terms of that agreement. We
will be an accredited registrar through November 9, 2004 with a right to renew
indefinitely in accordance with the agreement.

On or before March 9, 2000, we are required to implement a system under which we
will not accept the registration of a domain name as a registrar unless we have
received a reasonable assurance of payment of the registration fee. We are
entitled to establish our own prices for registrar services, except that if we
charge a price different than $35 per registration per year prior to March 9,
2000, we must do so only for registrations for which we have a reasonable
assurance of payment of the registration fee.

We have implemented modifications to the shared registration system that enable
a registrar to (a) accept registrations and re-registrations in one-year
increments and (b) add one year to a registrant's registration period upon
transfer of a registration from one registrar to another. The unexpired term of
any registration may not exceed ten years. We are contractually obligated to
provide equivalent access to the shared registration system to all
ICANN-accredited registrars and to ensure that the revenues and assets of the
registry are not utilized to advantage our registrar to the detriment of other
registrars. We have agreed to and implemented an organizational conflict of
interest compliance plan that includes organizational, physical and procedural
safeguards in connection with these obligations.

The term of the registry agreement extends until November 9, 2003, except that
in the event that we complete the legal separation of the ownership of our
registry business from our registrar business by divesting all the assets and
operations of one of those businesses by May 9, 2001 to an unaffiliated third
party that enters an agreement enforceable by ICANN and the Department of
Commerce (1) not to be both a registry and a registrar in the .com, .net and
.org top level domains and (2) not to control, own or have as an affiliate any
individual(s) or entity(ies) that, collectively, act as both a registry and a
registrar in the .com, .net and .org top level domains, the term will be
extended for an additional four years, resulting in a total term of eight years.
For the purposes of this provision, "unaffiliated third party" means any entity
in which we (including our successors and assigns, subsidiaries and divisions,
and their respective directors, officers, employees, agents and representatives)
do not have majority equity ownership or the ability to exercise managerial or
operational control, either directly or indirectly through one or more
intermediaries. "Control," as used in this provision, means any of the
following: (1) ownership, directly or indirectly, or other interest entitling us
to exercise in the aggregate 25% or more of the voting power of an entity; (2)
the power, directly or indirectly, to elect 25% or more of the board of
directors (or equivalent governing body) of an entity; or (3) the ability,
directly or indirectly, to direct or cause the direction of the management,
operations, or policies of an entity. Department of Commerce approval would be
required for the transfer of our registry operations and for the designation of
a successor registry by ICANN. We intend to engage financial advisors to review
alternatives for possible separation. Upon expiration of the agreement, ICANN
will conduct a process for selecting a successor registry, in which case we may
compete on an equal basis. If, during the term of the agreement, we fail to
remedy any breach by us of the agreement, we may be terminated as the registry
for the .com, .net and .org top level domains.

ICANN is contractually obligated to the registry and to all accredited
registrars to comply with specified procedural requirements governing the
exercise of its authority. The agreements also explicitly define the subjects
within the scope of ICANN's authority with respect to both the registry and
registrars. ICANN's authority to set policy for the registry may be terminated
if (a) ICANN breaches the registry agreement and fails to remedy that breach;
(b) the Department of Commerce withdraws its recognition of ICANN; or (c) the
Department of Commerce concludes that ICANN has not made sufficient progress
towards entering into agreements with other registries and we are competitively
disadvantaged. In the event ICANN's authority is

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<PAGE> 42

terminated, the Department of Commerce will assume the policy-setting function
for registry services for the .com, .net and .org top level domains.

We have agreed to pay annual fees to ICANN as set by ICANN at levels currently
not to exceed $2 million for our registrar and $250,000 for our registry. We
have agreed to provide to the Department of Commerce control over the content
and use of the internic.net website, subject to transition arrangements set
forth in the agreements.

All accredited registrars are obligated to provide query-based access to
registration data and are barred from placing conditions upon any legal use of
that data, except to prohibit use of the data to enable the transmission of mass
unsolicited commercial solicitations via e-mail (spam) or to enable high volume,
automated electronic processes that apply to the registrar (or its systems). In
addition, all accredited registrars are required to provide third-party bulk
access to registration data (subject to the restrictions described above) for an
annual fee not to exceed $10,000. This obligation would remain in effect until
replaced by a different policy adopted by ICANN or a finding by the Department
of Commerce that no individual or entity is able to exercise market power with
respect to data used for development of third-party value added products and
services.

On October 24, 1999, ICANN adopted the Uniform Domain Name Dispute Resolution
Policy, commonly known as the dispute policy, and accompanying rules of
procedure required to be used by all accredited registrars in the .com, .net and
.org top level domains. We implemented this policy on January 1, 2000. Under the
dispute policy, registrars do not participate in the administration or conduct
of any proceeding brought under the dispute policy. Each registrant agrees in
its contract with a registrar to be bound by the terms and conditions found in
the dispute policy. If a complaint is brought by a trademark owner under the
dispute policy and the trademark owner prevails, the registrar is required under
the dispute policy to implement the decision ten days after being notified of a
decision. The registrant can suspend implementation of the decision by filing
suit against the trademark owner within that ten-day period.

On November 29, 1999, the Anticybersquatting Consumer Protection Act was signed
into law by the President, making it illegal under certain circumstances for
persons to register domain names which conflict with personal names or
trademarks. The remedies under this Act are forfeiture, cancellation, and
transfer of the domain name registration to the trademark owner or the
individual. Except in cases of bad faith, reckless disregard or willful failure
to comply with a court order, the registry and registrar are not liable for
injunctive or monetary relief as long as the registry and registrar complies
with the procedural requirements of the statute.

EMPLOYEES

As of December 8, 1999, we had approximately 735 full-time employees. None of
our employees are covered by collective bargaining agreements. We believe that
our relations with our employees are good.

LEGAL PROCEEDINGS

As of February 1, 2000, we were a defendant in six active lawsuits involving
domain name disputes between trademark owners and domain name holders. We are
drawn into such disputes, in part, as a result of claims by trademark owners
that we are legally required, upon request by a trademark owner, to terminate
the right we granted to a domain name holder to register a domain name which is
alleged to be similar to the trademark in question. On October 25, 1999,
however, the Ninth Circuit Court of Appeals ruled in our favor and against
Lockheed Corporation, holding that our services do not make us liable for
contributory infringement to trademark owners. Thus, we believe, this type of
suit should decline. The holders of the domain name registrations in dispute
have, in turn, questioned our right, absent a court order, to take any action
which suspends their use of the domain names in question. Beginning January 1,
2000, however, we no longer included a contractual provision in our service
contracts with domain name holders under which we would suspend their use of
their domain name under dispute by a trademark owner. Thus, we believe, this
type of suit also should decline. Although 64 out of approximately 9,300 of
these situations have resulted in suits actually naming us as a defendant, as of
February 1, 2000, no adverse judgment has been rendered and no award of damages
has ever been made against us. We believe that we have meritorious defenses and
vigorously defend ourselves against these claims.
39
<PAGE> 43

On March 20, 1997, PG Media, Inc., a New York-based corporation, filed a lawsuit
against us in the United States District Court, Southern District of New York
alleging that we had restricted access to the Internet by not adding PG Media's
requested 490 top level domains to the Internet root zone in violation of the
Sherman Act. In its complaint, PG Media, in addition to requesting damages,
asked that we be ordered to include reference to PG Media's top level domains
and name servers in the root zone file administered by us under the cooperative
agreement. In June 1997, we received written direction from the National Science
Foundation not to take any action which would create additional top level
domains or to add any new top level domains to the Internet root zone until the
National Science Foundation provides further guidance. On September 17, 1997, PG
Media filed a Second Amended Complaint adding the National Science Foundation as
a defendant. On May 14, 1998, PG Media served us with a motion for a preliminary
injunction against both defendants to compel both defendants to add PG Media's
top level domains to the Internet root zone within 30 days. In response, both
defendants filed cross-motions for summary judgment against PG Media. On July
20, 1998, a hearing on all parties' motions occurred. The basic issue before the
court was the National Science Foundation's authority to control the Internet's
root zone system. On March 16, 1999, the court granted both our and the National
Science Foundation's motions for summary judgment, holding that the National
Science Foundation does have authority over the root zone system and that the
federal instrumentality immunity doctrine immunizes us against liability under
both sections 1 and 2 of the Sherman Act for our root zone administration. PG
Media appealed to the Second Circuit Court of Appeals and on January 21, 2000,
the Court of Appeals issued its opinion in our favor on all issues.

On October 17, 1997, a group of six plaintiffs filed the Thomas suit against us
and the National Science Foundation in the United States District Court,
District of Columbia, challenging the legality of fees defendants charge for the
registration of domain names on the Internet and seeking restitution of fees
collected from domain name registrants in an amount in excess of $100 million,
damages, and injunctive and other relief. Plaintiffs alleged violations of the
Sherman Act, the U.S. Constitution, the Administrative Procedures Act and the
Independent Offices Appropriations Act. On February 10, 1998, the plaintiffs
filed a motion for preliminary injunction against us seeking several items of
relief. On April 6, 1998, the Court issued its opinion granting summary judgment
in favor of the plaintiffs on the Intellectual Infrastructure Fund, ruling it an
"unlawful tax." The court also granted our motion to dismiss all other counts
(II through X) and simultaneously denied the plaintiffs' preliminary injunction
motion against us. On April 30, 1998, Congress passed H.R. 3579 which was signed
into law by the President on May 1, 1998. Section 8003 of H.R. 3579 legalized,
ratified and confirmed the entire Intellectual Infrastructure Fund and
authorized and directed the National Science Foundation to deposit the entire
fund into the U.S. Treasury. On August 28, 1998, the District Court dismissed
the entire case, issuing a final judgment in the matter. In October 1998, the
plaintiffs appealed the court's dismissal of their claims, and oral argument
occurred on February 25, 1999. On May 14, 1999, the Court of Appeals ruled in
our favor by unanimously affirming the District Court's decision. The Court of
Appeals denied the plaintiffs' motion for reconsideration and entered final
judgment on July 20, 1999. On October 12, 1999, the plaintiffs filed a Petition
for a Writ of Certiorari with the U.S. Supreme Court. Our opposition to that
Petition was filed on December 8, 1999. On January 18, 2000, the U.S. Supreme
Court denied the plaintiffs' petition.

On June 27, 1997, SAIC received a Civil Investigative Demand, or "CID," from the
U.S. Department of Justice issued in connection with an investigation to
determine whether there is, has been, or may be any antitrust violation under
the Sherman Act relating to its Internet registration services. The CID sought
documents and information from SAIC and us relating to our Internet registration
business. On April 29, 1999, we received a second CID seeking additional
information and documents relating to our ownership rights in, policies relating
to access to, and our use of, data that we compile in the course of operating
our Internet registration business. We provided information responsive to the
CID. On June 23, 1999, the Department of Justice formally notified us that SAIC
had been removed as a subject of the investigation. On January 28, 2000, the
Department of Justice formally notified us that the investigation had been
closed. No enforcement action was taken.

On August 17, 1998, we received notice from the Commission of the European
Communities, or "EC," of an investigation concerning the Company's Premier
Program agreements in Europe. The EC requested production of these agreements
and related materials for review and we complied. On June 17, 1999, we received
a second inquiry from the EC concerning our registrar licensing agreements with
the five newly-accredited testbed

40
<PAGE> 44

registrars and we responded to this inquiry on July 9, 1999. On January 26,
2000, the EC formally notified us that its investigation had been closed. No
enforcement action was taken.

We are involved in various other investigations, claims and lawsuits arising in
the normal conduct of our business, none of which, in our opinion will harm our
business.

Legal proceedings in which we are involved have resulted and likely will result
in, and any future legal proceedings can be expected to result in, substantial
legal and other expenses and a diversion of the efforts of our personnel.

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<PAGE> 45

MANAGEMENT

The name, age and position held with Network Solutions by each of the executive
officers and directors of Network Solutions as of December 22, 1999 are set
forth below:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
James P. Rutt (1)............... 46 Chief Executive Officer and Director
Michael A. Daniels (1)(2)....... 53 Chairman of the Board
Robert J. Korzeniewski.......... 42 Chief Financial Officer
Bruce L. Chovnick............... 39 Senior Vice President and General Manager, Registry Business
Jonathan W. Emery............... 47 Senior Vice President, General Counsel and Secretary
David H. Holtzman............... 43 Senior Vice President, Chief Technology Officer
Timothy R. Ranney............... 44 Senior Vice President and General Manager, Internet Technology
Services Business
Douglas L. Wolford.............. 38 Senior Vice President and General Manager, Registrar and
Value-Added Services Business
Michael G. Voslow............... 40 Vice President, Finance and Treasurer
Richard A. Walsh................ 52 Vice President, Operations and acting Chief Information
Officer
Alan E. Baratz (2)(3)........... 45 Director
J. Robert Beyster (1)(2)........ 75 Director
Craig I. Fields (1)(3).......... 53 Director
J. Dennis Heipt (2)............. 57 Director
William A. Roper, Jr. (3)....... 53 Director
Stratton D. Sclavos (2)......... 38 Director
</TABLE>

- ---------------
(1) Member of Executive Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.

JAMES P. RUTT has served as Chief Executive Officer of Network Solutions since
May 1999 and as a Director of Network Solutions since July 1999. From 1993 until
May 1999, Mr. Rutt served in various senior management positions with The
Thomson Corporation, one of the world's leading information publishing
companies, and, most recently, he served as Chief Technology Officer. Prior to
that, Mr. Rutt was the co-founder of First Call, an investment information
service that was one of the earliest ventures to provide on-line delivery of
complex information products. Mr. Rutt received a B.S. from the Massachusetts
Institute of Technology -- Sloan School of Management.

MICHAEL A. DANIELS has served as Chairman of the Board of Network Solutions
since 1995. From November 1998 to May 1999, Mr. Daniels served as acting Chief
Executive Officer of Network Solutions. Since 1986, Mr. Daniels has served in
various positions with SAIC and has served as a Sector Vice President and Sector
Manager for the Technology Applications Sector of SAIC since 1993. Prior
thereto, Mr. Daniels served as a Group Senior Vice President of SAIC from 1991
to 1993. Mr. Daniels received a B.S. and an M.A. from Northwestern University
and received a J.D. from the University of Missouri School of Law.

ROBERT J. KORZENIEWSKI has served as Chief Financial Officer of Network
Solutions since March 1996. From November 1998 to May 1999, Mr. Korzeniewski
served as acting Chief Operating Officer of Network Solutions. From 1987 until
October 1997, Mr. Korzeniewski held a variety of senior financial positions with
SAIC and served as a Corporate Vice President for Administration of SAIC from
1989 until 1997. Mr. Korzeniewski is a Certified Public Accountant and received
a B.S. in Business Administration from Salem State College.

BRUCE L. CHOVNICK has served as Senior Vice President and General Manager,
Registry Business of Network Solutions since August 1999 and Senior Vice
President and General Manager, Internet Technology Services Business of Network
Solutions from September 1997 to August 1999. From October 1993 until September
1997, Mr. Chovnick served in various executive leadership roles with General
Electric Information Services, Inc., an electronic commerce company, and, most
recently, he served as Vice President of its Global Internet Solutions

42
<PAGE> 46

business. Prior to that he was a Senior Manager of IBM Corporation, a computer
systems, software, networking systems and storage devices manufacturer, from
January 1984 to September 1993. Mr. Chovnick received a B.S. in Computer Science
from the University of Florida.

JONATHAN W. EMERY has served as Senior Vice President, General Counsel and
Secretary of Network Solutions since December 1997. From 1986 until 1997, Mr.
Emery held a variety of positions with Tambrands Inc., a consumer products
company, most recently as Vice President, Senior Counsel and Assistant
Secretary. Prior thereto, from 1977 until 1986, Mr. Emery was an associate with
the law firm of Brown & Wood. Mr. Emery received a B.A. from Trinity College,
Hartford, Connecticut, and a J.D. from Boston University School of Law.

DAVID H. HOLTZMAN has served as Senior Vice President, Chief Technology Officer
of Network Solutions since August 1999 and Senior Vice President, Engineering
from February 1997 to August 1999. From September 1995 until January 1997, he
served as Business Development Manager, Development Manager and Chief Scientist,
Internet Information Technology (InfoMarket) group of IBM Corporation, a
computer systems, software, networking systems and storage devices manufacturer.
From May 1992 to August 1995, he served as a Senior Associate at Booz-Allen &
Hamilton, a management consulting firm. Mr. Holtzman received a B.A. in
Philosophy from the University of Pittsburgh and a B.S. in Computer Science from
the University of Maryland.

TIMOTHY R. RANNEY has served as Senior Vice President and General Manager of the
Internet Technology Services Business of Network Solutions since September 1999.
From February 1998 to September 1999, Mr. Ranney served as Director, then Vice
President of the Southeast Region, Internet Technology Services of Network
Solutions. Prior to joining Network Solutions, Mr. Ranney was Vice President,
Sales for Distributed Systems Management, a consulting and software development
firm, from September 1997 to January 1998 and President of Unix Integration
Services, a consulting and software development firm, from March 1990 to August
1997. Mr. Ranney received a B.S. in Business Administration from Bemidji State
University in Minnesota.

DOUGLAS L. WOLFORD has served as Senior Vice President and General Manager,
Registrar and Value-Added Services Business since August 1999 and Senior Vice
President, Marketing and Sales of Network Solutions since from December 1997
until August 1999. From December 1994 to November 1997, Mr. Wolford was employed
by General Electric Information Services, Inc., an electronic commerce company,
during which tenure he progressed to the position of General
Manager -- Marketing (Americas). From March 1989 to December 1994 he was
employed by the National Academy of Engineering, most recently as Director,
Development and Public Affairs. Mr. Wolford received a B.S. in Mechanical
Engineering from North Carolina State University, a Certificat de Langue
Francaise from Sorbonne University and an M.B.A. in Marketing from the
University of Maryland.

MICHAEL G. VOSLOW has served as Vice President, Finance and Treasurer since
March 1998 and as Treasurer of Network Solutions since January 1997. From
January 1995 to January 1997, Mr. Voslow was Vice President and Corporate
Controller for MAXM Systems Corporation, a worldwide provider of computer
software and professional services. Prior to joining MAXM, Mr. Voslow was a
Senior Manager at Price Waterhouse where he served from August 1983 to January
1995. Mr. Voslow is a Certified Public Accountant and received a B.S. in
Business Administration from Miami University (Ohio) and an M.B.A. in Finance
from Duke University.

RICHARD A. WALSH has served as acting Chief Information Officer since August
1999, Vice President, Operations of Network Solutions since March 1999 and
Director, Operations Support from July 1997 to March 1999. From September 1995
to July 1997, Mr. Walsh was self employed and provided operation support
consulting services to various large scale information technology operations.
Prior to that Mr. Walsh held several executive management positions at Sprint
International, a provider of global telecommunications services, from August
1991 to September 1995. Mr. Walsh received a B.A. from the University of
Maryland and an M.B.A. from the University of Southern California.

ALAN E. BARATZ has served as a director of Network Solutions since September
1999. Since September 1999, Dr. Baratz has served as a Managing Director of E.M.
Warburg, Pincus & Co., LLC, a private equity investment firm. Prior to joining
Warburg, Pincus & Co., from 1996 to August 1999 Dr. Baratz served in various
senior management positions with Sun Microsystems, a provider of products,
services and support solutions for building

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<PAGE> 47

and maintaining network computing environments, most recently as President of
Sun Microsystems' Software Products and Platforms division. Prior to joining Sun
Microsystems, Dr. Baratz served as President and Chief Executive Officer of
Delphi Internet, the online business unit of Rupert Murdoch's News Corp from
June 1994 to 1995.

J. ROBERT BEYSTER has served as a director of Network Solutions since 1996.
Since 1998, Dr. Beyster has been the Chief Executive Officer, President and
Chairman of the Board of SAIC, a company he founded in 1969. From 1988 to 1998,
Dr. Beyster was Chief Executive Officer and Chairman of the Board of SAIC. Dr.
Beyster is also the Chairman of the Board of SAIC Venture Capital Corporation.
Dr. Beyster is a Fellow of the American Nuclear Society and a Fellow of the
American Physical Society. Dr. Beyster is also the founder, President and a
member of the Board of Trustees of the Foundation for Enterprise Development, a
nonprofit organization that promotes employee ownership.

CRAIG I. FIELDS has served as a director of Network Solutions since 1997. Dr.
Fields has served as Chairman of the Defense Science Board since 1994. Dr.
Fields has served as a consultant to several companies, including as a
consultant to SAIC since 1994. Prior thereto, Dr. Fields served as Vice Chairman
of Alliance Gaming Corporation, a diversified entertainment company, from 1994
to 1997. From 1990 until 1994, Dr. Fields served as Chairman and Chief Executive
Officer of the Microelectronics and Computer-Technology Corporation, a privately
held research and development consortium. Dr. Fields serves as a director of
ENSCO International Incorporated and Firearms Training Systems, Inc.

J. DENNIS HEIPT has served as a director of Network Solutions since February
1998. Mr. Heipt has served as Executive Vice President of SAIC since October
1999 and as Corporate Secretary since 1984. Mr. Heipt has held various positions
with SAIC since 1979, including Senior Vice President for Administration from
1984 to October 1999. Mr. Heipt is also a director of SAIC Venture Capital
Corporation.

WILLIAM A. ROPER, JR. has served as a director of Network Solutions since 1996.
Mr. Roper has served as Executive Vice President of SAIC since October 1999 and
as Chief Financial Officer since 1990. Mr. Roper served as Senior Vice President
of SAIC from 1990 to October 1999. Mr. Roper also serves as a director of SAIC
Venture Capital Corporation, ODS Networks, Inc. and Daleen Technologies, Inc.

STRATTON D. SCLAVOS has served as a director of Network Solutions since 1997.
Mr. Sclavos has served as President, Chief Executive Officer and director of
VeriSign, Inc., a provider of digital certificate services, since 1995. From
1993 until 1995, Mr. Sclavos served as Vice President of Worldwide Marketing and
Sales for Taligent, Inc., a joint venture of Apple Computer, Inc., IBM
Corporation and The Hewlett-Packard Company, Inc. From 1992 until 1993, Mr.
Sclavos served as Vice President of Worldwide Sales and Business Development for
GO Corporation, a mobile computing company. From 1988 until 1993, Mr. Sclavos
served in various executive positions with MIPS Computers Systems.

Several officers and employees of SAIC currently serve as directors of Network
Solutions. We anticipate that the composition of our board of directors will
change in connection with the decrease in SAIC's percentage ownership of Network
Solutions.

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<PAGE> 48

SELLING STOCKHOLDERS

The following table sets forth certain information as of December 15, 1999
regarding the beneficial ownership of common stock by each of the selling
stockholders and the shares of common stock offered hereby. Prior to this
offering, SAIC Venture Capital Corporation, a wholly-owned subsidiary of SAIC,
held approximately 44% of the outstanding common stock. After selling the
6,700,000 shares it is offering in this prospectus, SAIC Venture Capital
Corporation will hold approximately 23% of the outstanding common stock.

The following table is based on information supplied by the selling
stockholders. Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with respect to
securities. Except as indicated by footnotes and subject to community property
laws, where applicable, the persons named below have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by
them. Shares of common stock that are issuable upon exercise of options that are
exercisable within 60 days of December 15, 1999 are deemed to be beneficially
owned by the person holding such options or such shares of common stock for the
purpose of computing the percentage ownership of such person, but are not
treated as outstanding for purposes of computing the percentage ownership of any
other person.

Applicable percentages of shares beneficially owned prior to and after this
offering and the number of shares being offered are based on 33,883,707 shares
of common stock outstanding as of December 15, 1999. The applicable percentages
of shares of common stock beneficially owned after this offering gives effect to
the 1,000,000 shares of common stock to be issued and sold by Network Solutions,
6,700,000 shares of common stock to be sold by SAIC Venture Capital Corporation
and 30,000 shares of common stock to be issued to and sold by the other selling
stockholders after they exercise their stock options simultaneously with the
closing of this offering. The percentages shown assume that the underwriters'
option to purchase up to an additional 1,159,500 shares of common stock is not
exercised.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
COMMON STOCK
SHARES BENEFICIALLY SHARES BENEFICIALLY SHARES SUBJECT
OWNED PRIOR TO NUMBER OF SHARES OWNED AFTER TO UNVESTED
OFFERING BEING OFFERED OFFERING OPTIONS
-------------------- ------------------- ------------------- --------------
BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT NUMBER
---------------- ---------- ------- --------- ------- --------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Science Applications
International Corporation(1)... 14,850,000 43.8% 6,700,000 19.8% 8,150,000 23.3% --
Craig I. Fields(2)............... 27,300 * 12,300 * 15,000 * 12,300
Robert J. Korzeniewski(3)........ 52,125 * 10,000 * 42,125 * 96,320
Jonathan W. Emery(4)............. 19,623 * 7,700 * 11,923 * 43,200
</TABLE>

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

* Less than 1%.
(1) Represents shares held through a wholly-owned subsidiary, SAIC Venture
Capital Corporation.
(2) Includes 21,300 shares of common stock issuable pursuant to options
exercisable within 60 days of December 15, 1999.
(3) Includes 26,120 shares of common stock issuable pursuant to options
exercisable within 60 days of December 15, 1999.
(4) Includes 18,000 shares of common stock issuable pursuant to options
exercisable within 60 days of December 15, 1999.

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<PAGE> 49

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Our authorized capital stock consists of 210,000,000 shares of common stock and
10,000,000 shares of preferred stock. No shares of preferred stock are
outstanding as of the date hereof. Of the 210,000,000 shares of common stock
authorized, as of December 15, 1999, 33,883,707 shares were outstanding,
3,807,480 shares were issuable upon exercise of outstanding stock options (of
which options to purchase 371,799 shares were currently exercisable) and
2,699,921 shares were reserved for issuance pursuant to certain employee
benefits plans (exclusive of the 3,807,480 shares reserved for issuance upon
exercise of outstanding stock options).

On December 21, 1999, our board of directors approved a 2-for-1 stock split of
the shares of common stock, to be effected in the form of a stock dividend on
shares of common stock. The record and distribution dates for the stock dividend
have not yet been determined but will occur after completion of this offering.

COMMON STOCK

The holders of common stock are entitled to one vote per share and do not have
cumulative voting rights. Generally, all matters to be voted on by stockholders
must be approved by a majority (or, in the case of election of directors, by a
plurality) of the votes entitled to be cast by all shares of common stock
subject to any voting rights granted to holders of any preferred stock. In the
event we voluntarily or involuntarily liquidate, dissolve or wind up, the
holders of shares of common stock would share ratably in all assets remaining
after payment of liabilities subject to prior distribution rights and payment of
any distributions owing to holders of shares of preferred stock then
outstanding, if any. Holders of the shares of common stock have no preemptive
rights, and the shares of common stock are not subject to further calls or
assessment. There are no redemption or sinking fund provisions applicable to the
shares of common stock.

Holders of common stock will share in an equal amount per share in any dividend
declared by our board of directors, subject to any preferential rights of any
outstanding preferred stock.

PREFERRED STOCK

There are currently no shares of preferred stock outstanding. Under our
certificate of incorporation, our board of directors has the authority, without
further action by the stockholders, to issue from time to time up to 10,000,000
shares of the preferred stock in one or more series and to fix the number of
shares, designations, preferences, powers, and relative, participating, optional
or other special rights and the qualifications or restrictions of the preferred
stock. The preferences, powers, rights, qualifications and restrictions of
different series of preferred stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions, and purchase funds and other matters. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could decrease the
amount of earnings and assets available for distribution to holders of common
stock or affect adversely the rights and powers, including voting rights, of the
holders of common stock, and may have the effect of delaying, deferring or
preventing a change in control. We have no present plan to issue any shares of
preferred stock.

REGISTRATION RIGHTS

Pursuant to the registration rights agreement between us and SAIC, if we propose
to register any of our securities either for our own account or for the account
of our other security holders, SAIC is entitled to notice of the registration
and is entitled to include, at our expense, their shares in the registration,
subject to cutback by the underwriters. In addition, SAIC may require us on not
more than two occasions, to register its shares. The first registration required
by SAIC was effected in February 1999. The second registration required by SAIC
is the registration being effected with this offering. We have agreed to
indemnify SAIC in connection with any such registration.

46
<PAGE> 50

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Certificate of Incorporation

Our certificate of incorporation provides that our bylaws may be repealed or
amended only by a two-thirds vote of our board of directors or a two-thirds vote
of our stockholders. In addition, those provisions of our certificate of
incorporation may only be amended or repealed by the holders of at least
two-thirds of the voting power of all the then-outstanding shares of stock
entitled to vote generally for the election of directors voting together as a
single class. The provisions described above, together with the ability of our
board of directors to issue preferred stock as described under "Description of
Capital Stock -- Preferred Stock," may have the effect of deterring a hostile
takeover or delaying a change in control or change in management.

Delaware Takeover Statute

We have elected not to be governed by Section 203 of the Delaware General
Corporation Law. This section requires the vote of at least 66 2/3% of the
outstanding voting stock of a company not owned by an interested stockholder to
approve certain business combinations. Section 203 defines interested
stockholder as any entity or person owning 15% or more of the outstanding voting
stock of the company and any entity or person affiliated with, controlling or
controlled by such entity or person. As a result, if we decide to enter into any
such proposed business combination, we will only need the approval of a majority
of our outstanding voting stock.

CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

Our certificate of incorporation provides that any person purchasing or
acquiring an interest in shares of our capital stock is deemed to have consented
to the following provisions relating to intercompany agreements and to
transactions with interested parties and corporate opportunities. The corporate
charter of SAIC does not include comparable provisions relating to intercompany
agreements, transactions with interested parties or corporate opportunities.

Transactions with Interested Parties

Our certificate of incorporation provides that no contract, agreement,
arrangement or transaction between us and SAIC or any related entity will be
void or voidable solely because SAIC, a related entity or any officers or
directors of SAIC, a related entity or Network Solutions are parties or because
these directors or officers are present at or vote with respect to the
authorization of the contract, agreement, arrangement or transaction. Our
certificate of incorporation also provides that SAIC, a related entity and the
officers or directors of SAIC and the related entity will not be presumed liable
to us or our stockholders for:

- breach of any fiduciary duty or duty of loyalty,

- failure to act in our best interests, or

- receipt of any improper personal benefit,

simply because SAIC or any director or officer of SAIC or a related entity, in
good faith, takes any action or gives or withholds any consent with respect to
any agreement or contract between SAIC or a related entity and us.

For purposes of the foregoing, "Network Solutions" or "us" and "SAIC" include
all corporations and other entities in which either we or SAIC owns fifty
percent or more of the outstanding voting stock, and "related entity" means one
or more corporations or other entities in which one or more of our directors
have a direct or indirect financial interest.

Competition by SAIC with Us; Corporate Opportunities

Our certificate of incorporation provides that SAIC has no duty to refrain from
engaging in the same or similar activities or lines of business as us and that
neither SAIC nor any of its directors, officers or employees will be liable to
us or our stockholders for breach of any fiduciary duty due to any of these
activities. If SAIC learns of

47
<PAGE> 51

a potential matter which may be a corporate opportunity for both SAIC and us,
SAIC has no duty to communicate or offer this opportunity to us. In addition,
SAIC will not be liable to us or our stockholders for breach of any fiduciary
duty if SAIC pursues or acquires the corporate opportunity or does not
communicate it to us.

If one of our directors, officers or employees who is also a director, officer
or employee of SAIC knows of a potential transaction or matter that may be a
corporate opportunity both for us and SAIC, the director, officer or employee is
entitled to offer the corporate opportunity to us or SAIC as the director,
officer or employee deems appropriate under the circumstances in his or her sole
discretion, and no such director, officer or employee will be presumed liable to
us or our stockholders for breach of any fiduciary duty or duty of loyalty or
failure to act in our best interests or the derivation of any improper personal
benefit by reason of the fact that:

- the director, officer or employee offered the corporate opportunity to
SAIC (rather than to us) or did not communicate information regarding the
corporate opportunity to us, or

- SAIC pursues or acquires such corporate opportunity for itself or directs
the corporate opportunity to another person or does not communicate the
corporate opportunity to us.

The enforceability of the provisions discussed above under Delaware corporate
law has not been established and, due to the absence of relevant judicial
authority, our counsel is not able to deliver an opinion as to the
enforceability of these provisions. These provisions of our certificate of
incorporation eliminate certain rights that might have been available to
stockholders under Delaware law, although the enforceability of these provisions
has not been established.

These provisions of our certificate of incorporation expire on the date that
SAIC ceases, directly or indirectly, to own at least 20% of our outstanding
shares of common stock and no person who is a director or officer of Network
Solutions is also a director or officer of SAIC or its subsidiaries.

Actions Under Intercompany Agreements

Our certificate of incorporation limits the liability of SAIC and its
subsidiaries for some breaches of their fiduciary duties in connection with
action that may be taken or not taken in good faith under the intercompany
agreements.

Advance Notice Provision

Our bylaws provide for an advance notice procedure for the nomination, other
than by or at the direction of our board of directors, of candidates for
election as directors as well as for other stockholder proposals to be
considered at annual meetings of stockholders. In general, notice of intent to
nominate a director or raise matters at such meetings will have to be received
by us not less than 120 days prior to any meeting of the stockholders called for
the election of directors, and must contain information concerning the person to
be nominated or the matters to be brought before the meeting and concerning the
stockholder submitting the proposal.

48
<PAGE> 52

UNDERWRITING

J.P. Morgan Securities Inc. is acting as book running lead manager for this
offering. J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated are
acting as joint lead managers.

The underwriters named below, for whom J.P. Morgan Securities Inc., Morgan
Stanley & Co. Incorporated, Chase Securities Inc., PaineWebber Incorporated,
FleetBoston Robertson Stephens Inc. and Prudential Securities Incorporated are
acting as representatives, have severally agreed, subject to the terms and
conditions set forth in the underwriting agreement among us, the selling
stockholders and the underwriters, to purchase from us and the selling
stockholders, and we and the selling stockholders have agreed to sell to the
underwriters, the respective number of shares of common stock set forth opposite
their names below:

<TABLE>
<CAPTION>
---------
NUMBER
OF SHARES
UNDERWRITERS ---------
<S> <C>
J.P. Morgan Securities Inc. ................................ 2,132,000
Morgan Stanley & Co. Incorporated........................... 2,132,000
Chase Securities Inc. ...................................... 1,151,000
PaineWebber Incorporated.................................... 550,000
FleetBoston Robertson Stephens Inc. ........................ 360,000
Prudential Securities Incorporated.......................... 250,000
Bear, Stearns & Co. Inc. ................................... 225,000
Dain Rauscher Wessels....................................... 225,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 200,000
Banc of America Securities LLC.............................. 150,000
Lehman Brothers Inc. ....................................... 150,000
Legg Mason Wood Walker, Incorporated........................ 125,000
Friedman Billings Ramsey & Co., Inc. ....................... 80,000
---------
Total............................................. 7,730,000
=========
</TABLE>

The nature of the underwriters' obligations under the underwriting agreement is
such that all of the common stock being offered, excluding shares covered by the
over-allotment option granted to the underwriters, must be purchased if any are
purchased.

The representatives of the underwriters have advised us and the selling
stockholders that the several underwriters propose to offer the common stock to
the public initially at the public offering price set forth on the cover page of
this prospectus and may offer the common stock to selected dealers at this price
less a concession not to exceed $5.85 per share. The underwriters may allow, and
these dealers may reallow, a concession to other dealers not to exceed $0.10 per
share. After the initial public offering of the common stock, the public
offering price and other selling terms may be changed by the representatives.

We have granted the underwriters an option, exercisable for 30 days from the
date of this prospectus, to purchase up to 1,159,500 additional shares of common
stock at the same price per share to be paid by the underwriters for the other
shares offered hereby. If the underwriters purchase any such additional shares
pursuant to the option, each of the underwriters will be committed to purchase
such additional shares in approximately the same proportion as shown in the
above table. The underwriters may exercise the option only to cover
over-allotments, if any, made in connection with the distribution of the common
stock offered in this prospectus.

49
<PAGE> 53

The following table shows the per share and total underwriting discounts to be
paid to the underwriters by us and by the selling stockholders. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
over-allotment option.

<TABLE>
<CAPTION>
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
By Network Solutions
Per share................................................ $ 9.75 $ 9.75
Total.................................................... $ 9,750,000 $21,055,125
By the Selling Stockholders
Per share................................................ $ 9.75 --
Total.................................................... $65,617,500 --
</TABLE>

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

We estimate that the total expenses of this offering, excluding underwriting
discounts, will be $1,200,000. We will be responsible for all of these expenses.

In connection with this offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriters may overallot this offering, creating a syndicate
short position. In addition, the underwriters may bid for, and purchase, shares
of common stock in the open market to cover syndicate shorts or to stabilize the
price of the common stock. Finally, the underwriting syndicate may reclaim
selling concessions allowed for distributing shares of common stock in this
offering, if the syndicate repurchases previously distributed common stock in
syndicate covering transactions, in stabilization transactions or otherwise. Any
of these activities may stabilize or maintain the market price of the shares of
common stock above independent market levels. The underwriters are not required
to engage in these activities, and may end any of these activities at any time.

Prior to the pricing of the shares, and until such time when a stabilizing bid
may have been made, some or all of the underwriters who are market makers in the
shares may make bids for or purchases of shares subject to certain restrictions,
known as passive market making activities.

We, the selling stockholders and our executive officers and directors have
agreed, with limited exceptions, that, during the period beginning from the date
of this prospectus and continuing and including the date 90 days after the date
of this prospectus, they will not, directly or indirectly offer, sell, offer to
sell, contract to sell or otherwise dispose of any shares of common stock or any
of our securities which are substantially similar to the common stock, including
but not limited to any securities that are convertible into or exchangeable for,
or that represent the right to receive, common stock or any such substantially
similar securities or enter into any swap, option, future, forward or other
agreement that transfers, in whole or in part, the economic consequence of
ownership of common stock or any securities substantially similar to the common
stock, other than pursuant to employee benefit plans existing on the date of
this prospectus, without the prior written consent of J.P. Morgan Securities
Inc.

It is expected that delivery of the shares will be made to investors on or about
February 11, 2000.

The common stock is traded on the Nasdaq National Market under the symbol NSOL.

From time to time in the ordinary course of their respective businesses, members
of the underwriters and their affiliates have engaged in and may in the future
engage in commercial and/or investment banking transactions with SAIC, us and
their and our affiliates. Each of the representatives, or its predecessor, acted
as an underwriter in connection with a public offering of securities which we
consummated on February 12, 1999.

The underwriters have agreed that:

- they have not offered or sold and, before the date which is six months
after the date of this prospectus, will not offer or sell shares to
persons in the United Kingdom, except to persons whose ordinary

50
<PAGE> 54

activities involve them in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of their businesses
or in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 or the Financial Services
Act 1986;

- they have complied with and will comply with all applicable provisions of
the Financial Services Act 1986 regarding anything done by them in
relation to the shares in, from or involving the United Kingdom; and

- they have only issued or passed on and will only issue or pass on in the
United Kingdom any documents received by them in connection with the
offer of shares to a person who is of a kind described in Article 11(3)
of the Financial Services Act 1986, Order 1996 or is a person to whom
this document may lawfully be issued or passed.

LEGAL MATTERS

Selected legal matters with respect to the validity of the common stock offered
in this prospectus are being passed upon for us and the selling stockholders by
Pillsbury Madison & Sutro LLP, Palo Alto, California and Washington, D.C. Cahill
Gordon & Reindel, New York, New York, is acting as counsel to the underwriters
in connection with legal matters relating to the shares of common stock offered
in this prospectus.

EXPERTS

The financial statements as of December 31, 1997 and 1998, and for each of the
three years in the period ended December 31, 1998, included in this prospectus
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have also filed with the SEC a registration
statement on Form S-3 to register the shares of common stock being offered in
this prospectus. This prospectus, which forms part of the registration
statement, does not contain all of the information included in the registration
statement. For further information about us and the shares of common stock
offered in this prospectus, you should refer to the registration statement and
its exhibits and our other SEC filings. Statements made in this prospectus
regarding the contents of any contract or other document including, but not
limited to, our agreements with ICANN dated November 10, 1999 and amendment 19
to our cooperative agreement with the Department of Commerce dated November 10,
1999, which are filed as exhibits to our current report on Form 8-K filed with
the SEC on November 30, 1999, are not necessarily complete. You should refer to
the registration statement and its exhibits and our other SEC filings for a more
complete description and each such statement is deemed qualified in its entirety
by such reference. You may read and copy any document we file with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the Public Reference Room. We file our SEC materials electronically
with the SEC, so you can also review our filings by accessing the web site
maintained by the SEC at http://www.sec.gov. This web site contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the SEC.

The SEC allows us to "incorporate by reference" the information we file with
them, which means we can disclose important information to you by referring you
to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this prospectus. The
most recent information that we file with the SEC automatically updates and
supersedes more dated information. We have previously filed the following
documents with the SEC and incorporate them by reference into this prospectus:

1. Our annual report on Form 10-K for the year ended December 31, 1998;

2. Our quarterly reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999 and September 30, 1999;

51
<PAGE> 55

3. Our current reports on Form 8-K filed on January 15, 1999, February 9,
1999, February 11, 1999, October 6, 1999, November 30, 1999 and January
31, 2000; and

4. The description of the common stock contained in registration statement
on Form 8-A, filed by us with the SEC on August 8, 1997, as amended on
June 17, 1999.

We also incorporate by reference all documents subsequently filed by us pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the termination of this offering.

We will provide without charge to each person to whom a prospectus is delivered,
including any beneficial owner, a copy of any or all of the information that has
been incorporated by reference in this prospectus. If you would like to obtain
this information from us, please direct your request, either in writing or by
telephone, to Jonathan W. Emery, Esq., Network Solutions, Inc., 505 Huntmar Park
Drive, Herndon, Virginia 20170, telephone (703) 742-0400.

52
<PAGE> 56

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
REFERENCE
---------
<S> <C>
Report of Independent Accountants........................... F-2
Statements of Financial Position as of December 31, 1997 and
1998 and September 30, 1999 (Unaudited)................... F-3
Statements of Operations for the Years Ended December 31,
1996, 1997 and 1998 and for the Nine Months Ended
September 30, 1998 and 1999 (Unaudited)................... F-4
Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1996, 1997 and 1998 and for the Nine
Months Ended September 30, 1999 (Unaudited)............... F-5
Statements of Cash Flows for the Years Ended December 31,
1996, 1997 and 1998 and for the Nine Months Ended
September 30, 1998 and 1999 (Unaudited)................... F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 57

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Network Solutions, Inc.

In our opinion, the accompanying statements of financial position and the
related statements of operations, of changes in stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Network Solutions, Inc. (a majority-owned subsidiary of Science Applications
International Corporation) at December 31, 1998 and 1997 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PRICEWATERHOUSECOOPERS LLP

PRICEWATERHOUSECOOPERS LLP

McLean, VA
February 5, 1999

F-2
<PAGE> 58

NETWORK SOLUTIONS, INC.

STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
---------------------------------------------
DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 41,146,000 $ 12,862,000 $ 98,863,000
Short-term investments....................... 40,200,000 118,808,000 99,090,000
Accounts receivable, net..................... 5,792,000 22,628,000 45,783,000
Prepaids and other assets.................... 1,005,000 4,001,000 13,415,000
Deferred tax asset........................... 20,153,000 40,508,000 81,920,000
Restricted assets............................ 25,873,000 -- --
------------ ------------ ------------
Total current assets............... 134,169,000 198,807,000 339,071,000
Furniture and equipment, net................. 6,146,000 16,005,000 54,688,000
Long-term investments........................ -- 13,590,000 36,013,000
Deferred tax asset........................... 8,128,000 14,831,000 29,990,000
Goodwill, net................................ 1,177,000 634,000 226,000
------------ ------------ ------------
Total Assets....................... $149,620,000 $243,867,000 $459,988,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities..... $ 6,426,000 $ 28,287,000 $ 41,850,000
Due to parent................................ 1,250,000 4,766,000 6,578,000
Income taxes payable......................... 5,042,000 5,409,000 8,767,000
Current portion of capital lease
obligations................................ 842,000 834,000 436,000
Deferred revenue, net........................ 43,789,000 93,720,000 200,160,000
Internet fund liability...................... 25,873,000 -- --
------------ ------------ ------------
Total current liabilities.......... 83,222,000 133,016,000 257,791,000
Capital lease obligations.................... 1,081,000 247,000 --
Long-term deferred revenue, net.............. 17,662,000 35,474,000 82,779,000
------------ ------------ ------------
Total liabilities.................. 101,965,000 168,737,000 340,570,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, authorized
10,000,000 shares; none issued and
outstanding in 1997 and 1998............... -- -- --
Common stock, $.001 par value; authorized
210,000,000 shares; 33,381,167 issued and
outstanding in 1999........................ -- -- 33,000
Class A common stock, $.001 par value;
authorized 100,000,000 shares; 7,590,000
and 9,140,372 issued and outstanding in
1997 and 1998.............................. 4,000 9,000 --
Class B common stock, $.001 par value;
authorized 30,000,000 shares; 23,850,000
issued and outstanding in 1997 and 1998.... 12,000 24,000 --
Additional paid-in capital................... 56,451,000 72,331,000 86,783,000
Retained earnings (accumulated deficit)...... (8,812,000) 2,407,000 20,278,000
Accumulated other comprehensive income....... -- 359,000 12,324,000
------------ ------------ ------------
Total stockholders' equity......... 47,655,000 75,130,000 119,418,000
------------ ------------ ------------
Total Liabilities and Stockholders'
Equity........................... $149,620,000 $243,867,000 $459,988,000
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements
F-3
<PAGE> 59

NETWORK SOLUTIONS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
--------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue..................... $18,862,000 $45,326,000 $93,652,000 $62,395,000 $144,885,000
Cost of revenue................. 14,666,000 25,798,000 38,530,000 26,451,000 54,040,000
----------- ----------- ----------- ----------- ------------
Gross profit.................... 4,196,000 19,528,000 55,122,000 35,944,000 90,845,000
Research and development
expenses...................... 680,000 1,653,000 4,821,000 2,893,000 7,365,000
Selling, general and
administrative expenses....... 6,280,000 12,268,000 37,144,000 24,438,000 59,581,000
Interest income................. (496,000) (2,211,000) (6,303,000) (4,423,000) (6,312,000)
Other expenses.................. -- 116,000 116,000 93,000 45,000
----------- ----------- ----------- ----------- ------------
Income (loss) before income
taxes......................... (2,268,000) 7,702,000 19,344,000 12,943,000 30,166,000
Provision (benefit) for income
taxes......................... (643,000) 3,471,000 8,109,000 5,426,000 12,295,000
----------- ----------- ----------- ----------- ------------
Net income (loss)............... $(1,625,000) $ 4,231,000 $11,235,000 $ 7,517,000 $ 17,871,000
=========== =========== =========== =========== ============
Earnings (loss) per common
share:
Basic......................... $ (0.07) $ 0.16 $ 0.35 $ 0.24 $ 0.54
=========== =========== =========== =========== ============
Diluted....................... $ (0.07) $ 0.16 $ 0.34 $ 0.23 $ 0.51
=========== =========== =========== =========== ============
</TABLE>

The accompanying notes are an integral part of these financial statements
F-4
<PAGE> 60

NETWORK SOLUTIONS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
ACCUMULATED
CLASS A CLASS B OTHER
COMMON STOCK COMMON STOCK COMMON STOCK ADDITIONAL COMPRE-
-------------------- --------------------- ---------------------- PAID-IN HENSIVE
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME
---------- ------- ----------- ------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995..... -- $ -- -- $ -- 12,500,000 $ 12,000 $ 4,468,000 $ --
Net loss for the year ended
December 31, 1996............. -- -- -- -- -- -- --
---------- ------- ----------- ------- ----------- -------- ----------- -----------
Balance, December 31, 1996..... -- -- -- -- 12,500,000 12,000 4,468,000 --
Declaration of Class B
dividend...................... -- -- -- -- -- -- -- --
Conversion of Class B Common
Stock......................... -- -- 575,000 -- (575,000) -- -- --
Issuance of Class A Common
Stock......................... -- -- 3,220,000 4,000 -- -- 51,983,000 --
Net income for the year ended
December 31, 1997............. -- -- -- -- -- -- -- --
---------- ------- ----------- ------- ----------- -------- ----------- -----------
Balance, December 31, 1997..... -- -- 3,795,000 4,000 11,925,000 12,000 56,451,000 --
Issuance of common stock
pursuant to stock plans....... -- -- 775,000 1,000 -- -- 10,273,000 --
Tax benefit associated with
stock plans................... -- -- -- -- -- -- 5,607,000 --
Two-for-one common stock split
effected in the form of a 100%
stock dividend................ -- -- 4,570,000 4,000 11,925,000 12,000 -- --
Comprehensive Income:
Net income for the year ended
December 31, 1998........... -- -- -- -- -- -- -- --
Other comprehensive income,
net of tax:
Unrealized gains on
securities................ -- -- -- -- -- -- -- 359,000
Comprehensive income.......... -- -- -- -- -- -- -- --
---------- ------- ----------- ------- ----------- -------- ----------- -----------
Balance, December 31, 1998..... -- -- 9,140,000 9,000 23,850,000 24,000 72,331,000 359,000
Issuance of common stock
pursuant to stock plans....... 68,000 -- 323,000 -- -- -- 3,726,000 --
Tax benefit associated with
stock plans................... -- -- -- -- -- -- 10,726,000 --
Conversion of Class B common
stock......................... -- -- 23,850,000 24,000 (23,850,000) (24,000) -- --
Reclassification of Class A
common stock.................. 33,313,000 33,000 (33,313,000) (33,000) -- -- -- --
Comprehensive income:
Net income for the period
ended September 30, 1999.... -- -- -- -- -- -- -- --
Other comprehensive income,
net of tax:
Unrealized gains on
securities................ -- -- -- -- -- -- -- 11,965,000
Comprehensive income.......... -- -- -- -- -- -- -- --
---------- ------- ----------- ------- ----------- -------- ----------- -----------
Balance, September 30, 1999
(unaudited)................... 33,381,000 $33,000 -- $ -- -- $ -- $86,783,000 $12,324,000
========== ======= =========== ======= =========== ======== =========== ===========

<CAPTION>
------------------------------------------

RETAINED COMPRE- TOTAL
EARNINGS HENSIVE STOCKHOLDERS'
(DEFICIT) INCOME EQUITY
------------ ----------- -------------
<S> <C> <C> <C>
Balance, December 31, 1995..... $ (1,418,000) $ 3,062,000
Net loss for the year ended
December 31, 1996............. (1,625,000) (1,625,000)
------------ ------------
Balance, December 31, 1996..... (3,043,000) 1,437,000
Declaration of Class B
dividend...................... (10,000,000) (10,000,000)
Conversion of Class B Common
Stock......................... -- --
Issuance of Class A Common
Stock......................... -- 51,987,000
Net income for the year ended
December 31, 1997............. 4,231,000 4,231,000
------------ ------------
Balance, December 31, 1997..... (8,812,000) 47,655,000
Issuance of common stock
pursuant to stock plans....... -- 10,274,000
Tax benefit associated with
stock plans................... -- 5,607,000
Two-for-one common stock split
effected in the form of a 100%
stock dividend................ (16,000) --
Comprehensive Income:
Net income for the year ended
December 31, 1998........... $ 11,235,000 $11,235,000 11,235,000
Other comprehensive income,
net of tax:
Unrealized gains on
securities................ -- 359,000 359,000
-----------
Comprehensive income.......... -- $11,594,000 --
------------ =========== ------------
Balance, December 31, 1998..... 2,407,000 75,130,000
Issuance of common stock
pursuant to stock plans....... -- 3,726,000
Tax benefit associated with
stock plans................... -- 10,726,000
Conversion of Class B common
stock......................... -- --
Reclassification of Class A
common stock.................. -- --
Comprehensive income:
Net income for the period
ended September 30, 1999.... 17,871,000 $17,871,000 17,871,000
Other comprehensive income,
net of tax:
Unrealized gains on
securities................ -- 11,965,000 11,965,000
-----------
Comprehensive income.......... -- $29,836,000 --
------------ =========== ------------
Balance, September 30, 1999
(unaudited)................... $ 20,278,000 $119,418,000
============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements
F-5
<PAGE> 61

NETWORK SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- ---------------------------
1996 1997 1998 1998 1999
------------ ------------ ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................... $ (1,625,000) $ 4,231,000 $ 11,235,000 $ 7,517,000 $ 17,871,000
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............... 1,417,000 2,432,000 3,754,000 2,613,000 6,440,000
Provision for uncollectible accounts
receivable................................ 3,597,000 8,082,000 2,247,000 2,168,000 --
Deferred income taxes....................... (12,834,000) (13,226,000) (27,317,000) (14,061,000) (64,876,000)
Tax benefit associated with stock plans..... -- -- 5,607,000 2,240,000 10,726,000
Changes in operating assets and liabilities:
Increase in accounts receivable......... (12,144,000) (1,287,000) (19,083,000) (10,298,000) (23,155,000)
Increase in prepaids and other assets... (925,000) (69,000) (2,996,000) (507,000) (9,414,000)
Increase in accounts payable and accrued
liabilities........................... 1,226,000 3,845,000 21,861,000 9,139,000 13,563,000
Increase in income taxes payable........ -- 5,042,000 367,000 (1,952,000) 3,358,000
Increase in deferred revenue............ 26,006,000 32,099,000 67,743,000 45,279,000 153,745,000
------------ ------------ ------------- ------------ ------------
Net cash provided by operating
activities.......................... 4,718,000 41,149,000 63,418,000 42,138,000 108,258,000
------------ ------------ ------------- ------------ ------------
Cash flows from investing activities:
Purchase of furniture and equipment......... (1,901,000) (3,240,000) (13,070,000) (5,639,000) (44,717,000)
Purchase of short-term investments, net..... -- (40,200,000) (77,990,000) (67,676,000) 21,223,000
Purchase of long-term investments........... -- -- (13,590,000) (6,012,000) (11,656,000)
Proceeds from maturity of long-term
investments, net.......................... -- -- -- -- 8,000,000
Net investment in net assets of discontinued
operations................................ (208,000) -- -- -- --
------------ ------------ ------------- ------------ ------------
Net cash used in investing
activities.......................... (2,109,000) (43,440,000) (104,650,000) (79,327,000) (27,150,000)
------------ ------------ ------------- ------------ ------------
Cash flows from financing activities:
Net transactions with SAIC.................. 12,926,000 (14,045,000) 3,516,000 1,337,000 1,812,000
Proceeds from issuance of common stock...... -- 52,405,000 -- -- --
Dividend paid............................... -- (10,000,000) -- -- --
Issuance of common stock pursuant to stock
plans..................................... -- -- 10,274,000 4,456,000 3,726,000
Repayment of capital lease obligations...... -- (463,000) (842,000) (626,000) (645,000)
------------ ------------ ------------- ------------ ------------
Net cash provided by financing
activities.......................... 12,926,000 27,897,000 12,948,000 5,167,000 4,893,000
------------ ------------ ------------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents............................... 15,535,000 25,606,000 (28,284,000) (32,022,000) 86,001,000
Cash and cash equivalents, beginning of
period.................................... 5,000 15,540,000 41,146,000 41,146,000 12,862,000
------------ ------------ ------------- ------------ ------------
Cash and cash equivalents, end of period.... $ 15,540,000 $ 41,146,000 $ 12,862,000 $ 9,124,000 $ 98,863,000
============ ============ ============= ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements
F-6
<PAGE> 62

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Network Solutions is the exclusive registry and the leading registrar for second
level domain names within the .com, .net, .org and .edu top level domains
pursuant to a series of agreements with ICANN and the Department of Commerce. As
a registry, we maintain the master directory of all second level domain names in
the .com, .net and .org top level domains. We own and maintain the shared
registration system that allows all registrars, including us, to enter new
second level domain names into the master directory and to submit modifications,
transfers, re-registrations and deletions for existing second level domain
names. As a registrar, we market second level domain name registration services
that enable registrants to establish their identities on the web. In addition,
we market a portfolio of value-added products and services to help our customers
maximize the value of that identity throughout its life cycle. Network Solutions
also provides Internet Technology Services, focusing on network engineering,
network and systems security and network management solutions.

Cooperative Agreement

The original terms of the cooperative agreement provided for a cost
reimbursement plus fixed-fee contract (with an initial fee of 8%). Effective
September 14, 1995, the National Science Foundation and Network Solutions
amended the cooperative agreement to require Network Solutions to begin charging
end users a services fee of $50 per year for each domain name in the .com, .net
and .org top level domains. Until April 1, 1998, registrants paid a services fee
of $100 for two years of domain name services upon each initial registration and
an annual re-registration fee of $50 per year thereafter. The National Science
Foundation paid the registration fees for domain names within the .edu and .gov
top level domains through March 31, 1997. Commencing April 1, 1997, Network
Solutions agreed with the National Science Foundation to provide domain name
registration services within the .edu and .gov top level domains free of charge.
As of October 1, 1997, Network Solutions no longer registers or administers
domain names in the .gov top level domain.

Under the terms of the September 14, 1995 amendment to the cooperative
agreement, 30% of the registration fees collected by Network Solutions was
required to be set aside for the enhancement of the intellectual infrastructure
of the Internet (set aside funds) and, as such, was not recognized as revenue by
Network Solutions. Network Solutions has reflected these set aside funds, along
with the appropriate percentage of net accounts receivable (Note 3), as
restricted assets and has recorded an equivalent, related current liability.
Network Solutions maintained the cash received relating to the set aside funds
in a separate interest bearing account. The set aside funds, plus any interest
earned, were disbursed at the direction of the National Science Foundation. As
of December 31, 1998, Network Solutions had cumulatively disbursed all set aside
funds collected and associated interest earned for a total of $62.3 million to
the National Science Foundation at their direction. The restricted cash at
December 31, 1997 and 1998 was approximately $23,512,000 and $0, respectively.

F-7
<PAGE> 63
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

by a corresponding amount. Initial registrations on and after April 1, 1998 are
charged $70 for two years of registration services and an annual re-registration
fee of $35 per year thereafter. This amendment had no effect on the revenue
currently recognized on each registration, $70 for initial registrations and $35
for re-registrations, since Network Solutions previously did not recognize
revenue on the 30% set aside funds. Accordingly, while the revenue to Network
Solutions on a per registration basis does not change, the amount charged to
customers declined.

For purposes of Network Solutions' statements of cash flows, amounts relating to
these restricted assets and the Internet fund liability have been excluded in
their entirety.

Revenue Recognition

Registration fees charged to end users for registration services provided by
Network Solutions are recognized on a straight-line basis over the life of the
registration term, two years for initial registrations and one year for re-
registrations. Network Solutions records revenue net of an estimated provision
for uncollectible accounts receivable (Note 3).

Substantially all of Network Solutions' Internet Technology Services revenue is
derived from professional services which are generally provided to clients on a
time and expense basis and is recognized as services are performed.

One Internet Technology Services' customer contributed approximately 20% of net
revenue for the year ended December 31, 1996. During the years ended December
31, 1997 and 1998, there were no customers which individually represented more
than 4% of net revenues.

Deferred Revenue

Deferred revenue primarily represents the unearned portion of revenue related to
the unexpired term of registration fees, net of an estimate for uncollectible
accounts receivable (Note 3).

Cash and Cash Equivalents

Network Solutions considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

Short and Long-Term Investments

Short and long-term investments in marketable securities are classified as
available-for-sale. All long-term investments in marketable securities mature
within two years. At December 31, 1997 and 1998, the fair value of short and
long-term investments approximated cost. Fair value is determined based upon the
quoted market prices of the securities as of the balance sheet date.

At December 31, 1998, Network Solutions also held equity interests in a
privately-held, information technology company totaling $4,200,000. This
investment is included in other long-term assets and is accounted for under the
cost method which approximates fair value.

Financial Instruments

The recorded value of Network Solutions' financial instruments, which include
short and long-term investments, accounts receivable and accounts payable,
approximates market value. Concentration of credit risks with respect to
registration receivables is limited due to the wide variety and number of
customers, as well as their dispersion across geographic areas. Network
Solutions has no derivative financial instruments.

F-8
<PAGE> 64
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Furniture and Equipment

Furniture and equipment are stated at cost. Depreciation on furniture, office
and computer equipment is calculated principally using a declining-balance
method over the useful lives of three to seven years. Equipment under capital
leases is amortized using a declining-balance method over the shorter of the
assets' useful lives or lease term, ranging from two to three years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful lives of the assets, generally six years.

Goodwill

Goodwill represents the excess of the purchase cost over the fair value of net
assets acquired in Network Solutions' acquisition by Science Applications
International Corporation, or SAIC, in 1995 and is amortized over five years
using the straight-line method. Amortization expense of $715,000, $686,000 and
$543,000 for years ended December 31, 1996, 1997 and 1998, respectively, was
included in selling, general and administrative expenses. In connection with
Network Solutions' initial public offering during 1997, SAIC sold a portion of
its interest in Network Solutions resulting in a corresponding reduction of
goodwill in the amount of $418,000 which was charged to additional paid-in
capital.

Stock Split

On December 31, 1998, Network Solutions' board of directors approved a
two-for-one stock split of the shares of Class A common stock and Class B common
stock, to be effected in the form of a 100% stock dividend on shares of Class A
common stock and Class B common stock outstanding on February 26, 1999. The
stock dividend will be distributed on March 23, 1999. Share and per share
information for all periods presented in the accompanying financial statements
have been adjusted to reflect the two-for-one stock split.

Software Development Costs

Research and development costs are expensed as incurred. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed", Network
Solutions has not capitalized any significant software development costs as of
December 31, 1998.

Income Taxes

Deferred taxes are accounted for under SFAS No. 109, "Accounting for Income
Taxes," whereby deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between financial
statement reporting and income tax purposes. A valuation allowance is recorded
if it is "more likely than not" that some portion of or all of a deferred tax
asset will not be realized.

Until Network Solutions' initial public offering, Network Solutions filed tax
returns as part of SAIC's consolidated tax group. Tax expense during this period
has been determined as if Network Solutions was a separate taxpayer and was
charged to Network Solutions by SAIC. Effective October 1, 1997, Network
Solutions is no longer part of SAIC's consolidated tax group for federal income
tax purposes and prepares its income tax returns as a separate entity.

Stock Based Compensation

Network Solutions accounts for its stock option and employee stock purchase
plans in accordance with the provisions of Accounting Principles Board Opinion
(APB) No. 25, "Accounting for Stock Issued to Employees". No compensation cost
has been recognized by Network Solutions for its employee stock plans. The SFAS
No. 123, "Accounting for Stock-Based Compensation", provides an alternative
accounting method to APB

F-9
<PAGE> 65
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

No. 25 and requires additional pro forma disclosures (Note 11). Network
Solutions expects to continue to account for its employee stock plans in
accordance with the provisions of APB No. 25.

Segment Data

During 1998, Network Solutions adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise", replacing the
"industry segment" approach with the "management" approach. The management
approach designates internal reporting that is used by management for making
operating decisions and assessing performance as the source of an entity's
reportable segments. SFAS No. 131 also requires disclosures about products and
services, geographic areas and major customers. The adoption of SFAS No. 131 did
not affect results of operations, financial position or segment information
disclosures of Network Solutions due to the nature and relative magnitude of its
business activities.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make reasonable estimates and
assumptions, based upon all known facts and circumstances that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements. Actual results could
differ from those estimates.

Newly Issued Accounting Standards

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This standard requires
companies to capitalize qualifying computer software costs which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998.

Network Solutions is currently evaluating the impact of SOP 98-1 on its
financial statements and related disclosures.

NOTE 2 -- RECAPITALIZATION AND INITIAL PUBLIC OFFERING

On June 26, 1997, the Board of Directors amended the Certificate of
Incorporation to provide for two classes of common stock, designated as Class A
and Class B. The holders of Class A and Class B common stock generally have
identical rights except that holders of Class A common stock are entitled to one
vote per share while holders of Class B common stock are entitled to ten votes
per share. Each share of Class B common stock is convertible at the holder's
option into one share of Class A common stock.

On October 1, 1997, Network Solutions completed an initial public offering of
7,590,000 shares of its $.001 par value Class A common stock, including 990,000
shares resulting from the exercise of certain overallotment provisions. Network
Solutions' net proceeds from the initial public offering, including
overallotment, were $52.5 million based on Network Solutions' direct sale of
6,440,000 shares of Class A common stock.

Prior to the offering, Network Solutions was a wholly-owned subsidiary of SAIC.
In conjunction with the initial public offering, SAIC converted 1,150,000 shares
(including 150,000 overallotment shares) of Class B common stock into 1,150,000
shares of Class A common stock and directly sold the shares as a selling
stockholder. Upon completion of the offering, SAIC owned 100% of the outstanding
Class B common stock representing 75.9% of Network Solutions' equity and 96.9%
of the combined voting power of Network Solutions' outstanding Class B and Class
A common stock.

F-10
<PAGE> 66
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On August 21, 1997, Network Solutions' Board of Directors declared a $10,000,000
dividend to be paid to SAIC upon consummation of the initial public offering.
This dividend was paid to SAIC on October 1, 1997.

NOTE 3 -- ACCOUNTS RECEIVABLE

Accounts receivable consist of the following amounts as of December 31:

<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Billed................................................... $ 24,483,000 $ 42,679,000
Unbilled................................................. 1,526,000 5,695,000
------------ ------------
Total accounts receivable before allowances.... 26,009,000 48,374,000
Less -- Allowance for uncollectible accounts............. (17,856,000) (25,746,000)
-- Accounts receivable allocable to 30% NSF set
aside (Note 1)......................................... (2,361,000) --
------------ ------------
Accounts receivable, net................................. $ 5,792,000 $ 22,628,000
============ ============
</TABLE>

Unbilled receivables consist of registration fees and time and material contract
costs which have been incurred but which have not yet been billed.

In accounting for registration fees, Network Solutions initially records the
gross amount of the registration fee to accounts receivable and deferred
revenue. The allowance for estimated uncollectible accounts is recorded against
both accounts receivable and deferred revenue balances (see Note 1 for treatment
of the 30% National Science Foundation set aside). From the deferred revenue and
allowance balances, Network Solutions records revenue and its provision for
uncollectible accounts on a straight-line basis over the registration term.
Effective April 1, 1998, Network Solutions consolidates and then amortizes only
the net deferred revenue balance as net revenue over the registration term.

The provision for uncollectible accounts receivable, which was separately
recorded and deducted from gross registration fees in determining net
registration revenue, was $3,597,000, $7,782,000 and $2,168,000, respectively,
for the years ended December 31, 1996, 1997 and 1998. An additional $300,000 and
$79,000 of bad debt expense was recorded in 1997 and 1998, respectively, for the
write-off of Internet Technology Services receivables. Network Solutions'
allowance for uncollectible accounts receivable is associated solely with its
registration services business. The provision for uncollectible accounts
receivable is primarily due to the large number of individuals and corporations
that have registered multiple domain names with the apparent intention of
transferring registration for such names at a profit. Network Solutions'
experience has been that, in contrast to other registrants, such speculative
resellers have a higher tendency to default on their registration fees,
returning the names into the available pool for subsequent registration.

NOTE 4 -- FURNITURE AND EQUIPMENT

Furniture and equipment consist of the following amounts as of December 31:

<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Furniture and office equipment............................ $ 476,000 $ 833,000
Computer equipment........................................ 8,619,000 19,400,000
Leasehold improvements.................................... 288,000 2,018,000
----------- -----------
Furniture and equipment, at cost........................ 9,383,000 22,251,000
Less: Accumulated depreciation and amortization........... (3,237,000) (6,246,000)
----------- -----------
Furniture and equipment, net.............................. $ 6,146,000 $16,005,000
=========== ===========
</TABLE>

F-11
<PAGE> 67
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Furniture and equipment includes $2,386,000 of computer equipment acquired
during 1997 under capital lease agreements. Amortization expense related to
capital leases totaled $915,000 and $1,028,000 in 1997 and 1998, respectively.
Total depreciation and amortization expense for the years ended December 31,
1996, 1997 and 1998 was $702,000, $1,746,000 and $3,211,000, respectively.

NOTE 5 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following amounts as of
December 31:

<TABLE>
<CAPTION>
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
Accounts payable........................................... $1,896,000 $ 7,647,000
Accrued expenses........................................... 2,384,000 16,717,000
Accrued payroll............................................ 2,146,000 3,923,000
---------- -----------
Total accounts payable and accrued expenses...... $6,426,000 $28,287,000
========== ===========
</TABLE>

NOTE 6 -- LEASES

Future minimum lease payments, including fixed escalation increases for office
space and equipment under capital and operating leases with initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1998 are:

<TABLE>
<CAPTION>
-------------------------
CAPITAL OPERATING
YEAR ENDING DECEMBER 31: LEASES LEASES
- ------------------------ ---------- -----------
<S> <C> <C>
1999 ...................................................... $ 885,000 $ 3,778,000
2000 ...................................................... 252,000 3,099,000
2001 ...................................................... -- 1,935,000
2002 ...................................................... -- 1,452,000
---------- -----------
Total minimum lease payments..................... 1,137,000 $10,264,000
===========
Less: Amounts representing interest........................ (56,000)
----------
Present value of minimum lease payments.................... 1,081,000
Less: Current portion...................................... (834,000)
----------
Long-term portion of capital lease obligations............. $ 247,000
==========
</TABLE>

In December 1992, Network Solutions entered into a lease agreement for Network
Solutions' headquarters in Herndon, Virginia. Subsequent to the acquisition,
SAIC subleased the facilities to Network Solutions under a lease expiring
November 2002. During 1997, Network Solutions leased a second facility in
Herndon whose lease term expires in July 2002.

Operating lease expense for the years ended December 31, 1996, 1997 and 1998 was
$924,000, $2,188,000 and $3,533,000, respectively. Network Solutions generated
rental income from subleases of $187,000, $291,000 and $215,000 for the years
ended December 31, 1996, 1997 and 1998, respectively.

NOTE 7 -- INTEREST EXPENSE AND INCOME

For the year ended December 31, 1996, interest income of $496,000 was allocated
by SAIC based upon the cost of capital calculation. From its acquisition by SAIC
in March 1995 until December 1996, Network Solutions participated in SAIC's
centralized cash management system whereby cash received from operations was
transferred to SAIC's centralized cash accounts and cash disbursements were
funded from such centralized

F-12
<PAGE> 68
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

cash accounts. Accordingly, the SAIC cost of capital formula provided for
charges and credits to Network Solutions based upon management of certain
assets, including accounts receivable and fixed assets. Such amounts are not
necessarily indicative of the cost that would have been incurred if Network
Solutions had been operated as a separate entity.

Effective January 1, 1997, Network Solutions was no longer subject to SAIC's
cost of capital calculation in connection with Network Solutions fulfilling its
own treasury function. Interest paid for the years ended December 31, 1996, 1997
and 1998 was $0, $116,000 and $116,000, respectively.

NOTE 8 -- TRANSACTIONS WITH SAIC

Network Solutions was acquired by SAIC on March 10, 1995 in a stock-for-stock
transaction accounted for as a purchase. The financial statements for the years
ended December 31, 1996, 1997 and 1998 include significant transactions with
other SAIC business units involving functions and services (such as cash
management, tax administration, accounting, legal, data processing and employee
benefit plans) that were provided to Network Solutions by centralized SAIC
organizations. The costs of these functions and services have been directly
charged and/or allocated to Network Solutions using methods that SAIC management
believes are reasonable; primarily a percentage of budgeted administrative and
overhead costs. Such charges and allocations are not necessarily indicative of
the costs that would have been incurred if Network Solutions had been a separate
entity. Through August 9, 1996, the amounts allocated by SAIC to Network
Solutions included both administrative and overhead costs which are included in
selling, general and administrative expenses and cost of revenue, respectively.
Effective August 10, 1996, SAIC stopped allocating costs based generally upon
pro rata labor and began assessing Network Solutions for corporate services
provided by SAIC at a fee equal to 2.5% of annual net revenue. The corporate
services fee is negotiated annually and was 2.5% and 1.5% during 1997 and 1998,
respectively. The agreement may be terminated by either party upon 180 days'
prior written notice.

Amounts charged and allocated to Network Solutions for these functions and
services for the years ended December 31, 1996, 1997 and 1998 were $1,196,000,
$1,126,000 and $1,447,000, respectively, and are principally included in
selling, general and administrative expenses. Additionally, certain interest
credits were allocated by SAIC to Network Solutions (Note 7).

Sales as a subcontractor to SAIC for the years ended December 31, 1996, 1997 and
1998 were $1,505,000, $2,445,000 and $525,000, respectively. In addition,
because Network Solutions was included in SAIC's consolidated tax returns for
periods from acquisition until the initial public offering, Network Solutions
was obligated to make payment for its tax liability to SAIC in accordance with
the tax sharing arrangement (Note 9). The due to parent balance represents the
cumulative net activity of all transactions between Network Solutions and SAIC.
Network Solutions reflects this activity in the statements of cash flows on a
net basis because of the quick turnover, the large amounts and the short
maturities of these related party cash transactions.

NOTE 9 -- PROVISION FOR INCOME TAXES

The results of Network Solutions since its acquisition by SAIC until its initial
public offering were included in SAIC's consolidated tax returns. Subsequent to
the initial public offering, Network Solutions is no longer part of SAIC's
consolidated tax group for federal income tax purposes and prepares its income
tax returns as a separate entity.

F-13
<PAGE> 69
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The provision for (benefit) from income taxes consists of the following:

<TABLE>
<CAPTION>
------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Current:
Federal..................................... $ 10,171,000 $ 13,931,000 $ 29,559,000
State....................................... 2,020,000 2,766,000 5,867,000
------------ ------------ ------------
Total current provision............. 12,191,000 16,697,000 35,426,000
------------ ------------ ------------
Deferred:
Federal..................................... (10,716,000) (11,035,000) (22,792,000)
State....................................... (2,118,000) (2,191,000) (4,525,000)
------------ ------------ ------------
Total deferred (benefit)............ (12,834,000) (13,226,000) (27,317,000)
------------ ------------ ------------
Provision for (benefit) from income taxes..... $ (643,000) $ 3,471,000 $ 8,109,000
============ ============ ============
</TABLE>

Deferred tax assets are comprised of the following temporary differences as of
December 31:

<TABLE>
<CAPTION>
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Deferred revenue............................................ $26,295,000 $46,943,000
Provision for uncollectible accounts receivable............. 1,841,000 8,409,000
Other....................................................... 145,000 (13,000)
----------- -----------
Total deferred tax asset.......................... $28,281,000 $55,339,000
=========== ===========
</TABLE>

Although Network Solutions has a past history of net losses, it has not
established a current valuation allowance for its deferred tax assets since, in
the opinion of management, it is more likely than not that all of the deferred
tax assets will be realized. The deferred tax assets relate primarily to
registration fees which are taxable upon initial registration but are recognized
in the financial statements over the next 12 to 24 months, the registration
term.

A reconciliation of the provision for income taxes to the amount computed by
applying the statutory federal income tax rate of 35% to income before income
taxes is provided below:

<TABLE>
<CAPTION>
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Federal tax at statutory rate....................... $(794,000) $2,696,000 $6,771,000
State income taxes, net of federal tax benefit...... (96,000) 374,000 1,015,000
Nondeductible goodwill amortization................. 281,000 240,000 213,000
Other............................................... (34,000) 161,000 110,000
--------- ---------- ----------
Provision for (benefit) from income taxes........... $(643,000) $3,471,000 $8,109,000
========= ========== ==========
</TABLE>

Network Solutions paid income taxes of $31,235,000 during the year ended
December 31, 1998.

F-14
<PAGE> 70
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- COMPUTATION OF EARNINGS (LOSS) PER SHARE

The following is a reconciliation of the numerator and denominator used in the
basic and diluted earnings per share computations:

<TABLE>
<CAPTION>
-----------------------------------------
INCOME (LOSS) SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------- ------------- ---------
<S> <C> <C> <C>
1996 Loss Per Share:
Basic........................................... $(1,625,000) 25,000,000 $(0.07)
======
Dilutive securities:
Outstanding options............................. -- --
----------- ----------
Diluted......................................... $(1,625,000) 25,000,000 $(0.07)
=========== ========== ======
1997 Earnings Per Share:
Basic........................................... $ 4,231,000 26,610,000 $ 0.16
======
Dilutive securities:
Outstanding options............................. -- 356,000
----------- ----------
Diluted......................................... $ 4,231,000 26,966,000 $ 0.16
=========== ========== ======
1998 Earnings Per Share:
Basic........................................... $11,235,000 31,957,000 $ 0.35
======
Dilutive securities:
Outstanding options............................. -- 1,440,000
----------- ----------
Diluted......................................... $11,235,000 33,397,000 $ 0.34
=========== ========== ======
Nine Months Ended September 30, 1999 (Unaudited)
Basic............................................. $17,871,000 33,251,000 $ 0.54
======
Dilutive securities:
Outstanding options............................. -- 1,476,000
----------- ----------
Diluted........................................... $17,871,000 34,727,000 $ 0.51
=========== ========== ======
Nine Months Ended September 30, 1998 (Unaudited)
Basic............................................. $ 7,517,000 31,776.000 $ 0.24
======
Dilutive securities:
Outstanding Options............................. -- 1,312,000
----------- ----------
Diluted........................................... $ 7,517,000 33,088,000 $ 0.23
=========== ========== ======
</TABLE>

Common shares issued are weighted for the period the shares were outstanding and
incremental shares assumed issued under the treasury stock method for dilutive
earnings per share are weighted for the period the underlying options were
outstanding. Options outstanding in 1996 are not reflected in the computation of
diluted earnings per share because the effects are anti-dilutive and would
increase diluted earnings per share.

F-15
<PAGE> 71
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- EMPLOYEE BENEFIT PLANS

1996 Stock Incentive Plan

The 1996 Stock Incentive Plan, or Incentive Plan, of Network Solutions was
adopted by the Board of Directors on September 18, 1996. The Incentive Plan
provides for awards in the form of restricted shares, stock units, stock
appreciation rights, and stock options (including incentive stock options and
nonstatutory stock options). A total of 4,612,500 shares of Class A Common Stock
have been initially reserved for issuance under the Incentive Plan. The number
of shares are increased by 2% of the total number of common shares of Network
Solutions outstanding at the end of the most recent calendar year, subject to a
cumulative limit of 2,000,000 shares. Through December 31, 1998, an additional
1,789,000 shares were eligible for issuance and have subsequently been reserved
for a combined total of 6,401,000 eligible shares under the Incentive Plan.

Following is a summary of activity pursuant to Network Solutions' Incentive
Plan:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
---------- -----------------
<S> <C> <C>
Balance at January 1, 1996.............................. -- --
Granted................................................. 2,451,000 $ 6.49
Exercised............................................... -- --
Cancelled............................................... -- --
----------
Balance at December 31, 1996............................ 2,451,000 $ 6.49
Granted................................................. 1,201,000 $ 7.11
Exercised............................................... -- --
Cancelled............................................... (73,000) $ 7.00
----------
Balance at December 31, 1997............................ 3,579,000 $ 6.68
Granted................................................. 1,359,000 $21.95
Exercised............................................... (1,520,000) $ 6.51
Cancelled............................................... (707,000) $ 9.26
----------
Balance at December 31, 1998............................ 2,711,000 $13.74
========== ======
</TABLE>

Granted stock options generally become exercisable one year after the date of
the grant, vest 30%, 30%, 20% and 20%, respectively, on each anniversary date of
the grant and have a term of five years. All options granted to date have been
nonstatutory stock options except for 202,000 incentive stock options granted in
1996. No restricted shares, stock units or stock appreciation rights have been
granted to date.

The following table summarizes the status of Network Solutions' stock options
outstanding and exercisable at December 31, 1998:

<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING
--------------------------------------- STOCK OPTIONS EXERCISABLE
WEIGHTED AVERAGE -----------------------------------
REMAINING WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF CONTRACTUAL SHARES EXERCISE LIFE EXERCISE PRICE SHARES PRICE
EXERCISE PRICES ------------------- ----------------- ----------------- ------- -----
<S> <C> <C> <C> <C> <C>
$ 7.00-$ 9.25................. 1,712,000 3.31 $ 7.29 252,000 $7.16
$15.88-$34.25................. 918,000 4.58 $21.20 -- --
$65.44-$69.50................. 81,000 5.00 $65.59 -- --
--------- -------
$7.00-$69.50................. 2,711,000 3.79 $13.74 252,000 $7.16
========= =======
</TABLE>

F-16
<PAGE> 72
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Employee Stock Purchase Plan

Effective January 7, 1998, Network Solutions adopted an Employee Stock Purchase
Plan to provide substantially all full time employees an opportunity to purchase
shares of its Class A common stock through payroll deductions of up to 10% of
eligible compensation. Semiannually, on June 30 and December 31, participant
account balances are used to purchase stock at the lesser of 85 percent of the
fair market value on the trading day before the participation period starts or
the trading day preceding the day on which the participation period ends. A
total of 500,000 shares were initially reserved for purchase under the plan.
During the year ended December 31, 1998, a total of 30,000 shares were purchased
under this plan.

SAIC Benefit Plans

Employees of Network Solutions participate in various SAIC benefit plans,
including stock, bonus and retirement plans, subject to the applicable
eligibility requirements. SAIC charges Network Solutions directly for the costs
of such employee benefit plans. Charges related to the administration of the
SAIC benefit plans in which employees of Network Solutions participate are
included within SAIC general corporate allocations (Note 8).

SAIC has one principal Cash or Deferred Arrangement plan which allows eligible
participants to defer a portion of their income through payroll contributions.
Such deferrals are fully vested, are not taxable to the participant until
distributed from the Cash or Deferred Arrangement plan upon termination,
retirement, permanent disability or death and may be matched by SAIC. SAIC also
has an SAIC Employee Stock Purchase Plan which allows eligible employees to
purchase shares of SAIC's Class A common stock, with SAIC currently contributing
10% of the existing fair market value.

SAIC has a Bonus Compensation Plan which provides for bonuses to reward
outstanding performance. Bonuses are paid in the form of cash, fully vested
shares of SAIC Class A common stock or vesting shares of SAIC Class A common
stock. Network Solutions participated in this plan during the period from
acquisition until December 31, 1996.

During the years ended December 31, 1996 and 1997, a total of 53,000 and 11,000
SAIC options were granted to Network Solutions' employees, respectively, with
exercise prices ranging from $19.33 to $22.83 and $25.96 to $34.78 per share,
respectively, with a weighted average price of $20.51 and $28.13, respectively.
These options were granted under the SAIC 1995 Stock Option Plan to purchase
SAIC Class A common stock and vest 20%, 20%, 20% and 40%, respectively, on each
anniversary of the date of grant and have a term of five years. There were no
SAIC options granted to Network Solutions' employees during 1998.

Pro Forma Disclosures

The weighted average fair value of the options granted during the years ended
December 31, 1996 and 1997 under the SAIC Bonus Compensation Plan were estimated
at $4.30 and $7.56, respectively, and $1.38, $2.34 and $14.91, during 1996, 1997
and 1998, respectively, under Network Solutions' Incentive Plan using the
Black-Scholes model. The following weighted average assumptions were used in
calculating the option fair values.

F-17
<PAGE> 73
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
-------------------------------------------------
NETWORK SOLUTIONS
SAIC STOCK OPTIONS STOCK OPTIONS
----------------------- ----------------------
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997 1998 1996 1997 1998
----- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Expected life (years)........................ 4.0 5.0 -- 4.0 4.0 4.0
Risk-free interest rate...................... 5.91% 6.30% -- 5.98% 6.25% 5.1%
Volatility................................... 0.00% 0.00% -- 0.00% 20.79% 90.73%
Dividend yield............................... 0.00% 0.00% -- 0.00% 0.00% 0.00%
</TABLE>

Under the above models, the total value of SAIC stock options granted during
1996 and 1997 was approximately $228,000 and $87,000, respectively, and
$3,379,000, $2,809,000 and $20,322,000, respectively, for the Network Solutions'
employee stock purchase program and stock options granted in 1996, 1997 and
1998, all of which would be amortized ratably on a pro forma basis over their
respective option terms. Had Network Solutions recorded compensation costs for
these plans in accordance with SFAS No. 123, Network Solutions' pro forma income
(loss) would have been ($1,763,000), $3,510,000 and $9,236,000, respectively,
for the years ended December 31, 1996, 1997 and 1998. Pro forma earnings (loss)
per share on a diluted basis would have been ($0.07), $0.13 and $0.28,
respectively, for the years ended December 31, 1996, 1997 and 1998.

NOTE 12 -- COMPREHENSIVE INCOME

The changes in the components of accumulated other comprehensive income are
reported net of income taxes for the year ended December 31, 1998 as follows:

<TABLE>
<CAPTION>
----------------------------------------
UNREALIZED GAINS COMPREHENSIVE INCOME
ON SECURITIES ACCUMULATED OTHER
---------------- --------------------
<S> <C> <C>
Pre-tax amount........................................... $618,000 $618,000
Income tax............................................... 259,000 259,000
-------- --------
Net of tax amount........................................ $359,000 $359,000
======== ========
</TABLE>

NOTE 13 -- COMMITMENTS AND CONTINGENCIES

As of December 31, 1998, Network Solutions was a defendant in two active
lawsuits involving domain name disputes between trademark owners and domain name
holders. Network Solutions is drawn into such disputes, in part, as a result of
claims by trademark owners that Network Solutions is legally required, upon
request by a trademark owner, to terminate the right Network Solutions granted
to a domain name holder to register a domain name which is alleged to be similar
to the trademark in question. The holders of the domain name registrations in
dispute have, in turn, questioned Network Solutions' right, absent a court
order, to take any action which suspends their use of the domain names in
question. Although 46 out of approximately 4,500 of these situations have
resulted in suits actually naming us as a defendant, as of December 31, 1998, no
adverse judgment has been rendered and no award of damages has been made against
Network Solutions. Network Solutions believes that it has meritorious defenses
and vigorously defends itself against these claims.

On March 20, 1997, PG Media, Inc., a New York-based corporation (PG Media),
filed a lawsuit against Network Solutions in the United States District Court,
Southern District of New York alleging that Network Solutions had restricted
access to the Internet by not adding PG Media's requested top level domains to
the Internet root zone system in violation of the Sherman Act. In its complaint,
PG Media, in addition to requesting damages, asked that Network Solutions be
ordered to include reference to PG Media's top level domains and name servers in
the root zone file administered by Network Solutions under the cooperative
agreement. In June 1997, Network Solutions received written direction from the
National Science Foundation not to take any action which would create additional
top level domains or to add any new top level domains to the Internet root zone
until the
F-18
<PAGE> 74
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

National Science Foundation provided further guidance. On September 17, 1997, PG
Media filed a Second Amended Complaint adding the National Science Foundation as
a defendant. On May 14, 1998, PG Media served Network Solutions with a motion
for a preliminary injunction against both defendants to compel both defendants
to add PG Media's top level domains to the Internet root zone within 30 days. In
response, both defendants filed cross-motions for summary judgment against PG
Media. On July 20, 1998, a hearing on all parties' motions occurred. The basic
issue before the court is the National Science Foundation's authority to control
the Internet's root zone system. The court has taken the issue under advisement
and no date has been indicated for the issuance of a decision. With the
transition of the cooperative agreement from the National Science Foundation to
the Department of Commerce, Network Solutions is still required to request
written direction from the U.S. Government before making or rejecting any
modifications, additions or deletions to the root zone file, in accordance with
the October 1998 amendment to the cooperative agreement.

On October 17, 1997, a group of six plaintiffs filed a lawsuit (the "Thomas
suit") against Network Solutions and the National Science Foundation in the
United States District Court, District of Columbia, challenging the legality of
fees defendants charge for the registration and renewal of domain names on the
Internet and seeking restitution of fees collected from domain name registrants
in an amount in excess of $100 million, damages, and injunctive and other
relief. Plaintiffs alleged violations of the Sherman Act, the U.S. Constitution,
the Administrative Procedures Act and the Independent Offices Appropriations
Act. On February 10, 1998, the plaintiffs filed a motion for preliminary
injunction against Network Solutions seeking several items of relief. On April
6, 1998, the Court issued its opinion granting summary judgment in favor of the
plaintiffs on the Intellectual Infrastructure Fund, ruling it an "unlawful tax."
The court also granted Network Solutions' motion to dismiss all other counts (II
through X) and simultaneously denied the plaintiffs' preliminary injunction
motion against Network Solutions. On April 30, 1998, Congress passed H.R. 3579
which was signed into law by the President on May 1, 1998. Section 8003 of H.R.
3579 legalized, ratified and confirmed the entire Intellectual Infrastructure
Fund and authorized and directed the National Science Foundation to deposit the
entire fund into the U.S. Treasury. On August 28, 1998, the District Court
dismissed the entire case, issuing a final judgment in the matter. In October
1998, the plaintiffs appealed the court's dismissal of their claims, with oral
argument scheduled for February 25, 1999.

On October 20, 1998, Network Solutions was included as a defendant in a suit
brought by the Pennsylvania Attorney General's office against a domain name
holder who has alleged to have used his domain name in connection with a web
site promoting white supremacy and threatening certain state employees. The
Pennsylvania Attorney General named all of the communications companies in any
way connected with the domain name or web site. The Pennsylvania Attorney
General seeks to permanently enjoin these entities, including Network Solutions,
from providing services to this domain name holder in the event that the domain
name holder fails to comply with the order of the court. Network Solutions has
answered the complaint denying any knowledge or participation in the actions of
the primary defendant. No motions are pending and Network Solutions expects to
be dismissed from the matter.

Network Solutions believes that it has meritorious defenses and vigorously
defends itself against the claims advanced in the PG Media, Thomas or
Pennsylvania Attorney General suits. While management cannot reasonably estimate
the potential impact of such claims, a successful claim against Network
Solutions in any of these proceedings could have a material adverse effect on
Network Solutions' business, financial condition and results of operations.

On June 27, 1997, SAIC received a Civil Investigative Demand, or "CID" from the
U.S. Department of Justice issued in connection with an investigation to
determine whether there is, has been, or may be an antitrust violation under the
Sherman Act relating to Internet registration products and services. The CID
seeks documents and information from SAIC and Network Solutions relating to
their Internet registration business. Network Solutions cannot reasonably
estimate the potential impact of the investigation nor can it predict

F-19
<PAGE> 75
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

whether a civil action will ultimately be filed by the Department of Justice or
the form of relief that might be sought. Any such relief could have a material
adverse effect on Network Solutions' business, financial condition and results
of operations.

On August 17, 1998, Network Solutions received notice from the Commission of the
European Communities, or "EC," of an investigation concerning Network Solutions'
Premier Program agreements in Europe. The EC requested production of these
agreements and related materials for review. Network Solutions cannot reasonably
estimate the potential impact of the investigation nor can Network Solutions
predict whether an action will ultimately be brought by the EC or the form of
relief that might be sought. Any such relief could harm Network Solutions'
business.

Network Solutions is involved in various other investigations, claims and
lawsuits arising in the normal conduct of business, none of which, in
management's opinion will harm Network Solutions' business.

Legal proceedings in which Network Solutions is involved have resulted and
likely will result in, and any future legal proceedings can be expected to
result in, substantial legal and other expenses and a diversion of the efforts
of Network Solutions' personnel.

NOTE 14 -- SUBSEQUENT EVENTS (UNAUDITED)

Secondary Stock Offering

On February 12, 1999, Network Solutions completed a secondary stock offering in
which a total of 9,160,000 shares of Class A common stock were sold. Concurrent
with the offering, SAIC converted 9,000,000 shares of Class B common stock into
9,000,000 shares of Class A common stock sold in the offering. The remaining
160,000 shares of Class A common stock were sold by other selling stockholders
after they exercised the applicable stock options simultaneously with the
closing of the offering. Network Solutions was not a selling stockholder, and,
therefore, did not receive any proceeds from the stock offering other than
proceeds from options exercised as part of the offering. After the offering,
SAIC owned approximately 89% of the combined voting power and approximately 45%
of the economic interest of the outstanding common stock.

On June 3, 1999, SAIC, the sole Class B common stock stockholder, converted the
remaining Class B common stock into an identical number of shares of Class A
common stock. As a result, SAIC's voting power changed from 89% to 45%,
consistent with the number of Class A shares owned after the conversion. On June
17, 1999, Network Solutions filed a Certificate of Amendment of Second Amended
and Restated Certificate of Incorporation whereby its Class A common stock, par
value $0.001 per share, and Class B common stock, par value $0.001 per share,
were reclassified as a single class of common stock, par value $0.001 per share.
At the time of the reclassification of the Class A common stock and Class B
common stock to common stock, there were 33,312,594 shares of Class A common
stock and no shares of Class B common stock outstanding.

The Certificate of Amendment also increased the total number of authorized
shares of Network Solutions, Inc. to 220,000,000 of which 210,000,000 shares are
authorized shares of common stock and 10,000,000 shares are authorized shares of
preferred stock, par value $0.001 per share. There are no shares of preferred
stock outstanding.

Litigation

On March 16, 1999, the United States District Court ruled in favor of Network
Solutions' and the National Science Foundation's motions for summary judgment in
the PG Media antitrust lawsuit. In the decision, Network Solutions was found to
be immune to antitrust violations of the Sherman Act for its actions taken
pursuant to the cooperative agreement. PG Media appealed to the Second Circuit
Court of Appeals. On January 21, 2000, the Court of Appeals issued its opinion
in Network Solutions' favor on all issues.

F-20
<PAGE> 76
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On May 14, 1999, the U.S. Court of Appeals for the District of Columbia Circuit
unanimously affirmed Federal District Court Judge Thomas F. Hogan's decision in
Thomas v. Network Solutions and the National Science Foundation, thus affirming
the validation of Network Solutions' role in providing domain name registration
services and charging fees for such services. The lawsuit, which had been filed
in October 1997, named the National Science Foundation and Network Solutions as
defendants, and alleged that the National Science Foundation lacked authority to
permit Network Solutions to charge for Internet registration services, and to
set aside 30 percent of all fees for the preservation and enhancement of the
Internet's infrastructure. The suit further had charged that the National
Science Foundation had created an illegal monopoly in Internet registration
services and that Network Solutions had illegally precluded competition. The
Court of Appeals denied the plaintiff's motion for reconsideration and entered
final judgment on July 20, 1999. On October 12, 1999, the plaintiffs filed a
Petition for Writ of Certiorari with the U.S. Supreme Court. Our opposition to
that petition was filed on December 8, 1999. On January 18, 2000, the U.S.
Supreme Court denied the plaintiffs' petition.

On April 26, 1999, the Pennsylvania Attorney General dismissed Network Solutions
from a suit brought by the Pennsylvania Attorney General's Office against a
domain holder who was alleged to have used his domain name in connection with a
web site promoting white supremacy and threatening certain state employees.
Named in the suit were all of the communications companies in any way connected
with the domain name or web site.

On August 17, 1998, Network Solutions received notice from the Commission of the
European Communities, or "EC," of an investigation concerning Network Solutions'
Premier Program agreements in Europe. The EC requested production of these
agreements and related materials for review and Network Solutions complied. On
June 17, 1999, Network Solutions received a second inquiry from the EC
concerning its registrar licensing agreements with the five newly-accredited
testbed registrars and Network Solutions responded to this inquiry on July 9,
1999. On January 26, 2000, the EC formally notified Network Solutions that its
investigation had been closed. No enforcement action was taken.

On January 28, 2000, the Department of Justice formally notified Network
Solutions that its investigation had been closed. No enforcement action was
taken.

Status of Privatization of Internet Administration

On November 10, 1999, a series of wide-ranging agreements were entered into
relating to the domain name system. These agreements consist of the following:

- A registry agreement between Network Solutions and the Internet
Corporation for Assigned Names and Numbers, commonly known as "ICANN",
under which Network Solutions will continue to act as the exclusive
registry for the .com, .net and .org top level domains for at least four
more years.

- A revised registrar accreditation agreement between ICANN and all
registrars registering names in the .com, .net and .org domains.

- A revised registrar license and agreement between Network Solutions as
registry and all registrars registering names in the .com, .net and .org
domains using Network Solutions' proprietary shared registration system.

- Amendment 19 to the cooperative agreement.

- An amendment to the Memorandum of Understanding between the U.S.
Government and ICANN.

Under these agreements Network Solutions has recognized ICANN as the
not-for-profit corporation described in Amendment 11 to the cooperative
agreement, has become an ICANN-accredited registrar and has agreed to operate
the registry in accordance with the provisions of the registry agreement and the
consensus policies

F-21
<PAGE> 77
NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

established by ICANN in accordance with the terms of that agreement. Network
Solutions will be an accredited registrar through November 9, 2004 with a right
to renew indefinitely in accordance with the terms of that agreement. As the
registry, Network Solutions charges $6 per registration per year, unless
increased to cover increases in registry costs under the circumstances described
in the registry agreement.

The term of the registry agreement extends until November 9, 2003, except that
if the ownership of Network Solutions' registry and registrar operations is
separated within 18 months as described in the agreement, the registry agreement
term would be extended for four additional years.

Network Solutions has agreed to pay annual fees set by ICANN at levels currently
not to exceed $2 million for Network Solutions registrar and $250,000 for the
Network Solutions registry.

Stock Split

On December 21, 1999, the board of directors of the Company approved a 2-for-1
stock split of the shares of common stock, to be effected in the form of a stock
dividend. The record and distribution dates have not yet been determined but
will occur in 2000. After giving effect to this stock split, pro forma earnings
(loss) per share for all periods presented would be as follows:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
YEAR ENDED YEAR ENDED YEAR ENDED --------------------
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998 1998 1999
----------------- ----------------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C>
Basic................ $(0.03) $ 0.08 $ 0.18 $0.12 $0.27
Diluted.............. $(0.03) $ 0.08 $ 0.17 $0.11 $0.26
</TABLE>

F-22
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