DIDAX INC
SB-2/A, 1997-09-17
COMPUTER PROGRAMMING SERVICES
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<PAGE>   1
 
   
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1997
    
 
                                                      REGISTRATION NO. 333-25937
================================================================================
 
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
   
                               AMENDMENT NO. 4 TO
    
                                   FORM SB-2
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
 
                                   DIDAX INC.
                 (Name of small business issuer in its charter)
 
<TABLE>
<S>                                   <C>                                   <C>
               DELAWARE                                7371                               54-1831588
      (State or jurisdiction of            (Primary Standard Industrial                (I.R.S. Employer
    incorporation or organization)         Classification Code Number)              Identification Number)
</TABLE>
 
                           4501 DALY DRIVE, SUITE 103
                           CHANTILLY, VIRGINIA 20151
                                 (703) 968-4808
         (Address and telephone number of principal executive offices)
                            ------------------------
 
                           4501 DALY DRIVE, SUITE 103
                           CHANTILLY, VIRGINIA 20151
(Address of principal place of business or intended principal place of business)
 
                            ROBERT C. VARNEY, PH.D.
                           4501 DALY DRIVE, SUITE 103
                   CHANTILLY, VIRGINIA 20151  (703) 968-4808
           (Name, address, and telephone number of agent for service)
 
                                   COPIES TO:
 
   
<TABLE>
<S>                                                     <C>
                   CHARLES J. RENNERT                                    DAVID A. CARTER, P.A.
              BERMAN WOLFE & RENNERT, P.A.                                  2300 GLADES ROAD
             NATIONSBANK TOWER, SUITE 3500                                     SUITE 210W
              100 SOUTHEAST SECOND STREET                              BOCA RATON, FLORIDA 33431
               MIAMI, FLORIDA 33131-2130                                     (561) 750-6999
                     (305) 577-4177                                        (561) 367-0960 FAX
                   (305) 373-6036 FAX                                (Counsel for the Underwriter)
               (Counsel for the Company)
</TABLE>
    
 
                APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
                            ------------------------
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
 
                        CALCULATION OF REGISTRATION FEE
 
   
<TABLE>
<S>                                          <C>               <C>               <C>               <C>
====================================================================================================================
                                                                                     PROPOSED
                                                                   PROPOSED           MAXIMUM
           TITLE OF EACH CLASS OF              DOLLAR AMOUNT   MAXIMUM OFFERING      AGGREGATE         AMOUNT OF
        SECURITIES TO BE REGISTERED          TO BE REGISTERED   PRICE PER SHARE   OFFERING PRICE   REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
Common Stock(1) par value $.01 per share....     2,300,000           $5.00          $11,500,000        $3,485.00
- --------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock Purchase
  Warrants(2)...............................     2,875,000          $0.1875          $539,062           $163.00
- --------------------------------------------------------------------------------------------------------------------
Common Stock(3) par value $.01 per share
  underlying Redeemable Common Stock
  Purchase Warrants.........................     2,875,000           $5.75          $16,531,250        $5,009.00
- --------------------------------------------------------------------------------------------------------------------
Common Stock Underwriter Warrants(4)........      190,000          $0.00002             $5               $1.00
- --------------------------------------------------------------------------------------------------------------------
Common Stock(5) par value $.01 per share
  underlying Common Stock Underwriter
  Warrants..................................      190,000            $8.25          $1,567,500          $500.00
- --------------------------------------------------------------------------------------------------------------------
Warrant Underwriter Warrants(6).............      250,000          $0.00002             $5               $1.00
- --------------------------------------------------------------------------------------------------------------------
Underwriter Underlying Warrants(7)..........      250,000          $0.309375          $77,344           $23.00
- --------------------------------------------------------------------------------------------------------------------
Common Stock(8) par value $.01 per share
  underlying Underwriter Underlying
  Warrants..................................      250,000            $8.25          $2,187,500          $663.00
- --------------------------------------------------------------------------------------------------------------------
Total Fee...................................                                                          $9,845.00*
====================================================================================================================
</TABLE>
    
 
                                                        (footnotes on next page)
<PAGE>   2
 
   
(1) Includes 300,000 shares reserved for the option, exercisable within 45 days
    after the date on which the Securities and Exchange Commission (the
    "Commission") declares this Registration Statement effective, to cover
    over-allotments, if any (the "Over-Allotment Option"), granted by the
    Company to Barron Chase Securities, Inc. (the "Underwriter"). See
    "UNDERWRITING."
    
 
   
(2) Includes 375,000 Redeemable Common Stock Purchase Warrants (the "Purchase
    Warrants" or the "Warrants") reserved for the Over-Allotment Option. The
    Purchase Warrants (a) may be purchased separately from the Common Stock in
    the offering, (b) are exercisable during a five-year period commencing on
    the effective date of this Registration Statement, and (c) shall be
    redeemable, at the option of the Company, at $0.25 per Purchase Warrant upon
    30 days' prior written notice, (i) if the closing bid price, as reported on
    The Nasdaq SmallCap Market(SM), or the closing sale price, as reported on a
    national or regional securities exchange, as applicable, of the shares of
    the Registrant's Common Stock for 30 consecutive trading days ending within
    ten days of the notice of redemption of the Purchase Warrants averages in
    excess of $10.00 per share, subject to adjustment, and (ii) after a then
    current registration statement has been declared effective by the Commission
    with regard to the shares of Common Stock to be received by the holder upon
    exercise, but (iii) during the one-year period after the effective date of
    this Registration Statement, only with the written consent of the
    Underwriter. Pursuant to Rule 416 under the Securities Act of 1933, as
    amended (the "Securities Act"), such additional number of these securities
    are also being registered to cover any adjustment resulting from the
    operation of the anti-dilution provisions relating to the Purchase Warrants.
    
 
(3) Reserved for issuance upon exercise of the Purchase Warrants. Pursuant to
    Rule 416 under the Securities Act, such additional number of shares of
    Common Stock subject to the Purchase Warrants are also being registered to
    cover any adjustment resulting from the operation of the anti-dilution
    provisions relating to the Purchase Warrants.
 
   
(4) To be issued to the Underwriter or persons related to the Underwriter.
    Pursuant to Rule 416 under the Securities Act, such additional number of
    Underwriter stock purchase options (the "Common Stock Underwriter Warrants")
    are also being registered to cover any adjustment resulting from the
    operation of the anti-dilution provisions relating to the Common Stock
    Underwriter Warrants.
    
 
   
(5) Reserved for issuance upon exercise of the Common Stock Underwriter
    Warrants. Pursuant to Rule 416 under the Securities Act, such additional
    number of shares of Common Stock subject to the Common Stock Underwriter
    Warrants are also being registered to cover any adjustment resulting from
    the operation of the anti-dilution provisions relating to the Common Stock
    Underwriter Warrants.
    
 
   
(6) To be issued to the Underwriter or persons related to the Underwriter.
    Pursuant to Rule 416 under the Securities Act, such additional number of
    Underwriter warrant purchase options (the "Warrant Underwriter Warrants")
    are also being registered to cover any adjustment resulting from the
    operation of the anti-dilution provisions relating to the Warrant
    Underwriter Warrants.
    
 
   
(7) Reserved for issuance upon exercise of the Warrant Underwriter Warrants.
    Pursuant to Rule 416 under the Securities Act, such additional number of
    warrants to purchase shares of Common Stock subject to the Warrant
    Underwriter Warrants ("Underwriter Underlying Warrants") are also being
    registered to cover any adjustment resulting from the operation of the
    anti-dilution provisions relating to the Warrant Underwriter Warrants.
    
 
   
(8) Reserved for issuance upon exercise of the Underwriter Underlying Warrants.
    Pursuant to Rule 416 under the Securities Act, such additional number of
    shares of Common Stock subject to the Underwriter Underlying Warrants are
    also being registered to cover any adjustment resulting from the operation
    of the anti-dilution provisions relating to the Underwriter Underlying
    Warrants.
    
 
   
 *  $8,847 of which has been previously paid.
    
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE>   3
 
     INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
     SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
     MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
     THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
     SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
     UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
     OF ANY SUCH STATE.
 
   
[DIDAX LOGO]                                                   [CCN LOGO]
    

   
                SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1997
    
PROSPECTUS
                                   DIDAX INC.
   
                        2,000,000 SHARES OF COMMON STOCK
    
   
              2,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
    
 
   
     DIDAX INC. (the "Company") is offering hereby 2,000,000 shares (the
"Shares") of Common Stock, $.01 par value per share (the "Common Stock"), and
2,500,000 Redeemable Common Stock Purchase Warrants (the "Purchase Warrants" or
"Warrants") of the Company. The Shares and the Purchase Warrants (collectively,
the "Securities") may be purchased separately and are separately transferable at
any time after the date of this Prospectus (the "Effective Date"). Each Purchase
Warrant entitles the registered holder thereof to purchase, at any time during
the period commencing on the Effective Date, through         , 2002, one share
of Common Stock at a price of $5.75 per share, subject to adjustment under
certain circumstances. The Purchase Warrants offered hereby are not exercisable
unless, at the time of exercise, the Company has a current prospectus covering
the shares of Common Stock issuable upon exercise of the Purchase Warrants and
such shares have been registered, qualified or deemed to be exempt under the
securities laws of the states of residence of the exercising holders of the
Purchase Warrants. Commencing after the Effective Date, the Purchase Warrants
are subject to redemption by the Company, at the option of the Company, at $0.25
per Purchase Warrant, upon 30 days' prior written notice, if the closing bid
price, as reported on The Nasdaq SmallCap Market(SM) ("Nasdaq SmallCap"), or the
closing sale price, as reported on a national or regional securities exchange,
as applicable, of the shares of the Common Stock for 30 consecutive trading days
ending within ten days of the notice of redemption of the Purchase Warrants
averages in excess of $10.00 per share, subject to adjustment. The Company is
required to maintain an effective registration statement with respect to the
Common Stock underlying the Purchase Warrants prior to redemption of the
Purchase Warrants. Prior to the first anniversary of the Effective Date, the
Purchase Warrants will not be redeemable by the Company without the written
consent of Barron Chase Securities, Inc. (the "Underwriter"). See "RISK
FACTORS -- Non-Registration in Certain Jurisdictions of Shares Underlying the
Purchase Warrants."
    
 
   
     Prior to this Offering, there has been no public market for the Common
Stock or the Purchase Warrants. The Company has applied to have the Common Stock
and the Purchase Warrants listed on Nasdaq SmallCap under the symbols "AMEN" and
"AMENW", respectively. There is no assurance that an active trading market in
the Common Stock or the Purchase Warrants will develop or that, if developed,
any such market will be sustained. The offering price of the Shares and the
Purchase Warrants, as well as the exercise price and other terms of the Purchase
Warrants, have been determined by negotiation between the Company and the
Underwriter, and bear no relationship to the Company's asset value, net worth or
other established criteria of value. See "RISK FACTORS" and "UNDERWRITING."
    
 
     THE SECURITIES ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. IN ADDITION, PURCHASERS OF THE SECURITIES WILL SUFFER IMMEDIATE
SUBSTANTIAL DILUTION IN THAT THE BOOK VALUE PER SHARE OF THE COMMON STOCK AFTER
THIS OFFERING WILL BE SUBSTANTIALLY LESS THAN THE PUBLIC OFFERING PRICE OF THE
COMMON STOCK. SEE "RISK FACTORS" AND "DILUTION" AT PAGES [6] AND [20].
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
   
<TABLE>
<CAPTION>
========================================================================================================
                                                    PRICE TO                                PROCEEDS TO
                                                     PUBLIC      UNDERWRITING DISCOUNT(1)    COMPANY(2)
- --------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>                        <C>
 Per Share......................................     $5.00             $.50                    $4.50
- --------------------------------------------------------------------------------------------------------
 Per Warrant....................................     $.1875           $.01875                 $.16875
- --------------------------------------------------------------------------------------------------------
 Total(3).......................................  $10,468,750       $1,046,875              $9,421,875
========================================================================================================
</TABLE>
    
 
                                             See footnotes on the following page
               The date of this Prospectus is             , 1997
<PAGE>   4
 
- ---------------
   
(1) Does not include additional underwriting compensation in the form of (i) a
    non-accountable expense allowance (the "Non-Accountable Expense Allowance")
    equal to 3% of the total public offering price for the Securities; (ii)
    stock purchase options (the "Common Stock Underwriter Warrants"), for
    nominal consideration, to purchase up to 190,000 shares of Common Stock of
    the Company at an exercise price of $8.25 per share (165% of the initial
    public offering price), exercisable during a five-year period commencing on
    the Effective Date; (iii) warrant purchase options (the "Warrant Underwriter
    Warrants"), for nominal consideration, to purchase up to 250,000 warrants
    (the "Underwriter Underlying Warrants") at an exercise price of $.309375 per
    warrant (165% of the initial public offering price), exercisable during a
    five-year period commencing on the Effective Date, each of which Underlying
    Warrant entitles the holder to purchase a share of Common Stock of the
    Company at an exercise price of $8.25 per share, exercisable during a
    five-year period commencing on the Effective Date. The Common Stock
    Underwriter Warrants, the Warrant Underwriter Warrants, and the Underwriter
    Underlying Warrants are sometimes referenced in this Prospectus as the
    "Underwriter Warrants." In addition, the Company has agreed to indemnify the
    Underwriter against certain civil liabilities, including liabilities under
    the Securities Act. See "UNDERWRITING."
    
 
   
(2) Before deducting expenses of this offering (the "Offering") payable by the
    Company (excluding the Underwriting Discount), including the Non-Accountable
    Expense Allowance, federal and state registration and filing fees and taxes,
    and listing, printing, legal, accounting and transfer agent fees
    (collectively, the "Offering Costs"). The net proceeds to the Company, after
    deducting all commissions and the Offering Costs (the "Net Proceeds"), are
    estimated to be $8,669,065 (approximately 82.8% of the gross proceeds of
    this Offering), or $10,035,235 (approximately 83.3% of the gross proceeds of
    this Offering) if the Over-Allotment Option (as hereinafter defined) is
    exercised in full.
    
 
   
(3) The Company has granted to the Underwriter an option, exercisable within 45
    days after the Effective Date, to purchase up to 300,000 additional shares
    of Common Stock of the Company and up to 375,000 additional Purchase
    Warrants on the same terms and conditions as set forth above, solely to
    cover over-allotments, if any (the "Over-Allotment Option"). If the
    Over-Allotment Option is exercised in full, the total Price to Public,
    Underwriting Discount and Proceeds to Company for Shares will be increased
    to $12,039,062, $1,203,906 and $10,835,156, respectively. See
    "UNDERWRITING."
    
 
   
     The Securities are offered subject to prior sale, when, as and if delivered
to and accepted by the Underwriter and subject to the approval of certain legal
matters by counsel and certain other conditions. It is expected that delivery of
the certificates representing the Securities will be made at the offices of
Barron Chase Securities, Inc., 7700 West Camino Real, Boca Raton, Florida 33433,
on or about          , 1997.
    
 
     At the Effective Date, the Company will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act")
and, in accordance therewith, will be required to file reports, proxy or
information statements and other information with the Securities and Exchange
Commission (the "Commission"). At the Effective Date, the Securities will be
listed on Nasdaq SmallCap. Accordingly, such reports, proxy statements and other
information can be inspected and copied at the Commission's principal office,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; the
Northeast Regional Office of the Commission at 7 World Trade Center, Suite 1300,
New York, New York 10048; and the Midwest Regional Office of the Commission,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
where copies may be obtained upon payment of the fees prescribed by the
Commission, as well as at the offices of The Nasdaq Stock Market, Inc., 1735 K
Street, N.W., Washington, D.C. Such documents may also be obtained through the
website maintained by the Commission at http://www.sec.gov.
 
   
     IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE REGISTERED
SECURITIES ISSUED IN THIS OFFERING AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON NASDAQ SMALLCAP
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
    
 
     INVESTORS SHOULD CAREFULLY REVIEW THE FINANCIAL STATEMENTS WHICH ARE AN
INTEGRAL PART OF THIS PROSPECTUS.
 
     ATTENTION VIRGINIA RESIDENTS: Offers and sales of the securities of the
Company made to Virginia residents pursuant to this Prospectus are restricted to
individuals who meet suitability standards of not less than a $100,000 net worth
(a net worth exclusive of home, home furnishings and automobiles), and a
<PAGE>   5
 
minimum gross income of $100,000 during the last tax year with the expectation
of equal or greater gross income in the current tax year. Alternatively, offers
and sales may be made to all individuals with a net worth, as defined above, of
greater than $200,000 regardless of gross income level.
 
     RESIDENTS OF NEW JERSEY: This offering is being directed to New Jersey
Accredited Investors only, as defined by Regulation D Rule 501 of the Securities
Act of 1933. Specifically, an accredited investor is any natural person whose
individual net worth, or joint net worth with that person's spouse, at the time
of his purchase exceeds $1,000,000; or, any natural person who had an individual
income in excess of $200,000 in each of the two most recent years or joint
income with that person's spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level in the
current year.
 
     ATTENTION CALIFORNIA RESIDENTS: Offers and sales of the Securities of the
Company made to California residents pursuant to this Prospectus are restricted
to individuals who meet suitability standards of not less than $250,000 liquid
net worth (net worth exclusive of home, home furnishings and automobiles) plus
$100,000 annual gross income, or $500,000 liquid net worth (net worth exclusive
of home, home furnishings and automobiles).
<PAGE>   6
 
                               PROSPECTUS SUMMARY
 
     The following is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Each prospective investor is urged to
read this Prospectus in its entirety.
 
                                  THE COMPANY
 
     Since its inception in 1993, the operations of the Company and its
predecessors (referred to in this Prospectus collectively as the "Company") have
been limited to (a) research and development and marketing activities related to
The Christian Community Network(TM) ("CCN") (WWW.CHRISTCOM.NET), the Company's
interactive website focused on content material that the Company generally
believes appeals to the Christian community, and (b) providing for a fee, to
Christian organizations, limited technology consulting services, including
website development services, Internet access through the IBM Global Network,
hosting through various hosting services (including in-house hosting) and other
related Internet services. The Company's website, an Internet-based alternative
to traditional means of communication by Christian ministries and Christian
content publishers and retailers (such as fliers, periodicals, books, radio and
television) is intended to provide its target constituent base, the Christian
consumer, with resources and information provided by Christian and secular
retailers, publishers, charities and ministries. The Company's website is also
intended to reduce its clients' costs of contacting their target constituents
and markets while expanding the potential reach and duration of that contact.
Access to CCN is currently provided free of charge to persons who have Internet
access. To date, the Company has derived all of its revenues from (i) providing
website development and other technology consulting services (the "Consulting
Services") to Christian organizations, such as Promise Keepers, a nonprofit
Christian ministry (PK Net, www.promisekeepers.org), Christianity Today, Inc., a
publisher of Christian periodicals (www.christianity.net), Learn @ Home, a
coalition of Christian homeschooling professional organizations, and World
Vision, an international Christian relief agency; (ii) providing Internet access
through the IBM Global Network (the "Internet Access Services"); and (iii) to a
very limited extent retail sales of books , music and filtering software
("Retail Sales").
 
     The Company targets the marketing of its sales, products and services and
the content on CCN to persons of all ages, economic levels, genders, ethnic
backgrounds and nationalities that identify themselves as Christian, principally
Protestant (regardless of denomination, if any) and Catholic, with particular
emphasis upon evangelical Christians. According to a poll conducted by the
Gallup Organization in 1994, approximately 25% of Americans identify themselves
as Catholic and approximately 20% identify themselves as Protestant. The Pew
Center for Civic Journalism, in a survey published in April 1997, reported that
approximately 35% of the United States population identify themselves as
evangelical Christians.
 
     The Company presently intends to strive to position itself to generate
commercial sales of (i) Christian interest advertising space on CCN; (ii)
memberships in Christianity-based affinity marketing programs (such as sales of
Internet-based travel services), which afford participants price discounts and
other benefits of group purchasing power; (iii) Christian interest products
manufactured or developed by others (primarily Christian books, Christian music
and other Christian articles on CCN); and (iv) expanded computer consulting
services to Christian organizations. The Company recently has released on CCN
its on-line Christian books and music store featuring Christian content material
produced by others.
 
     In April 1997 (the "Merger Date"), DIDAX, Inc., a Virginia corporation,
DIDAX ON-LINE, L.C., a Virginia limited liability company (collectively,
"Predecessor Didax") and DIDAX INC., a Delaware corporation organized on January
7, 1997 ("Didax Delaware") consummated a reorganization resulting in Didax
Delaware being the surviving corporation (the reorganization being referenced
herein as the "Merger"). Under the terms of the Merger, Didax Delaware, among
other things, issued a total of 1,160,376 shares of its Common Stock,
representing 100% of its outstanding Common Stock subsequent to the Merger. For
comparison purposes, the discussion below relates to the combined financial
statements of Predecessor Didax. Predecessor Didax and Didax Delaware are
referenced in this Prospectus collectively as the "Company."
 
                                        3
<PAGE>   7
 
     The Company has an extremely limited operating history upon which an
evaluation of the Company and its business can be based. For the fiscal years
ended December 31, 1995 and 1996 and the six-month periods ended June 30, 1996
and 1997, the Company generated net losses of $(706,564), $(2,464,904), and
$(1,408,391) (unaudited) and $(1,323,388) (unaudited), respectively, from
operations. See FINANCIAL STATEMENTS. The Company has achieved only limited
revenues to date, has incurred net losses since inception and expects to
continue to operate at a loss for the foreseeable future. Its expense levels are
based in part on its expectations as to future revenues, if any. Any shortfall
in revenues, whether caused by the cancellation or deferral of, or the failure
to obtain, advertising, retail or website development customers, or otherwise,
would have a material adverse impact on the Company's business, results of
operations and financial condition. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION."
 
     The Company's corporate headquarters are located at 4501 Daly Drive, Suite
103, Chantilly, Virginia 20151 and its telephone number is (703) 968-4808, its
fax number is (703) 968-4819 and its Internet address is
http://www.christcom.net.
 
                                  THE OFFERING
 
   
SECURITIES OFFERED.........  2,000,000 shares of Common Stock at $5.00 per Share
                               and 2,500,000 Purchase Warrants at $0.1875 per
                               Purchase Warrant. The Shares and the Purchase
                               Warrants may be purchased separately and are
                               separately transferable at any time after the
                               Effective Date. Each Purchase Warrant entitles
                               the registered holder thereof to purchase, at any
                               time during the period commencing on the
                               Effective Date, through          , 2002, one
                               share of Common Stock at a price of $5.75 per
                               share, subject to adjustment under certain
                               circumstances. The Purchase Warrants offered
                               hereby are not exercisable unless, at the time of
                               exercise, the Company has a current prospectus
                               under the Securities Act of 1933, as amended
                               ("Securities Act") covering the shares of Common
                               Stock issuable upon exercise of the Purchase
                               Warrants and such shares have been registered,
                               qualified or deemed to be exempt under the
                               securities laws of the states of residence of the
                               exercising holders of the Purchase Warrants.
                               Commencing after the Effective Date, the Purchase
                               Warrants are subject to redemption by the
                               Company, at the option of the Company, at $0.25
                               per Purchase Warrant, upon 30 days prior written
                               notice, if the closing bid price, as reported on
                               Nasdaq SmallCap, or the closing sale price, as
                               reported on a national or regional securities
                               exchange, as applicable, of the shares of the
                               Common Stock for 30 consecutive trading days
                               ending within ten days of the notice of
                               redemption of the Purchase Warrants averages in
                               excess of $10.00 per share, subject to
                               adjustment. The Company is required to maintain
                               an effective registration statement with respect
                               to the Common Stock underlying the Purchase
                               Warrants prior to redemption of the Purchase
                               Warrants. Prior to the first anniversary of the
                               Effective Date, the Purchase Warrants will not be
                               redeemable by the Company without the written
                               consent of the Underwriter. See "DESCRIPTION OF
                               SECURITIES" and "UNDERWRITING."
    
 
SHARES OF COMMON STOCK
  OUTSTANDING
  Prior to this Offering...  1,202,588 shares
 
  After this Offering
(1)........................  3,542,588 shares
 
   
ESTIMATED NET PROCEEDS.....  $8,669,065 (or $10,035,235 if the Over-Allotment
                               Option is exercised in full)
    
 
                                        4
<PAGE>   8
 
   
USE OF PROCEEDS............  Approximately $2,600,000 (approximately 30%, or
                               approximately 26% if the Over-Allotment Option is
                               exercised in full) of the Net Proceeds will be
                               used to retire Company indebtedness, including
                               approximately $823,000 owed to officers of the
                               Company (the "Officer Notes" and the "Short Term
                               Notes"). Approximately $2,400,000 (approximately
                               28%, or approximately 24% if the Over-Allotment
                               Option is exercised in full) will be used for
                               marketing, sales and consulting services,
                               $1,200,000 (approximately 14%, or approximately
                               12% if the Over-Allotment Option is exercised in
                               full) will be used for product development and
                               approximately $2,500,000 (approximately 28% of
                               the Net Proceeds of the Offering) or
                               approximately $3,800,000 (approximately 38% if
                               the Over-Allotment Option is exercised in full)
                               will be used for working capital and general
                               corporate purposes. See "USE OF PROCEEDS."
    
 
PROPOSED NASDAQ SMALLCAP
  SYMBOLS                         Common Stock             Warrants
 
                                       AMEN                  AMENW
 
RISK FACTORS AND
DILUTION...................  The Securities involve a high degree of risk
                               including risks related to the failure of the
                               Company to anticipate and adapt to a developing
                               market, the rejection of the Company's services
                               and products by Internet users, development of
                               equal or superior services or products by
                               competitors and the failure of the market to
                               adopt the Internet as a transaction medium. The
                               Securities should not be purchased by investors
                               who cannot afford the loss of their entire
                               investment. Purchasers of the Securities will
                               incur immediate substantial dilution of their
                               investment. See "RISK FACTORS," "DILUTION" and
                               "FINANCIAL STATEMENTS."
- ---------------
 
   
(1) Includes the issuance of 340,000 shares to holders of the Company's Junior
    Convertible Subordinated Notes (the "Junior Notes"), which shares are
    issuable by the Company upon the Company's satisfaction of the Junior Notes.
    Assumes no exercise of (i) the Over-Allotment Option (300,000 shares of
    Common Stock and 375,000 Purchase Warrants); (ii) the Purchase Warrants
    offered hereby (2,500,000 Purchase Warrants); (iii) the Underwriter Warrants
    (190,000 shares of the Common Stock and 250,000 Purchase Warrants); or (iv)
    any outstanding options (the "Outstanding Stock Options") granted pursuant
    to the Company's 1997 Stock Option Plan (options to acquire an additional
    1,767,520 shares, including options (the "Officer Note Options") to acquire
    an aggregate of 172,639 shares of Common Stock, which options are issuable
    to a director and an officer of the Company at the Closing in addition to
    the satisfaction of the Officer Notes). The inclusion of the Common Stock
    and the Purchase Warrants on Nasdaq SmallCap does not imply that an
    established public trading market will develop therefor or, if developed,
    that such market will be sustained. See "RISK FACTORS -- No Prior Public
    Market and Share Price Volatility," "MANAGEMENT'S DISCUSSION AND ANALYSIS OR
    PLAN OF OPERATION -- Liquidity and Capital Resources," "PRINCIPAL
    STOCKHOLDERS," "MANAGEMENT -- 1997 Stock Option Plan," and "UNDERWRITING."
    
 
ATTENTION VIRGINIA RESIDENTS
 
     Offers and sales of the securities of the Company made to Virginia
residents pursuant to this Prospectus are restricted to individuals who meet
suitability standards of not less than a $100,000 net worth (a net worth
exclusive of home, home furnishings and automobiles), and a minimum gross income
of $100,000 during the last tax year with the expectation of equal or greater
gross income in the current tax year. Alternatively, offers and sales may be
made to all individuals with a net worth, as defined above, of greater than
$200,000 regardless of gross income level.
 
                                        5
<PAGE>   9
 
                                  RISK FACTORS
 
     The Securities are speculative, and involve immediate substantial dilution
and a high degree of risk, including, but not necessarily limited to, the
several factors described below. Each prospective investor should consider
carefully the following risk factors inherent in and affecting the business of
the Company and this Offering before making an investment decision.
 
EXTREMELY LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT AND ANTICIPATION OF
CONTINUED LOSSES
 
     The Company is a development stage company, the predecessors of which were
founded in May 1993 and commenced offering internal systems development in
February 1995. Accordingly, the Company has an extremely limited operating
history upon which an evaluation of the Company and its business can be based.
The Company's business must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such as
the Internet. Specifically, such risks include the failure of the Company to
anticipate and adapt to a developing market, the rejection of the Company's
services and products by Internet users, development of equal or superior
services or products by competitors and the failure of the market to adopt the
Internet as a transaction medium.
 
     There can be no assurance that the Company will be successful in addressing
such risks. Since its inception, the Company has incurred costs to develop and
enhance its technology, to create, introduce, and enhance its service and
content offerings, to establish marketing and distribution relationships, to
recruit and train an engineering and marketing group, and to build an
administrative organization. The Company intends to continue these efforts in
order to develop customer participation from the content provided in order to
generate revenue. As of June 30, 1997, the Company had an accumulated deficit of
approximately $4,800,000. There can be no assurance that the Company can
generate revenue growth, or that any revenue growth that is achieved can be
sustained. Revenue growth that the Company may achieve may not be indicative of
future operating results. With revenue growth, the Company may increase further
its operating expenses in order to increase its sales and marketing efforts,
fund greater levels of product development, increase its editorial staff, and
increase its general and administrative costs to support the enlarged
organization. To the extent that the Company increases operating expenses and
does not experience an increase in revenues, the Company's business, results of
operations and financial condition will be materially adversely affected. Given
the level of planned expenditures, the Company anticipates that it will continue
to incur losses for the foreseeable future and there can be no assurance that
the Company will ever achieve or sustain profitability. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."
 
DEVELOPMENT STAGE COMPANY AND GOING CONCERN QUALIFICATION IN INDEPENDENT
AUDITORS' REPORT
 
     The Company's independent accountants' report on the Company's financial
statements includes an explanatory paragraph to the effect that THE COMPANY'S
ACCUMULATED DEFICIT ($4,823,615 AS OF JUNE 30, 1997) RAISES SUBSTANTIAL DOUBT
ABOUT ITS ABILITY TO CONTINUE AS A GOING CONCERN and that the financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern. See FINANCIAL STATEMENTS.
 
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
 
     As a result of the Company's extremely limited operating history and the
rapid technological change experienced in the Internet industry generally, the
Company has no meaningful historical financial data upon which to base future
operating expenses. Accordingly, the Company's expense levels are based in part
on its expectations as to future revenues, of which there can be no assurance.
There can be no assurance that the Company will be able to accurately predict
the levels of future revenues, if any, and the failure to do so would have a
materially adverse effect on the Company's business, results of operations and
financial condition.
 
     The Company expects to experience significant fluctuations in future
quarterly operating results that may be caused by many factors. Causes of such
significant fluctuations may include, among other factors, demand
 
                                        6
<PAGE>   10
 
for the Company's services, the number, timing and significance of new service
announcements by the Company and its competitors, the ability of the Company to
develop, market and introduce new and enhanced versions of its services on a
timely basis, the level of product and price competition, changes in operating
expenses, changes in service mix, changes in the Company's sales incentive
strategy, and general economic factors. A substantial portion of the Company's
cost of revenue, which consists principally of fees payable to information
providers, telecommunications costs, personnel expenses attributable to the
daily publication of its services and related editorial and client services
expenses, is relatively fixed in nature. In addition, a substantial portion of
the Company's operating expenses is related to personnel and marketing programs,
which cannot be adjusted quickly and are therefore fixed in the short term. The
Company's operating expense levels are based, in significant part, on the
Company's expectations of future revenue on a quarterly basis. If actual revenue
levels on a quarterly basis are below management's expectations, both gross
margins and results of operations are likely to be adversely affected because a
relatively small amount of the Company's costs and expenses varies with its
revenue in the short term. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION."
 
DEVELOPING MARKET; VALIDATION OF THE INTERNET AS AN EFFECTIVE COMMERCE MEDIUM
 
     The market for the Company's services and products has recently begun to
develop, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced or developed services and products for use
on the Internet. As a result, the Company's mix of services and products may
undergo substantial changes as the Company reacts to competitive and other
developments in the overall Internet market. The Company's market is highly
dependent upon the increased use of the Internet for information, interaction,
distribution and commerce. In particular, the Internet is still an unproven
medium for paid services such as the Company's. Accordingly, the Company's
future operating results will depend substantially upon the increased use of the
Internet by individuals and companies for information, interaction, distribution
and commerce, and the emergence of the Internet as an effective commerce medium.
Moreover, critical issues concerning the commercial use of the Internet
(including security, reliability, cost, ease of use, access, quality of service
and acceptance of advertising), remains a barrier to entry for many individuals
and businesses and therefore may impact the rate of growth of Internet use. If
widespread commercial use of the Internet does not develop, or if the Internet
does not develop as an effective commerce medium, the Company's business,
results of operations and financial condition will be materially adversely
affected.
 
TECHNOLOGICAL CHANGE; DEPENDENCE ON RECENTLY INTRODUCED AND NEW PRODUCTS AND
RISK OF PRODUCT DELAYS
 
     The market in which the Company competes is characterized by rapidly
changing technology, evolving industry standards, frequent new service and
product announcements, introductions and enhancements and changing customer
demands. These market characteristics are exacerbated by the emerging nature of
the Internet and the apparent need of companies from a multitude of industries
to offer Internet-based products and services. Accordingly, the Company's future
success will depend in significant part on its ability to adapt to rapidly
changing technologies, the ability to adapt its services and products to
evolving industry standards, and to continually improve the performance,
features and reliability of its services and products in response to both
evolving demands of the marketplace and competitive service and product
offerings. The failure of the Company to adapt to such changes and evolution
would have a materially adverse effect on the Company's business, results of
operations and financial condition.
 
     Since advertising and retail sales are based entirely upon the use of the
Company's marketed services and products by Internet consumers, broad acceptance
of the Company's services and products offerings by Internet consumers is
critical to the Company's future success. Failure of the Company to successfully
design, develop, test and introduce new services and products to achieve market
acceptance could prevent the Company from developing its desired family of
services and products. Furthermore, there can be no assurance that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction or marketing of these services and products, or that
its new or recently introduced services and products and enhancements thereon
will adequately meet the requirements of the marketplace and achieve any degree
of significant market acceptance. If the Company is unable, for technological or
other reasons, to
 
                                        7
<PAGE>   11
 
develop and introduce new services, products or enhancements of services and
products in a timely manner in accordance with its business model or in response
to changing market conditions or customer requirements, or if the services
provided do not achieve a significant degree of market acceptance, the Company's
business, results of operations and financial condition would be materially
adversely affected.
 
UNCERTAINTY OF PRICING OF ADVERTISING
 
     The intense competition faced by the Company in the sale of Internet
advertising from online service providers and search engine companies, including
competition from other firms focused on Christian content, has resulted and will
continue to result in a wide range of rates quoted by different vendors for a
variety of advertising services. This, combined with a limitation on the type
and content of advertising acceptable to the Company for use on CCN, makes it
very difficult to project future levels of the Company's Internet advertising
costs. To date, the Company has derived no revenues from its sales of
advertising space on CCN.
 
LIMITED SALES FORCE; EVOLVING DISTRIBUTION CHANNELS
 
     The Company has a limited number of sales and marketing employees and has
immature distribution channels for its services and products. In order to
generate advertising and retail sales, the Company must achieve broad promotion
of its services and products to Internet users, thereby, developing a
recognition of its services, products and technology. There can be no assurance
that the Company will be able to establish additional content relationships,
retain existing relationships or broadly promote its services and products and
generate demand for its services and products, and the inability to do so would
have a material adverse effect on the Company's business, results of operations
and financial condition. See "PROPOSED BUSINESS."
 
DEPENDENCE ON THE INTERNET
 
     Because global commerce and online exchange of information on the Internet
and other similar open wide area networks are new and evolving, it is difficult
to predict with any assurance whether the Internet will prove to be a viable
commercial marketplace. The Internet has experienced, and is expected to
continue to experience growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by this continued growth. In addition,
the Internet could lose its viability due to delays in the development or
adoption of new standards and protocols to handle increased levels of Internet
activity, or due to increased governmental regulation. There can be no assurance
that the infrastructure or complementary services necessary to make the Internet
a viable commercial marketplace will be developed, or, if developed, that the
Internet will become a viable commercial marketplace for services and products
such as those offered by the Company. If the necessary infrastructure or
complementary services or facilities are not developed, or if the Internet does
not become a viable marketplace, the Company's business, results of operations
and financial condition will be materially adversely affected. Computer viruses
could lead to interruptions, delays or cessations in service to users of the
Company's services and products. The occurrence of any of these risks could have
a material adverse effect on the Company's business, results of operations and
financial condition. See "PROPOSED BUSINESS."
 
SIGNIFICANT FLEXIBILITY IN APPLYING NET PROCEEDS INCLUDING UNSPECIFIED
ACQUISITIONS
 
   
     Although the Company intends to utilize a majority of the Net Proceeds of
the Offering for repayment of notes payable and the expansion of its sales,
marketing, promotional and product development efforts and approximately 28%
($2,500,000) of the Net Proceeds of the Offering for working capital, a portion
of the Net Proceeds may also be used to acquire or invest in complementary
businesses or products or to obtain product development rights or complementary
technologies. Accordingly, management will have significant flexibility in
applying the Net Proceeds of the Offering. Working capital will be allocated in
the judgment of the Board of Directors. Potential acquisition candidates may
include companies with a compatible vision, product and technology, where
economies of scale and significant synergy or increase in distribution of the
Company's products and services may result. As of the date of this Prospectus,
the Company has no agreements, understandings or arrangements with respect to
any such acquisitions. Investors in the Offering will not have an opportunity to
evaluate the specific merits or risks of any acquisition. See "USE OF PROCEEDS."
    
 
                                        8
<PAGE>   12
 
RISK OF CAPACITY CONSTRAINTS
 
     A key element of the Company's strategy is to generate a high volume of
traffic to its website, CCN. Accordingly, the performance of the Company's
services and products is critical to the Company's reputation, its ability to
attract customers to CCN and market acceptance of these services and products.
Any system failure that causes interruptions in the availability or increases
response time of the Company's services would reduce traffic to the Company's
website and, if sustained or repeated, would reduce the attractiveness of the
Company's services to advertisers and other future potential customers or
Internet users. An increase in the volume of traffic conducted through the
Company's services and products could strain the capacity of the software or
hardware deployed by the Company, which could lead to slower response time or
system failures. In addition, as the number of websites and Internet users
increases, there can be no assurance that the Company's services and products
will be able to compete with firms who may have greater financial resources than
the Company. The Company is also dependent upon web browsers and Internet and
online service providers for access to its services and consumers may experience
difficulties due to system failures unrelated to the Company's systems, services
and products. To the extent that the capacity restraints described above are not
effectively addressed by the Company, such constraints would have a material
adverse effect on the Company's business, results of operations and financial
condition.
 
DEPENDENCE ON COMPUTER INFRASTRUCTURE
 
     Certain of the Company's communications hardware and certain of its
computer hardware operations are located at the Company's headquarters located
in Chantilly, Virginia, and at a customer site located in Denver, Colorado.
There can be no assurance that a system failure at these locations would not
adversely affect the performance of the Company's services. These locations are
vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events. The Company does not
presently have a disaster recovery plan. Although the Company carries property
insurance, its coverage may not be adequate to compensate the Company for all
losses that may occur. Despite the implementation of network security measures
by the Company, its servers are also vulnerable to computer viruses, physical or
electronic break-ins and similar disruptive problems. Computer viruses,
break-ins or other problems caused by third parties could lead to interruptions,
delays or cessations in service to users of the Company's services and products.
The occurrence of any of these risks could have a material adverse effect on the
Company's business, results of operations and financial condition. See "PROPOSED
BUSINESS".
 
GOVERNMENT REGULATION AND REGULATORY UNCERTAINTIES
 
     The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to access to or commerce
on the Internet. However, due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted
with respect to the Internet, covering issues such as user privacy, pricing,
characteristics and quality of products and services. The Telecommunications
Reform Act of 1996 imposes criminal penalties on anyone who distributes obscene,
indecent or patently offensive communications on the Internet (although certain
provisions of that law have been declared unconstitutional by the Supreme Court
of the United States.) The adoption of any additional laws or regulations may
decrease the growth of the Internet, which could in turn decrease the demand for
the Company's services and products and increase the Company's cost of doing
business or otherwise have an adverse effect on the Company's business, results
of operations and financial condition. Moreover, the applicability to the
Internet of existing laws in various jurisdictions governing issues such as
property ownership, libel and personal privacy is uncertain. Any such new
legislation or regulation could have a material adverse effect on the Company's
business, results of operations and financial condition.
 
PROPRIETARY TECHNOLOGY; LICENSES AND INTELLECTUAL PROPERTY
 
     The Company regards its technology as proprietary and attempts to protect
it with copyrights, trademarks, trade secret laws, restrictions on disclosure
and transferring title and other methods. The Company also generally enters into
confidentiality or license agreements with its consultants and business
 
                                        9
<PAGE>   13
 
   
partners, and generally controls access to and distribution of its documentation
and other proprietary information. Despite these precautions, it may be possible
for a third party to copy or otherwise obtain and use the Company's products or
technology without authorization, or to develop similar technology
independently. Policing unauthorized use of the Company's technology is
difficult. There can be no assurance that the steps taken by the Company will
prevent misappropriation or infringement of its technology. In addition,
litigation may be necessary in the future to enforce the Company's intellectual
property rights, to protect the Company's trade secrets or to determine the
validity and scope of the proprietary rights of others. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, results of operations and financial
condition.
    
 
     The Company currently owns and licenses from third parties several
technologies, as it continues to introduce new services and products and to
incorporate new technologies. There can be no assurance that these third party
technology licenses will be available to the Company on commercially reasonable
terms, if at all. The inability of the Company to obtain any of these technology
licenses could result in delays or reductions in the introduction of new
services or product shipments or could materially and adversely affect the
performance of its services until equivalent technology could be identified,
licensed and integrated. Any such delays or reductions in the introduction of
services or product shipments or adverse impact on service quality could
materially adversely affect the Company's business, results of operations and
financial condition.
 
FUTURE CAPITAL NEEDS, UNCERTAINTY OF ADDITIONAL FINANCING
 
     The Company currently anticipates that the Net Proceeds of this Offering,
together with available funds will be sufficient to meet its anticipated needs
for working capital, capital expenditures and business expansion for
approximately two years. Thereafter, the Company may need to raise additional
funds. The Company may need to raise additional funds sooner in order to fund
more rapid expansion, to develop new or enhanced services or products, to
respond to competitive pressures or to acquire complementary products,
businesses or technologies. If additional funds are raised through the issuance
of equity or convertible debt securities, the percentage ownership of the
stockholders of the Company will be reduced and such securities may have rights,
preferences or privileges senior to those of the existing stockholders of the
Company. There can be no assurance that additional financing will be available
on terms favorable to the Company, or at all. If adequate funds are not
available or are not available on acceptable terms, the Company may not be able
to fund growth, take advantage of acquisition opportunities, develop or enhance
services or products or respond to competitive pressures. Such inability could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "USE OF PROCEEDS" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION."
 
PROCEEDS TO REPAY INDEBTEDNESS; BENEFITS TO AFFILIATES
 
   
     The Company will use a portion of the Net Proceeds of this Offering to
repay (i) $623,000 principal amount of the Officer Notes, including interest
payable thereon, of which $201,000 (approximately 2.3% of the Net Proceeds of
this Offering) is payable to Robert C. Varney Ph.D., the Chairman of the Board
of Directors and Chief Executive Officer of the Company and $422,000
(approximately 4.9% of the Net Proceeds of this Offering) is payable to Bruce E.
Edgington, a director of the Company; (ii) $1,700,000 principal amount of
non-interest bearing Junior Notes, including $300,000 (approximately 3.5% of the
Net Proceeds of this Offering), payable to John J. Meindl Jr., a director of the
Company; (iii) $200,000 principal amount of promissory notes (the "Short Term
Notes") at 11.5% interest per annum, of which $130,000 is payable to Bruce E.
Edgington (approximately 2.3% of the Net Proceeds of this Offering), and $70,000
of which is payable to Robert C. Varney (approximately .8% of the Net Proceeds
of this Offering). See "USE OF PROCEEDS" and "MANAGEMENT."
    
 
IMMEDIATE AND SUBSTANTIAL DILUTION
 
   
     New investors will incur an immediate and substantial dilution of
approximately $3.39 per share (67.8%) (assuming no exercise of the Purchase
Warrants, the Over-Allotment Option, the Underwriter Warrants, or the
Outstanding Stock Options or options to be granted upon satisfaction of the
Officer Notes and Common
    
 
                                       10
<PAGE>   14
 
   
Stock subject to rescission is rescinded; if not rescinded, dilution is
approximately $3.16 per share representing 63.2% of the public offering price of
the shares) between the pro forma net tangible book value per share of Common
Stock and the offering price. The Company believes that the Net Proceeds of the
Offering will be sufficient to meet the Company's operating and capital
requirements for the next two years. The Company anticipates that additional
funding will be required after the use of the Net Proceeds of the Offering. Such
additional funding will likely result in further dilution to the Company's
stockholders. See "DILUTION."
    
 
ABILITY TO OBTAIN ADDITIONAL FINANCING
 
   
     As of the Effective Date an aggregate of 1,767,520 shares of the Company's
Common Stock shall be issuable upon the exercise of outstanding stock options,
including the Officer Note Options and excluding an aggregate of 3,615,000
shares issuable upon the exercise of (i) the Purchase Warrants; (ii) the Over-
Allotment Option (including shares issuable under Purchase Warrants included in
the Over-Allotment Option); and (iii) the Underwriter Warrants, including shares
issuable under the Warrant Underwriter Warrants. There can be no assurances that
any additional financing would be available on acceptable terms, if at all, as a
result of, among other things, the significant number of shares of the Company's
Common Stock issuable upon the exercise of the Company's outstanding stock
options and warrants.
    
 
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY AND CONSIDERATION
 
   
     New investors will incur an immediate and substantive dilution of
approximately $3.39 per share between the pro forma net tangible book value per
share after the offering of $1.61 and the Public Offering Price of $5.00 per
share allocable to each share (assuming no exercise of the Purchase Warrants,
the Underwriter Warrants, or the Over-Allotment Option). The existing
shareholders of the Company acquired their shares of the Company's Common Stock
at prices below $5 and, accordingly, new investors will bear substantially all
of the risks inherent in an investment in the Company. See "DILUTION", "PROPOSED
BUSINESS."
    
 
DEPENDENCE ON STRATEGIC RELATIONSHIPS
 
     The Company has entered into certain agreements with numerous businesses
which provide to the Company services and products consisting of Internet
access, networking, filtering, hosting, radio and chat technology, market
research and transaction processing capability.
 
     The following table provides information pertinent to the material
relationships:
 
<TABLE>
<CAPTION>
     NAME             SERVICE PROVIDED                 TERM                      CONSIDERATION
- --------------    -------------------------    --------------------    ---------------------------------
<S>               <C>                          <C>                     <C>
digitalNATION     Hosting                      Two contracts, one      Company pays quarterly fixed rate
                                               through November
                                               1997, the other to
                                               March 1998,
                                               thereafter month
                                               through month
netradio          Software infrastructure      Exclusive for           Company paid one time license
                  for Internet radio, audio    Christian format        fee; shares advertising revenue
                  archiving and simulcast      through June 1999,      in 20% to 50% range based on
                                               with renewable one-     extent of exposure of advertising
                                               year terms              spot relative to netradio cost
                                                                       for providing spot; other
                                                                       services paid for on a quotation
                                                                       case-by-case basis
ichat             Chat technology              Annual renewal          Company pays annual license fee
Cybercash         Internet secure              Month to month          Company pays fee per transaction
                  transaction capability
Spring Arbor      Fulfillment of retail        Through September       Company pays wholesale cost of
                  sales from the Company's     1998                    the product plus a shipping cost
                  Internet bookstore                                   per transaction
Intermind         Internet publishing          Cancellable with        Company receives commission for
                  software                     ninety day notice       introducing Intermind to other
                                                                       users
</TABLE>
 
                                       11
<PAGE>   15
 
     The average amount expended by the Company monthly in connection with these
relationships is between $4,000 and $10,000.
 
     If the Company's arrangements and activities with such companies were
lessened, curtailed, or otherwise modified, the Company may not be able to
replace or supplement such services alone or with other companies. If these
companies were to cease to jointly provide their services, the Company's
business, results of operations, and financial condition would be materially and
adversely affected. See "PROPOSED BUSINESS."
 
DEPENDENCE ON KEY PERSONNEL
 
     The Company's future success depends, in significant part, upon the
continued service of Robert C. Varney, Ph.D. the Company's Chairman of the Board
of Directors and Chief Executive Officer, Dane B. West, the Company's President,
and William H. Bowers, the Company's Chief Operating Officer, all of whom have
entered into employment agreements with the Company for terms expiring on June
30, 1999. In addition, certain non-officer level skilled technical, editorial,
sales, and product development personnel, while not key to the success of the
business are important to the Company's operations. None of such personnel have
entered into employment agreements. The Company has obtained "key man" life
insurance on the lives of Dr. Varney and Messrs. West and Bowers. Although the
Company anticipates that it will maintain this "key man" life insurance for at
least the next two years, no assurance can be given that such insurance can be
maintained at reasonable rates, if at all. The loss of the services of Dr.
Varney, Mr. West or Mr. Bowers before suitable replacements are obtained could
have a material adverse effect on the Company's capacity to successfully achieve
its business objectives. In addition, departures and additions of skilled
personnel, to the extent disruptive, could have a material adverse effect on the
Company. The Company's future success also depends on its ability to identify,
hire, train and retain other skilled personnel. Competition for such skilled
personnel is intense, and there can be no assurance that the Company will be
able to attract, assimilate or retain such personnel in the future. The
inability to attract and retain the necessary skilled personnel could have a
material adverse effect upon the Company's business, results of operations and
financial condition. See "MANAGEMENT -- Employment Agreements" and "-- Executive
Officer Compensation."
 
INABILITY TO MANAGE GROWTH
 
     The rapid execution necessary for the Company to establish itself as a
leader in the developmental market for Internet-based sales of Christian related
products and advertising requires an effective planning and management process.
The Company's development has placed, and is expected to continue to place, a
significant strain on the Company's managerial, technical, sales and marketing
and administrative personnel as well as the Company's financial resources. To
manage its growth, the Company must implement operational and financial systems
and train and manage its employee base. There can be no assurances that the
Company will be able to successfully implement such systems on a timely basis,
if at all. Further, the Company will be required to manage multiple
relationships with consumers, strategic partners and other third parties. There
can be no assurance that the Company's systems, procedures or controls will be
adequate to support the Company's future operations. The Company's future
operating results will also depend on its ability to expand its sales and
marketing organizations, implement and manage new services to penetrate broader
markets and further develop and expand its organization. If the Company is
unable to manage growth effectively, the Company's business, results of
operations and financial condition will be materially adversely affected. There
can be no assurance that the Company will be able to effectively manage such
change.
 
COMPETITION
 
     There are several other companies, including nonprofit organizations, some
of which have longer operating histories, greater name recognition and
significantly greater financial and other resources than the Company, attempting
or which may attempt to aggregate Christian content on the Internet. There can
be no assurances that the Company will ever be positioned to compete
successfully with its current or future competitors nor can there be any
assurance that competitive pressures faced by the Company will not result in
increased marketing costs, decreased Internet traffic or loss of market share or
otherwise will not materially
 
                                       12
<PAGE>   16
 
adversely affect the Company's business, results of operations and financial
condition. See "PROPOSED BUSINESS -- Competition."
 
CLASSIFICATION AS A "RELIGIOUS CORPORATION"
 
     Article XIII of the Company's Bylaws provides that the Company is a
"religious corporation." To this end, the Company's policy is generally, to
include among its officers and directors unconditionally, and employees, where a
bona-fide occupational qualification exists, only persons who, upon request,
subscribe to the Company's Christian Statement of Faith. The Company deems this
as necessary in order to best identify with and service its selected Christian
market niche and to generate its Internet product which is heavily content
laden. Based on advice of its special counsel, the Company believes that its use
of religious criteria in employment practices does not violate federal law
relating to equal employment opportunities ("Federal Employment Law") because
the Company qualifies as an exempt religious corporation for purposes of the
Federal Employment Law. The Federal Employment Law has been subject to limited
judicial and regulatory interpretation on the question of what type of religious
corporation would be exempt from the reach of the Federal Employment Law. The
Federal Employment Law is enforced, in part, by a federal regulatory agency that
is vested with broad discretion in interpreting its meaning. The Company's
policies and procedures with respect to hiring have not been examined by federal
or state authorities. For these reasons, there can be no assurances that a
review of the Company's hiring practices or the operation of the Company's
business will not result in determinations that materially adversely affect the
Company's business, results of operations and financial condition or the
Company's ability to attain its objectives. Article XIII of the Company's Bylaws
cannot be amended or superseded except by a super majority vote of the Company's
stockholders at a meeting. See "PROPOSED BUSINESS -- Christian Statement of
Faith; the Company's Policy" and "LEGAL MATTERS."
 
INTENDED USE OF NET PROFITS
 
     The Company intends generally to act in accordance with the policy, stated
in Article XIII of its Bylaws, that, to the extent permitted by law, the Company
will expend approximately 10% of the amount that would otherwise be the net
profits of the Company, if any, for each accounting period, or such other sums
as are deemed prudent by the Board of Directors of the Company, "to support,
encourage, or sustain persons or entities which in the judgment of the Board of
Directors are expected to make significant efforts to propagate the Gospel of
Jesus Christ in any manner not in conflict with the Statement of Faith . . .
without regard to the tax status or nonprofit status of the recipient." Article
XIII cannot be amended or superseded except by a super majority vote of the
Company's stockholders at a meeting. Accordingly, there can be no assurance that
the financial condition and results of operations of the Company will not be
adversely affected by these expenditures. See "PROPOSED BUSINESS -- Christian
Statement of Faith; the Company's Policy."
 
POSSIBLE SECURITIES LAW VIOLATION
 
     In April 1996, the Company became aware that certain previously completed
private offerings of equity securities closed between December 1994 and April
1996 at a per share price ranging from $1.66 to $4.00, may be deemed not to have
been properly exempted from registration under federal and/or state law. This
may give rise to the opportunity for certain stockholders to exercise rescission
rights, if any, related to their investment in the Company. The Company believes
that there may be valid legal defenses to any and/or all such rescission
actions, if initiated. The potential of inadvertent exemption violations was
communicated by the Company to the investors concerned in August, 1996.
Furthermore, in December, 1996, each stockholder and member who the Company
believed may have had certain claims to rescission rights, was sent a written
request to waive such rights (if any) to rescission and other remedies, in
connection with any past omissions or violations of federal or state securities
laws or regulations by the Company and to further release the Company and its
affiliates from liability associated with such possible breaches of the law (the
"Waivers"). Stockholders representing approximately 84% of the proceeds raised
by the Company in connection with such prior offerings delivered the Waivers to
the Company. Assuming the Waivers are valid and enforceable by the Company, if,
in the future, it is determined that the prior offerings were effected in
violation of federal securities and/or certain state securities laws, the
Company may have to refund an aggregate of approximately $388,000, plus interest
from the date of purchase, to purchasers of securities in the prior offerings
who have not delivered the
 
                                       13
<PAGE>   17
 
   
Waivers and bring an action for rescission within the applicable limitations
period, which amount would be paid from the Net Proceeds of this Offering. If
the Waivers are not deemed valid, the Company could be obligated to refund up to
$1,788,399 in connection with the rescission. The Company has been informed by
the Commonwealth of Virginia that pursuant to its investigation, the
Commonwealth of Virginia believes the Waivers were issued in violation of the
Virginia Securities Act. The Commonwealth of Virginia has requested that the
Company notify each Virginia investor of their rights and remedies in connection
with their investment in the Company as stipulated under the Virginia Securities
Act (generally, to recover the consideration paid, together with nominal
interest) and that evidence of such compliance be in the form of an affidavit
signed by the Company's President which contains the date on which each investor
received the notice. As of the date of this Prospectus, the Company has not been
made aware of the institution by any other state, federal or regulatory
authority proceeding against the Company for potential securities laws
violations. The Company's financial statements do not include a reserve for any
amounts the Company may be required to deliver in connection with a rescission
of the prior offerings. The 607,433 shares subject to possible rescission,
however, are reflected in the Company's balance sheets as Common Stock Subject
to Possible Rescission.
    
 
NO PRIOR PUBLIC MARKET AND SHARE PRICE VOLATILITY
 
   
     Prior to the Offering there has been no public market for the Common Stock
or Purchase Warrants and there can be no assurance that any such market will
develop for the securities offered herein. The initial offering price for the
Securities as well as the exercise price and other terms of the Purchase
Warrants, have been determined by negotiation between the Company and the
Underwriter and bear no relationship to the Company's asset value, net worth or
other established criteria of value. There can be no assurance that the market
price of those securities will be sustained at the offering price. Quarterly
variations in the Company's operating results, news regarding other Internet
firms, Company or industry performance compared to securities analyst
expectations, a drop in a technology stock index and an anti-Christian sentiment
in the press are examples of events which could have an immediate adverse effect
on the market price of the securities offered herein. See "DESCRIPTION OF
SECURITIES" and "UNDERWRITING."
    
 
SHARES ELIGIBLE FOR FUTURE SALE
 
   
     All of the 3,310,108 shares of Common Stock issued and outstanding before
giving effect to the Securities purchased in the Offering (which amount, for
this purpose, includes an aggregate of 340,000 shares to be issued to the
holders of the Junior Notes upon satisfaction of the Junior Notes as well as all
1,767,520 shares issuable upon the exercise of the Outstanding Stock Options),
are "restricted securities," as that term is defined under Rule 144 ("Rule
144"), promulgated under the Securities Act, and may only be sold pursuant to a
registration statement under the Securities Act or in compliance with Rule 144.
Furthermore, the holders of all of the restricted securities (other than the
holders of 27,000 shares of common stock) have agreed not to sell, transfer or
otherwise dispose of any shares of Common Stock for a period of 6 months (65,750
shares), 12 months (51,550 shares), 18 months (2,825,808 shares) and 24 months
(340,000 shares) from the Effective Date, or any longer period required by the
laws of any state. The Company is unable to predict the effect that any
subsequent sales of the Company's securities by its existing stockholders, under
Rule 144 or otherwise, may have on the then-prevailing market price of the
Common Stock, although such sales could have depressive effect on such market
price. Nevertheless, the possibility that substantial amounts of Common Stock
may be sold in the public market may adversely affect prevailing market prices
of the Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities. See "DESCRIPTION OF
SECURITIES -- Shares Eligible for Future Sale."
    
 
CONTROL BY OFFICERS
 
   
     Upon the Closing, the directors and officers of the Company will own
beneficially 965,257 shares of Common Stock, or approximately 24.3% of the
Company's then outstanding shares of Common Stock, and will have the right to
acquire 880,500 additional shares more than 60 days after the Effective Date
pursuant to outstanding stock options. By virtue of this ownership, such
directors and officers may be in a position to have a significant impact on the
outcome of substantially all matters on which shareholders are entitled to vote,
    
 
                                       14
<PAGE>   18
 
including the election of directors. See "PRINCIPAL STOCKHOLDERS" and
"DESCRIPTION OF SECURITIES."
 
LIMITATION ON MONETARY LIABILITY OF OFFICERS AND DIRECTORS TO STOCKHOLDERS
 
     Section 145 of the General Corporation Law of the State of Delaware
contains provisions entitling directors and officers of the Company to
indemnification from judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees, as a result of an action or proceeding in
which they may be involved by reason of being or having been a director or
officer of the Company provided said officers or directors acted in good faith.
Articles 10 and 11 of the Company's Certificate of Incorporation contain
provisions indemnifying officers and directors of the Company to the fullest
extent provided by Delaware law. As a result, the rights of the Company's
stockholders to recover monetary damages from directors of the Company for
breaches of directors' fiduciary duties may be significantly limited.
 
NON-REGISTRATION IN CERTAIN JURISDICTION OF SHARES UNDERLYING THE PURCHASE
WARRANTS
 
     The Purchase Warrants are not exercisable unless, at the time of the
exercise, the Company has a current prospectus covering the shares of Common
Stock issuable upon exercise of the Purchase Warrants, and such shares are
registered, qualified or deemed to be exempt under the securities laws of the
states of residence of the exercising holders of the Purchase Warrants. Although
the Company will use its best efforts to have all of the shares of Common stock
issuable upon exercise of the Purchase Warrants registered or qualified on or
before the exercise date and to maintain a current prospectus relating thereto
until the expiration of the Purchase Warrants, there is no assurance that it
will be able to do so.
 
     Although the Purchase Warrants will not knowingly be sold to purchasers in
jurisdictions in which the Securities are not registered or otherwise qualified
for sale, purchasers may buy Purchase Warrants in the after-market or may move
to jurisdictions in which the shares underlying the Purchase Warrants are also
registered or qualified during the period that the Purchase Warrants are
exercisable. In this event, the Company would be unable to issue shares of
Common Stock to those persons desiring to exercise their Purchase Warrants
(whether in response to a redemption notice or otherwise), unless and until the
shares could be qualified for sale in the jurisdictions in which such purchasers
reside, or exemptions exist in such jurisdictions from such qualification.
Purchase Warrant holders would have no choice but to attempt to sell the
Purchase Warrants or allow them to expire unexercised. See "DESCRIPTION OF
SECURITIES."
 
DIVIDEND POLICY
 
     The Company has not paid any dividends on its capital stock to date and
does not currently intend to pay dividends in the foreseeable future. The
payment of dividends, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition
subsequent to the Closing of this Offering. The payment of any dividends
subsequent to the Closing of this Offering will be within the discretion of the
Company's Board of Directors. It is the current intention of the Board of
Directors to retain all earnings, if any, for use in the Company's business
operations and, accordingly, the Board does not anticipate paying any cash
dividends in the foreseeable future. See "DESCRIPTION OF SECURITIES --
Dividends."
 
NASDAQ SMALLCAP ELIGIBILITY AND MAINTENANCE; POSSIBLE DELISTING OF SECURITIES
FROM NASDAQ SMALLCAP
 
     Under the current rules relating to the listing of securities on Nasdaq
SmallCap, a company must have (a) at least $4,000,000 in net tangible assets, or
$750,000 in net income in two of the last three years, or a market
capitalization of at least $50,000,000, (b) public float of at least 1,000,000
shares, (c) market value of public float of at least $5,000,000, and (d) a
minimum bid price of $4.00 per share, among other requirements. For continued
listing, a company must maintain (a) at least $2,000,000 in net tangible assets,
or $500,000 in net income in two of the last three years, or a market
capitalization of at least $35,000,000, (b) public float of at least 500,000
shares, (c) market value of public float of at least $1,000,000, and (d) a
minimum bid price of $1.00 per share; among other requirements.
 
                                       15
<PAGE>   19
 
     The Common Stock and the Purchase Warrants (the "Listed Securities") are
expected to be eligible for initial listing on Nasdaq SmallCap under the current
rules upon the Closing. If at any time after issuance the Common Stock and
Purchase Warrants are not listed on Nasdaq SmallCap, and no other exclusion from
the definition of a "penny stock" under the Exchange Act were available,
transactions in the Listed Securities would become subject to the penny stock
regulations which impose additional sales practice requirements on
broker-dealers who sell such securities. See "-- Risk of Low-Priced Stocks."
 
     If the Company should experience losses from operations, it may be unable
to maintain the standards for continued listing and the Listed Securities could
be subject to delisting from Nasdaq SmallCap. Trading, if any, in the Listed
Securities would thereafter be conducted in the over-the-counter market on an
electronic bulletin board established for securities that do not meet the Nasdaq
SmallCap listing requirements or in what are commonly referred to as the "pink
sheets." As a result, an investor may find it more difficult to dispose of, or
to obtain accurate quotations as to the price of, the Listed Securities.
 
RISK OF LOW-PRICED AND PENNY STOCK
 
     If the Listed Securities were delisted from Nasdaq SmallCap, and no other
exclusion from the definition of a "penny stock" under applicable Commission
regulations were available, the Listed Securities may become subject to the
penny stock rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally defined as investors with net
worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with spouse). For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase and
must have received the purchaser's written consent to the transaction prior to
sale. Consequently, delisting from Nasdaq SmallCap, if it were to occur, could
materially adversely affect the ability of broker-dealers to sell the Securities
and the ability of purchasers in this Offering to sell their Securities in the
secondary market. See "DESCRIPTION OF SECURITIES."
 
   
UNDERWRITER'S INFLUENCE ON THE MARKET
    
 
   
     A significant amount of the Securities may be sold to customers of the
Underwriter. Such customers subsequently may engage in transactions for the sale
or purchase of such Securities through or with the Underwriter. Although it has
no obligation to do so, the Underwriter has indicated to the Company that it
intends to make a market in the Securities. Such market-making activity may be
discontinued at any time. The price and liquidity of the Common Stock and
Purchase Warrants may be significantly affected by the degree, if any, of the
Underwriter's participation in such market. If the Underwriter ceases making a
market, the market and market prices for such Securities may be adversely
affected and the holders thereof may be unable to sell the Securities. See
"DESCRIPTION OF SECURITIES."
    
 
NON-EXERCISE OF PURCHASE WARRANTS CALLED FOR REDEMPTION
 
   
     Commencing after the Effective Date, the Purchase Warrants are subject to
redemption by the Company, at the option of the Company, at $0.25 per Purchase
Warrant, upon 30 days prior written notice, if the closing bid price, as
reported on Nasdaq SmallCap, or the closing sale price, as reported on a
national or regional securities exchange, as applicable, of the shares of the
Common Stock for 30 consecutive trading days ending within ten days of the
notice of redemption of the Purchase Warrants averages in excess of $10.00 per
share, subject to adjustment. Prior to the first anniversary of the Effective
Date, the Purchase Warrants will not be redeemable by the Company without the
written consent of the Underwriter. The Company is required to maintain an
effective registration statement with respect to the Common Stock underlying the
Purchase Warrants prior to redemption of the Purchase Warrants. In the event the
Company elects to redeem the Purchase Warrants, such Purchase Warrants will be
exercisable until the close of business on the date for redemption fixed in such
notice. If any Purchase Warrant called for redemption is not exercised by such
time, it will cease to be exercisable and the holder will be entitled only to
the redemption price. Redemption of the Purchase Warrants could force Purchase
Warrant holders either to (i) exercise the Purchase Warrants and pay the
exercise price thereof at a time when it may be less advantageous economically
to do so, or (ii) accept the redemption price in consideration for cancellation
of the Purchase Warrants, which could be substantially
    
 
                                       16
<PAGE>   20
 
less than the market value thereof at the time of redemption. See "DESCRIPTION
OF SECURITIES -- Purchase Warrants."
 
   
UNDERWRITER WARRANTS
    
 
   
     In connection with this Offering, the Company has agreed to sell to the
Underwriter and/or persons related to the Underwriter, for nominal
consideration, the Common Stock Underwriter Warrants and the Warrant Underwriter
Warrants. See note (1) to the table on the cover page of this Prospectus. The
holders of the Underwriter Warrants will have certain registration rights with
respect to the Underwriter Warrants and the shares of Common Stock underlying
the Underwriter Warrants (the "Underlying Shares"). See "UNDERWRITING." In
addition, the sale, or even the possibility of sale, of the securities issuable
upon exercise of the Underwriter Warrants could have an adverse effect on the
market price for the Company's securities or on the Company's ability to obtain
future financing. If and to the extent the Underwriter Warrants are exercised,
stockholders may experience dilution in the book value of their holdings. See
"DILUTION."
    
 
                                USE OF PROCEEDS
 
   
     The Net Proceeds to the Company from the sale of the Securities are
estimated to be $8,669,065. If the Over-Allotment Option is exercised in full,
the Net Proceeds would be $10,035,235. The Company anticipates that the Net
Proceeds will be expended substantially in the manner set forth in the following
table:
    
 
   
<TABLE>
<CAPTION>
                                                                                   APPROXIMATE
                   APPLICATION OF NET PROCEEDS                  DOLLAR AMOUNT     % OF PROCEEDS
    ----------------------------------------------------------  -------------     -------------
    <S>                                                         <C>               <C>
    Marketing and sales and consulting services(1)............   $ 2,400,000           28.0%
    Research and Development(2)...............................     1,200,000           14.0%
    Retirement of Debt(3).....................................     2,596,000           30.0%
    Working Capital and general corporate purposes(4).........     2,473,065           28.0%
                                                                  ----------          ------
              Total...........................................   $ 8,669,065          100.0%
</TABLE>
    
 
- ---------------
 
   
(1) Represents anticipated costs for the promotion of CCN, participation in
    trade shows, multimedia presentations, market research; the hiring of at
    least four additional marketing and sales personnel and three additional
    personnel to the Company's editorial staff.
    
 
(2) Includes continuing enhancements of CCN and related technology.
 
   
(3) Represents (i) the satisfaction of $623,000 principal amount of the Officer
    Notes held by Robert C. Varney, Ph.D., the Chairman of the Board of
    Directors, Chief Executive Officer and a director and Bruce E. Edgington, a
    director of the Company, including interest payable thereon; (ii) the
    satisfaction of $1,700,000 principal amount of the Junior Notes, and (iii)
    the satisfaction of $200,000 principal amount of the Short Term Notes held
    by Robert C. Varney, Ph.D., the Chairman of the Board of Directors, Chief
    Executive Officer and a director and Bruce E. Edgington, a director of the
    Company, including interest payable thereon. The Officer Notes bear interest
    at 9.75% per annum. The Officer Notes were issued on July 10, 1996, July 30,
    1996, September 26, 1996 and October 30, 1996, and the proceeds received by
    the Company from the issuance of the Officer Notes were used for working
    capital. The Company intends to satisfy the Officer Notes at the Closing. In
    connection with the satisfaction of the Officer Notes, the Company is
    obligated to issue to Dr. Varney and Mr. Edgington Officer Note Options to
    purchase up to 60,357 shares and 112,282 shares of the Common Stock,
    respectively, at a purchase price of $4.00 per share, exercisable at any
    time and from time to time for a period commencing with the satisfaction of
    the Officer Notes and for a period of eight years thereafter. The Company
    will also recognize interest expense of approximately $12,000 relating to
    the notes payable and $14,000 of amortization of the discount (which
    represents an effective rate of interest of 17.8 percent) accrued for the
    period June 30, 1997 to the time of the repayment of the Officer Notes. The
    Short Term Notes bear interest at 11.5% per annum. One of the Short Term
    Notes was issued on August 8, 1997, two on August 22, 1997 and two on
    September 5, 1997, and the proceeds received by the Company from the
    issuance of the Short Term Notes were used for working capital and offering
    expenses. The Company
    
 
                                       17
<PAGE>   21
 
    intends to satisfy the Short Term Notes at the Closing. The Company will
    recognize interest expense of approximately $1,900 relating to the Short
    Term Notes.
   
         The Junior Notes consist of $1,700,000 principal amount of non-interest
    bearing Junior Convertible Subordinated Notes held by 25 persons
    unaffiliated with the Company and John J. Meindl, Jr., a director of the
    Company. The Junior Notes were issued by the Company during the period
    December 16, 1996 through February 4, 1997, and the proceeds derived by the
    Company from the issuance of the Junior Notes were used for development and
    marketing of additional websites, CCN expansion, reduction of accounts
    payable and working capital. The Company intends to satisfy the Junior Notes
    at the Closing. Pursuant to the terms of the Junior Notes, the Company is
    obligated to deliver to the holders of the Junior Notes an aggregate of
    340,000 shares of the Common Stock upon satisfaction of the Junior Notes. At
    that time the Company will also record a $1,700,000 interest expense for the
    use of these funds, representing an effective rate of interest of
    approximately 150%. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION."
    
 
(4) Includes payment of salaries to executive officers of $360,000 per annum
    over the next two years. See "MANAGEMENT -- Employment Agreements,
    Termination of Employment and Change-in-Control Arrangements."
 
     In the event that the Company's plans change or its assumptions prove to be
inaccurate, or if the proceeds of this Offering prove insufficient to fund
operations, the Company may find it necessary to reallocate the proceeds within
the categories as described or to use a portion of the proceeds to seek
additional financing or to cease operations. Any changes in the allocation of
the proceeds would be based, among other things, upon a revenue mix that differs
materially from that anticipated, the timing of revenue generation and the
acceptance of CCN, all of which affect the level of and content of operating
expenses.
 
     Although the Company intends to utilize a majority of the Net Proceeds for
repayment of indebtedness and the expansion of its sales, marketing, promotional
and product development efforts, a portion of the Net Proceeds may also be used
to acquire or invest in complementary businesses or products or to obtain
product development rights or complementary technologies. Accordingly,
management will have significant flexibility in applying the Net Proceeds.
Potential acquisition candidates may include companies with a compatible vision,
product and technology, where economies of scale and significant synergy or
increase in distribution of the Company's products and services may result. As
of the date of this Prospectus, the Company has no agreements, understandings or
arrangements with respect to any such acquisitions. Investors in this offering
will not have an opportunity to evaluate the specific merits or risks of any
acquisition. See "RISK FACTORS."
 
     The Company currently anticipates that the Net Proceeds, together with
available funds will be sufficient to meet its anticipated needs for working
capital, capital expenditures and business expansion for at least two years.
Thereafter, the Company may need to raise additional funds. The Company may need
to raise additional funds sooner in order to fund more rapid expansion, to
develop new or enhanced services or products, to respond to competitive
pressures or to acquire complementary products, businesses or technologies. If
additional funds are raised through the issuance of equity or debt securities,
the percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution and such securities may have
rights, preferences or privileges senior to those of the stockholders of the
Company. There can be no assurance that additional financing will be available
on terms favorable to the Company, or at all. If adequate funds are not
available or are not available on acceptable terms, the Company may not be able
to fund its expansion, take advantage of acquisition opportunities, develop or
enhance services or products or respond to competitive pressures. Such inability
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "RISK FACTORS" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."
 
     The Net Proceeds not immediately required for the purposes set forth above
will be invested in United States Government securities or other minimum risk,
short-term interest-bearing investments; provided, however, that the Company
will attempt not to invest the Net Proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act of 1940.
 
                                       18
<PAGE>   22
 
                                 CAPITALIZATION
 
   
     The following table sets forth the capitalization of the Company at June
30, 1997 and as adjusted to give effect to (i) the issuance and sale of the
Securities offered hereby (based on an assumed offering price of $5.00 per share
and $.1875 per Purchase Warrant) and the initial application of the Net Proceeds
therefrom; (ii) the issuance of 340,000 shares of Common Stock upon the
repayment at the Closing, of the Junior Notes; (iii) the repayment of the
Officer Notes. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION"
and "FINANCIAL STATEMENTS."
    
 
   
<TABLE>
<CAPTION>
                                                                    OUTSTANDING     AS ADJUSTED
                                                                    -----------     -----------
<S>                                                                 <C>             <C>
Short Term Debt -- Officer Notes................................    $   623,000              --
Long Term Debt -- Junior Notes..................................      1,700,000              --
Common Stock Subject to Possible Rescission, $.01 par value,
  607,433 shares issued and 607,433 shares issued (pro forma as
  adjusted).....................................................      1,788,399       1,788,399
Stockholders Equity
(Net Capital Deficiency):
Common Stock, $.01 par value, 20,000,000 shares authorized,
  595,155 shares issued and 2,935,155 shares issued (pro forma
  as adjusted)(1)...............................................    $     5,952          29,352
Additional paid-in capital......................................        888,967      11,345,819
Common Stock Warrants...........................................        111,187              --
Accumulated Deficit(2)..........................................     (4,823,615)     (6,669,868)
                                                                    -----------     -----------
     Total stockholders' equity (net capital deficiency)........    $(3,817,509)    $ 4,705,303
</TABLE>
    
 
- ---------------
 
   
(1) Excludes (i) 1,767,520 shares of Common Stock issuable upon exercise of
    Outstanding Stock Options (including the Officer Note Options) of which
    options to purchase 706,382 shares are currently exercisable, including
    options to acquire 30,000 shares to become exercisable at the Closing; (ii)
    2,500,000 shares of Common Stock issuable upon exercise of the Purchase
    Warrants; (iii) 675,000 shares of Common Stock reserved for issuance upon
    exercise of the Over-Allotment Option, including the exercise of the
    Purchase Warrants included in the Over-Allotment Option; and (iv) 440,000
    shares of Common Stock reserved for issuance upon exercise of the
    Underwriter Warrants, including the exercise of the Warrant Underwriter
    Warrants. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION,"
    "DESCRIPTION OF SECURITIES" and "UNDERWRITING."
    
 
(2) The difference between As Adjusted and Outstanding consists of (i) a
    $1,700,000 interest expense associated with the Junior Notes to be repaid at
    the Closing; (ii) $118,580 of private placement costs to be expensed in
    connection with the payment at the Closing of the Officer Notes and the
    Junior Notes; (iii) $14,000 remaining amortization of the discount for
    proceeds allocated to the Officer Note Options and $11,553 for related
    interest expense; and (iv) $1,917 interest payable on the Short Term Notes.
 
                                       19
<PAGE>   23
 
                                    DILUTION
 
     The difference between the public offering price per share and the pro
forma net tangible book value per share of Common Stock of the Company after
this Offering constitutes the dilution to investors in this Offering. Net
tangible book value per share is determined by dividing the net tangible book
value of the Company (total tangible assets less total liabilities) by the
number of outstanding shares of Common Stock.
 
   
     At June 30, 1997, the net tangible book value of the Company was
$(3,817,509) or approximately $(6.41) per share of Common Stock of the Company
(based upon 595,155 shares then outstanding). After giving effect to the
issuance and sale of the 2,000,000 Shares offered hereby (and assuming that a
value of $0.1875 is ascribed to each of the Purchase Warrants offered hereby),
the application of the estimated Net Proceeds and the issuance of 340,000 shares
upon satisfaction of the Junior Notes, the pro forma net tangible book value of
the Company at June 30, 1997 would have been $4,705,303 or approximately $1.61
per share, representing an immediate increase in net tangible book value of
$8,522,811 or $8.02 per share to existing stockholders and an immediate dilution
of $3.39 per share to new investors (which represents 67.8% of the public
offering price of the Shares). As of the date hereof, there are currently no
plans, proposals, arrangements, understandings or obligations with respect to
the sale of additional securities to any persons for the period commencing with
the Closing, other than the Company's issuance of shares of Common Stock upon
the exercise of the Over-Allotment Option, the Underwriter Warrants, the
Purchase Warrants and the Outstanding Stock Options. See "PROSPECTUS
SUMMARY -- The Offering," "PRINCIPAL STOCKHOLDERS," "MANAGEMENT -- 1997 Stock
Option Plan," "UNDERWRITING" and FINANCIAL STATEMENTS.
    
 
     The following table illustrates the foregoing information with respect to
dilution to new investors on a per Share basis after this Offering(1):
 
   
<TABLE>
    <S>                                                                   <C>        <C>
    Initial public offering price per Share.............................              $5.00
    Net tangible book value per share of Common Stock, before this
      Offering..........................................................  $(6.41)
    Increase per share of Common Stock attributable to payment
      by new investors..................................................    8.02
                                                                          ------
    Pro forma adjusted net tangible book value per share of Common Stock
      after this Offering...............................................               1.61
                                                                                      -----
    Net tangible book value dilution to new investors per Share of
      Common Stock......................................................               3.39
                                                                                      =====
</TABLE>
    
 
- ---------------
   
(1) If the Common Stock subject to rescission was included in the dilution
    calculation, the net tangible book value of the Company would be
    $(2,029,110) or approximately $(1.69) per share and pro forma net tangible
    book value would be $6,493,701 or approximately $1.84 per share,
    representing an immediate increase in net tangible book value of $8,522,811
    or $3.53 per share to existing stockholders and an immediate dilution of
    $3.16 per share to new investors (which represents 63.2% of the public
    offering price of the Shares.)
    
 
     The following table sets forth as of the Effective Date, with respect to
existing stockholders (including for this purpose the holders of the Junior
Notes who will become stockholders upon the closing of this Offering) and new
investors, on a pro forma basis, a comparison of the number of shares of Common
Stock acquired from the Company, their percentage ownership of such shares, the
total consideration paid, the percentage of total consideration paid and the
average price per share of Common Stock:
 
   
<TABLE>
<CAPTION>
                                               SECURITIES PURCHASED(1)         TOTAL CONSIDERATION
                                               ------------------------     --------------------------
                                                AMOUNT       PERCENTAGE      AMOUNT(3)      PERCENTAGE
                                               ---------     ----------     -----------     ----------
<S>                                            <C>           <C>            <C>             <C>
Existing Stockholders(2).....................  1,542,588        100.0%      $ 2,502,909         19.3%
New Investors-Shares.........................  2,000,000        100.0%      $10,000,000         77.1%
New Investors-Warrants.......................  2,500,000        100.0%      $   468,750          3.6%
                                                                            -----------        -----
                                                                            $12,971,659        100.0%
                                                                            ===========        =====
</TABLE>
    
 
- ---------------
 
   
(1) The above table assumes no exercise of the Purchase Warrants, the
    Over-Allotment Option, the Underwriter Warrants or the Outstanding Stock
    Options. If the Outstanding Stock Options currently
    
 
                                       20
<PAGE>   24
 
   
    exercisable had been exercised at June 30, 1997, the net tangible book value
    per share would be increased to $10,878,698 and the percentage of
    outstanding Common Stock owned by new investors would decrease to 83.9%. If
    the Over-Allotment Option is exercised in full with respect to Shares and
    with respect to Purchase Warrants, the new investors will have paid
    $12,039,062 for 2,300,000 Shares and 2,875,000 Purchase Warrants,
    representing approximately 82.8% of the total consideration of $14,541,971.
    See "PROSPECTUS SUMMARY -- The Offering," "PRINCIPAL STOCKHOLDERS,"
    "MANAGEMENT -- 1997 Stock Option Plan" and "UNDERWRITING."
    
 
(2) Of these shares, 519,943 shares were purchased by officers, directors,
    promoters and affiliated persons of the Company for an aggregate
    consideration of $548,449.
 
(3) Before deduction of underwriting discounts and estimated expenses of the
    Offering.
 
              MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
     The following discussion should be read in conjunction with the Financial
Statements and Notes thereto of the Company included elsewhere in this
Prospectus.
 
GENERAL
 
     In April 1997 (the "Merger Date"), DIDAX, INC., a Virginia corporation,
DIDAX ON-LINE, L.C., a Virginia limited liability company (collectively,
"Predecessor Didax") and DIDAX INC., a Delaware corporation organized on January
7, 1997 ("Didax Delaware") consummated a reorganization resulting in Didax
Delaware being the surviving corporation (the reorganization being referenced
herein as the "Merger"). Under the terms of the Merger, Didax Delaware, among
other things, issued a total of 1,160,376 shares of its Common Stock,
representing 100% of its outstanding Common Stock subsequent to the Merger. For
comparison purposes, the discussion below relates to the combined financial
statements of Predecessor Didax. Predecessor Didax and Didax Delaware are
referenced in this Prospectus collectively as the "Company."
 
     Since its inception in 1993, the operations of the Company have been
limited to (a) research and development and marketing activities related to The
Christian Community Network(TM) (CCN) (WWW.CHRISTCOM.NET), the Company's
interactive website focused on content material that the Company generally
believes appeals to the Christian community, and (b) providing for a fee, to
Christian organizations, limited technology consulting services, including
website development services and other related Internet services. The Company
presently intends to position itself to generate commercial sales of (i)
Christian interest advertising space on CCN; (ii) memberships in
Christianity-based affinity marketing programs (affording participants price
discounts and other benefits of group purchasing power); and (iii) Christian
interest products manufactured or developed by others (primarily Christian
books, Christian music and other Christian articles) on CCN. To date, the
Company has generated revenues only from providing the Consulting Services, the
Internet Access Services, and to a very limited extent, Retail Sales.
 
     The Company has an extremely limited operating history upon which an
evaluation of the Company and its business can be based. The Company's business
must be considered in light of the risks, expenses and problems frequently
encountered by companies in the early stage of development, particularly
companies in new and rapidly evolving markets, such as the Internet. The market
for the Company's services and products has only very recently begun to develop,
is rapidly evolving and is characterized by an increasing number of market
entrants who have introduced or developed services and products for use on the
Internet. As a result, the Company's mix of services and products may undergo
substantial changes as the Company reacts to competitive and other developments
in the overall Internet market. The Company has achieved only limited revenues
to date, has incurred net losses since inception and expects to continue to
operate at a loss for the foreseeable future. As of June 30, 1997, the Company
had an accumulated deficit of approximately $4,823,615. See "RISK
FACTORS -- Extremely Limited Operating History; Accumulated Deficit and
Anticipation of Continued Losses" and "-- Developing Market; Validation of the
Internet as an Effective Commerce Medium."
 
                                       21
<PAGE>   25
 
     As a result of the Company's extremely limited operating history, the
Company has no meaningful historical financial data upon which to base future
operating expenses. Accordingly, the Company's expense levels are based in part
on the Company's goals for obtaining future revenues, of which there can be no
assurance. A shortfall in revenues would have an immediate adverse impact on the
Company's business, results of operations and financial condition. To date, the
Company has generated no material revenue from the commercial sale of
advertising space on CCN and very limited sales of products via CCN. The Company
plans to significantly increase its operating expenses, increase its sales and
marketing efforts, fund greater levels of product development, increase its
editorial staff and increase its general and administrative costs. The Company
expects to experience significant fluctuations in future quarterly operating
results and believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as any
indication of future performance. See "RISK FACTORS -- Extremely Limited
Operating History; Accumulated Deficit and Anticipation of Continued Losses" and
"-- Potential Fluctuations in Quarterly Results."
 
RESULTS OF OPERATIONS
 
  SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
  (UNAUDITED)
 
     For the six months ended June 30, 1997, the Company incurred a loss of
$1,323,386 compared to a loss of $1,408,391 for the six-month period ended June
30, 1996. This decreased loss of approximately $85,005 (approximately 6%) was
due to increased revenue and decreased payroll expenses offset by increases in
interest expense and the donation of stock. During the six month periods ended
June 30, 1997 and June 30, 1996 the Company donated to three separate Christian
ministry customers unaffiliated with the Company otherwise salable computer
consulting services, including website development services valued at
approximately $48,000 and $138,000, respectively. Additionally, the period ended
June 30, 1997 includes a $200,000 expense for the market value of 40,000 shares
of Common Stock donated to one of these ministries, Promise Keepers, Inc.
 
     The Company derived $188,645 in revenue during the six-month period ended
June 30, 1997 compared to $42,045 in revenues for the six-month period ended
June 30, 1996. $27,941 of the revenue generated during this period was generated
from Internet Access Services which were recognized ratably over the period that
such services were provided, $154,388 was generated from Consulting Services,
$1,788 was generated from advertising and $4,528 was generated from Retail
Sales. This compares to $28,929 generated from Internet Access Services, $9,789
from Consulting Services and $3,327 from Retail Sales for the six-month period
ended June 30, 1996. There was no prior year advertising revenue and the Company
ceased to actively market Internet Access Services in the fourth quarter of
1996. Interest income was $15,453 for the six-month period ended June 30, 1997
compared to $10,763 for the six-month period ended June 30, 1996.
 
     Cost of goods and services, consisting primarily of costs related to
development, maintenance and support of customer websites increased to $100,790
for the six month period ended June 30, 1997 as compared to $61,014 for the six
month period ended June 30, 1996. Technical and development expenses, consisting
primarily of costs related to the Company's product development activities for
CCN decreased to $287,980 for the six-month period ended June 30, 1997 as
compared to $373,107 for the six month period ended June 30, 1996. Approximately
half of this decrease in technical and development expenses is due to the
increase in revenue which results in a larger portion of these expenses now
being classified as cost of sales rather than as technical and development
expense. The remaining decrease in technical and development expense is
associated with reduced salaries and headcount. Sales and marketing costs,
consisting primarily of expenses related to employees and consultants engaged in
sales activities, as well as promotional cost related to CCN, increased to
$670,443 during the six month period ended June 30, 1997 as compared to $611,445
for the six month period ended June 30, 1996 when the majority of the expense
was associated with the marketing of Internet Access Services. The June 30, 1997
figure includes the $200,000 recognized pursuant to the donation of common stock
noted above. The Company believes that it will continue to incur substantial
technical and marketing expenses in the foreseeable future. General and
administrative expenses consisting of payroll and related expenses and office
overhead costs (including rent) decreased by approximately $35,312 (8.5%) to
$380,321 for the six months ended June 30, 1997, as compared to $415,633 for the
six-month period ended
 
                                       22
<PAGE>   26
 
June 30, 1996. This decrease was primarily a result of voluntary salary
reductions. The Company's payroll costs decreased to $991,191 from $1,260,354
primarily as a result of headcount and salary reductions.
 
     For the six-month period ended June 30, 1997, interest expense was $88,471
versus $0 for the comparable six-month period ended June 30, 1996. This increase
is a result of increased borrowings of $835,000 during the third and fourth
quarter of 1996 inclusive of recognition of amortization of the discount on
warrants issued to an executive officer and a director of the Company. See
"-- Liquidity and Capital Resources" and Note D to FINANCIAL STATEMENTS.
 
  YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
 
     For the year ended December 31, 1996, the Company incurred a net loss of
$(2,464,904) compared to a net loss of $(706,564) for the year ended December
31, 1995. This increased loss of approximately $1,758,340 was due to substantial
increases in interest and expenses associated with product development,
marketing expenses and general and administrative expenses related to increases
in lease payments, professional fees and increased professional staff. During
the year ended December 31, 1996 and December 31, 1995, as part of its product
development expense, the Company provided without charge to Christian ministry
customers otherwise salable computer consulting services, including website
development services valued at approximately $240,500 and $250,000,
respectively.
 
     The Company generated $180,776 in revenue during the year ended December
31, 1996 compared to no revenue for the year ended December 31, 1995. Of the
revenue generated in 1996, $90,571 was generated from Internet Access Services,
which were recognized ratably over the period that such services were provided,
$81,371 was generated from Consulting Services, and $8,834 was generated from
Retail Sales. Interest income was $11,412 for the year ended December 31, 1996
compared to $4,353 for the year ended December 31, 1995 partially as a result of
the increase in liquid assets during 1996. See "-- Liquidity and Capital
Resources," and Note D to FINANCIAL STATEMENTS.
 
     Cost of goods and services increased to $226,220 for the year ended
December 31, 1996 as compared to none for the year ended December 31, 1995.
Technical and development expenses increased to $694,072 for the year ended
December 31, 1996 as compared to $283,819 for the year ended December 31, 1995.
Sales and marketing costs increased to $991,300 during the year ended December
31, 1996 as compared to $259,701 for the year ended December 31, 1995. General
and administrative expenses increased by approximately $504,128 (301%) to
$671,525 for the year ended December 31, 1996, as compared to $167,397 for the
year ended December 31, 1995, partially as a result of increased professional
fees relating to initial customer and vendor contracts. The Company's payroll
costs increased to approximately $1,334,896 for the year ended December 31, 1996
from $342,724 for the year ended December 31, 1995 as a result of approximately
ten additional employees hired.
 
     For the year ended December 31, 1996, interest expense was $77,815 versus
none for the year ended December 31, 1995. This increase is a result of
borrowings of $835,000 during the third and fourth quarter of 1996 inclusive of
recognition of amortization of the discount on warrants issued to an executive
officer and a director of the Company. See "-- Liquidity and Capital Resources,"
and Note D to FINANCIAL STATEMENTS.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Since inception, the Company has financed its operations and met its
capital expenditure requirements from proceeds of the private sale of its equity
securities totaling approximately $2,491,000, the issuance of the Officer Notes
in the principal amount of $623,000, the issuance of the Junior Notes in the
principal amount of $1,700,000, and the issuance of the Short Term Notes in the
principal amount of $200,000.
 
     With regard to the equity securities, in December 1996, the Company
solicited waivers from fifty investors, of rescission rights and other remedies,
in connection with any past omissions or violations of federal or state
securities laws or regulations by the Company and to further release the Company
and its affiliated from liability associated with such possible breaches of the
law (the "Waivers"). Shareholders representing
 
                                       23
<PAGE>   27
 
approximately 84% of the proceeds raised by the Company in connection with such
prior offerings delivered the Waivers to the Company. Assuming the Waivers are
valid and enforceable by the Company, if in the future it is determined that the
prior offerings were effected in violation of federal securities and/or certain
state securities laws, the Company may have to refund an aggregate of
approximately $388,000 plus interest from the date of purchase, to purchasers of
securities in the prior offerings who have not delivered the Waiver and bring an
action for rescission within the applicable limitations period. If the Waivers
are not deemed valid, the possible rescission totals $1,788,399. The Company's
financial statements do not include a reserve for any amounts the Company may be
required to deliver in connection with a rescission of the prior offerings,
however the 607,433 shares subject to possible rescission are reflected in the
Company's balance sheets as Common Stock Subject to Possible Rescission. See
"FINANCIAL STATEMENTS."
 
   
     The Officer Notes consist of four promissory notes aggregating $623,000
principal amount of debt owed by the Company to Robert C. Varney, Ph.D.
($201,000) and Mr. Bruce E. Edgington ($422,000), the Chairman of the Board of
Directors and Chief Executive Officer of the Company, and a director of the
Company, respectively. The Officer Notes bear interest at 9.75% per annum. The
Officer Notes were issued on July 10, 1996, July 30, 1996, September 26, 1996
and October 30, 1996, and the proceeds received by the Company from the issuance
of the Officer Notes were used for working capital. The Company intends to
satisfy the Officer Notes at the Closing. In connection with the satisfaction of
the Officer Notes, the Company is obligated to issue to Dr. Varney and Mr.
Edgington Officer Note Options to purchase up to 60,357 shares and 112,282
shares of the Common Stock, respectively, at a purchase price of $4.00 per
share, exercisable at any time and from time to time for a period commencing
with the satisfaction of the Officer Notes and for a period of eight years
thereafter. The Company will also recognize interest expense of approximately
$11,500 relating to the notes payable and $14,000 of amortization of the
discount (which represents an effective rate of interest of 17.8 percent)
accrued for the period June 30, 1997 to the time of the repayment of the Officer
Notes.
    
 
   
     The Junior Notes consist of $1,700,000 principal amount of non-interest
bearing Junior Convertible Subordinated Notes held by 25 persons unaffiliated
with the Company and John J. Meindl, Jr., a director of the Company. The Junior
Notes were issued by the Company during the period December 16, 1996 through
February 4, 1997, and the proceeds derived by the Company from the issuance of
the Junior Notes were used for development and marketing of additional websites,
CCN expansion, reduction of accounts payable and working capital. The Company
intends to satisfy the Junior Notes at the Closing. Pursuant to the terms of the
Junior Notes, the Company is obligated to deliver to the holders of the Junior
Notes an aggregate of 340,000 shares of the Common Stock upon satisfaction of
the Junior Notes. At that time, the Company will also record a $1,700,000
interest expense for the use of these funds, representing an effective rate of
interest of approximately 150%.
    
 
     The Short Term Notes consist of five promissory notes aggregating $200,000
principal amount of unsecured corporate debt owed by the Company to Robert C.
Varney, Ph.D. ($70,000) and Mr. Bruce E. Edgington ($130,000), the Chairman of
the Board of Directors and Chief Executive Officer of the Company, and a
director of the Company, respectively. The Short Term Notes are sixty day notes
which bear interest at 11.5% per annum. The Short Term Notes were issued on
August 8, 1997, August 22, 1997 and September 5, 1997, and the proceeds received
were used for working capital and offering expenses. The Company intends to
satisfy the Short Term Notes at the Closing. The Company will recognize interest
expense of approximately $1,900 prior to the Closing related to the Short Term
Notes.
 
     During the six month periods ended June 30, 1997 and June 30, 1996, net
cash used in operating activities was $928,012 and $1,216,299, respectively.
During the fiscal year ended December 31, 1996 and December 31, 1995, net cash
used in operating activities was $2,023,558 and $693,309, respectively,
including $180,668 and $67,674 used in connection with investment activities
during 1996 and 1995, respectively.
 
     As of June 30, 1997, the Company had current liquid assets of $170,419
compared to $1,932 at December 31, 1996. The Company had total assets of
$807,480 and $282,274 at June 30, 1997 and December 31, 1996, respectively. The
increase in liquid assets and total assets is attributable to the Company's
receipt of cash in exchange for the issuance of the Junior Notes.
 
                                       24
<PAGE>   28
 
     Capital expenditures have been, and future expenditures are anticipated to
be, primarily for facilities and equipment to support expansion of the Company's
operations and management information systems. While the Company has no material
capital commitments, the Company anticipates that its planned purchases of
capital equipment will increase with increases in salaried employees and website
traffic.
 
     The Company is currently expending approximately $175,000 per month, which
expenses include operational expenses, salaries, rent and professional fees. The
Company anticipates that its expenses will increase due to additional expenses,
including increases in salaries for executive officers totaling approximately
$13,000 per month, the payment of salaries for additional personnel, increased
professional expenses and increased sales and marketing expenses. The Company
expects that the Net Proceeds will be sufficient to meet its working capital
requirements for two years. See "RISK FACTORS."
 
     THE COMPANY'S FINANCIAL STATEMENTS INCLUDE AN EXPLANATORY PARAGRAPH TO THE
EFFECT THAT THE COMPANY'S ABILITY TO CONTINUE OPERATIONS IS DEPENDENT UPON THE
SALE OF THE SECURITIES OR OTHER FUND-RAISING, WHICH RAISES SUBSTANTIAL DOUBT
ABOUT ITS ABILITY TO CONTINUE AS A GOING CONCERN. THE COMPANY'S FINANCIAL
STATEMENTS DO NOT INCLUDE ANY ADJUSTMENTS WHICH MIGHT BE NECESSARY SHOULD THE
COMPANY BE UNABLE TO CONTINUE AS A GOING CONCERN. SEE FINANCIAL STATEMENTS.
 
     The Company is not involved in any material acquisitions, nor are there any
material acquisitions currently planned. There is no assurance that the
Company's resources will be sufficient to finance any acquisition or expansion
of the Company's operations.
 
                                       25
<PAGE>   29
 
                               PROPOSED BUSINESS
 
OVERVIEW
 
     Since its inception in 1993, the operations of the Company and its
predecessors (referred to in this Prospectus collectively as the "Company") have
been limited to (a) research and development and marketing activities related to
The Christian Community Network(TM) ("CCN") (WWW.CHRISTCOM.NET), the Company's
interactive website focused on content material that the Company generally
believes appeals to the Christian community, and (b) providing for a fee, to
Christian organizations, limited technology consulting services, including
website development services, Internet access through the IBM Global Network,
hosting through various hosting services (including in-house hosting) and other
related Internet services. The Company's website, an Internet-based alternative
to traditional means of communication by Christian ministries and Christian
content publishers and retailers (such as fliers, periodicals, books, radio and
television) is intended to provide its target constituent base, the Christian
consumer, with resources and information provided by Christian and secular
retailers, publishers, charities and ministries. The Company's website is also
intended to reduce its clients' costs of contacting their target constituents
and markets while expanding the potential reach and duration of that contact.
Access to CCN is currently provided free of charge to persons who have Internet
access. To date, the Company has derived all of its revenues from (i) providing
Consulting Services to Christian organizations, such as Promise Keepers, a
nonprofit Christian ministry (PK Net, www.promisekeepers.org), Christianity
Today, Inc., a publisher of Christian periodicals (www.christianity.net), Learn
@ Home, a coalition of Christian homeschooling professional organizations, and
World Vision, an international Christian relief agency; (ii) providing Internet
Access Services; and (iii) to a very limited extent, Retail Sales. See
"-- Strategic Relationships" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION -- General"
 
     The Company targets the marketing of its sales, products and services and
the content on CCN to persons of all ages, economic levels, genders, ethnic
backgrounds and nationalities that identify themselves as Christian, principally
Protestant (regardless of denomination, if any) and Catholic, with particular
emphasis upon evangelical Christians. According to a poll conducted by the
Gallup Organization in 1994, approximately 25% of Americans identify themselves
as Catholic and approximately 20% identify themselves as Protestant. The Pew
Center for Civic Journalism in a survey published in April 1997, reported that
approximately 35% of the United States population identify themselves as
evangelical Christians. The Wall Street Journal (September 1996) reported that
the number of individuals on the Internet grew from approximately eight million
in September 1995 to approximately 30 million in September 1996. According to
Intelliquest, a marketing research firm, the number of individuals on the
Internet grew to approximately 47 million by February 1997. According to SOMA
Communications, Inc., a Christian broadcast market research firm, over 70% of
Christians on the Internet have annual incomes in excess of $40,000 and over 30%
of Christians on the Internet have annual incomes over $75,000. According to
Christianity Today, Inc., a publisher of Christian periodicals, when compared to
the general U.S. population, Christians are approximately 25% more likely to own
a computer and approximately 15% more likely to own a modem.
 
     The Company presently intends to position itself to generate commercial
sales of (i) Christian interest advertising space on CCN; (ii) memberships in
Christianity-based affinity marketing programs (such as sales of Internet-based
travel services), which afford participants price discounts and other benefits
of group purchasing power; and (iii) Christian interest products manufactured or
developed by others (primarily Christian books, Christian music and other
Christian articles) on CCN. The Company recently has released the Promise
Keepers Marketplace and on CCN, its on-line Christian books and music store
featuring Christian content material produced by others.
 
     The Company has an extremely limited operating history upon which an
evaluation of the Company and its business can be based. For the fiscal years
ended December 31, 1995 and 1996 and the six-month periods ended June 30, 1996
and 1997, the Company generated net losses of $(706,564), $(2,464,904), and
$(1,408,391) (unaudited) and $(1,323,388) (unaudited), respectively, from
operations. See FINANCIAL STATEMENTS. The Company has achieved only limited
revenues to date, has incurred net losses since inception and expects to
continue to operate at a loss for the foreseeable future. Its expense levels are
based in
 
                                       26
<PAGE>   30
 
part on its expectations as to future revenues, if any. Any shortfall in
revenues, whether caused by the cancellation or deferral of, or the failure to
obtain, advertising, retail or website development customers, or otherwise,
would have an immediate material adverse impact on the Company's business,
results of operations and financial condition. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION."
 
INFORMATION AND COMMERCE ON THE INTERNET GENERALLY
 
     The Internet is a network of computers which enables users to access and
share information and conduct business transactions. Much of the recent growth
in the use of the Internet by businesses and individuals has been driven by the
emergence of the World Wide Web (the "Web"), which enables non-technical users
to exploit the resources of the Internet. International Data Corporation ("IDC")
estimates that the number of Web users increased from 16.1 million at the end of
1995 to 34.6 million at the end of 1996 and that this number will increase to
163 million by the end of the year 2000.
 
     The emergence of the Internet as a significant communications medium is
driving the development and adoption of website content and commerce
applications that offer convenience and value to consumers, as well as unique
marketing opportunities and reduced operating costs to businesses. By hosting
information about products and services on a website, a company or organization
can enable potential customers or constituents in any geographical area to
gather relevant, in-depth information about products, services or organization
activities and messages at their convenience and according to their preferences.
A growing number of consumers have begun to transact business electronically,
such as paying bills, booking airline tickets, trading securities and purchasing
consumer goods, including personal computers, consumer electronics, compact
disks, books and vehicles. Moreover, online transactions can be faster, less
expensive and more convenient than transactions conducted through a human
intermediary. In addition, website commerce applications enable businesses and
organizations, including ministries, to rapidly target and economically manage a
broad customer and constituent base and establish and maintain ongoing direct
customer and constituent relationships. IDC estimates that the dollar value of
goods and services purchased over the Internet will increase from approximately
$318 million in 1995 to $95 billion in the year 2000.
 
CURRENT OPERATIONS
 
  Research and Development; Initial Marketing
 
     As of June 30, 1996, the Company had developed most of the infrastructure
necessary to support a coordinated collection of websites. During the third
quarter 1996, the Company created three products which could be accessed by
Internet users via CCN: an Internet radio station, discussion forums, and a
Reuters news feed. Shortly thereafter, during the fourth quarter 1996, retail
purchasing services became accessible to Internet users via CCN. In the second
quarter of 1997, the Company launched beta versions of chat and a database
driven magazine. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION -- Results of Operations."
 
     Before 1997, the Company's marketing activities were limited to its direct
communication with Christian organizations and its distribution of diskettes to
participants in programs of Promise Keepers to afford them access to CCN. The
Company commenced more active promotional activity in January 1997 through
Internet-based marketing and expanded its non-Internet based marketing activity
to print media, radio stations and direct mail promotion in April 1997. By June
30, 1997 after three months of promotion, the number of ad impressions on CCN
tripled.
 
  Website Development and Technology Consulting Services
 
     The Company has been engaged in providing the Consulting Services for
others since late 1995. Substantially all of the Consulting Services were
donated to the Company's clients. Currently, the Company generates approximately
$30,000 per month from providing Consulting Services to others. The Company has
received more than 20 awards for its website development activities. In addition
to Promise Keepers and Christianity Today, Inc., for which the Company developed
websites in April 1996, the Company's website
 
                                       27
<PAGE>   31
 
services and development clients include World Vision, Maranatha! Music, the
Salvation Army, Ministry Business Services, Prison Fellowship, Family Research
Council, Evangelical Council for Financial Accountability (ECFA), Christian
Liberty Academy and Billy Graham Institute of Evangelism. Because other firms in
the Christian niche market (some of which have longer operating histories and
may have greater financial and other resources) offer website development and
computer consulting services at competitive prices, there can be no assurances
that the Company will derive significant revenues from providing Consulting
Services in the future.
 
INTENDED OPERATIONS
 
  Fee-Based Advertising
 
     Access to CCN is provided by the Company free of charge to those persons
who have Internet access. The Company attempts to collect demographic (e.g. age,
sex, location) and psychographic (e.g. purchasing habits, brand loyalty, price
sensitivity) characteristics of its consumers by building individual profiles
over a period of time through guestbook registration, online surveys and instant
polling techniques. User profiles allow the Company to provide valuable,
targeted information to the consumer (called Personalization), resulting in the
Company positioning itself to receive a greater share of that consumer's
expenditures. At the same time, Personalization provides highly-targeted
exposure opportunities, positioning the Company to charge higher premiums for
third-party advertising on CCN.
 
     The Company measures website traffic according to the number of "visits"
and "ad impressions." A visit is a sequence of pages viewed by a single user
within a defined time period, normally 30 minutes. An ad impression is the
display of a banner advertisement to a site visitor.
 
     The traffic throughout CCN has grown from 1,345 visits per month in July
1996 to 84,297 visits per month in July 1997, a growth of approximately 6200%
over a one-year period. Ad impressions on CCN have increased from 109,606 per
month in February 1997 to 645,740 per month in July 1997, representing a growth
of approximately 500% in five months.
 
     The Company believes, based on an informal survey of the market, that the
cost of advertising on websites is within the range of $15 to $50 per 1,000 ad
impressions ("CPM"). In late June 1997, the Company formed an advertising sales
program which has generated $5,025 of revenue over the June to September period
representing approximately 11% of the Company's current monthly ad inventory, at
an average CPM rate of over $25 per CPM. To the extent the Company continues to
have advertisements on CCN for which it receives a fee, in the event there is an
increase in the website traffic on CCN, the Company's revenues from advertising
should increase. See " -- The DIDAX Plan."
 
  Affinity Program
 
     In order to offer CCN consumers and other members of the Christian
community additional services and encourage them to regularly revisit CCN, the
Company intends to begin offering an Internet-based affinity program during the
fourth quarter of 1997. This program, which has been developed in conjunction
with an affinity consulting organization, may include various services,
including web-based travel services, overnight delivery service, long-distance
telephone service, business equipment imaging supplies, paging services and
financial services. Members will accumulate credits to be applied towards the
purchase of products on CCN. The Company currently expects that consumers will
pay an annual fee for such programs or a small commission each time certain
services are utilized, such annual fee to range from approximately $30 to $100
per member depending upon the level of membership.
 
  Commercial Sales of Products and Services
 
     The Company believes that enhancing its national brand name recognition and
position as a leading Internet-based Christian product and service marketer is
critical to its efforts to solicit purchase requests and subscribing
manufacturers, producers and distributorships. The Company believes the growing
number of websites offering competing services and the relatively low barriers
to entry in providing Internet services
 
                                       28
<PAGE>   32
 
increase the importance of establishing and maintaining brand name recognition.
In order to enhance brand name awareness, the Company intends to market
aggressively its products and services to consumers and Internet users by
advertising on various websites, in print media and by direct mail.
 
   
     Products currently being offered for retail sale on CCN consist of
approximately 14,000 separate items of Christian books and music and related
items. The books and music are being offered on CCN through the Company's
on-line store, Books for Life. In addition, in August 1997, the Company launched
a Marketplace offering products specifically targeted toward specific
ministries. Approximately $30,000 of sales were generated by this marketplace
for the month ended August 1997, for which the Company is entitled to receive a
5% royalty.
    
 
  Additional Services
 
     In order to generate additional revenues, attract more consumers to its
website and Christian organizations and retailers to its programs and remain
competitive, the Company must successfully develop, market and introduce new
services. There can be no assurance that the Company will successfully develop
or introduce new services, that such services will achieve market acceptance or
that subscribing Christian organizations and retailers will not view such new
services as competitive to services already offered by such Christian
organizations and retailers. The Company intends to incur additional expenses to
develop and successfully market such services. To the extent that revenues
generated by such additional services are insufficient to cover such expenses,
the Company's operating results would be adversely affected. Should the Company
fail to develop and successfully introduce competing services, the Company's
business, results of operations, and financial condition may be materially
adversely affected.
 
THE DIDAX PLAN
 
     Having developed websites for Christian organizations and the
infrastructure and certain limited services for users of CCN, the Company
contemplates offering expanded services on CCN, including real time chat rooms
and forums, initially across four topic areas: (1) Business and Finance; (2)
Culture and Politics; (3) Arts and Entertainment; and (4) Christian Life. The
Company currently has an agreement with Reuters whereby Reuters provides for a
fee, secular news content on CCN, updated hourly. For Christian information on
CCN, in addition to the Company providing information, the Company receives
without charge, Christian content material offered on CCN from various Christian
organizations, including Promise Keepers, Christianity Today, Prison Fellowship,
DOVE, Family Research Council and the Christian Film and TV Commission. The
Company also receives religious news for a fee from Evangelical News Service.
The Company also plans to provide on CCN, stock market quotes and other business
data, as well as secular content through links to other Internet sites.
 
     In anticipation of the Company providing these expanded services on CCN,
the Company has commenced its first significant promotion in order to build
traffic to provide a strong base for advertising revenues. Specifically, the
Company has undertaken the following marketing initiatives: (1) CCN promotion by
public relations firms, including Superhighway Consulting Services and World
Wide Web Public Relations; (2) a CCN update and announcement service using
Intermind, a leading push technology; (3) a radio affiliate promotion program;
(4) retention of an advertising agency; (5) commencement of a banner exchange/
purchase program on websites; (6) print advertising; and (7) retention of a
public relations firm with news clipping services.
 
     The Company intends to seek to grow its CCN traffic in order to position
itself to sell on CCN advertising space as well as products of particular
interest to the Christian community. The Company then will seek to develop
additional revenue paths, such as transaction processing, subscriptions,
micro-transactions, affinity programs, reservations, and ticket sales. The
selection will be determined by a combination of market research and current
site traffic analysis.
 
     In the future, the Company may seek to integrate CCN with other Christian
resources on the Internet. In certain circumstances, the Company will attempt to
partner with other organizations, with the Company
 
                                       29
<PAGE>   33
 
assuming responsibility for various Internet activities and the partner assuming
responsibility for areas in which it has expertise, with the collective goal of
providing more Christian resources to Christian consumers.
 
STRATEGIC ALLIANCES
 
     The most significant sources of the Company's revenues to date have been
derived from the Company providing website development and other technology
consulting services to Promise Keepers and World Vision. The consulting services
that the Company provides to these ministries are labor intensive and are billed
at hourly rates along with other direct costs. From March 1996 through June 1997
payments to the Company by Promise Keepers totalled $110,000. The monthly
amounts paid ranged from $2,000 to $13,000. The first $250,000 of services
rendered by the Company to Promise Keepers in 1995 were completed at no charge.
In addition, from March 1996 through June 1997, the Company has provided
internal system maintenance, software and certain web development services
amounting to $260,000 at no charge. The Company has also donated to Promise
Keepers 40,000 shares of the Company's Common Stock for which the Company
recognized a $200,000 expense in the second quarter of 1997. After June 15,
1997, the contract between the Company and Promise Keepers is cancellable by
either party without cause upon 60 days prior notice. The services provided to
World Vision in creating www.worldvision.org continue under a one year
cancellable contract which expires in October of 1997. Contract inception
through June 1997, the total payments to the Company by World Vision were
$58,000, consisting of a one time charge of $12,000 for consulting and five
monthly billings of approximately $9,200 each. For a discussion of the Company's
material relationships with vendors, see "RISK FACTORS -- Dependence on
Strategic Relationships."
 
COMPETITION
 
     To the extent the Company engages in sales of advertising space on CCN, the
Company will compete with print and direct mail, radio and television
advertising, as well as several hundreds of thousands of other websites.
 
     The Company's retail sales services compete against a variety of Internet
and traditional buying services and stores, some of which offer the same
products and services as the Company does on CCN. In the Internet-based market,
the Company competes for attention with other entities which maintain similar
commercial websites. The Company also competes indirectly against affinity
programs offered by several companies.
 
     The market for Internet-based commercial services is new and competition
among commercial websites is expected to increase significantly in the future.
The Internet is currently characterized by minimal barriers to entry, and
current and new competitors can launch new websites at relatively low cost.
Potential competitors could include, but are not limited to, information service
providers and manufacturers, producers and distributors of products and
services. In order to compete successfully as an Internet commerce entity, the
Company must significantly increase awareness of the Company and its brand name,
effectively market its services and successfully differentiate its website.
Certain of the Company's current and potential competitors have longer operating
histories and greater name recognition. Such competitors could undertake more
aggressive and costly marketing campaigns than the Company, which may adversely
affect the Company's marketing strategies and have a material adverse effect on
the Company's business, results of operations or financial condition.
 
     In addition, as the Company introduces new services, it will compete
directly with a greater number of companies. Such companies may already maintain
or may introduce websites which compete with those of the Company. There can be
no assurance that the Company can continue to compete successfully against
current or future competitors, nor can there be any assurance that competitive
pressures faced by the Company will not result in increased marketing costs,
decreased Internet traffic or loss of market share or otherwise will not
materially adversely affect its business, results of operations and financial
condition.
 
     The Company believes that the principal competitive factors affecting the
market for Internet-based marketing services are the speed and quality of
service execution, the size and effectiveness and quality of products and
services of the participating manufacturers, producers and distributors,
competitive pricing, successful marketing and establishment of national brand
name recognition, positioning itself as a leading
 
                                       30
<PAGE>   34
 
Internet-based marketing service, the volume and quality of traffic to and
purchase requests from a website and the ability to introduce new services in a
timely and cost-effective manner. Although the Company believes that it
currently competes favorably with respect to such factors, there can be no
assurance that the Company will be able to compete successfully against current
or future competitors with respect to any of these factors.
 
   
     The Company's known competitors include CHRISTIANITY ONLINE (COL), an area
available only to American Online subscribers operated by Christianity Today,
Inc. The Company has developed Christianity.Net, a website operated by
Christianity Today, Inc. which is available through CCN to all Internet users
pursuant to an agreement between the Company and Christianity Today, Inc. Other
known competitors include GOSPEL COMMUNICATIONS NETWORK (GCN), a website
operated by a division of Gospel Films, currently supported through donations
and does not generate revenue through advertising; GOSHEN, a website operated by
Media Management , which provides limited news services and advertising space;
ICRN (INVOLVED CHRISTIAN RADIO NETWORK BY DOMAIN), a website operated by The
Domain Group, a for-profit international marketing and fund raising organization
currently operating an Internet radio service geared to the Christian community;
LIGHTSOURCE ONLINE (BY KMA), a website operated by Killian, McCabe and
Associates (KMA), a for-profit marketing and fund raising organization currently
operating an Internet radio service geared to the Christian community; CHRISTIAN
ANSWERS, a website operated by Eden Communications supported entirely by
donations, including an area of interest to young Christians and movie reviews;
and NETCENTRAL, a website operated by Net Central, Inc. and providing
information on Christian music and artists.
    
 
OPERATIONS AND TECHNOLOGY
 
     The Company believes that its future success is dependent on its ability to
improve continuously the speed and reliability of CCN, enhance communications
functionality with its consumers and maintain the highest level of information
privacy and transaction security. Continuous system enhancements are primarily
intended to accommodate increased traffic across the Company's website, improve
the speed with which purchase requests are processed and heighten website
security, which will be increasingly important as the Company offers new
services. System enhancements entail the implementation of sophisticated new
technology and system processes and there can be no assurance that such
continuous enhancements may not result in unanticipated system disruptions, such
as power loss and telecommunications failures. The Company's primary servers are
located offsite and maintained by various unaffiliated third parties. In
addition the Company maintains certain servers at its corporate headquarters in
Chantilly, Virginia. The Company's servers are vulnerable to interruption by
damage from fire, hurricane, power loss, telecommunications failure and other
events beyond the Company's control. The Company is in the process of developing
comprehensive out-of-state disaster recovery plans to safeguard consumer
information. The Company maintains business interruption insurance for the
actual loss of business income sustained due to the suspension of its operations
over a twelve month period as a result of direct physical loss of or damage to
property at the Company's offices. However, in the event of a prolonged
interruption, it is probable that this business interruption insurance will not
be sufficient to fully compensate the Company. In the event that the Company
experiences significant system disruptions, the Company's business, results of
operations or financial condition could be materially adversely affected.
 
     The Company's services also may be vulnerable to break-ins and similar
disruptive problems caused by Internet users. Further, weaknesses in the
Internet may compromise the security of confidential electronic information
exchanged across the Internet. This includes, but is not limited to, the
security of the physical network and security of the physical machines used for
the information transfer. Any such flaws in the Internet or the end-user
environment, or weaknesses or vulnerabilities in the Company's services or the
licensed technology incorporated in such service, would jeopardize the
confidential nature of information transmitted over the Internet and could
require the Company to expend significant financial and human resources to
protect against future breaches, if any, in order to alleviate or mitigate
problems caused by such security breaches. Concerns over the security of
Internet transactions and the privacy of users may also inhibit the growth of
the Internet generally, particularly as a means of conducting commercial
transactions. To the extent that activities of the Company, or third party
contractors, involve the storage and transmission of
 
                                       31
<PAGE>   35
 
proprietary information (such as personal financial information or credit card
numbers), security breaches could expose the Company to a risk of financial loss
or litigation or other liabilities. Any such occurrence could reduce consumer
satisfaction in the Company's services and could have a material adverse effect
on the Company's business, results of operations or financial condition.
 
TRADEMARKS AND PROPRIETARY RIGHTS
 
     The Company's success and ability to compete is dependent in part upon its
proprietary systems and technology. While the Company relies on trademark, trade
secret and copyright laws to protect its proprietary rights, the Company
believes that the technical and creative skills of its personnel, continued
development of its proprietary systems and technology, brand name recognition
and reliable website maintenance are more essential in establishing and
maintaining a leadership position. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's services or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's proprietary rights is
difficult. In addition, litigation may be necessary in the future to enforce or
protect the Company's intellectual property rights or to defend against claims
of infringement or invalidity. Misappropriation of the Company's intellectual
property or potential litigation could have a material adverse effect on the
Company's business, results of operations or financial condition.
 
CHRISTIAN STATEMENT OF FAITH; THE COMPANY'S POLICY
 
     Article XIII of the Company's Bylaws provides that the Company is a
"religious corporation." To this end and in order to best identify with and
service its selected Christian market niche and to generate its Internet product
which is heavily content laden, the Company's policy is generally to include
among its officers and directors unconditionally, and employees, where a
bona-fide occupation qualification exists, only persons who, upon request,
subscribe to the Company's Christian Statement of Faith as follows:
 
"1. We believe that there is one God, eternally existing in three persons: the
    Father, the Son, and the Holy Spirit.
 
"2. We believe that the Bible is God's written revelation to man and that it is
    verbally inspired, authoritative, and without error in the original
    manuscripts.
 
"3. We believe in the deity of Jesus Christ, His virgin birth, sinless life,
    miracles, death on the cross to provide for our redemption, bodily
    resurrection and ascension into heaven, present ministry of intercession for
    us, and His return to earth in power and glory.
 
"4. We believe in the personality and deity of the Holy Spirit, that He performs
    the miracle of the new birth in an unbeliever and indwells believers,
    enabling them to live a godly life.
 
"5. We believe that man was created in the image of God, but because of sin, was
    alienated from God. That alienation can be removed only by accepting through
    faith, God's gift of salvation which was made possible by Christ's death."
 
     In order to implement the Christian Statement of Faith, the Company intends
generally to act in accordance with the following policy, as stated in its
Bylaws:
 
     "The Corporation shall:
 
"1. Actively seek to market the services of the [C]orporation to those persons,
    entities, and agencies which are actively involved in propagating a pattern
    of beliefs and actions consistent with the tenets of the Statement of Faith.
    Nothing herein shall be construed to prohibit marketing such services to
    other persons, entities, or agencies except as specifically set forth in the
    prohibitions or corporate action set forth below.
 
"2. To the extent permitted by law, expend from the revenues of the
    [C]orporation such sums as are deemed prudent by the Board of Directors to
    support, encourage, or sustain persons or entities which in the judgment of
    the Board of Directors are expected to make significant efforts to propagate
    the Gospel of
 
                                       32
<PAGE>   36
 
    Jesus Christ in any manner not in conflict with the Statement of Faith. Such
    expenditures may be made without regard to the tax status or nonprofit
    status of the recipient. It is expected that the expenditures paid out under
    the provisions of this paragraph shall approximate ten percent (10%) of the
    amount that would otherwise be the net profits of the [C]orporation for the
    accounting period.
 
     "The Corporation shall not:
 
"1. Take any position publicly or privately that denies or conflicts with the
    tenets of the Statement of Faith.
 
"2. Elect, qualify or permit to serve in office as a [d]irector or officer to
    the [C]orporation any person who has not without reservation subscribed to
    the Statement of Faith as being true, accurate and correct or who having so
    subscribed has either publicly or privately recanted from a particular of
    the Statement of Faith or who has publicly made statements or taken actions
    without repentance which the Board of Directors finds to be in clear
    conflict with the Statement of Faith.
 
"3. Hire or continue to employ any employee in any position in which, in the
    sole discretion of the Corporation, subscription to the Statement of Faith
    is a bona-fide occupational qualification reasonably necessary to the normal
    operations of the Corporation's activities, where such employee refuses,
    upon request, to subscribe to the Statement of Faith or having so subscribed
    has either publicly or privately recanted from any particular of the
    Statement of Faith or has publicly made statements or taken actions without
    repentance which the Board of Directors finds to be in clear conflict with
    the Statement of Faith. Because the Scriptures teach that bad company
    corrupts good morals and that a little leaven affects the whole lump, it is
    important to the Corporation's purposes that it be protected from the
    influence of persons not in agreement with the Statement of Faith at every
    level of employment.
 
"4. Permit any party to utilize the name, goodwill, trade marks, or trade names
    of the [C]orporation in any course of action or dealings which the
    [C]orporation itself is herein prohibited from taking.
 
     "In addition to any other appropriate legend, prior to its issuance each
and every share certificate to be issued by this Corporation shall be inscribed
with a legend that states:
 
              'This Corporation is a religious corporation. All shares
         of this [C]orporation are subject to the terms as set forth in
         the BYLAWS of the corporation which restricts the amendment or
         deletion of that section of the BYLAWS which prescribes a
         corporate Statement of Faith in the LORD JESUS CHRIST and
         directs or prohibits certain corporate actions on the basis of
         the Statement of Faith.' "
 
     The Bylaws also state:
 
          "No amendment to this Article XIII and no other superseding or
     conflicting provision of these BYLAWS, the ARTICLES OF INCORPORATION,
     or any stockholder agreement shall be adopted unless the result of the
     count of votes approving the amendment is 90% affirmative without
     dissension and a minimum of two-thirds of the shares outstanding are
     represented and voting. Such vote must be made at an actual special
     meeting of the stockholders called by written notice delivered to each
     stockholder not less than 10 nor more than 60 days prior to the date
     of the meeting. Time is of the essence as to this notice provision and
     no extension of the time of the meeting or adjournment of the meeting
     to a date outside the notice period shall be permitted except upon the
     affirmative vote of not less than 70 percent of the shares then issued
     and outstanding."
 
     See "RISK FACTORS -- Classification as a 'Religious Corporation.' "
 
GOVERNMENT REGULATION
 
     As the Company introduces new services, the Company may need to comply with
additional licensing regulations and regulatory requirements. Becoming licensed
may be an expensive and time-consuming process which could divert the efforts of
management. In the event that the Company does not successfully become licensed
under applicable state laws or otherwise comply with regulations necessitated by
changes in current
 
                                       33
<PAGE>   37
 
regulations or the introduction of new services, the Company's business, results
of operations or financial condition be materially adversely affected.
 
     There are currently few laws or regulations directly applicable to access
to or commerce on the Internet. However, because of the increasingly popularity
and use of the Internet, it is likely that a number of laws and regulations may
be adopted at the local, state, national or international levels with respect to
commerce over the Internet, potentially covering issues such as pricing of
services and products, advertising, user privacy and expression, intellectual
property, information security, anti-competitive practices or the convergence of
traditional distribution channels with Internet commerce. In addition, tax
authorities in a number of states are currently reviewing the appropriate tax
treatment of companies engaged in Internet commerce. New state tax regulations
may subject the Company to additional state sales and income taxes. The adoption
of any such laws or regulations may decrease the growth of Internet usage or the
acceptance of Internet commerce which could, in turn, decrease the demand for
the Company's services and increase the Company's costs or otherwise have a
material adverse effect on the Company's business, results of operations or
financial condition.
 
EMPLOYEES
 
   
     The Company currently has 24 employees, all of whom are employed on a
full-time basis, including its four executive officers, Robert C. Varney, Ph.D.,
Chairman of the Board of Directors and Chief Executive Officer, Dane B. West,
President, William H. Bowers, Chief Operating Officer, and Gary A. Struzik,
Chief Financial Officer and Secretary, 10 engineering employees, four marketing
and sales employees, four editors and two administration employees. The
employees are not represented by a labor union, and no work stoppages have
occurred.
    
 
PROPERTY AND FACILITIES
 
     The Company currently maintains its executive offices in approximately
5,000 square feet of space at 4501 Daly Drive, Chantilly, Virginia pursuant to a
three-year lease terminating in September, 1998 with an unaffiliated third party
at an annual rental of approximately of $66,400. The Company considers this
space to be sufficient for its corporate headquarters.
 
                                       34
<PAGE>   38
 
                                   MANAGEMENT
 
     The following sets forth certain information concerning the directors and
executive officers of the Company:
 
<TABLE>
<CAPTION>
              NAME                   AGE                             TITLE
- ---------------------------------    ---     -----------------------------------------------------
<S>                                  <C>     <C>
Robert C. Varney, Ph.D.(1)           53      Chairman of the Board of Directors, Chief Executive
                                               Officer and director
Dane B. West                         43      President and director
William H. Bowers                    37      Chief Operating Officer and director
Gary A. Struzik                      42      Chief Financial Officer and Secretary
Bruce E. Edgington(1)                39      director
John J. Meindl, Jr.(1)               41      director
Clay T. Whitehead, Ph.D.(2)          58      director
James G. Buick(2)                    65      director
Earl E. Gjelde(2)                    53      director
William Russell 'Max' Carey, Jr.     49      director
</TABLE>
 
- ---------------
 
(1) Members of Compensation Committee
 
(2) Members of Audit Committee
 
     ROBERT C. VARNEY, PH.D. has been Chairman of the Board of Directors, Chief
Executive Officer and a director of the Company and its predecessor entities
since July 1995. From 1993 until July 1995 he managed his personal real estate
holdings. Dr. Varney was Chairman and Chief Executive Officer of International
Telesystems Corporation ("ITC"), a firm engaged in outbound call center
automation, from 1985 through 1993. Dr. Varney received a B.S. degree from the
University of Rochester in June, 1966 and an M.S. and a Ph.D. degree in Computer
Science from Pennsylvania State University in 1969 and 1971, respectively.
 
     DANE B. WEST has been the President and a director of the Company and its
predecessor entities since the Company's inception in 1993. From January 1992
through April, 1993, Mr. West was a student at the University of Virginia. Mr.
West is an ordained minister with 15 years of ministry leadership experience. As
a pastor, he recruited, trained and managed a volunteer staff of more than 300
persons. He has completed doctoral studies in educational administration at the
University of Virginia. He received a B.A. in Biblical Studies from The
Washington Bible College in 1978, and an M.A. in Christian Education from Talbot
Theological Seminary in 1981.
 
     WILLIAM H. BOWERS has been the Chief Operating Officer and a director of
the Company and its predecessor entities since the Company's inception in 1993.
Mr. Bowers was a Branch Chief of the Central Intelligence Agency from April,
1990 until May, 1993, where his responsibilities included providing engineering
and technical support services. Mr. Bowers received a B.S. degree in Engineering
from Virginia Polytechnic Institute in 1983.
 
     GARY A. STRUZIK has been the Chief Financial Officer and Secretary of the
Company since April 1997 and was Vice President, Finance and Administration, of
the Company's predecessor entities from February 1996 until April 1997. Mr.
Struzik was Director of Accounting for Loral Defense Systems (formally Unisys
Defense Systems) from February 1995 through February 1996 and Director of
Accounting for Unisys Defense Systems from October 1987 through February 1995,
where his responsibilities included financial statement preparation, external
audit liaison, policy and procedures. Mr. Struzik received a B.A. degree in
Economics from the State University of New York at Oswego in May 1977 and an
M.B.A. from Chapman College in October 1984.
 
     BRUCE E. EDGINGTON has been a director of the Company and its predecessors
since November 1995. From 1979 through 1988, Mr. Edgington was a registered
representative with Johnston Lemon & Co., a
 
                                       35
<PAGE>   39
 
securities broker-dealer, where his responsibilities include the management of
retail securities accounts and administration. In 1988 he founded and continues
to be an officer, director and stockholder of DiBiasio & Edgington, a firm
engaged in providing software to investment firms and money managers.
 
     JOHN J. MEINDL, JR. has been a director of the Company since April 1997,
has been self employed as a management consultant to medium and large firms in
the area of electronic records management, Internet strategies and business
reengineering since 1996. From 1993 through 1996 Mr. Meindl was Chief Operating
Officer of OTG Software, Inc., a firm engaged in the development of electronic
imaging and optical disk storage management software. Since 1988 he has been
Chief Executive Officer of GeneSys Data Technologies, Inc., a firm engaged in
providing software and services in the area of electronic records management.
GeneSys Data Technologies, Inc. has been dormant and inactive since 1992 but was
not liquidated because of its pursuit of a claim which was successfully awarded
in 1996. In connection with winding up the affairs of GeneSys Data Technologies,
Inc. GeneSys Data Technologies, Inc. filed for bankruptcy protection in June
1996 (Case No. 96-5-50118-SD, U.S. Bankruptcy Court, Baltimore, Maryland
District) and as of the date hereof has not been discharged.
 
     CLAY T. WHITEHEAD, PH.D. has been a director of the Company since April
1997 and, since 1987, has been the President of Clay Whitehead Associates, a
consulting firm in the areas of strategic planning and business development
concentrating on the telecommunications and media industries. Mr. Whitehead
holds a B.S. and M.S. in Electrical Engineering and a Ph.D. in Management, all
from the Massachusetts Institute of Technology and from 1969 through 1974 held
various federal government positions, including Director of the U.S. Office of
Telecommunications Policy.
 
     JAMES G. BUICK has been a director of the Company since April 1997. Since
1993 he has been self employed as a management consultant in the area of
business strategic long range financial planning. From 1984 to 1993, he was
President and Chief Executive Officer of the Zondervan Corporation, a firm
engaged in the distribution of Bibles, books, computer software, and religious
gifts. He currently is on the Board of Directors of Spartan Stores, a firm
engaged in food wholesale and operations, and is Chairman of the Board of the
Dove Foundation, a not-for-profit foundation engaged in the creation, promotion,
production and distribution of wholesome family entertainment.
 
   
     EARL E. GJELDE has been a director of the Company since April 1997. From
1989 through 1993, he was Vice President, Chemical Waste Management, Inc. and
from 1991 to 1993 was Vice President, Waste Management Inc. (currently WMX
Technologies, Inc.). Since 1991, Mr. Gjelde has been Managing Director, Summit
Group International, Ltd., an energy and natural resource consulting firm with
Internet based security controlled document systems and since 1996, a partner in
Pipeline Power Partners, LP, a natural gas services company. From 1980 through
1989, Mr. Gjelde held various federal government positions including Under
Secretary and Chief Operating Officer of the U.S. Department of Interior from
1987 through 1989 and Special Assistant to the Secretary, Chief Operating
Officer, U.S. Department of Energy from 1982 through 1985. He is a member of the
Board of Directors of The United States Energy Association, The World Energy
Congress, and the National Wilderness Institute.
    
 
     WILLIAM RUSSELL 'MAX' CAREY, JR. has been a director of the Company since
June 1997. Since 1981, he has been Chairman and Chief Executive Officer of
Corporate Resource Development Inc., a sales and marketing consulting and
training firm based in Atlanta. He currently is also a member of the Board of
Directors of Outback Steakhouse, Inc., a restaurant franchiser and ROMAC
International, a leading specialty staffing services firm, both public
companies.
 
   
     Each director serves until the next annual meeting of stockholders and the
election and qualification of their successors. In February 1997, the Company
agreed that an advisor to the Company's Board of Directors appointed by the
Underwriter would be invited to attend all meetings of the Board of Directors.
Executive officers are elected by the Board of Directors annually and serve at
the discretion of the Board.
    
 
                                       36
<PAGE>   40
 
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
 
     In June 1997 the Company entered into employment agreements, to be
effective as of the date of the Closing, with Robert C. Varney, Ph.D., Dane B.
West, William H. Bowers, and Gary A. Struzik for terms expiring on June 30, 1999
for Dr. Varney and Messrs. West and Bowers and on June 30, 1998 for Mr. Struzik.
The employment agreements provide annual base salaries of $90,000 for each of
them, with increases up to a maximum salary of $130,000, $120,000, $120,000 and
$110,000 for Dr. Varney and Messrs. West, Bowers and Struzik, respectively, if
the Company achieves one or more performance thresholds contemplated to be
determined by the Board of Directors not later than January 1, 1998. If at any
time during the term of his employment agreement, a change in ownership of more
than 33% of the outstanding voting shares of the Company occurs, or within two
years after a transaction involving the Company or a contested election of a
director, or a tender or exchange offer for voting securities of the Company,
the individuals who were directors of the Company immediately prior thereto
cease to constitute a majority of the Company's Board of Directors, ("Change in
Control"), then employee has the option to terminate his employment agreement
(the "Change in Control Termination"). In the event of a Change in Control
Termination, the Company is obligated to pay to the employee a lump sum equal to
24 times the compensation (base salary plus bonus) paid to such employee for the
month prior to the Change in Control. Further, pursuant to the employment
agreements, each of Dr. Varney and Messrs. West, Bowers, and Struzik have
agreed, during the term of his respective employment with the Company and for
six months after his voluntary withdrawal from employment with the Company or
the Company's termination of his employment for cause, not to compete with the
Company wherever the Company has revenue-producing customers or activities, and
for one year after his voluntary withdrawal from employment with the Company or
the Company's termination of his employment for cause not to interfere with the
Company's relationships with its stockholders, lenders, directors, officers,
employees, agents, lessors or other persons that have had a business
relationship with the Company within 12 months before the incident in question
(or within six months, in the case of employment of the Company's agent or
employee), except in the event of a Change in Control Termination.
 
     The agreement with each of Dr. Varney and Messrs. West and Bowers provides
that, if his employment is terminated by the Company for cause (as defined in
the agreement) or by voluntary unilateral decision by the employee without
cause, then the employee is entitled to his base salary under the agreement
earned, accrued vacation, and reimbursement of expenses, through the date of
termination. In addition, the agreements provide, that, if employment is
otherwise terminated, the employee is entitled to receive, in one-lump sum
payment, the employee's then current monthly compensation (base salary plus
bonus) for a minimum of 18 months, or the number of months remaining in the term
of his employment under the agreement, whichever is greater, and all applicable
allowances and reimbursements to the date of termination and in Dr. Varney's
case, he shall be entitled to receive accident and health insurance for himself
and his family until his death subject to Dr. Varney's eligibility to receive
such insurance coverage from another employer.
 
     In addition to their employment agreements, executive officers of the
Company may participate in the Option Plan. Other than the Option Plan, as
defined below, the Company does not currently have any compensation plans or
similar arrangements under which an executive officer is entitled to benefits,
except group life, medical and dental insurance plans.
 
EXECUTIVE OFFICER COMPENSATION
 
     No person employed by the Company received salary and bonus exceeding in
the aggregate $100,000 during any of the fiscal years 1994, 1995 and 1996. The
following Summary Compensation Table sets forth all
 
                                       37
<PAGE>   41
 
compensation awarded to, earned by or paid for services rendered to the Company
in all capacities during 1996 by the Company's Chief Executive Officer.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                 LONG-TERM
                                                                                COMPENSATION
                                                                                ------------
                                                                                   AWARDS
                                                ANNUAL COMPENSATION             ------------
                                        -----------------------------------      SECURITIES
                                                               OTHER ANNUAL      UNDERLYING     ALL OTHER
                                                               COMPENSATION       OPTIONS/     COMPENSATION
  NAME AND PRINCIPAL POSITION    YEAR   SALARY($)   BONUS($)      ($)(1)         SARS(#)(2)       ($)(3)
- -------------------------------  -----  ---------   --------   ------------     ------------   ------------
<S>                              <C>    <C>         <C>        <C>              <C>            <C>
Robert C. Varney, Ph.D.,          1996    38,203        0         4,271            162,839          140
Chairman of the Board of
  Directors
and Chief Executive Officer
</TABLE>
 
- ---------------
(1) Other Annual Compensation represents medical insurance premiums paid by the
    Company for Dr. Varney.
 
(2) See "OPTION GRANTS IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES."
 
(3) All Other Compensation represents term life insurance premiums paid by the
    Company for Dr. Varney.
 
     The following table sets forth information concerning stock option grants
made during 1996 to the executive officer of the Company named in the Summary
Compensation Table, and the fiscal year-end value of unexercised options. No
options were exercised during 1996 by Dr. Varney.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES
                               INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
                                               PERCENT OF
                              NUMBER OF       TOTAL OPTIONS
                             SECURITIES        GRANTED TO
                             UNDERLYING         EMPLOYEES           EXERCISE
                               OPTIONS          IN FISCAL        OR BASE PRICE
          NAME              GRANTED(1)(3)         YEAR          PER SHARE ($/SH)       EXPIRATION DATE
- ------------------------    -------------     -------------     ----------------     -------------------
<S>                         <C>               <C>               <C>                  <C>
Robert C. Varney, Ph.D.        17,524(2)           2.3%              $ 4.00            December 31, 2006
                              145,312(4)          18.8%              $ 5.00           September 30, 2006
 
<CAPTION>
                             NUMBER OF SECURITIES
                            UNDERLYING UNEXERCISED
                          OPTIONS AT FISCAL YEAR-END
                          --------------------------
                                 EXERCISABLE/
          NAME                 UNEXERCISABLE(3)
- ------------------------  --------------------------
<S>                         <C>
Robert C. Varney, Ph.D.         133,524/145,312
</TABLE>
 
- ---------------
(1) All options are non-qualified options.
 
(2) Does not include the Officer Note Options contemplated to be granted upon
    the Company's satisfaction of the Officer Notes. See "MANAGEMENT'S
    DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -- Liquidity and Capital
    Resources."
 
(3) The Board of Directors has determined that none of these options were
    in-the-money at the date of grant or at December 31, 1996.
 
(4) These stock options are a portion of the Outstanding Stock Options to
    acquire 712,500 shares of the Common Stock granted by the Company in
    September 1996 to Dr. Varney (145,312), Mr. Edgington (160,314), Mr. Struzik
    (71,250), Mr. Bowers (164,312) and Mr. West (171,312) and are exercisable
    commencing upon the Company generating earnings per share of $.50 through
    September 30, 2006
 
1997 STOCK OPTION PLAN
 
   
     In April 1997, the Board of Directors adopted, and the stockholders
approved the Company's 1997 Stock Option Plan (the "Option Plan"), The Option
Plan provides for the issuance of up to 2,057,937 shares of the Company's Common
Stock. As of the Closing options to purchase 1,767,520 shares of the Company's
Common Stock will have been granted and will be outstanding under the Option
Plan of which options to purchase 706,382 shares will be exercisable. If any
options granted under the Option Plan shall terminate, expire or be canceled as
to any shares, new options may thereafter be granted covering such shares. In
addition, any shares purchased under this Option Plan subsequently repurchased
by the Company pursuant to the terms hereof may again be granted under the
Option Plan. The shares issued upon exercise of options
    
 
                                       38
<PAGE>   42
 
under the option Plan may, in whole or in part, may be either authorized but
unissued shares or issued shares reacquired by the Company.
 
     The purpose of the Option Plan is to advance the interests of the Company
by providing an opportunity to its directors, employees and consultants,
including ministry partners, to purchase shares of the Company's Common Stock.
By encouraging stock ownership, the Company seeks to attract, retain and
motivate directors, employees and consultants. The Option Plan provides for the
grant of (i) incentive stock options ("Incentive Options") as described in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"); (ii)
nonqualified stock options ("Nonqualified Options," and, together with the
Incentive Options, the "Options"); and (iii) rights to purchase shares of Common
Stock ("Restricted Stock") of the Company pursuant to restricted stock
agreements and subscription agreements. The Option Plan is administered by the
Board of Directors, or at its discretion, by a committee which is appointed by
the Board to perform such function. Under the terms of the Option Plan, the
exercise price for Incentive Options may not be less than the fair market value
of the underlying stock at the time the Incentive Option is granted.
 
     The Option Plan has a provision which limits the number of shares of the
Company's Common Stock for which options may be granted to any individual during
any year. With this provision, options granted under the Option Plan qualify as
performance-based compensation for purposes of Section 162(m) of the Code and
the regulation thereunder, and the Company will be entitled to deduct the
compensation paid to certain executives pursuant to the Option Plan,
notwithstanding the deduction limit contained in Section 162(m).
 
     Under the Option Plan, the price payable upon exercise of options may be
paid in cash or check acceptable to the Company, or by any other consideration
that the Board deems acceptable. The exercise price may also be paid in shares
of the Company's Common Stock, duly owned by the optionee having a fair market
value equal to the option price on the date of exercise.
 
DIRECTOR COMPENSATION
 
   
     In April 1997, the Company's (i) non-employee directors, other than Bruce
E. Edgington and (ii) an advisor to the Company's Board appointed by the
Underwriter (the "Advisor") each were granted under the Company's 1997 Stock
Option Plan options to acquire an aggregate of 37,000 shares of the Company's
Common Stock at an exercise price of $5.00 per share, exercisable for the
following number of shares for a period of five years subsequent to the
satisfaction of the following conditions precedent (collectively the "Non-
Employee Director Options"):
    
 
<TABLE>
<CAPTION>
              NUMBER OF SHARES                        CONDITIONS PRECEDENT TO EXERCISE
- ---------------------------------------------   ---------------------------------------------
<S>                                             <C>
1,000 shares per Board of Director meeting      Attendance at Board meeting
  for the first three years as a member of
  the Board up to a maximum of 4,000 shares
  per year.
5,000 shares                                    Closing of this Offering.
5,000 shares                                    CCN's use exceeding one million hits per day.
5,000 shares                                    The Company's quarterly earnings per share
                                                equaling or exceeding $.05.
5,000 shares                                    The Company's quarterly earnings per share
                                                equaling or exceeding $.10.
5,000 shares                                    The Company's quarterly earnings per share
                                                equaling or exceeding $.15.
</TABLE>
 
     As of the date hereof, non-employee directors excluding Mr. Edgington and
including the Advisor have the right to acquire an aggregate of 222,000 shares
of the Common Stock pursuant to the Non-Employee Director Options. In addition,
non-employee directors receive reimbursement of reasonable expenses incurred in
attending Board meeting.
 
                                       39
<PAGE>   43
 
                             PRINCIPAL STOCKHOLDERS
 
     The following table sets forth information, as of the date hereof and as
adjusted to reflect the sale of the Securities offered by the Company hereby,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by the
Company to be the owner of more than 5% of the outstanding shares of Common
Stock; (ii) each director and each executive officer named in the Summary
Compensation Table; and (iii) all executive officers and directors of the
Company as a group:
 
   
<TABLE>
<CAPTION>
                                             BEFORE OFFERING                   AFTER OFFERING
                                          ----------------------           ----------------------
                                          AMOUNT AND                       AMOUNT AND
                                           NATURE OF      PERCENT           NATURE OF      PERCENT
           NAME AND ADDRESS               BENEFICIAL      OF               BENEFICIAL      OF
         OF BENEFICIAL OWNER              OWNERSHIP(1)    SHARES(2)        OWNERSHIP(1)    SHARES(3)
- --------------------------------------    -----------     ------           -----------     ------
<S>                                       <C>             <C>              <C>             <C>
Bruce E. Edgington                         247,500   (4)  20.5%             359,782   (5)  9.8%
7857 Heritage Drive
Annandale, VA 22003
Robert C. Varney, Ph.D.                    171,924   (6)  12.7%             235,000   (7)  6.3%
4501 Daly Drive
Chantilly, VA 20151
Dane B. West                               130,032   (8)  10.5%             130,032   (8)  3.6%
4501 Daly Drive
Chantilly, VA 20151
William H. Bowers                          124,417   (9)  10.2%             124,417   (9)  3.4%
4501 Daly Drive
Chantilly, VA 20151
Robert E. Turner                            62,500        5.2%               62,500        1.8%
1235 Westlake Dr., Suite 350
Berwyn, PA 19312
Ruth A. Hirsh Revocable Trust               62,500        5.2%               62,500        1.8%
80 East Sir Francis Drake Blvd.
Larkspur, CA 94939
John J. Meindl, Jr.                          2,000   (10)  .2%               67,000   (11) 1.9%
5 Old Tyler Court
Greenville, SC 29615
Clay T. Whitehead, Ph.D.                     2,000   (12)  .2%                8,000   (13)  .2%
1320 Old Chain Bridge Rd.
McLean, VA 22101
James G. Buick                               2,000   (14)  .2%                8,000   (15)  .2%
10081 East Rivershore Dr.
Alto, MI 49302
Earl E. Gjelde                               2,000   (16)  .2%                8,000   (17)  .2%
42 Bristlecone Crt.
Keystone, CO 80435
Max Carey                                       --          --                6,000   (18)  .1%
665 River Knoll Drive
Marietta, GA 30067
All officers and directors                 700,899        50.3%             965,257        24.3%
  as a group (10 persons)
</TABLE>
    
 
- ---------------
 (1) Unless otherwise noted, all persons named in the table have sole voting and
     sole investment power with respect to all shares of Common Stock
     beneficially owned by them, and no persons named in the table are acting as
     nominees for any persons or are otherwise under the control of any person
     or group of persons. For the purposes of this table, the term "beneficial
     ownership" with respect to a security means sole or shared voting power
     (including the power to vote or direct the vote) or sole or shared
     investment power (including the power to dispose or direct the disposition)
     with respect to the security through any contract, arrangement,
     understanding, relationship or otherwise, including a right to acquire any
     such power during the next 60 days.
 
                                       40
<PAGE>   44
 
 (2) Based upon 1,202,588 shares of Common Stock outstanding as of the date
     hereof.
 
   
 (3) Based upon 3,542,588 shares of Common Stock to be outstanding after the
     Closing of this Offering, including 340,000 shares of Common Stock issuable
     in connection with the satisfaction of the Junior Notes, assuming no
     exercise of the Purchase Warrants, the Underwriter Warrants or the Over-
     Allotment Option and unless otherwise noted, no exercise of the Outstanding
     Stock Options.
    
 
 (4) Includes 5,000 shares of Common Stock, issuable to Mr. Edgington upon
     exercise of currently exercisable stock options.
 
   
 (5) Includes 117,282 shares of Common Stock issuable to Mr. Edgington upon
     exercise of stock options exercisable at the Closing of the Offering.
    
 
 (6) Includes 149,674 shares of Common Stock issuable to Dr. Varney upon
     exercise of currently exercisable stock options.
 
   
 (7) Includes 212,750 shares of Common Stock issuable to Dr. Varney upon
     exercise of stock options exercisable at the Closing of the Offering.
    
 
 (8) Includes 40,031 shares of Common Stock issuable to Mr. West upon exercise
     of currently exercisable stock options. Does not include 24,000 shares of
     Common Stock owned by Mr. West's parents and Mr. West's spouse's parents,
     with respect to which Mr. West disclaims beneficial ownership.
 
 (9) Includes 19,225 shares of Common Stock issuable to Mr. Bowers upon exercise
     of currently exercisable stock options.
 
(10) Represents 2,000 shares of Common Stock issuable to Mr. Meindl upon
     exercise of currently exercisable stock options.
 
(11) Represents 7,000 shares of Common Stock issuable to Mr. Meindl upon
     exercise of stock options exercisable at the Closing of the Offering and
     60,000 shares of Common Stock issuable to Mr. Meindl at the Closing of the
     Offering in connection with the Company's satisfaction of the Junior Notes.
 
(12) Represents 2,000 shares of Common Stock issuable to Dr. Whitehead upon
     exercise of currently exercisable stock options.
 
(13) Represents 8,000 shares of Common Stock issuable to Dr. Whitehead upon
     exercise of stock options exercisable at the Closing of the Offering.
 
(14) Represents 2,000 shares of Common Stock issuable to Mr. Buick upon exercise
     of currently exercisable stock options.
 
(15) Represents 8,000 shares of Common Stock issuable to Mr. Buick upon exercise
     of stock options exercisable at the Closing of the Offering.
 
(16) Represents 2,000 shares of Common Stock issuable to Mr. Gjelde upon
     exercise of currently exercisable stock options.
 
(17) Represents 8,000 shares of Common Stock issuable to Mr. Gjelde upon
     exercise of stock options exercisable at the Closing of the Offering.
 
(18) Represents 6,000 shares of Common Stock issuable to Mr. Carey upon exercise
     of stock options exercisable at the Closing of the Offering.
 
CERTAIN TRANSACTIONS
 
     During 1996, Mr. Edgington and Dr. Varney advanced $212,000 to the Company
to cover operating costs for certain periods, which advances bear interest in
the amount of 9.75% and were repaid from the proceeds of the Company's most
recent private placement offering closed in February 1997.
 
     For a description of the Officer Notes issued during the second half of
1996 and the Short Term Notes issued during the third quarter of 1997, all to
Mr. Edgington and Dr. Varney and the Junior Note issued to Mr. Meindl, see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION."
 
     In January 1997, John J. Meindl, Jr., a director of the Company, purchased
from the Company Junior Notes in the aggregate principal amount of $300,000.
 
                                       41
<PAGE>   45
 
     For the fiscal years ended December 31, 1996 and December 31, 1995 and for
the six month period ended June 30, 1997, there were no other material
transactions between the Company and any of its officers or directors which
involved $60,000 or more.
 
     Transactions by the Company with its officers, directors and shareholders,
and with their affiliates, were made, and the Company intends that in the
future, they will be made on terms no less favorable to the Company than those
available from unaffiliated parties.
 
                           DESCRIPTION OF SECURITIES
 
     The Company is authorized to issue 20,000,000 shares of Common Stock, $.01
par value per share. As of the date of this Prospectus, 1,202,588 shares of
Common Stock are held by 59 holders of record.
 
COMMON STOCK
 
     The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted for the election of directors can
elect all of the directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out of funds
legally available therefor. In the event of liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to share ratably in
all assets remaining available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the Common Stock. Holders of shares of Common Stock, as
such, have no conversion, preemptive or other subscription rights, and, except
as noted herein, there are no redemption provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are, and the Shares, when
issued and paid for as set forth in this Prospectus, will be, fully paid and
nonassessable. See "UNDERWRITING."
 
     The holders of Common Stock do not have any subscription, redemption or
conversion rights, nor do they have any preemptive or other rights to acquire or
subscribe for additional, unissued or treasury shares. Accordingly, if the
Company were to elect to sell additional shares of Common Stock following this
Offering, persons acquiring Common Stock in this Offering would have no right to
purchase additional shares, and, as a result, their percentage equity interest
in the Company would be reduced.
 
     Pursuant to the Company's By Laws, except for any matters which, pursuant
to corporate law, require a greater percentage vote for approval (including, for
example certain mergers and consolidations and the amendment of certain
provisions of the Company's Bylaws) , the holders of majority of the issued and
outstanding Common Stock entitled to vote, if present in person or by proxy, are
necessary and sufficient to constitute a quorum for the transaction of business
at meetings of the Company's stockholders. Further, except as to any matter
which, pursuant to corporate law, requires a greater percentage vote for
approval (including, for example, certain mergers, consolidations, sales of
substantially all of the assets, and amendments to certain provisions of the
charter and Bylaws, of the Company), the affirmative vote of the holders of a
majority of the Common Stock voted on the matter (provided a quorum as aforesaid
is present) is necessary and sufficient to authorize, affirm or ratify any act
or action except the election of directors, which is by a plurality of the votes
cast. See "PROPOSED BUSINESS -- Christian Statement of Faith; the Company's
Policy."
 
     The holders of Common Stock do not have cumulative voting rights.
Accordingly, the holders of more than half of the outstanding shares of Common
Stock can elect all of the directors to be elected in any election. In such
event, the holders of the remaining shares of Common Stock would not be able to
elect any directors. The Board of Directors is empowered to fill any vacancies
on the Board of Directors created by the resignation, death or removal of
directors.
 
     In addition to voting at duly called meetings at which a quorum is present
in person or by proxy, corporate law, the Charter and the Company's By Laws
provide that stockholders may take action without the holding of a meeting by
written consent or consents signed by the holders of that number of the
outstanding shares of the capital stock of the Company entitled to vote thereon
which would be required to take the subject action.
 
                                       42
<PAGE>   46
 
Prompt notice of the taking of any action without a meeting by less than
unanimous consent of the stockholders will be given to those stockholders who do
not consent in writing to the action. The purposes of this provision are to
facilitate action by stockholders and to reduce the corporate expense associated
with annual and special meetings of stockholders. Pursuant to the rules and
regulations of the Commission, if stockholder action is taken by written
consent, the Company will be required to send to each stockholder entitled to
vote on the matter acted on, but whose consent was not solicited, an information
statement containing information substantially similar to that which would have
been contained in a proxy statement.
 
   
     Upon the Closing, without giving effect to the exercise of the Purchase
Warrants, Over-Allotment Option, or Underwriter Warrants or the Outstanding
Options, the Company's executive officers and directors will beneficially own
approximately 24.3% of the outstanding shares of Common Stock, and may
accordingly be in a position to significantly influence the voting results of
certain actions required or permitted to be taken by stockholders of the
Company, including the election of directors. As a result, the officers and
directors of the Company are in a position to control the outcome of
substantially all matters on which stockholders are entitled to vote, including
the election of directors.
    
 
PURCHASE WARRANTS
 
     The following is a brief summary of certain provisions of the Purchase
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Purchase Warrant Agreement
between the Company and American Stock Transfer & Trust Company (the "Transfer
and Warrant Agent"). A copy of the Purchase Warrant Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part. See
"ADDITIONAL INFORMATION."
 
   
     Exercise Price and Terms. Each Purchase Warrant entitles the holder thereof
to purchase, at any time from the Effective Date through the fifth anniversary
of the Effective Date, one share of Common Stock at a price of $5.75 per share
if exercised prior to                     , 2002, when the Purchase Warrants
expire, subject to adjustment in accordance with the anti-dilution and other
provisions referred to below.
    
 
   
     The holder of any Purchase Warrant may exercise such Purchase Warrant by
surrendering the certificate representing the Purchase Warrant to the Transfer
and Warrant Agent, with the subscription form on the reverse side of such
certificate properly completed and executed, together with payment of the
exercise price. The Purchase Warrants may be exercised at any time in whole or
in part at the applicable exercise price until expiration of the Purchase
Warrants five years from the Effective Date. No fractional shares will be issued
upon the exercise of the Purchase Warrants.
    
 
   
     Commencing after the Effective Date, the Purchase Warrants are subject to
redemption by the Company, at the option of the Company, at $0.25 per Purchase
Warrant, upon 30 days prior written notice, if the closing bid price, as
reported on Nasdaq, or the closing sale price, as reported on a national or
regional securities exchange, as applicable, of the shares of the Common Stock
for 30 consecutive trading days ending within ten days of the notice of
redemption of the Purchase Warrants averages in excess of $10.00 per share,
subject to adjustment. The Company is required to maintain an effective
registration statement with respect to the Common Stock underlying the Purchase
Warrants prior to redemption of the Purchase Warrants. Prior to the first
anniversary of the Effective Date, the Purchase Warrants will not be redeemable
by the Company without the written consent of the Underwriter. In the event the
Company exercises the right to redeem the Purchase Warrants, such Purchase
Warrants will be exercisable until the close of business on the date for
redemption fixed in such notice. If any Purchase Warrant called for redemption
is not exercised by such time, it will cease to be exercisable and the holder
will be entitled only to the redemption price. Redemption of the Purchase
Warrants could force the Purchase Warrant holders either to (i) exercise the
Purchase Warrants and pay the exercise price thereof at a time when it may be
less advantageous economically to do so, or (ii) accept the redemption price in
consideration for cancellation of the Purchase Warrant, which could be
substantially less than the market value thereof at the time of redemption.
    
 
     The exercise price of the Purchase Warrants bear no relation to any
objective criteria of value and should in no event be regarded as an indication
of any future market price of the Securities offered hereby.
 
                                       43
<PAGE>   47
 
     The Company has authorized and reserved for issuance a sufficient number of
shares of Common Stock to accommodate the exercise of all Purchase Warrants to
be issued in this Offering. All shares of Common Stock issued upon exercise of
the Purchase Warrants, if exercised in accordance with their terms, will be
fully paid and non-assessable.
 
   
     Adjustments. The exercise price and the number of shares of Common Stock
purchasable upon exercise of the Purchase Warrants are subject to adjustment
upon the occurrence of certain events, including stock dividends, stock splits,
combinations or reclassification of the Common Stock, or sale by the Company of
shares of its Common Stock (or other securities convertible into or exercisable
for Common Stock) at a price per share or share equivalent below the
then-applicable exercise price of the Purchase Warrants or the then-current
market price of the Common Stock. Additionally, an adjustment would be made in
the case of a reclassification or exchange of Common Stock, consolidation or
merger of the Company with or into another corporation, or sale of all or
substantially all of the assets of the Company, in order to enable Purchase
Warrant holders to acquire the kind and number of shares of stock or other
securities or property receivable in such event by a holder of that number of
shares of Common Stock that would have been issued upon exercise of the Purchase
Warrant immediately prior to such event. No adjustments will be made until the
cumulative adjustments in the exercise price per share amount to $.05 or more.
No adjustment to the exercise price of the shares subject to the Purchase
Warrants will be made for dividends (other than stock dividends), if any paid on
the Common Stock or upon exercise of the Purchase Warrants, the Underwriter
Warrant or any other options or warrants outstanding as of the date of this
Prospectus.
    
 
     Transfer, Exchange and Exercise. The Purchase Warrants are in registered
form and may be presented to the Transfer and Warrant Agent for transfer,
exchange or exercise at any time prior to their expiration date three years from
the Effective Date, at which time the Purchase Warrants become wholly void and
of no value. If a market for the Purchase Warrants develops, the holder may sell
the Purchase Warrants instead of exercising them. There can be no assurance,
however, that a market for the Purchase Warrants will develop or continue. If
the Company is unable to qualify for sale in particular states the Common Stock
underlying the Purchase Warrants, holders of the Purchase Warrants residing in
such states and desiring to exercise the Purchase Warrants will have no choice
but to sell such Purchase Warrants or allow them to expire. See "-- Transfer and
Warrant Agent."
 
     Warrant Holder Not a Stockholder. The Purchase Warrants do not confer upon
holders any dividend, voting, preemption or any other rights as stockholders of
the Company.
 
   
     This Offering is the initial registered public offering of the Securities
and accordingly, there is no regular public trading market for the Securities at
the present time. There can be no assurance that a public trading market will
ever develop or, if one develops, that it will be maintained. Although it has no
obligation to do so, the Underwriter may from time to time become a market-maker
and otherwise effect transactions in the Securities. The Underwriter, if it
participates in the market, may be a dominating influence in any market that
might develop for any of the Securities. The price and liquidity of the
Securities may be significantly affected by the degree, if any, of the
Underwriter's participation in the market. See "RISK FACTORS."
    
 
SHARES ELIGIBLE FOR FUTURE SALE
 
   
     Upon completion of this Offering, there will be 5,310,108 shares of Common
Stock outstanding including the issuance of 340,000 shares upon satisfaction of
the Junior Notes and an aggregate of 1,767,520 shares of Common Stock issuable
upon the exercise of the Outstanding Stock Options, and excluding (a) an
aggregate of 3,615,000 shares issuable upon the exercise of (i) the Purchase
Warrants; (ii) the Over-Allotment Option (including shares issuable under the
Purchase Warrants included in the Over-Allotment Option); and (iii) the
Underwriter Warrants, including shares issuable under the Warrant Underwriter
Warrants. See "CAPITALIZATION" and "UNDERWRITING." Of these, the 2,000,000
Shares sold in this Offering, the 2,500,000 shares underlying the Purchase
Warrants, and the maximum of 1,115,000 shares issuable upon full exercise of the
Over-Allotment Option (including shares issuable under the Purchase Warrants
included in the Over-Allotment Option) and the exercise of the Underwriter
Warrants, including the Warrant Underwriter Warrants, will be freely tradeable
without restriction or further registration under the Securities Act,
    
 
                                       44
<PAGE>   48
 
   
except for any such shares purchased by an "affiliate" of the Company. The
1,202,588 shares currently outstanding and the 1,767,520 shares issuable upon
exercise of the Outstanding Stock Options (collectively, the "Current Shares")
and, as well as the 340,000 shares issuable upon satisfaction of the Junior
Notes (the "Junior Note Shares") are "restricted securities" as defined in Rule
144 and may not be sold without registration under the Securities Act unless
pursuant to an applicable exemption therefrom (collectively, the "Restricted
Shares").
    
 
   
     In general, under Rule 144, a person (or persons whose shares are required
to be aggregated) who has satisfied a one-year holding period may, under certain
circumstances, sell within any three-month period a number of Restricted Shares,
and an "affiliate" of the Company may, under certain circumstances, sell within
any three-month period a number of shares, whether or not Restricted Shares,
which does not exceed the greater of 1% of the then-outstanding shares of Common
Stock or the average weekly trading volume during the four calendar weeks prior
to such sale a reported on Nasdaq, all exchanges and the consolidated
transaction reporting system. Rule 144 also permits the sale of Restricted
Shares without any quantity limitations by a person who is not an "affiliate" of
the Company, who has not been an "affiliate" of the Company for at least three
months immediately preceding the sale, and who has owned the shares for at least
two years. The holders of all of the Current Shares (other than the holders of
27,000 shares), and the holders of the Junior Notes, with respect to the Junior
Note Shares, have agreed not to sell any shares of Common Stock for a period of
6 months (65,750 shares), 12 months (51,550 shares), 18 months (2,825,808
shares), and 24 months (340,000 shares), respectively, from the Effective Date,
or any longer period required by the law of any state (the "Lock-up").
    
 
     The Company is unable to predict the effect that any subsequent sales of
the Company's securities by its existing stockholders, under Rule 144 or
otherwise, may have on the then-prevailing market price of the Common Stock,
although such sales could have a depressive effect on such market price. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof.
 
DIVIDENDS
 
     The Company has not paid any dividends on its capital stock to date and
does not currently intend to pay cash dividends. The payment of dividends, if
any, will be contingent upon the Company's revenues and earnings, if any,
capital requirements and general financial condition at that time. The payment
of any dividends will be within the discretion of the Company's Board of
Directors. It is the current intention of the Board of Directors to retain all
earnings, if any, for use in the Company's business operations and, accordingly,
the Board does not anticipate paying any cash dividends in the foreseeable
future.
 
TRANSFER AND WARRANT AGENT
 
     The transfer agent for the Common Stock and the warrant agent for the
Purchase Warrants is American Stock Transfer & Trust Company, New York, New
York.
 
                                       45
<PAGE>   49
 
                                  UNDERWRITING
 
   
     Subject to the terms and conditions of the Underwriting Agreement, Barron
Chase Securities, Inc. (the "Underwriter") has agreed to purchase from the
Company an aggregate of 2,000,000 Shares and 2,500,000 Purchase Warrants
(collectively, the "Securities"). The Securities are offered by the Underwriter
subject to prior sale, when, as and if delivered to and accepted by the
Underwriter and subject to approval of certain legal matters by counsel and
certain other conditions. The Underwriter is committed to purchase all
Securities offered by this Prospectus, if any are purchased (other than those
covered by the Over-Allotment Option described below).
    
 
   
     The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Securities to the public at the offering price set forth
in the cover page of this Prospectus, and that the Underwriter may allow
concessions to certain selected dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD"), all of whom agree to sell the
Securities in conformity with the NASD's Conduct Rules. Such concessions will
not exceed the amount of the underwriting discount that the Underwriter is to
receive.
    
 
   
     The Company has granted to the Underwriter an Over-Allotment Option,
exercisable for 45 days from the Effective Date, to purchase up to an additional
300,000 Shares and an additional 375,000 Purchase Warrants at the public
offering price less the Underwriting Discount set forth on the cover page of
this Prospectus. The Underwriter may exercise this option solely to cover
over-allotments in the sale of the Securities being offered by this Prospectus.
    
 
   
     Officers and directors of the Company may introduce the Underwriter to
persons to consider this Offering and to purchase Securities either through the
Underwriter or through participating dealers. In this connection, no shares have
been reserved for these purchases and officers and directors will not receive
any commissions or any other compensation.
    
 
   
     The Company has agreed to pay to the Underwriter a commission of 10% of the
gross proceeds of this Offering (the "Underwriting Discount"), including the
gross proceeds from the sale of the Over-Allotment Option, if exercised. In
addition, the Company has agreed to pay to the Underwriter the Non-Accountable
Expense Allowance of 3% of the gross proceeds of this Offering, including
proceeds from any Securities purchased pursuant to the Over-Allotment Option.
The Underwriter's expenses in excess of the Non-Accountable Expense Allowance
will be paid by the Underwriter. To the extent that the expenses of the
Underwriter are less than the amount of the Non-Accountable Expense Allowance
received, such excess shall be deemed to be additional compensation to the
Underwriter. The Underwriter has informed the Company that it does not expect
sales to discretionary accounts to exceed five percent (5%) of the total number
of Securities offered by the Company hereby.
    
 
   
     Prior to this Offering, there has been no public market for the shares of
Common Stock or Purchase Warrants. Consequently, the initial public offering
price for the Securities, and the terms of the Purchase Warrants (including the
exercise price of the Purchase Warrants), have been determined by negotiation
between the Company and the Underwriter. Among the factors considered in
determining the public offering price were the history of, and the prospects
for, the Company's business, an assessment of the Company's management, its past
and present operations, the Company's development and the general condition of
the securities market at the time of this Offering. The initial public offering
price does not necessarily bear any relationship to the Company's assets, book
value, earnings or other established criterion of value. Such price is subject
to change as a result of market conditions and other factors, and no assurance
can be given that a public market for the Shares or the Purchase Warrants will
develop after the Closing, or if a public market in fact develops, that such
public market will be sustained, or that the Shares or Purchase Warrants can be
resold at any time at the offering or any other price. See "RISK FACTORS -- No
Assurance of Public Market; Arbitrary Determination of Offering Price."
    
 
   
     At the Closing, the Company will issue to the Underwriter or persons
related to the Underwriter, for nominal consideration, the Common Stock
Underwriter Warrants to purchase up to 190,000 shares of Common Stock (the
"Underlying Shares") and the Warrant Underwriter Warrants to purchase up to
250,000
    
 
                                       46
<PAGE>   50
 
   
warrants (the "Underlying Warrants"). The Common Stock Underwriter Warrants, the
Warrant Underwriter Warrants and the Underlying Warrants are sometimes referred
to in this Prospectus as the "Underwriter Warrants." The Common Stock
Underwriter Warrants and the Warrant Underwriter Warrants will be exercisable
for a five-year period commencing on the Effective Date. The initial exercise
price of each Common Stock Underwriter Warrant shall be $8.25 per Underlying
Share (165% of the public offering price). The initial exercise price of each
Warrant Underwriter Warrant shall be $.309375 per Underwriter Underlying Warrant
(165% of the public offering price). Each Underwriter Underlying Warrant will be
exercisable for a five-year period commencing on the Effective Date to purchase
one share of Common Stock at an exercise price of $8.25 per share of Common
Stock. The Underwriter Warrants will not be transferable for twelve months from
the Effective Date by the holder, except (i) to officers of the Underwriter and
members of the selling group and officers and partners thereof; (ii) by will; or
(iii) by operation of law.
    
 
   
     The Common Stock Underwriter Warrants and the Warrant Underwriter Warrants
contain provisions providing for appropriate adjustment in the event of any
merger, consolidation, recapitalization, reclassification, stock dividend, stock
split or similar transaction. The Underwriter Warrants contain net issuance
provisions permitting the holders thereof to elect to exercise the Underwriter
Warrants in whole or in part and instruct the Company to withhold from the
securities issuable upon exercise, a number of securities, valued at the current
fair market value on the date of exercise, to pay the exercise price. Such net
exercise provision has the effect of requiring the Company to issue shares of
Common Stock without a corresponding increase in capital. A net exercise of the
Underwriter Warrants will have the same dilutive effect on the interests of the
Company's stockholders as will a cash exercise. The Underwriter Warrants do not
entitle the Underwriter to any rights as a stockholder of the Company until such
Underwriter Warrants are exercised and shares of Common Stock are purchased
thereunder.
    
 
   
     The Underwriter Warrants and the securities issuable thereunder may not be
offered for sale except in compliance with the applicable provisions of the
Securities Act. The Company has agreed that if it shall cause a post-effective
amendment, a new registration statement, or similar offering document to be
filed with the Commission, the holders shall have the right, for seven years
from the Effective Date, to include in such registration statement or offering
statement the Underwriter Warrants and the securities issuable upon their
exercise at no expense to the holders. Additionally, the Company has agreed
that, upon request, by the holders of 50% or more of the Underwriter Warrants
during the period commencing 12 months from the Effective Date and expiring four
years thereafter, the Company will, under certain circumstances, register the
Underwriter Warrants and any of the securities issuable upon their exercise.
    
 
   
     Underwriting compensation also includes 10,000 shares of the Company's
Common Stock to be received by Universal Partners, L.P. ("Universal") in
connection with the satisfaction by the Company of $50,000 in Junior Notes held
by Universal. Universal has agreed not to sell, pledge or otherwise dispose of
such securities for a twenty-four (24) month period from the effective date of
the Offering. See "Description of Securities -- Shares Eligible for Future
Sale."
    
 
   
     The Company has also agreed that if the Company participates in any
transaction which the Underwriter has introduced in writing to the Company
during a period of five years after the Closing (including mergers,
acquisitions, joint ventures and any other business transaction for the Company
introduced in writing by the representative), and which is consummated after the
Closing (including an acquisition of assets or stock for which it pays, in whole
or in part, with shares or other securities of the Company), or if the Company
retains the services of the Underwriter in connection with any such transaction
(an "Introduced Consummated Transaction"), then the Company will pay for the
Underwriter's services an amount equal to 5% of up to one million dollars of
value paid or received in the transaction, 4% of the next million of such value,
3% of the next million of such value, 2% of the next million of such value, and
1% of the next million dollars of such value and of all such value above
$4,000,000.
    
 
                                       47
<PAGE>   51
 
   
     The Company has agreed to indemnify the Underwriter against any costs or
liabilities incurred by the Underwriter by reasons of misstatements or omissions
to state material facts in connection with the statements made in the
Registration Statement on Form SB-2 filed by the Company with the Commission
(the "Registration Statement") under the Securities Act and this Prospectus. The
Underwriter has in turn agreed to indemnify the Company against any costs or
liabilities by reason of misstatements or commissions to state material facts in
connection with the statements made in the Registration Statement and this
Prospectus, based on information relating to the Underwriter and furnished in
writing by the Underwriter. To the extent that this section may purport to
provide exculpation from possible liabilities arising from the federal
securities laws, in the opinion of the Commission, such indemnification is
contrary to public policy and therefore unenforceable.
    
 
     The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of each such agreement which are filed as exhibits to the Registration
Statement. See "ADDITIONAL INFORMATION."
 
                               LEGAL PROCEEDINGS
 
     The Company is not a party to, nor is it aware of, any pending litigation
to which it is a party or of which its property is subject.
 
                                 LEGAL MATTERS
 
   
     The validity of the securities offered hereby will be passed upon for the
Company by Berman Wolfe & Rennert, P.A., Miami, Florida. Gammon & Grange, P.C.,
McLean, Virginia, has acted as counsel to the Company on matters relating to the
Company's use of religious criteria in employment practices. A member of the law
firm of Gammon & Grange, P.C. is the owner of 12,000 shares of the Company's
Common Stock. Certain legal matters will be passed upon for the Underwriter by
David A. Carter, P.A., Boca Raton, Florida.
    
 
                                    EXPERTS
 
     The combined financial statements of the Company's predecessor Companies
(companies in the development stage) at December 31, 1996 and 1995 and for the
years ended December 31, 1996 and 1995, appearing in this Prospectus and
Registration Statement have been audited by Hoffman, Morrison & Fitzgerald,
P.C., independent auditors, as set forth in their report thereon appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
 
                                       48
<PAGE>   52
 
                             ADDITIONAL INFORMATION
 
   
     The Company has filed with the Commission the Registration Statement under
the Securities Act with respect to the Securities, among other securities. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and this Offering, reference is made to the Registration Statement,
including the exhibits filed therewith, which may be examined at the
Commission's principal office, Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549; the Northeast Regional Office of the Commission at
7 World Trade Center, Suite 1300, New York, New York 10048; and the Midwest
Regional Office of the Commission, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, where copies may be obtained upon payment
of the fees prescribed by the Commission. Such documents may also be obtained
through the website maintained by the Commission at http://www.sec.gov.
Descriptions contained in this Prospectus as to the contents of any contract or
other document filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to such
contract or document. The Company will provide without charge to each person who
receives a Prospectus, upon written or oral request of such person to the
following address or telephone number, a copy of any of the information that is
incorporated by reference in this Prospectus: 4501 Daly Drive, Suite 103,
Chantilly, Virginia 20151; (703) 968-4808.
    
 
                                       49
<PAGE>   53
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)
 
                         COMBINED FINANCIAL STATEMENTS
 
                     FROM MAY 12, 1993 (DATE OF INCEPTION)
                                TO JUNE 30, 1997
 
                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
 
                             AND FOR THE SIX MONTHS
                          ENDED JUNE 30, 1997 AND 1996
                                  (UNAUDITED)
 
                                      WITH
 
                          INDEPENDENT AUDITORS' REPORT
 
                                C O N T E N T S
 
   
<TABLE>
<CAPTION>
                                                                                      PAGE
                                                                                    --------
<S>                                                                                 <C>
INDEPENDENT AUDITORS' REPORT.....................................................     F-2
COMBINED FINANCIAL STATEMENTS:
     Balance sheets at December 31, 1996 and 1995 and June 30, 1997
      (unaudited)................................................................     F-3
     Statements of operations for the years ended December 31, 1996 and 1995, the
      six months ended June 30, 1997 and 1996 (unaudited) and cumulative from
      Inception (May 12, 1993) to June 30, 1997 (unaudited)......................     F-4
     Statements of stockholders' equity (deficit) from Inception (May 12, 1993)
      to December 31, 1996 and for the six months ended June 30, 1997
      (unaudited)................................................................     F-5
     Statements of cash flows for the years ended December 31, 1996 and 1995, the
      six months ended June 30, 1997 and 1996 (unaudited) and cumulative from
      Inception (May 12, 1993) to June 30, 1997 (unaudited)......................     F-6
NOTES TO COMBINED FINANCIAL STATEMENTS...........................................   F-7-F-19
</TABLE>
    
 
                                       F-1
<PAGE>   54
 
                          INDEPENDENT AUDITORS' REPORT
 
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
  DIDAX ON-LINE, L.C. AND AFFILIATE
     Chantilly, Virginia
 
We have audited the accompanying combined balance sheets of DIDAX ON-LINE, L.C.
AND AFFILIATE (development stage companies) as of December 31, 1996 and 1995,
and the related combined statements of operations, and cash flows for the years
ended December 31, 1996 and 1995, and stockholders' equity (deficit) for the
period May 12, 1993 (date of inception) to December 31, 1996. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of DIDAX
ON-LINE, L.C. AND AFFILIATE as of December 31, 1996 and 1995, and the combined
results of their operations and their combined cash flows for the years then
ended in conformity with generally accepted accounting principles.
 
The accompanying combined financial statements have been prepared assuming that
the Company will continue as a going concern which contemplates the realization
of assets and liquidation of liabilities in the normal course of business. As
more fully described in Note A, the Company has incurred losses from operations
and has an accumulated deficit that raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan in regard to these
matters is also described in Note A. The combined financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
 
HOFFMAN, MORRISON & FITZGERALD, P.C.
 
McLean, Virginia
January 30, 1997 except Note K
which is as of April 11, 1997
 
                                       F-2
<PAGE>   55
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)
 
                            COMBINED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                              --------------------------     JUNE 30,
                                                                 1995           1996           1997
                                                              -----------    -----------    -----------
                                                                                            (UNAUDITED)
<S>                                                           <C>            <C>            <C>
                                                ASSETS
CURRENT ASSETS:
    Cash and cash equivalents..............................   $  247,317     $    1,932     $  170,419
    Accounts receivable including unbilled of $24,978 and
       $24,648 at December 31, 1996 and June 30, 1997,
       respectively........................................           --         46,450         83,029
    Advances due from officer..............................       43,560         10,000         10,000
    Prepaid expenses.......................................           --         10,800            400
    Deferred costs, net....................................           --         29,367        273,637
                                                              ----------     ----------     ---------- 
         Total current assets..............................      290,877         98,549        537,485
PROPERTY AND EQUIPMENT, net................................       60,384        166,923        143,539
OTHER ASSETS
    Deposits...............................................        9,553          9,553          9,553
    Deferred costs, net....................................           --          7,249        116,903
                                                              ----------     ----------     ---------- 
         Total other assets................................        9,553         16,802        126,456
                                                              ----------     ----------     ----------  
                                                              $  360,814       $282,274     $  807,480
                                                              ==========     ==========     ==========  
 
                            LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
    Short-term debt, officer and director, net of discount
       of $69,797 at December 31, 1996 and $14,203 at June
       30, 1997............................................   $       --     $  553,203     $  608,797
    Advances due to officer and director...................       30,000        212,000             --
    Accounts payable.......................................        4,894        258,897        230,038
    Accrued liabilities....................................       82,797        170,835        295,260
    Deferred revenue.......................................           --          4,125          2,495
                                                              ----------     ----------     ---------- 
         Total current liabilities.........................      117,691      1,199,060      1,136,590
LONG-TERM DEBT.............................................           --             --      1,700,000
                                                              ----------     ----------     ---------- 
         Total liabilities.................................      117,691      1,199,060      2,836,590
COMMITMENTS AND CONTINGENCIES..............................           --             --             --
COMMON STOCK SUBJECT TO POSSIBLE RESCISSION, $.01 par
    value, 305,500 and 607,433 shares issued and
    outstanding at December 31, 1995; and December 31, 1996
    and June 30, 1997, respectively........................      600,000      1,788,399      1,788,399
STOCKHOLDERS' EQUITY (DEFICIT)
    Common stock, $.01 par value, 20,000,000 shares
       authorized; 546,693 and 595,155 issued and
       outstanding at December 31, 1995; and December 31,
       1996 and June 30, 1997, respectively................        5,467          5,530          5,952
    Common stock warrants..................................           --        111,187        111,187
    Additional paid-in capital.............................      672,981        678,327        888,967
    Deficit accumulated during development stage...........   (1,035,325)    (3,500,229)    (4,823,615) 
                                                              ----------     ----------     ---------- 
         Total stockholders' equity (deficit)..............     (356,877)    (2,705,185)    (3,817,509) 
                                                              ----------     ----------     ---------- 
                                                              $  360,814     $  282,274       $807,480
                                                              ==========     ==========     ==========  
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-3
<PAGE>   56
 
                                   DIDAX INC
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)
 
                       COMBINED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                        CUMULATIVE
                                                                                           FROM
                                                              FOR THE SIX MONTHS         INCEPTION
                                 YEAR ENDED DECEMBER 31,        ENDED JUNE 30,           (MAY 12,
                                 -----------------------   -------------------------     1993) TO
                                   1995         1996          1996          1997       JUNE 30, 1997
                                 ---------   -----------   -----------   -----------   -------------
                                                           (UNAUDITED)   (UNAUDITED)    (UNAUDITED)
<S>                              <C>         <C>           <C>           <C>           <C>
OPERATING REVENUES:
     Consulting services.......  $     --      $ 81,371   $     9,789   $   159,364    $   $240,735
     Internet access...........        --        90,571        28,929        24,753         115,324
     Retail sales..............        --         8,834         3,327         4,528          13,362
                                 ---------   -----------   -----------   -----------   -------------
          Total revenues.......        --       180,776        42,045       188,645         369,421
OPERATING EXPENSES:
     Cost of goods and
       services................        --       226,220        61,014       100,790         327,010
     Technical and
       development.............    283,819      694,072       373,107       287,980       1,315,516
     Sales and marketing.......    259,701      991,300       611,445       670,443       1,992,042
     General and
       administrative..........    167,397      671,525       415,633       380,321       1,427,761
                                 ---------   -----------   -----------   -----------   -------------
          Total operating
            expenses...........    710,917    2,583,117     1,461,199     1,439,534       5,062,329
                                 ---------   -----------   -----------   -----------   -------------
LOSS FROM OPERATIONS...........   (710,917)  (2,402,341)   (1,419,154)   (1,250,889)     (4,692,908)    
OTHER INCOME (EXPENSE):
     Interest income...........      4,353       11,412        10,763        15,453          31,218
     Gain on exchange of
       assets..................         --        3,091            --            --           3,091
     Miscellaneous income......         --          749            --           521           1,270
     Interest expense..........         --      (77,815)           --       (88,471)       (166,286)    
                                 ---------   -----------   -----------   -----------   -------------
          Total other income
            (expenses).........      4,353      (62,563)       10,763       (72,497)       (130,707)    
                                 ---------   -----------   -----------   -----------   -------------
Net loss before provision for
  income taxes.................   (706,564)  (2,464,904)   (1,408,391)   (1,323,386)     (4,823,615)    
Provision for income taxes.....         --           --            --            --              --
                                 ---------   -----------   -----------   -----------   -------------
NET LOSS.......................  $(706,564) $(2,464,904)  $(1,408,391)  $(1,323,386)   $ (4,823,615)   
                                 =========   ==========    ==========    ==========    =============
Net loss per common share......  $   (1.58) $     (4.35)  $     (2.56)  $     (2.15)   
                                 =========   ==========    ==========    ==========
Weighted average number of
  common shares and common
  share equivalents
  outstanding..................    447,557      564,959       550,545       616,439
                                 =========   ==========    ==========    ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-4
<PAGE>   57
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)
 
             COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 
           FROM MAY 12, 1993 (DATE OF INCEPTION) TO DECEMBER 31, 1996
             AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                            
                                              COMMON STOCK  
                                            ----------------                             DEFICIT
                                              (ROUNDED TO                              ACCUMULATED
                                              WHOLE SHARE)      ADDITIONAL   COMMON      DURING         TOTAL
                                            ----------------    PAID-IN      STOCK     DEVELOPMENT     EQUITY
                                            SHARES    AMOUNT    CAPITAL     WARRANTS      STAGE       (DEFICIT)
                                            -------   ------    ------      --------   -----------   -----------
<S>                                         <C>       <C>       <C>         <C>        <C>           <C>
Issuance of common stock to founders on
  May 12, 1993............................  180,000   $1,800    $  --                  $      --      $    1,800
Issuance of common stock to founders in
  May 1993 in consideration of costs paid
  on behalf of DIDAX, INC.................   17,000      170      22,520                       --         22,690
Issuance of common stock throughout
  1993....................................   81,000      810     134,190                       --        135,000
Net loss..................................      --       --          --                  (104,002)      (104,002)   
                                            -------   ------    --------               -----------   -----------
BALANCE, DECEMBER 31, 1993................  278,000    2,780     156,710                 (104,002)        55,488
 
Issuance of common stock to founders in
  December 1994 in consideration of costs
  paid on behalf of DIDAX, INC............   13,200      132      21,826                       --         21,958
Issuance of common stock throughout
  1994....................................   41,993      420      69,579                       --         69,999
Net loss..................................      --       --          --                  (224,759)      (224,759)   
                                            -------   ------    --------               -----------   -----------
 
BALANCE, DECEMBER 31, 1994................  333,193    3,332     248,115                 (328,761)       (77,314)   
                                                                                         
Issuance of common stock throughout
  1995....................................  213,500    2,135     424,865                       --        427,000
Net loss..................................      --       --          --     $    --       (706,564)     (706,564)   
                                            -------   ------    --------    --------   -----------   -----------
BALANCE, DECEMBER 31, 1995................  546,693    5,467     672,980         --     (1,035,325)     (356,878)   
 
Issuance of common stock throughout 1996,
  net of offering costs of $19,991........    6,250       63       5,347         --            --          5,410
Issuance of common stock warrants.........                                   111,187                     111,187
Net loss..................................      --       --          --          --     (2,464,904)   (2,464,904) 
                                            -------   ------    --------    --------   -----------   -----------
BALANCE, DECEMBER 31, 1996................  552,943    5,530     678,327     111,187    (3,500,229)   (2,705,185) 
 
Issuance of common stock..................   42,212      422     210,640         --            --        211,062
Net loss..................................      --       --          --          --     (1,323,386)   (1,323,386) 
                                            -------   ------    --------    --------   -----------   -----------
BALANCE, JUNE 30, 1997 (UNAUDITED)........  595,155   $5,952    $888,967    $111,187   $(4,823,615)  $(3,817,509)
                                            =======   ======    ========    ========   ===========   ===========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-5
<PAGE>   58
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)
 
                       COMBINED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                                               CUMULATIVE
                                                                                                                  FROM
                                                YEAR ENDED DECEMBER 31,           FOR THE SIX MONTHS            INCEPTION
                                                                                    ENDED JUNE 30,              (MAY 12,
                                               --------------------------     ---------------------------       1993) TO
                                                  1995           1996            1996            1997         JUNE 30, 1997
                                               ----------     -----------     -----------     -----------     -------------
                                                                              (UNAUDITED)     (UNAUDITED)      (UNAUDITED)
<S>                                            <C>            <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss................................    $(706,564)     $(2,464,904)    $(1,408,391)    $(1,323,386)    $  (4,823,615)   
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation and amortization.......        7,290           77,480          28,392          60,961           145,731
       Amortization of debt discount                              
         charged to interest expense.......           --           41,390              --          55,594            96,984
       Common stock issued in lieu of cash
         for professional services and
         donation..........................           --               --              --         211,062           236,062
       Changes in assets and liabilities
         affecting operations:
           Accounts receivable.............           --          (46,450)        (32,645)        (36,579)          (83,029)    
           Inventory.......................           --               --         (68,676)             --                --
           Advances due from officer.......      (30,000)          33,560          30,000              --           (10,000)    
           Prepaid expenses................       (9,553)         (10,800)           (400)         10,400            (9,953)    
           Accounts payable................        4,894          254,003         258,749         (28,859)          230,038
           Accrued liabilities.............       40,624           88,038         (31,479)        124,425           295,260
           Deferred revenue................           --            4,125           8,151          (1,630)            2,495
                                               ---------      -----------     -----------     -----------     -------------
               Net cash used by operating
                 activities:...............     (693,309)      (2,023,558)     (1,216,299)       (928,012)       (3,920,027)    
                                               ---------      -----------     -----------     -----------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment.....      (67,674)        (180,668)       (168,827)        (13,695)         (262,037)    
                                               ---------      -----------     -----------     -----------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt............           --               --              --       1,700,000         1,700,000
   Proceeds from short term debt, officer
     and director..........................           --          623,000              --              --           623,000
   Proceeds from advances due to officer
     and director..........................       30,000          212,000           5,000              --           242,000
   Repayment of advances due to officer and
     director..............................           --          (30,000)             --        (212,000)         (242,000)    
   Net proceeds from issuance of common
     stock.................................      972,000        1,193,808       1,213,399              --         2,447,256
   Deferred costs..........................           --          (39,967)             --        (377,806)         (417,773)    
                                               ---------      -----------     -----------     -----------     -------------
       Net cash provided by financing
         activities........................    1,002,000        1,958,841       1,218,399       1,110,194         4,352,483
                                               ---------      -----------     -----------     -----------     -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS....      241,017         (245,385)       (166,727)        168,487           170,419
CASH AND CASH EQUIVALENTS, BEGINNING OF
 PERIOD....................................        6,300          247,317         247,317           1,932                --
                                               ---------      -----------     -----------     -----------     -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD...    $ 247,317       $    1,932        $ 80,590     $   170,419     $     170,419
                                               =========      ===========     ===========     ===========     =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
 INFORMATION:
   Cash paid for interest..................    $      --        $   4,884        $     --     $     2,238     $          --
                                               =========      ===========     ===========     ===========     =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
 FINANCING ACTIVITIES:
   Common Stock totaling $2,000 was issued in 1995 in settlement of a loan from an officer.
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                       F-6
<PAGE>   59
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

                     NOTES TO COMBINED FINANCIAL STATEMENTS

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
A.  THE COMPANY AND GOING CONCERN CONSIDERATIONS
 
     DIDAX ON-LINE, L.C. AND AFFILIATE (The "Company") is presented in the
accompanying combined financial statements and include the accounts of DIDAX
ON-LINE, L.C. ("DIDAX ON-LINE"), a Virginia limited liability company
incorporated in Virginia on January 12, 1995, and DIDAX, INC., an S-Corporation
("DIDAX, Inc.") incorporated on May 12, 1993 in Virginia. DIDAX ON-LINE has a
finite life and, accordingly, will cease to exist no later than January 2020.
The assets and liabilities of DIDAX ON-LINE were previously held by DIDAX, Inc.
The net assets of DIDAX, Inc. were contributed to DIDAX ON-LINE in exchange for
366,193 membership units in DIDAX ON-LINE on January 12, 1995. The Company's
business includes the development of computer communications and information
services specifically designed to meet the needs of Christian users of the
Internet and World Wide Web.
 
     The members of DIDAX ON-LINE and the stockholders of DIDAX, Inc. voted to
merge into DIDAX INC., a Delaware corporation ("DIDAX"). Stockholders' Equity
has been restated to give retroactive recognition of the merger for all periods
presented by reclassifying from membership units to common stock and additional
paid in capital for the exchange of units for shares in DIDAX. In addition, all
references to number of shares, per share amounts, stock option data, and market
prices of Common Stock have been restated to reflect the merger effective April
11, 1997. See Note K.
 
     The Company has incurred significant losses from operations of $2,464,904
and $706,564 during the years ended December 31, 1996 and 1995, respectively and
$1,323,386 and $1,408,391, during the six months ended June 30, 1997 and 1996,
respectively (unaudited), and an accumulated deficit that raise substantial
doubt about its ability to continue as a going concern. The Company has required
substantial funding through equity and debt financing since its inception to
fund its product development and marketing efforts. Management has historically
been successful in obtaining loans from its principal members and stockholders,
as well as outside financing to meet obligations and fund working capital
requirements. The Company recently closed on an offering of junior convertible
subordinated notes of $1,700,000, as bridge financing, as referred to in Note E.
On November 8, 1996, the Company executed a letter of intent, modified on
February 20, 1997, for a proposed initial public offering ("IPO") and the filing
of a registration statement on Form SB-2 with the Securities and Exchange
Commission. The Company will offer 2,000,000 shares of DIDAX common stock at a
price per share estimated to be in the range of $5.00 to $7.00. The anticipated
proceeds from this offering would be used to fund continued product development
and marketing, repay outstanding debt, fund working capital and facilitate
expansion of the Company's business. If the Company's proposed IPO is
consummated on the currently expected time schedule and generates the
anticipated proceeds, or if the Company is successful in completing comparable
fund raising activities on a similar time schedule, management believes that the
Company will continue as a going concern.
 
     The Company intends to increase its level of activities following the
closing of the proposed IPO proceeds, and will make significant expenditures in
connection with marketing and product development activities. The Company
anticipates that losses will continue for the foreseeable future and until such
time as the Company is able to build an effective marketing and sales
organization, and achieve market acceptance of its products and services. There
can be no assurance that the Company will be able to successfully implement its
marketing strategy, generate significant revenues or achieve profitable
operations. Should the IPO not be successfully completed, the Company will
pursue other debt and equity financing alternatives.
 
                                       F-7
<PAGE>   60
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
B.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Basis of presentation -- The accompanying combined financial statements
include the accounts of DIDAX ON-LINE, L.C. and DIDAX, INC., for years ended
1996 and 1995, and the six month period ended June 30, 1996, all of which are
under common control. Intercompany transactions and balances have been
eliminated in combination. The six month period ended June 30, 1997 reflects the
accounts of DIDAX INC. pursuant to the merger of DIDAX ON-LINE L.C. and DIDAX,
Inc. effective April 11, 1997.
 
     Basis of accounting -- The Company's principal activities to date have been
planning and organization, initiating product development projects, conducting
market research and securing adequate financing for the development of its
products and marketing to potential customers. Accordingly, the Company's
financial statements are presented as those of a development stage enterprise,
as prescribed by Statement of Financial Accounting Standards ("SFAS") No. 7,
"Accounting and Reporting by Development Stage Enterprises."
 
     Use of estimates -- Management uses estimates and assumptions in preparing
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from the estimates
that were used.
 
     Cash equivalents -- Cash and cash equivalents include cash and investments
with maturities of three months or less.
 
     Depreciation and amortization -- Property and equipment are stated at cost.
Depreciation is determined using the straight-line method over estimated useful
lives ranging from three to seven years. Leasehold improvements are amortized
over the life of the related lease.
 
     Revenue recognition -- Revenue is principally derived from customer
contracts for various Internet services, including consulting and web site
development and is recognized as earned on a percentage of completion method in
accordance with the provisions of the individual customer contracts. The Company
also offers semi-annual subscriptions to its customers for Internet access.
Advance payments for these services are deferred and recognized ratably over the
period that such access is provided.
 
     Net loss per common share -- Net loss per common share is based on the
weighted average number of common shares and dilutive common share equivalents
outstanding during the periods presented. Pursuant to Securities and Exchange
Commission requirements, common stock issued and options and warrants to
purchase shares of common stock granted by the Company during the twelve months
preceding the initial filing date of the Registration Statement have been
included in the calculation of weighted average membership units and membership
unit equivalents outstanding as if they were outstanding for all periods
presented. Options and warrants issued by the Company prior to the
aforementioned twelve-month period have not been included in the calculation
because the effects of such items were anti-dilutive.
 
     Stock-based compensation -- In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation",
which encourages companies to recognize expense for stock-based awards based on
their estimated value on the date of grant. SFAS No. 123 is effective beginning
with the year ending December 31, 1996. SFAS No. 123 permits companies to
account for stock based compensation based on provisions prescribed in SFAS No.
123, or based on the authoritative guidance in Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees." The
Company has elected to continue to account for its stock based compensation in
accordance with APB 25 which uses the intrinsic value method, however, as
required by SFAS No. 123, the Company has disclosed the
 
                                       F-8
<PAGE>   61
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
B.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

pro forma impact on the financial statements assuming the measurement provisions
of SFAS No. 123 had been adopted. See Note J. The Company does account for all
other issuances of equity instruments in accordance with SFAS No. 123.
 
     Deferred Costs -- Deferred costs at December 31, 1996 consisted of legal,
accounting and other expenses associated with (1) the August 16, 1996 private
placement of 9.75% junior subordinated notes, which are being amortized using
the straight-line method over the term of the notes, see Note D; (2) the
December 3, 1996 private placement of units of junior convertible subordinated
notes which are being amortized using the straight-line method over the term of
the notes, see Note E; and (3) specific incremental costs directly attributable
to the planned IPO, which will be charged against the gross proceeds of the
offering, see Notes A and K. In the event the offering is not completed, the
costs will be charged to expense at that time. During the six months ended June
30, 1997, the Company incurred $140,436 and $237,971 of additional legal,
accounting and underwriting costs in connection with the December 3, 1996
private placement mentioned above and the planned IPO, respectively.
 
     Income Taxes -- DIDAX ON-LINE is classified as a limited partnership for
federal and state income tax purposes. Accordingly, no provision for income
taxes has been made in the accompanying combined financial statements, as all
items of tax attributes pass through pro-rata to each respective member in
accordance with the Operating Agreement. DIDAX, Inc. has elected to be treated
as an S-corporation for federal and state income tax purposes and accordingly,
items of income, deduction, expense and credits pass through pro-rata directly
to the stockholders to be reported on their individual income tax returns.
DIDAX, a C-corporation, accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
 
     Fair value of financial instruments -- The carrying value of cash and cash
equivalents, accounts receivable and notes payable approximate fair value
because of the relatively short maturity of these instruments.
 
     Interim financial information -- The financial statements of the Company as
of June 30, 1997 and 1996 are unaudited and include, in the opinion of
management, all adjustments consisting of only normal recurring adjustments,
which the Company considers necessary to present fairly the financial position,
results of operations and cash flows of the Company for those interim periods.
The operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the full year.
 
                                       F-9
<PAGE>   62
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
C.  PROPERTY AND EQUIPMENT
 
     Property and equipment, at cost, consisted of the following:
<TABLE>
<CAPTION>
                                                                                     JUNE 30,
                                                              1995        1996         1997
                                                             -------    --------    -----------
                                                                                    (UNAUDITED)
    <S>                                                      <C>        <C>         <C>
    Computer equipment....................................   $59,049    $219,169     $ 216,171
    Furniture and equipment...............................     8,625      26,873        35,173
    Leasehold improvements................................        --       2,300         2,300
                                                             -------    --------    -----------
                                                              67,674     248,342       253,644
         Less: accumulated depreciation and
           amortization...................................    (7,290)    (81,419)     (110,105)
                                                             -------    --------    -----------
                                                             $60,384    $166,923     $ 143,539
                                                             =======    ========     =========
</TABLE>
 
D.  SHORT-TERM DEBT, OFFICER AND DIRECTOR
 
     Short-term debt to an officer and a director consists of the following:
<TABLE>
<CAPTION>
                                                                                       JUNE 30,
                                                                            1996         1997
                                                                          --------    -----------
                                                                                      (UNAUDITED)
<S>                                                                       <C>         <C>
Junior subordinated note payable, original face value of $125,000, with
  detachable warrants earned over the term of the note with original
  discounted amount of $24,389 for estimated value of warrants, dated
  July 10, 1996, to an officer and member of the Company, originally
  due January 10, 1997 and extended to July 10, 1997 or earlier, at the
  Company's discretion, interest accrued at 9.75% from the date amounts
  were paid to the Company.............................................   $112,805     $ 125,000
Junior subordinated note payable, original face value of $76,000, with
  detachable warrants earned over the term of the note with original
  discounted amount of $16,055 for estimated value of warrants, dated
  September 26, 1996, to an officer and member of the Company,
  originally due February 8, 1997 and extended to September 26, 1997 or
  earlier, at the Company's discretion, interest accrued at 9.75% from
  the date amounts were paid to the Company............................     65,297        73,324
                                                                          --------    -----------
     Short-term debt to an officer.....................................   $178,102     $ 198,324
</TABLE>
 
                                      F-10
<PAGE>   63
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
D.  SHORT-TERM DEBT, OFFICER AND DIRECTOR -- (CONTINUED)
<TABLE>
<CAPTION>
                                                                                       JUNE 30,
                                                                            1996         1997
                                                                          --------    -----------
                                                                                      (UNAUDITED)
<S>                                                                       <C>         <C>
Junior subordinated note payable, original face value of $125,000, with
  detachable warrants earned over the term of the note with original
  discounted amount of $24,634 for estimated value of warrants, dated
  July 30, 1996, to a director and member of the Company, originally
  due January 30, 1997, and extended to July 30, 1997 or earlier, at
  the Company's discretion, interest accrued at 9.75% from the date
  amounts were paid to the Company.....................................   $112,683     $ 125,000
Junior subordinated note payable, original face value of $297,000, with
  detachable warrants earned over the term of the note with original
  discounted amount of $46,109 for estimated value of warrants, dated
  October 30, 1996, to a director and member of the Company, originally
  due July 30, 1997 or earlier, at the Company's discretion, interest
  accrued at 9.75% from the date of amounts were paid to the Company...    262,418       285,473
                                                                          --------    -----------
     Short-term debt to a director.....................................    375,101       410,473
                                                                          --------    -----------
          Total short-term debt, officer and director..................   $553,203     $ 608,797
                                                                          ========     =========
</TABLE>
 
     A director and an officer of the Company have purchased junior subordinated
notes in conjunction with the Company's private placement offering dated August
16, 1996 in the aggregate face value amount of $623,000. This total offering was
for $3,000,000 in junior subordinated debt. They agreed for the Company to close
the offering at $623,000 even though the total $3,000,000 was not obtained. As
part of the purchase of these junior subordinated debt securities, the purchaser
also earns warrants for the right to purchase common shares of the Company at
$4.00 per share, exercisable after July 1998, or at the time of an IPO,
whichever occurs sooner. The warrants are earned over the period the debt is
outstanding. For their participation in this private placement, they have earned
through December 31, 1996 and June 30, 1997, 61,209 and 133,751 warrants,
respectively.
 
     The maximum warrants that could be earned by the officer and director
through the maturities of the debt is 150,379 warrants. The portion of the
proceeds of the above debt securities allocated to these warrants, as estimated
by the Company, is $111,187 and is included in stockholders' equity in the
accompanying financial statement. The Company recognized interest expense of
$41,390 and $55,594 for the year ended December 31, 1996 and for the six months
ended June 30, 1997 respectively, related to the amortization of this discount.
See Note J. Included in accrued expenses is interest payable, at an effective
rate of 17.8%, to the above officer and director in the amount of $29,972 and
$54,647 at December 31, 1996 and June 30, 1997, respectively, relating to the
notes payable. The Company will also recognize approximately $11,500 of interest
expense relating to the notes payable and $14,000 of amortization of the
discount accrued for the period June 30, 1997 to the time the notes are repaid
at the expected closing of the proposed IPO.
 
                                      F-11
<PAGE>   64
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
E.  LONG-TERM DEBT
 
     Long-term debt consists of the following:
 
<TABLE>
<CAPTION>
                                                                                JUNE 30,
                                                                                  1997
                                                                               -----------
                                                                               (UNAUDITED)
    <S>                                                                        <C>
    Junior convertible subordinated notes...................................   $1,400,000
    Junior convertible subordinated notes -- director.......................      300,000
                                                                               ----------
                                                                               $1,700,000
                                                                               ==========
</TABLE>
 
   
     On January 9, 1997, the Company closed on the minimum portion of a private
placement offering dated December 3, 1996, placed by the underwriter of the
Company's proposed IPO, for units consisting of junior convertible subordinated
notes with total gross proceeds to the Company from this offering of $750,000.
The maximum portion of the offering for an additional $750,000 was
oversubscribed and the Company closed this offering on February 21, 1997, with
$950,000 in additional gross proceeds. In accordance with this offering,
unregistered shares will be issued at no additional cost to each note holder at
the time of an IPO by dividing the principal of the holder's note by the IPO
price. Thus, since $1,700,000 of notes were placed and assuming an IPO price of
$5.00 per share, 340,000 shares would be issued at the closing of an IPO and the
$1,700,000 returned to the investor from the proceeds of the IPO. The issuance
of the 340,000 shares will be recognized at the closing of the IPO, as interest
expense at the fair value of the shares issued which is $1,700,000 representing
an effective rate of interest of approximately 150%.
    
 
     If an IPO is not effected by the third anniversary of the investor
subscription agreement, then the notes shall mature and the holders have the
option of converting the notes to shares at a price of $4.00 per share, implying
the issuance of 425,000 shares if $1,700,000 in notes are converted, or
receiving repayment of the notes in four quarterly payments commencing one day
after the three year anniversary of their subscription agreement. The maturity
dates of the notes range from January 2000 through February 2000. These junior
convertible subordinated notes bear no interest. The underwriter received fees
aggregating $119,000 for this transaction.
 
F.  SERVICES PROVIDED WITHOUT CHARGE
 
     As part of an effort to obtain a large and reputable Christian organization
as a key customer, the Company provided $211,000, $250,000, and $48,000 worth of
products and services to Promise Keepers, Inc., at no charge, for the years
ending December 31, 1996 and 1995 and the six months ending June 30, 1997,
respectively. It is anticipated that further services provided without charge of
approximately $50,000 will continue through the first six months of 1997. This
work was performed to demonstrate the Company's capabilities and to develop a
growing relationship. Another incentive to attract this customer was to commit
50,000 shares of the Company to them as a donation. The Company will recognize
the donation of these shares as marketing expense at the fair value of the
shares at the time of the donation. See Notes H and J. In 1996, a long term
contract was signed with this major customer to provide Internet and internal
communications systems and services.
 
                                      F-12
<PAGE>   65
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
G.  RELATED PARTY TRANSACTIONS
 
     At December 31, 1996 and 1995, the Company had advances due from an officer
and member of the Company totaling $10,000 and $43,560, respectively. At June
30, 1997, advances due from this officer and stockholders of the Company totaled
$10,000. These advances are non-interest bearing and are being repaid under
informal arrangements with no fixed due date.
 
     In 1995, the Company borrowed $30,000 from an officer and member of the
Company under informal arrangements and repaid it in 1996. In 1996, the Company
borrowed $623,000 from an officer and a director. See Note D.
 
     Also, an officer and a director advanced $212,000 to the Company to cover
operating costs for certain periods during 1996. These advances bear interest of
9.75% and were repaid from the proceeds from the most recent private placement
offering closed in February 1997. See Note K. Included in accrued liabilities at
December 31, 1996, is $1,569 in interest due to the officer and director.
 
     On January 9, 1997, the Company borrowed $300,000 from a director of the
Company as part of the December 3, 1997 private placement offering of the junior
convertible subordinated notes. See Note E.
 
H.  COMMITMENTS AND CONTINGENCIES
 
  Operating Lease Obligations
 
     The Company leases office space and certain equipment under non-cancelable
operating leases. The office lease provides for a three-year term, an annual
increase in base rent of 3%, and additional rent representing the Company's
pro-rata share of operating expenses as defined in the lease agreement. The
equipment lease provides for a three-year lease term.
 
     Minimum future lease payments under non-cancelable operating leases are as
follows for each of the next two years ending December 31:
 
<TABLE>
                <S>                                                  <C>
                1997..............................................   $ 70,876
                1998..............................................     55,080
                1999..............................................      3,062
                2000..............................................        766
                                                                     --------
                                                                     $129,784
                                                                     ========
</TABLE>
 
     Rent expense for the years ended December 31, 1996 and 1995 was $63,325 and
$21,981, respectively, and $33,222 for the six months ended June 30, 1997
(unaudited) and is included in general and administrative expenses.
 
  Securities
 
     In April of 1996, the Company became aware that certain prior private
placements closed between December 1994 and April 1996 at a per share price
ranging from $1.66 to $4.00, may be deemed not to have been properly exempted
from registration under federal and/or state law. This may give rise to the
opportunity for certain stockholders and members to exercise rescission rights,
if any, related to their investment in the Company. The Company believes there
may be valid legal defenses to any and/or all such rescission actions, if
initiated. The potential of inadvertent exemption violations was communicated to
the investors concerned in
 
                                      F-13
<PAGE>   66
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
H.  COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

August of 1996. Furthermore, in late December of 1996, each stockholder and
member who might have rescission rights was sent a written request to waive such
rights (if any) to rescission and other remedies in connection with any past
omissions or violations of federal or state securities laws or regulations, and
also to agree not to sue the Company or its directors on the basis of such
rights. Approximately 80% of the members responded with waivers, representing
approximately 89% of the outstanding shares. The value of funds received of
those that have not responded as of June 30, 1997 is approximately $388,000. It
is the Company's expectation (but there can be no assurance) that only a
minority of the investors concerned will elect to exercise their rescission
rights, if indeed any in fact elect so to exercise. Any assertion of rescission
rights will be evaluated at the time made, in light of all the facts and
circumstances. The common stock subject to possible rescission are reflected in
the accompanying balance sheets as "Common Stock Subject to Possible
Rescission."
 
  Other
 
     50,000 common shares have been reserved for donation to the Company's first
customer and ministry partner. See Note F. Before the effective date of the
proposed IPO, 40,000 of these common shares will be donated. The remaining
10,000 common shares will be donated upon completion of several customer tasks
relevant to product promotion.
 
I.  CONCENTRATIONS OF CREDIT RISK
 
     Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents.
The Company maintains its cash accounts in commercial banks located in Virginia.
Cash balances are insured by the Federal Deposit Insurance Corporation ("FDIC")
up to $100,000 per financial institution. At December 31, 1996 and 1995, and
June 30, 1997, there were no uninsured cash balances.
 
     Cash equivalents are maintained in a US government money fund. These cash
equivalents are not insured by the FDIC, but are collateralized by the
underlying assets of the federal government. At December 31, 1996 and 1995, cash
equivalents totaled approximately $200 and $204,000, respectively. At June 30,
1997, cash equivalents totaled approximately $165,000.
 
     During 1996 and for the six months ending June 30, 1997, revenue was
generated from major customers in amounts exceeding 10% of total revenue as
follows:
 
<TABLE>
<CAPTION>
                                                   DECEMBER 31, 1996            JUNE 30, 1997 (UNAUDITED)
                                               -------------------------        -------------------------
                                                                  ACCOUNTS                         ACCOUNTS
                                                                 RECEIVABLE                       RECEIVABLE
                                               REVENUE     %      BALANCE       REVENUE     %      BALANCE
                                               -------    ---     ------        -------    ---     ------
<S>                                            <C>        <C>     <C>           <C>        <C>     <C>
Customer #1.................................   $62,842     35%    $ 2,994       $27,941     15%    $25,615
Customer #2.................................   $58,056     32%    $28,085       $65,593     35%    $16,053
Customer #3.................................   $ --        --%    $  --         $41,857     22%    $10,275
</TABLE>
 
                                      F-14
<PAGE>   67
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
J.  STOCK OPTION PLAN
 
     Since the inception of the Company, various options have been granted by
the Board of Directors to founders, directors, employees, consultants and
ministry partners. These options are pending approval by the stockholders of
DIDAX, pursuant to the adoption of the 1997 Stock Plan, by its Board of
Directors. See Note K. All options are stated in common stock of DIDAX. The
Board of Directors determines the option price (not less than fair market value)
at the date of grant. The objectives of the stock plan are to advance the
interest of DIDAX by providing an opportunity to its selected key employees,
consultants, and minority partners, to purchase shares of DIDAX. By encouraging
stock ownership, DIDAX seeks to attract, retain and motivate key employees,
consultants, and ministry partners. The plan will be administered by the Board
of Directors. The Plan provides for the granting of either qualified or
non-qualified option to purchase an aggregate of up to 2,057,937 shares of
common stock.
 
     At December 31, 1996 and 1995, the Company had outstanding options to sell
936,931 and 152,500 shares of common stock, respectively, and 1,150,456 at June
30, 1997, to various officers and directors of the Company at exercise prices
ranging from $1.50 to $5.00 per share. As of December 31, 1996 and June 30,
1997, options for 204,431 and 265,956 shares are vested, respectively, and
options for 42,000 shares are scheduled to vest during the remaining part of
1997 and 46,000 in 1998. The options expire ten years from the date granted.
 
     At December 31, 1996 and 1995, and June 30, 1997, the Company had
outstanding options to sell 49,500, 24,500 and 90,500 shares of common stock,
respectively, to various outside consultants and a marketing partner at exercise
prices ranging from $1.66 to $5.00 per share. As of December 31, 1996 and June
30, 1997, options for 19,000 and 60,500 were vested. 4,000 options expire five
years from the date granted. All other options expire ten years from the date
granted.
 
     At December 31, 1996 and 1995, the Company granted to employees options for
233,631 and 141,703 shares of common stock, respectively, and 375,026 at June
30, 1997, at exercise prices ranging from $2.00 to $5.00 per share. The grant
prices of $2.00 to $5.00 was determined by the Board of Directors to represent
fair value. As of December 31, 1996 and June 30, 1997, options for 169,444 and
212,679 shares are vested with the remainder scheduled to vest through 1999. The
options expire through 2007.
 
                                      F-15
<PAGE>   68
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
J.  STOCK OPTION PLAN -- (CONTINUED)

     A summary of activity for the period ended June 30, 1997, is as follows:
 
<TABLE>
<CAPTION>
                                                                       OPTIONS OUTSTANDING
                                                                    ------------------------ 
                                                                                   PER UNIT
                                                                    NUMBER OF      EXERCISE
                                                                     SHARES         PRICE
                                                                    ---------    ----------- 
    <S>                                                             <C>          <C>
    Outstanding, January 1, 1995.................................      72,500    $1.50-$1.66
         Options granted.........................................     246,203       $2.00
         Options exercised.......................................       --            --
         Options expired.........................................       --            --
    Outstanding, December 31, 1995...............................     318,703    $1.50-$2.00
         Options granted.........................................     941,759    $3.00-$5.00
         Options exercised.......................................       --            --
         Options expired.........................................      40,400    $2.00-$5.00
                                                                    ---------    ----------- 
    Outstanding, December 31, 1996...............................   1,220,062    $1.50-$5.00
         Options granted.........................................     395,920       $5.00
         Options exercised.......................................       --            --
         Options expired.........................................       --            --
                                                                    ---------    ----------- 
    Outstanding, June 30, 1997 (unaudited).......................   1,615,982    $1.50-$5.00
                                                                    =========    ===========
</TABLE>
 
     The Company accounts for the fair value of its options granted to employees
in accordance with APB 25. Accordingly, no compensation expense has been
recognized for the options granted, since the options are granted, at the
discretion of the Board of Directors, at an option price per share not less than
fair market value, as determined by the Board of Directors, at the date of
grant. Had compensation expense been determined based on the fair value of the
options at the grant dates consistent with the method of accounting under SFAS
123, the Company's net loss and net loss per share would have been increased to
the proforma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                                                       FOR THE SIX
                                                                                       MONTHS ENDED
                                                                                         JUNE 30,
                                                             1995          1996            1997
                                                           ---------    -----------    ------------
                                                                                       (UNAUDITED)
<S>                                                        <C>          <C>            <C>
Net loss
     As reported........................................   $(706,564)   $(2,464,904)   $(1,323,386) 
     Proforma...........................................   $(879,320)   $(2,715,065)   $(1,393,248) 
Net loss per common share
     As reported........................................   $  (1.58)    $    (4.35)    $     (2.15)   
     Proforma...........................................   $  (1.96)    $    (4.79)    $     (2.26)   
</TABLE>
 
     The fair value of each option is estimated on the date of grant using a
type of Black-Scholes option-pricing model with the following assumptions used
for grants during the years ended December 31, 1996 and 1995: dividend yield of
0%, volatility of effectively 0%, risk-free interest rate based on the 10-year
bond Treasury yield at the date of grant, and expected term of 10 years. SFAS
No. 123 provides for the use of a 0%
 
                                      F-16
<PAGE>   69
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
J.  STOCK OPTION PLAN -- (CONTINUED)

volatility assumption for grants made prior to becoming a public company. All
options granted to employees have been granted at an exercise price of $1.50 to
$5.00 per share.
 
     During 1995, the Company reserved options for 85,000 common shares to be
provided to marketing partners at management's discretion. These will be
distributed based on identifiable contract milestones at a contract specified
price not less than market value at the time of contract consummation. To date,
25,000 of these options have been granted, all at $4.00 per share and are
included in the 90,500 option shares noted above.
 
     During August 1996, the Company issued a private placement to secure
$3,000,000 in junior subordinated debt coupled with 375,000 warrants to purchase
common shares after July, 1998 at $4.00 per share. This offering was closed with
$623,000 in notes and with 61,209 and 133,751 warrants earned and granted as of
December 31, 1996 and June 30, 1997, respectively. See Note D. Since the only
participants in this offering were an officer and a director of the Company, the
warrants earned pursuant to this offering have been adopted in the 1997 Stock
Option Plan, as approved by the Board of Directors of DIDAX, and therefore are
referred to as options by the Company.
 
K.  SUBSEQUENT EVENTS (UNAUDITED)
 
  Proposed Public Offering
 
     On November 8, 1996, the Company executed a letter of intent for a proposed
IPO. As of February 20, 1997, DIDAX and the underwriter have agreed to modify
the offer such that DIDAX will offer 2,000,000 shares of common stock at a
currently anticipated price of $5.00 per share and 2,000,000 purchase warrants
at a currently anticipated price of $.125 per purchase warrant. The shares and
the purchase warrants are separately transferable at any time after the date of
the IPO.
 
     Each purchase warrant would entitle the registered holder thereof to
purchase, at any time during the five-year period commencing on the date of the
IPO, one share of the common stock at a price of $5.75 per share, subject to
adjustment under certain circumstances. The purchase warrants would not be
exercisable unless, at the time of exercise, DIDAX had a current prospectus
covering the shares of common stock issuable upon exercise of the purchase
warrants and such shares had been registered, qualified or deemed to be exempt
under the securities laws of the states of residence of the exercising holders
of the purchase warrants. Commencing after the date of the IPO, the purchase
warrants would be subject to redemption by DIDAX, at the option of DIDAX, at
$0.25 per purchase warrant, upon 30 days prior written notice, if the closing
bid or sale price, as reported on NASDAQ, a national or regional exchange, or
the National Association of Securities Dealers, Inc.'s OTC Bulletin Board, as
applicable, of the shares of the Common Stock for 30 consecutive trading days
ending within ten days of the notice of redemption of the purchase warrants
averaged in excess of $10.00 per share, subject to adjustment.
 
   
     Prior to the first anniversary of the date of the IPO, the purchase
warrants would not be redeemable by DIDAX without the written consent of the
underwriter. All beneficial owners of DIDAX's securities as of the date of the
IPO would be subject to an 18-month irrevocable lock-up agreement whereby they
have agreed not to sell any shares of common stock in the public market without
the prior written consent of the Underwriter.
    
 
     In addition, DIDAX is registering 400,000 shares for the purpose of
underlying representative warrants, to be issued to the underwriter or persons
related to the underwriter, and which consist of the right to purchase
 
                                      F-17
<PAGE>   70
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)

             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
K.  SUBSEQUENT EVENTS (UNAUDITED) -- (CONTINUED)

200,000 shares of common stock at an exercise price of $8.25 per share (or the
equivalent of 165% of the anticipated public offering price,) and warrants
priced at $.20625 per warrant (or the equivalent of 165% of the anticipated
public offering price), to purchase 200,000 shares of common stock, for the
right to purchase 200,000 shares of common stock at $8.25 per share. The
representative warrants cannot be transferred, sold, assigned or otherwise
disposed of during the first twelve (12) months following the date of the
prospectus except to officers, directors and/or partners of the representative
and their selected dealers; by will; or by operation of law, and may be
exercised, in whole or in part, at any time, and from time to time, during the
five (5) year period following the date of the prospectus.
 
  Merger with DIDAX
 
     The stockholders of DIDAX, INC. and the members of DIDAX ON-LINE voted on
December 30, 1996 to reorganize their operations into DIDAX. Under this
reorganization, the members of DIDAX ON-LINE have exchanged their units in DIDAX
ON-LINE for 794,183 shares in DIDAX. In addition, the stockholders of DIDAX,
INC., have exchanged their shares for 366,193 shares in DIDAX. These exchanges
of units and shares were done pursuant to a statutory merger of the entities.
Under the terms of the Merger, DIDAX, among other things, issued a total of
1,160,376 shares of its common stock, representing 100% of the outstanding units
of DIDAX ON-LINE prior to the merger. The Board of Directors of DIDAX, approved
the two separate proposed plan and agreements of merger on April 9, 1997. The
merger plan was received and filed on April 10, 1997 in the State of Delaware
and was also approved by the State of Virginia on April 11, 1997. The merger has
been consummated as of April 11, 1997 and the Company will commence business
under DIDAX.
 
     In February, 1997, the Incorporators of DIDAX authorized 8,500,000 shares,
at $.01 par value, necessary to underlie the total complement of common stock
and purchase warrants to be offered in the proposed IPO. In addition, the
Incorporators authorized 268,400 additional shares of common stock to underlie
additional options reserved for key employees and for future compensation to
members of the Board of Directors. On April 9, 1997, the Board of Directors
increased the authorized shares to 20,000,000 shares. The Board of Directors
also adopted, subject to approval of the Stockholders, the 1997 Stock Option
Plan, which covers 2,057,937 options inclusive of the 268,400 shares mentioned
above and any and all options or warrants granted in prior years by the Company.
See Note J.
 
     Certain proceeds from the private placement offering dated December 3,
1996, were used to repay advances to the Company made by an officer and a
director in the aggregate amount of $212,000, plus interest of $2,238. See Note
G. The remainder was used for, among other things, working capital in the
Company.
 
     In April of 1997, as discussed in Note F and Note H, the Company donated
40,000 common shares out of 50,000 common shares committed, to their first
customer and ministry partner as consistent with the contract with that
customer. This was reflected as a marketing expense in April, 1997 at a fair
value of $200,000, equivalent to $5.00 per common share. The remaining 10,000
common shares will be donated upon completion of tasks relevant to product
promotion. In addition, the Company also issued 2,212 common shares as payment
in lieu of compensation to a consultant for services rendered. In recognition of
this event, the Company posted a $11,062 marketing expense, which is the fair
value of these shares at $5.00 per share.
 
                                      F-18
<PAGE>   71
 
                                   DIDAX INC.
                  (FORMERLY DIDAX ON-LINE, L.C. AND AFFILIATE)
                         (DEVELOPMENT STAGE COMPANIES)
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
       (INFORMATION WITH RESPECT TO JUNE 30, 1997 AND FOR THE SIX MONTHS
                   ENDED JUNE 30, 1997 AND 1996 IS UNAUDITED)
 
K.  SUBSEQUENT EVENTS (UNAUDITED) -- (CONTINUED)
   
     In July of 1997, the maturity dates on the short-term debt, officer and
director were extended to September 26, 1997. This extension increases the
number of warrants committed in this arrangement by 22,259 shares to 172,639 and
increases the liability for interest expense by approximately $12,000.
    
 
     In August of 1997, the Company arranged for short term debt financing with
members of the Board of Directors in the amount of $200,000, payable in sixty
days, or at the closing of the IPO, whichever is sooner, at an annual interest
rate of 11.5%.
 
     Note F indicates that services provided without charge of approximately
$50,000 will continue through the first six months of 1997. The actual value of
these services provided at no charge was $48,000. Hereinafter all services
rendered to this customer will be charged at contracted rates.
 
   
     In September 1997, the Company and the Underwriter agreed to amend the size
of the initial public offering of the Company's securities by increasing the
number of Purchase Warrants to 2,500,000 and the price of the Purchase Warrants
to $.1875. This also resulted in the Purchase Warrants overallotment being
increased from 300,000 Purchase Warrants to 375,000 Purchase Warrants. In
addition, the Company has adjusted the registration of shares for the purpose of
underlying underwriter warrants by 40,000 shares as the Warrant Underwriter
Warrants have been increased from 200,000 to 250,000 and the price of the
Warrant Underwriter Warrants has been increased from $.20625 to $.309375, and
the Underwriter Warrants have been decreased from 200,000 to 190,000.
    
 
   
     By September 1997, the Company had received all lock-up agreements from
beneficial owners of the Company's securities. The number of securities amounts
to 3,310,108 shares of common stock issued and outstanding before giving the
effect of an initial public offering, but consisting of 1,202,588 shares of
restricted common stock, 1,767,520 options to purchase common stock at prices
ranging from $1.50 to $5.00 per share, inclusive of 172,639 warrants pursuant to
the Officer Notes granted at the closing of the initial public offering, and
340,000 shares of common stock related to the Junior Notes. This resulted in the
holders of all of the restricted securities (other than the holders of 27,000
shares of common stock) agreeing not to sell, transfer or otherwise dispose of
any shares of common stock for a period of 6 months (65,750 shares), 12 months
(51,550 shares), 18 months (2,825,808 shares including those related to the
Officer Notes) and 24 months (340,000 shares related to the Junior Notes).
    
 
L.  INCOME TAXES (UNAUDITED)
 
     Prior to April 11, 1997, DIDAX ON-LINE, L.C. and DIDAX, Inc. had no
responsibility for corporate income taxes since they were considered a
partnership and S Corporation, respectively, for both federal and state tax
purposes. Therefore, no income tax provision (benefit) was included in the
combined statements of operations for calendar years 1995 and 1996. The combined
statement of operations for the six months ended June 30, 1997 does not contain
any income tax provision (benefit) since the loss generated during the period
April 11, 1997 through June 30, 1997 may never be utilized and a valuation
allowance reducing the gross tax benefit to zero would be recorded in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
 
                                      F-19
<PAGE>   72
 
                     [COPY OF COMPANY'S WEBSITE HOMEPAGE.]
<PAGE>   73
 
================================================================================
 
  NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH
PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY
CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
                               ------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                        PAGE
                                        -----
<S>                                     <C>
Prospectus Summary....................   3
Risk Factors..........................   6
Use of Proceeds.......................  17
Capitalization........................  19
Dilution..............................  20
Management's Discussion and Analysis
  or Plan of Operation................  21
Proposed Business.....................  26
Management............................  35
Principal Stockholders................  40
Description of Securities.............  42
Underwriting..........................  46
Legal Proceedings.....................  48
Legal Matters.........................  48
Experts...............................  48
Additional Information................  49
Financial Statements..................  F-1
</TABLE>
 
                               ------------------
 
UNTIL             , 1997 (25 DAYS AFTER THE FIRST DATE ON WHICH THE REGISTERED
SECURITIES WERE BONA FIDE OFFERED TO THE PUBLIC), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH RESPECT TO THEIR
SOLICITATION OF SUBSCRIPTIONS TO PURCHASE THE SECURITIES OFFERED HEREBY.
 
================================================================================
================================================================================


                                   DIDAX INC.
 
                        2,000,000 SHARES OF COMMON STOCK
 
   
                              2,500,000 REDEEMABLE
    
                         COMMON STOCK PURCHASE WARRANTS
                              --------------------
                                   PROSPECTUS
                              --------------------
 
                        [BARRON CHASE SECURITIES LOGO]
                                      
                             7700 WEST CAMINO REAL
                           BOCA RATON, FLORIDA 33433
                                 (561) 347-1200
 
                                ATLANTA, GEORGIA
                           BEVERLY HILLS, CALIFORNIA
                             BOSTON, MASSACHUSETTS
                               CHICAGO, ILLINOIS
                              CLEARWATER, FLORIDA
                                DENVER, COLORADO
                            EAST BOCA RATON, FLORIDA
                               EDISON, NEW JERSEY
                            EUREKA SPRINGS, ARKANSAS
                            FORT LAUDERDALE, FLORIDA
                              HOOPESTON, ILLINOIS
                              LA JOLLA, CALIFORNIA
                             MINNEAPOLIS, MINNESOTA
                                NAPLES, FLORIDA
                               NEW YORK, NEW YORK
                                ORLANDO, FLORIDA
                               SARASOTA, FLORIDA
                                 TAMPA, FLORIDA
                                TULSA, OKLAHOMA
                                        , 1997
 
================================================================================

<PAGE>   74
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Articles 10 and 11 of the Company's Certificate of Incorporation, as
amended, and Article XI of the By-laws of the Company, as amended, contain the
following provisions with respect to indemnifying officers and directors of the
Company:
 
                          CERTIFICATE OF INCORPORATION
 
     Article 10 To the fullest extent permitted by Delaware statutory or
decisional law, as amended or interpreted, no director of this Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. This Article 10 does not affect the
availability of equitable remedies for breach of fiduciary duties.
 
     Article 11 The Corporation shall, to the fullest extent legally
permissible, indemnify (fully or, if not possible, partially) each of its
directors and officers, and persons who serve at its request as directors or
officers of another organization in which it owns shares or of which it is a
creditor, against all liabilities (including expenses) imposed upon or
reasonably incurred by him in connection with any action, suit or other
proceeding, civil or criminal (including investigations, audits, the activities
of, or service upon special committees of the board) in which he may be involved
or with which he may be threatened, while in office or thereafter, by reason of
his acts or omissions as such director or officer, unless in any proceeding he
shall be finally adjudged not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Corporation; provided,
however, that such indemnification shall not cover liabilities in connection
with any matter which shall be disposed of through a compromise payment by such
director or officer, pursuant to a consent decree or otherwise, unless such
compromise shall be approved as in the best interest of the Corporation, after
notice that it involved such indemnification, (a) by a vote of the directors in
which no interested director participates, or (b) by a vote or the written
approval of the holders of a majority of the outstanding stock at the time
having the right to vote for directors, not counting as outstanding any stock
owned by any interested director or officer. Such indemnification may include
payment by the Corporation of expenses incurred in defending a civil or criminal
action or proceeding in advance of the final disposition of such action or
proceeding, upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be adjudicated to be not entitled to indemnification
under these provisions. The rights of indemnification hereby provided shall not
be exclusive of or affect other rights to which any director or officer may be
entitled. As used in this paragraph, the terms "director" and "officer" include
their respective heirs, executors and administrators, and an "interested"
director or officer is one against whom as such the proceedings in question or
another proceeding on the same or similar grounds is then pending.
 
                                     BYLAWS
 
     Indemnification of employees and other agents of the Corporation (including
persons who serve at its request as employees or other agents of another
organization in which it owns shares or of which it is a creditor) may be
provided by the Corporation to whatever extent shall be authorized by the
directors before or after the occurrence of any event as to or in consequence of
which indemnification may be sought. Any indemnification to which a person is
entitled under these provisions may be provided although the person to be
indemnified is no longer a director, officer, employee or agent of the
Corporation or of such other organization. It is the intent of these provisions
to indemnify director and officers to the fullest extent not specifically
prohibited by law, including indemnification against claims brought
derivatively, in the name of the Corporation, and that such directors and
officers need not exhaust any other remedies.
 
                                      II-1
<PAGE>   75
 
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth various expenses, other than the
underwriting discount, which will be incurred in connection with the Offering.
Other than the SEC Registration Fee, NASD filing fee and Non-Accountable Expense
Allowance, amounts set forth below are estimates:
 
   
<TABLE>
        <S>                                                                 <C>
        SEC registration fee..............................................  $  9,845
        NASD filing fee...................................................     4,000
        NASDAQ listing fee................................................    10,000
        Transfer and warrant agent fee....................................     3,500
        Printing and engraving expenses...................................   150,000
        Legal fees and expenses...........................................   117,000
        Accounting fees and expenses......................................   105,000
        Blue Sky fees and expenses........................................    39,403
        Non-accountable expense allowance.................................  $314,062
                                                                            --------
                  TOTAL...................................................   752,810 *
                                                                            ========
</TABLE>
    
 
- ---------------
 
   
* Assumes no exercise of the Over-Allotment Option or the payment of the
financial advisor fee to the Underwriter.
    
 
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
 
     The following sets forth information relating to all securities of the
Registrant sold by it within the past three years without registration under the
Securities Act.
 
     The following shares of Common Stock were sold by the Company during the
past three years without registration under the Securities Act. There were no
underwriting discounts or commissions paid in connection with the issuance of
any of said securities.
 
     The sales of the securities described in the following table were made in
reliance upon Regulation D, Rule 506 and Section 4(2) of the Securities Act,
which both provide for exemption for transactions not involving a public
offering. With regard to the Company's reliance upon this exemption from
registration, certain inquiries were made by the Company that such sales
qualified for such exemption. In particular, all investors certified to the
Company that they were accredited, they executed investment letters, and the
securities bear a legend accordingly.
 
                                      II-2
<PAGE>   76
 
ITEM 26
 
<TABLE>
<CAPTION>
     DATE                         PRICE      NUMBER OF SHARES
FUNDS RECEIVED      AMOUNT      PER SHARE     OF COMMON STOCK
- -------------------------------------------------------------
<S>               <C>           <C>          <C>
   04/15/96       $    9,999    $3.0000              3,333
   03/20/96       $   20,000    $4.0000              5,000
   03/15/96       $   25,000    $4.0000              6,250
   03/11/96       $   40,000    $4.0000             10,000
   03/05/96       $   60,000    $4.0000             15,000
   03/05/96       $   15,000    $3.0000              5,000
   03/04/96       $   12,000    $4.0000              3,000
   03/01/96       $   40,000    $4.0000             10,000
   03/01/96       $   50,000    $4.0000             12,500
   03/01/96       $   10,000    $4.0000              2,500
   03/01/96       $    4,000    $4.0000              1,000
   02/28/96       $   40,000    $4.0000             10,000
   02/28/96       $   10,000    $4.0000              2,500
   02/27/96       $   22,000    $4.0000              5,500
   02/27/96       $   10,000    $4.0000              2,500
   02/27/96       $    5,000    $4.0000              1,250
   02/26/96       $  200,000    $4.0000             50,000
   02/26/96       $   25,000    $4.0000              6,250
   02/23/96       $   50,000    $4.0000             12,500
   02/23/96       $   25,000    $4.0000              6,250
   02/22/96       $   10,000    $4.0000              2,500
   02/22/96       $   19,400    $4.0000              4,850
   02/22/96       $  100,000    $4.0000             25,000
   02/22/96       $   15,000    $4.0000              3,750
   02/21/96       $   50,000    $4.0000             12,500
   02/21/96       $   28,000    $4.0000              7,000
   02/20/96       $   40,000    $4.0000             10,000
   02/16/96       $   70,000    $4.0000             17,500
   02/16/96       $   70,000    $4.0000             17,500
   02/16/96       $   20,000    $4.0000              5,000
   02/16/96       $   20,000    $4.0000              5,000
   02/15/96       $   10,000    $4.0000              2,500
   02/15/96       $   10,000    $4.0000              2,500
   02/14/96       $   25,000    $4.0000              6,250
   02/13/96       $   10,000    $4.0000              2,500
   01/26/96       $    3,000    $3.0000              1,000
   01/24/96       $   30,000    $3.0000             10,000
   01/23/96       $   10,000    $4.0000              2,500
   10/12/95       $  100,000    $2.0000             50,000
   10/05/95       $   10,000    $2.0000              5,000
   09/12/95       $  150,000    $2.0000             75,000
   09/12/95       $   50,000    $2.0000             25,000
   09/08/95       $   10,000    $2.0000              5,000
   09/05/95       $    2,000    $2.0000              1,000
   09/01/95       $   50,000    $2.0000             25,000
   08/29/95       $   50,000    $2.0000             25,000
   08/29/95       $  100,000    $2.0000             50,000
   07/27/95       $  200,000    $2.0000            100,000
   06/10/95       $  100,000    $2.0000             50,000
   05/15/95       $   50,000    $2.0000             25,000
   03/07/95       $   25,000    $2.0000             12,500
   02/13/95       $   25,000    $2.0000             12,500
   01/04/95       $   50,000    $2.0000             25,000
   12/31/94       $   13,280    $1.6667              7,968
   12/31/94       $    8,678    $1.6667              5,207
   12/16/94       $   10,000    $1.6667              6,000
   09/27/94       $   50,000    $1.6667             30,000
   09/05/94       $   25,000    $1.6667             15,000
   08/04/94       $   10,000    $1.6667              6,000
   08/01/94       $   10,000    $1.6667              6,000
                  ----------                 -------------
                  $2,312,357                       870,358
                  ==========                 =============
</TABLE>
 
     In addition, the Company issued 2,212 shares of Common Stock on April 11,
1997 in reliance upon Section 4(2) of the Securities Act, to Dr. J.C. Lasmanis
for consulting services, which the Board of Directors has determined had a value
of $11,062. Dr. Lasmanis has agreed not to sell any shares of Common Stock for a
 
                                      II-3
<PAGE>   77
 
period of 18 months from the Effective Date. Dr. Lasmanis has been involved with
the Company from inception as an informal advisor and contracted consultant in
assisting the Company to market to home schooling ministries and to develop
Internet content. Because he is considered, therefore, an "insider"
substantially familiar with, had access to or possession of the information an
investor needs to know in order to make an informed investment decision in the
Company and because Dr. Lasmanis was a sophisticated investor for purposes of
Section 4(2) of the Securities Act, the Company relied on the exemption in
Section 4(2) of the Securities Act.
 
     In December of 1996, the Company solicited from fifty investors, a waiver
of rescission rights and other remedies, in connection with any past omissions
or violations of federal or state securities laws or regulations by the Company
relating to certain previously completed private offerings of equity securities
and a further release of the Company and its affiliates from liability
associated with such possible breaches of the law (the "Waivers"). Stockholders
representing approximately 84% of the proceeds raised by the Company in
connection with such prior offerings delivered the Waivers to the Company.
Assuming the Waivers are valid and enforceable by the Company, if, in the
future, it is determined that the prior offerings were effected in violation of
federal securities and/or certain state securities laws, the Company may have to
refund an aggregate of approximately $388,000 plus interest from the date of
purchase, to purchasers of securities in the prior offerings who have not
delivered the Waiver and bring an action for rescission within the applicable
limitations period. If the Waivers are not deemed valid, the possible rescission
totals $1,788,399. The Company's financial statements do not include a reserve
for any amounts the Company may be required to deliver in connection with a
recission of the prior offerings. To the extent the solicitation of waivers is
deemed the offering of a new security, as to which the Company expresses no
opinion, the Company relies upon Section 4(2) of the Securities Act.
 
     The sales of junior subordinated notes described in the following table
were made in reliance upon Regulation D, Rule 506 of the Securities Act, which
provides for exemption for transactions not involving a public offering. With
regard to the Company's reliance upon this exemption from registration, certain
inquiries were made by the Company that such sales qualified for such exemption.
In particular, all investors certified to the Company that they were accredited,
they executed investment letters, and the securities bear a legend accordingly.
 
<TABLE>
<CAPTION>
                                                                              DOLLAR
                                                                              AMOUNT
                                       DATE                                  PURCHASED
        ------------------------------------------------------------------   --------
        <S>                                                                  <C>
        7/10/96                                                              $125,000
        7/30/96                                                               125,000
        9/26/96                                                                76,000
        10/30/96                                                              297,000
                                                                             --------
             Total                                                           $623,000
                                                                             ========
</TABLE>
 
   
     Holders of the above junior subordinated notes, earn interest payable in
the amount of 9.75% per annum, compounded monthly, payable in full at maturity,
with warrants to purchase up to 172,639 shares of the Company's common stock
exercisable at $4.00 per share, a portion of which are earned for every month
the notes are outstanding. As of December 31, 1996, warrants to purchase 61,209
shares of common stock have been earned by the Holders. At the effective date of
the Prospectus, it is anticipated that warrants to purchase 172,639 shares of
common stock will have been earned. These warrants are not exercisable until two
years after the date of subscription, or at the time of an IPO, whichever is
earlier. There were no underwriting discounts or commissions paid in connection
with the issuance of any of said securities.
    
 
                                      II-4
<PAGE>   78
 
     The sales of the junior convertible subordinated notes ("Notes") described
in the following table were made in reliance upon Regulation D, Rule 506 of the
Securities Act, which provides for exemption for transactions not involving a
public offering. With regard to the Company's reliance upon this exemption from
registration, certain inquiries were made by the Company that such sales
qualified for such exemption. In particular, all investors certified to the
Company that they were accredited, they executed investment letters, and the
securities bear a legend accordingly.
 
<TABLE>
<CAPTION>
                            AMOUNT
    DATE FUNDS             OF NOTES
     RECEIVED             PURCHASED
- ----------------------------------------
<S>                   <C>
           12/16/96             $100,000
           12/18/96             $100,000
           12/18/96              $50,000
           12/20/96              $25,000
           12/20/96              $50,000
           12/24/96             $100,000
           12/26/96              $25,000
           12/30/96              $50,000
           01/03/97              $75,000
           01/07/97             $100,000
           01/07/97              $50,000
           01/08/97              $25,000
           01/09/97              $25,000
           01/13/97              $25,000
           01/14/97              $50,000
           01/15/97              $45,000
           01/15/97              $10,000
           01/15/97              $25,000
           01/15/97              $25,000
           01/16/97             $200,000
           01/16/97              $45,000
           01/20/97              $25,000
           01/24/97              $25,000
           01/24/97              $25,000
           01/31/97              $25,000
           01/31/97              $25,000
           01/31/97             $275,000
           02/04/97             $100,000
                      ==================
                              $1,700,000
</TABLE>
 
                                      II-5
<PAGE>   79
 
     The holders of the Notes, as detailed above, also have the right to receive
at maturity, 340,000 shares of its common stock, which have been converted into
the right to receive an equal number of shares of common stock of the Company.
The Notes are unsecured, non interest bearing, and expressly subordinate to
institutional debt, and will mature at the earlier of the effective date of the
IPO or as indicated below. It is anticipated that proceeds from the IPO will be
used to repay the principal of the Notes on the closing date of the IPO. At that
time, in addition, unregistered shares of the company's stock, with a two year
irrevocable lock-up agreement, will be issued at no additional cost to each
holder of the notes in an amount calculated by dividing the principal of the
holder's Note by the IPO price of $5.00 per share (i.e., an aggregate of 340,000
shares). In the event that an initial public offering of the company's shares is
not effective within three years from the date of the Subscription Agreement, in
lieu of the right to receive shares of its common stock upon an IPO, the holder
of the Note has the option of converting the note to shares of the Company's
common stock in an amount calculated by dividing the principal of the holder's
Note by $4.00, or demanding repayment of the note in four quarterly
installments. Barron Chase Securities, Inc. served as placement agent for this
private placement and received a 7% commission amounting to $119,000 for their
services in this regard.
 
     The Company issued five separate unsecured Corporate Promissory Notes
consisting of (i) one promissory note in the aggregate principal amount of
$60,000 dated August 8, 1997; (ii) two promissory notes in the aggregate
principal amount of $60,000 dated August 22, 1997; and (iii) two promissory
notes in the aggregate principal amount of $80,000 dated September 5, 1997.
Exemption from registration under the Securities Act is claimed for the issuance
of the unsecured Corporate Promissory Notes in reliance upon the exemption
afforded by Section 4(2) of the Securities Act for transactions not involving a
public offering. Each person to whom the securities were issued were
sophisticated persons for purposes of Section 4(2) of the Securities Act and had
access to or possession of information an investor needs to know in order to
make an informed investment decision in the Company.
 
     The following is a record of the options to purchase shares of Common Stock
granted to officers, directors, consultants, ministry partners and employees of
the Company within the past three years. These non-qualified options were not
issued for the purposes of raising capital and have been granted solely to
persons deemed "insiders," i.e. persons considered sufficiently familiar with
the Company so that registration under Section 5 of the Securities Act was
deemed not necessary under Section 4(2) of the Securities Act. The Company also
relied on rule 701 of the Commission. Further, each person to whom the following
securities were issued were sophisticated persons for purposes of Section 4(2)
of the Securities Act and had access to or possession of information an investor
needs to know in order to make an informed investment decision in the Company.
   
<TABLE>
<CAPTION>
                                                           DATE OF GRANT
   CLASS OF        ----------------------------------------------------------------------------------------------
    PERSONS        12/31/94     6/29/95     08/29/95     12/31/95     1/15/96     3/31/96     5/26/96     6/30/96
- ---------------    --------     -------     --------     --------     -------     -------     -------     -------
<S>                <C>          <C>         <C>          <C>          <C>         <C>         <C>         <C>
EXECUTIVES
Dane West
Bill Bowers
Bob Varney                      116,000
Gary Struzik                                                          30,000
BOARD
Bruce Edgington                               2,500                                                        2,500
John Meindl
Jim Buick
Earl Gjelde
Tom Whitehead
Max Carey
Consultant                       4,000
Consultant          14,000
Consultant           4,500
Consultant                                                   250
Consultant                                                   500
Consultant                                                   500
Consultant                                                   250
Consultant                                                   500
Consultant
Consultant
Ministry
 Partner                                                                                      25,000
Employee
Employee            10,000                   10,000        7,638
Employee            10,000                   10,000        2,792
Employee                                                   7,600
Employee                                                  18,773                   2,019                   2,019
Employee                                                  12,100
Employee                                                  10,850
Employee                                                  10,100
Employee                                                  10,000
Employee                                                   2,600
 
<CAPTION>
   CLASS OF                                                                                                               
    PERSONS      8/16/96      9/30/96     9/30/96     12/31/96     3/31/97     4/09/97     4/30/97     6/10/97     8/18/97
- ---------------  --------     -------     -------     --------     -------     -------     -------     -------     -------
<S>              <C>          <C>         <C>          <C>          <C>         <C>         <C>         <C>         <C> 
EXECUTIVES
Dane West                     171,312                   5,191                               2,420       2,420
Bill Bowers                   164,312                  10,385                               2,420       2,420
Bob Varney                    145,312                  17,524                               8,075       8,075
Gary Struzik                  71,250                    6,331                               1,405       1,290
BOARD
Bruce Edgington               160,314
John Meindl                                                                    37,000
Jim Buick                                                                      37,000
Earl Gjelde                                                                    37,000
Tom Whitehead                                                                  37,000
Max Carey                                                                                              37,000
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant                                                                     37,000
Consultant                                                                                  4,000
Ministry
 Partner
Employee
Employee                                                  446                                 325      15,325
Employee                                               (7,500)
Employee                                                1,600                                 405       5,405
Employee                                   2,019        1,013                                 805       8,305
Employee                                                1,066                                 565       5,565
Employee                                                2,263                                 805       1,805      (11,750)
Employee                                                  965                                 405       5,405
Employee                                                1,095                                 405      10,405
Employee                                                  888                                           1,000
 

<CAPTION>               
   CLASS OF             
    PERSONS      9/12/97
- ---------------  -------
<S>                <C>                                                                                                    
EXECUTIVES
Dane West
Bill Bowers
Bob Varney
Gary Struzik
BOARD
Bruce Edgington
John Meindl
Jim Buick
Earl Gjelde
Tom Whitehead
Max Carey
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Consultant
Ministry
 Partner
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
</TABLE>
    
 
                                      II-6
<PAGE>   80
   
<TABLE>
<CAPTION>
                                                           DATE OF GRANT
   CLASS OF        ----------------------------------------------------------------------------------------------
    PERSONS        12/31/94     6/29/95     08/29/95     12/31/95     1/15/96     3/31/96     5/26/96     6/30/96
- ---------------    --------     -------     --------     --------     -------     -------     -------     -------
<S>                <C>          <C>         <C>          <C>          <C>         <C>         <C>         <C>
Employee                                                  12,500
Employee                                                   5,000
Employee                                                              50,000
Employee                                                                           2,660
Employee                                                                          10,000                  (10,000)
Employee                                                                           3,600                    (700)
Employee                                                               6,250
Employee                                                                           2,500
Employee                                                                           3,600                  (2,700)
Employee                                                               2,000
Employee                                                   1,740                     750         750
Employee                                                                           1,000                     250
Employee                                                                           1,950
Employee                                                                           3,000                    (750)
Employee                                                                           2,000
Employee                                                                           3,000                    (250)
Employee                                                                                       3,000        (250)
Employee                                                                                       3,000        (250)
Employee
Employee                                                                                                   2,000
Employee
Employee
Employee
   Total
    Options
    Granted         38,500      120,000      22,500      103,703      88,250      36,079      25,000       6,269
                   --------     -------     --------     --------     -------     -------     -------     -------
Option Exercise
 Price Per
 Share              $1.667      $ 2.00       $ 2.00      $  2.00      $ 3.00      $ 4.00      $ 4.00      $ 4.00
 
<CAPTION>                                                                                                                 
   CLASS OF                                                                                                               
    PERSONS      8/16/96      9/30/96     9/30/96     12/31/96     3/31/97     4/09/97     4/30/97     6/10/97     8/18/97
- ---------------  --------     -------     -------     --------     -------     -------     -------     -------     -------
<S>              <C>          <C>         <C>          <C>          <C>         <C>         <C>         <C>
Employee                                                1,350                                           1,000      (3,350)
Employee                                                1,830                                 805       1,805      (6,000)
Employee         (18,000 )
Employee                                                1,278                                           7,500
Employee
Employee
Employee                                   1,930                                1,250      27,605
Employee                                     788                                            1,000
Employee
Employee                                   2,091                                            6,000
Employee                         750
Employee
Employee                                   2,600                                            7,500
Employee
Employee                                     100                                            1,000
Employee
Employee
Employee
Employee                                   2,808                                            1,000
Employee                                     100                                            5,000
Employee                                                2,000
Employee                                               20,000
Employee                                                                                    1,000
   Total
    Options
    Granted      (20,650 )    712,500      2,769       56,142      22,000      185,000     24,090      164,830     (9,350)
                 --------     -------     -------     --------     -------     -------     -------     -------     -------
Option Exercise
 Price Per
 Share           $  4.00      $ 5.00       $4.00       $ 4.00      $ 5.00      $ 5.00      $ 6.00      $ 5.00      Various
 
<CAPTION>               
   CLASS OF             
    PERSONS      9/12/97
- ---------------  -------
<S>              <C>
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
Employee
   Total
    Options
    Granted      (11,750)
                 -------
Option Exercise
 Price Per
 Share           Various
</TABLE>
    
 
                                      II-7
<PAGE>   81
 
ITEM 27. EXHIBITS
 
   
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                    DESCRIPTION OF EXHIBIT
- --------   ----------------------------------------------------------------------------------
<S>        <C>
 1.1*      Form of Underwriting Agreement between Registrant and Underwriter
 1.2*      Form of Selected Dealer Agreement between the Underwriter and the selected dealers
 1.4*      Form of Merger and Acquisition Agreement between Registrant and Underwriter
 2*        Articles and Certificates of Merger of DIDAX ON-LINE, L.C. and DIDAX, INC. into
             the Registrant
 3.1*      Certificate of Incorporation and Certificates of Amendment thereto of the
             Registrant
 3.1(a)    Certificate of Correction regarding Certificate of Incorporation
 3.2*      Bylaws and amendments thereto of the Registrant
 4.1*      Form of certificate evidencing shares of Common Stock
 4.2*      Form of certificate evidencing Purchase Warrant
 4.3*      Form of Lock-Up Agreement
 4.4*      Form of Underwriter Warrant Agreement between Registrant and Underwriter
 4.5*      Form of Stock Option Agreement
 4.6*      Form of Warrant Agreement between the Registrant and American Stock Transfer &
             Trust Company
 5.1       Opinion of Berman Wolfe & Rennert, P.A.
 5.2*      Opinion of Gammon & Grange, P.C.
10.1*      Office Building Lease by and between 4501 Daly Dr. Inc. and the Registrant dated
             September 12, 1995
10.2*      Amended Office Building Lease by and between 4501 Daly Dr. Inc. and the Registrant
             dated January 30, 1996
10.3*      1997 Stock Option Plan
10.4*      Promissory Note and Warrant Certificate between the Registrant and Robert Varney
             dated July 10, 1996
10.5*      Promissory Note and Warrant Certificate between the Registrant and Robert Varney
             dated September 26, 1996
10.6*      Amendment to terms of promissory notes between Registrant and Robert Varney dated
             November 13, 1996
10.7       Amendment to terms of promissory notes between Registrant and Robert Varney dated
             July 10, 1997
10.8*      Promissory Note and Warrant Certificate between the Registrant and Bruce Edgington
             dated July 30, 1996
10.9*      Promissory Note and Warrant Certificate between the Registrant and Bruce Edgington
             dated October 30, 1996
10.10*     Amendment to terms of promissory notes between Registrant and Bruce Edgington
             dated November 13, 1996
10.11*     Amendment to terms of promissory notes between Registrant and Bruce Edgington
             dated July 24, 1997
10.12*     Promissory Note between the Registrant and John and Holli Meindl dated January 9,
             1997
10.13*     Form of Promissory Note between Registrant and Holders of Junior Notes
10.14*     Agreement between the Registrant and NetRadio dated June 21, 1996
10.15*     Agreements between the Registrant and digitalNATION dated March 19, 1997 and
             November 12, 1996
</TABLE>
    
 
                                      II-8
<PAGE>   82
 
   
<TABLE>
<CAPTION>
EXHIBIT
  NO.                                    DESCRIPTION OF EXHIBIT
- --------   ----------------------------------------------------------------------------------
<S>        <C>
10.16*     Agreement between the Registrant and Promise Keepers, Inc. dated March 13, 1996
             with amendment dated February 10, 1997
10.17*     Agreement between the Registrant and World Vision dated October 17, 1996
10.18@*    Employment Agreement between the Registrant and Robert Varney, Ph.D. dated as of
             June 6, 1997
10.19@*    Employment Agreement between the Registrant and Dane West dated as of June 6, 1997
10.20@*    Employment Agreement between the Registrant and William Bowers dated as of June 6,
             1997
10.21@*    Employment Agreement between the Registrant and Gary Struzik dated as of June 6,
             1997
10.22*     Agreement between the Registrant and ichat, Inc. dated February 28, 1997
10.23*     Agreement between the Registrant and Spring Arbor Distribution Company dated
             October 1, 1996
10.24*     Agreement between the Registrant and Intermind Corporation dated January 19, 1997
10.25*     Agreement between the Registrant and CyberCash, Inc. dated February 11, 1997
10.26*     Promissory Note between the Registrant and Bruce Edgington dated August 8, 1997
10.27*     Promissory Note between the Registrant and Bruce Edgington dated August 22, 1997
10.28*     Promissory Note between the Registrant and Bruce Edgington dated September 5, 1997
10.29*     Promissory Note between the Registrant and Robert Varney dated August 22, 1997
10.30*     Promissory Note between the Registrant and Robert Varney dated September 5, 1997
11*        Statement of computation of earnings per share
23.1       Consent of Berman Wolfe & Rennert, P.A. (Included as part of Exhibit 5.1)
23.2       Consent of Hoffman, Morrison & Fitzgerald, P.C.
23.3       Consent of Gammon & Grange, P.C.
24*        Power of Attorney (Included on the signature page of PART II of this Registration
             Statement)
27         Financial Data Schedule of Financial Statements of the Registrant
</TABLE>
    
 
- ---------------
 
*  Filed previously.
 
@ Contracts with Executive Officers
 
(b) FINANCIAL STATEMENT SCHEDULES. Financial statement schedules are omitted
because the conditions requiring their filing do not exist or the information
required thereby is included in the financial statements filed, including the
notes thereto.
 
ITEM 28. UNDERTAKINGS.
 
     The Registrant hereby undertakes:
 
     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
 
          (i) To include any prospectus required by Section 10(a)(3)of the
     Securities Act;
 
          (ii) To reflect in the prospectus any facts or events arising after
     the effective date of the Registration Statement (or the most recent
     post-effective amendment thereof) which, individually or together,
     represent a fundamental change in the information in the Registration
     Statement; and
 
          (iii) To include any additional or changed material information on the
     plan of distribution.
 
                                      II-9
<PAGE>   83
 
     (2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement of the securities offered, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering.
 
     (3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the end of the
offering.
 
   
     (4) To provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
    
 
     (5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise (other than
insurance), the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act, , and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
 
     (6) (a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time the Commission declared it effective.
 
          (b) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement for the securities offered in the
registration statement, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of those securities.
 
                                      II-10
<PAGE>   84
 
                                   SIGNATURES
 
   
     In accordance with the requirements of the Securities Act of 1933, as
amended, DIDAX INC., the Registrant, certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on Form SB-2 and
authorized this Registration Statement to be signed on its behalf by the
undersigned, in the city of Chantilly, State of Virginia, on the 17 day of
September, 1997.
    
 
                                          DIDAX INC.
 
   
September 17, 1997                        By:  /s/ ROBERT C. VARNEY, PH.D.
    
                                            ------------------------------------
                                            Robert C. Varney, Ph.D.
                                            Chairman of the Board of Directors
                                              and
                                            Chief Executive Officer, and
                                              Principal Executive Officer
 
     In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form SB-2 has been signed herein below
by the following persons in the capacities and on the dates indicated.
 
   
<TABLE>
<S>                    <C>
September 17, 1997     By: /s/ ROBERT C. VARNEY, PH.D.
                           -------------------------------------------
                           Robert C. Varney, Ph.D., Chairman of the
                           Board of Directors and Chief Executive
                           Officer and director
 
September 17, 1997     By: /s/ GARY A. STRUZIK
                           -------------------------------------------
                           Gary A. Struzik, Chief Financial Officer
                           and Secretary, and Principal Financial and
                           Chief Accounting Officer
 
September 17, 1997     By: /s/ DANE B. WEST
                           -------------------------------------------
                           Dane B. West, President and director
 
September 17, 1997     By: /s/ WILLIAM H. BOWERS
                           -------------------------------------------
                           William H. Bowers, Chief Technical Officer
                           and director
 
September 17, 1997     By: /s/ BRUCE E. EDGINGTON
                           -------------------------------------------
                           Bruce E. Edgington, director
 
September 17, 1997     By: /s/ JOHN J. MEINDL, JR.
                           -------------------------------------------
                           John J. Meindl, Jr., director
 
September 17, 1997     By: /s/ CLAY T. WHITEHEAD, PH.D.
                           -------------------------------------------
                           Clay T. Whitehead, Ph.D., director
</TABLE>
    
 
                                      II-11
<PAGE>   85
 
   
<TABLE>
<S>                    <C>
September 17, 1997     By: /s/ JAMES G. BUICK
                           -------------------------------------------
                           James G. Buick, director
 
September 17, 1997     By: /s/ EARL E. GJELDE
                           -------------------------------------------
                           Earl E. Gjelde, director
 
September 17, 1997     By: /s/ W.R. 'MAX' CAREY
                           -------------------------------------------
                           W.R. 'Max' Carey
</TABLE>
    
 
                                      II-12
<PAGE>   86
 
                               INDEX TO EXHIBITS
 
   
<TABLE>
<CAPTION>
EXHIBIT                                                                           SEQUENTIALLY
NUMBER                                   DESCRIPTION                              NUMBERED PAGE
- ------     ------------------------------------------------------------------------------------
<C>        <S>                                                                    <C>
  5.1      Opinion of Berman Wolfe & Rennert, P.A. ...............................
 23.1      Consent of Berman Wolfe & Rennert, P.A. (Included as part of Exhibit
             5.1).................................................................
 23.2      Consent of Hoffman, Morrison & Fitzgerald, P.C. .......................
 23.3      Consent of Gammon & Grange, P.C. ......................................
 27        Financial Data Schedule of Financial Statements of the Registrant......
</TABLE>
    

<PAGE>   1
                                                                     EXHIBIT 5.1


                          BERMAN WOLFE & RENNERT, P.A.
                            ATTORNEYS AND COUNSELORS
                    NATIONSBANK TOWER AT INTERNATIONAL PLACE
                    100 SOUTHEAST SECOND STREET, 35TH FLOOR
                           MIAMI, FLORIDA 33131-2130

CHARLES J. RENNERT                                          PHONE (305) 577-4177
                                                              FAX (305) 373-6036




                              September 17, 1997


DIDAX INC.
4501 Daly Drive, Suite 103
Chantilly, VA 20151


         Re:      DIDAX INC.
                  SEC File No. 333-25937


Gentlemen:

         We have acted as counsel to DIDAX INC., a Delaware corporation (the
"Company"), in connection with the proposed issuance and sale of the following
securities registered on a Form SB-2 Registration Statement, SEC File No. 333-
25937 (the "Registration Statement"), filed with the U.S. Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act of 1933,
as amended (the "Act"):

         1.       2,000,000 shares of Common Stock, $.01 par value;

         2.       2,500,000 Purchase Warrants;

         3.       2,500,000 shares of Common Stock, to be issued upon exercise
                  of the Purchase Warrants;

         4.       300,000 shares of Common Stock, to be issued upon exercise of
                  the over-allotment option;

<PAGE>   2
DIDAX INC
September 17, 1997
Page 2


         5.       375,000 Purchase Warrants, to be issued upon exercise of the
                  over-allotment option;

         6.       375,000 shares of Common Stock, to be issued upon exercise of
                  the Purchase Warrants issuable upon exercise of the
                  over-allotment option;

         7.       200,000 Common Stock Underwriter Warrants ("RPCs"), to be
                  issued and sold to Barron Chase Securities, Inc. (the
                  "Underwriter"), each RPC entitling the holder thereof to
                  purchase one share of Common Stock;

         8.       200,000 shares of Common Stock to be issued upon exercise of
                  the RPCs;

         9.       250,000 Warrant Underwriter Warrants ("RPWs"), to be issued
                  and sold to the Underwriter, each RPW entitling the holder
                  thereof to purchase one Purchase Warrant;

         10.      250,000 Underwriter Underlying Warrants ("RUPWs") to be
                  issued upon exercise of the RPWs; and

         11.      250,000 shares of Common Stock to be issued upon exercise of
                  the RUPWs.

         In rendering the opinion expressed herein, we have examined the
following documents and instruments:

         1.       The Registration Statement, the exhibits filed in connection
                  therewith, and the form of Prospectus contained therein;

         2.       The Company's Certificate of Incorporation, as amended, as
                  certified by the Secretary of State of the state of Delaware;

         3.       The Company's Bylaws, as amended, as certified by the
                  Secretary of the Company; and

         4.       The Unanimous Written Consent of the Board of Directors of the
                  Company dated as of September 15, 1997 authorizing the 
                  issuance and sale of the Company's securities pursuant to 
                  the terms contained in the Registration Statement.
<PAGE>   3
DIDAX INC
September 17, 1997
Page 3


         We have examined originals or copies, identified to our satisfaction,
of such certificates, agreements and assurances as we considered necessary for
the purposes of rendering the opinion hereinafter expressed.

         We have also consulted with officers and directors of the Company and
have obtained such representations with respect to the matters of fact as we
have deemed necessary or advisable for purposes of rendering the opinion
hereinafter expressed. We have not independently verified the factual statements
made to us in connection therewith, nor the veracity of such representations.

         Based on the foregoing, it is our opinion that:

         After the Commission has declared the Registration Statement to be
effective (such Registration Statement as is finally declared effective and the
form of Prospectus contained therein being hereinafter referred to as the
"Registration Statement" and the "Prospectus," respectively) and when the
applicable provisions of the "Blue Sky" or other state securities laws shall
have been complied with, the Company's securities covered by the Registration
Statement, upon receipt of payment therefor, will constitute legally issued
securities of the Company, fully paid and non-assessable.

         We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference of this law firm in the Prospectus
under the heading "Legal Matters." In giving this consent, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission promulgated
thereunder.

                                            Very truly yours,

                                            BERMAN WOLFE & RENNERT, P.A.



                                            By:/s/ CHARLES J. RENNERT
                                               -------------------------
                                               Charles J. Rennert
CJR:ss


<PAGE>   1
                                                                    EXHIBIT 23.2


                                 [LETTERHEAD]


     Consent of Hoffman, Morrison & Fitzgerald, P.C., Independent Auditors



We hereby consent to the use in this Registration Statement on Form SB-2 of our
report included herein dated January 30, 1997, relating to the combined
financial statements of DIDAX ON-LINE, L.C. AND AFFILIATE and to the reference
to our Firm under the caption "Experts" in the Prospectus.




/s/ HOFFMAN, MORRISON & FITZGERALD, P.C.

HOFFMAN, MORRISON & FITZGERALD, P.C.
McLean, VA
September 17, 1997




                                 [LETTERHEAD]

<PAGE>   1
                                                                   EXHIBIT 23.3


                       [GAMMON & GRANGE, PC LETTERHEAD]

September 17, 1997



We hereby consent to the inclusion in this Amendment No. 4 to Registration
Statement of DIDAX Inc. of our opinion dated April 7, 1997.

By: /s/ George R. Grange II
    -------------------------
    George R. Grange II
    Scott J. Ward



<TABLE> <S> <C>

<ARTICLE> 5
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   6-MOS                   YEAR                  
<FISCAL-YEAR-END>                          DEC-31-1997             DEC-31-1996
<PERIOD-START>                             JAN-01-1997             JAN-01-1996
<PERIOD-END>                               JUN-30-1997             DEC-31-1996
<CASH>                                          170419                    1932
<SECURITIES>                                         0                       0
<RECEIVABLES>                                    83029                   46450
<ALLOWANCES>                                         0                       0
<INVENTORY>                                          0                       0
<CURRENT-ASSETS>                                537485                   98549
<PP&E>                                          253644                  248342
<DEPRECIATION>                                  110105                   81419
<TOTAL-ASSETS>                                  807480                  282274
<CURRENT-LIABILITIES>                          1136590                 1199060
<BONDS>                                        1700000                       0
                                0                       0
                                          0                       0
<COMMON>                                       2683318                 2472256
<OTHER-SE>                                      111187                  111187
<TOTAL-LIABILITY-AND-EQUITY>                    807480                  282274
<SALES>                                           4528                    8834
<TOTAL-REVENUES>                                188645                  180776
<CGS>                                             9320                    5932
<TOTAL-COSTS>                                   100790                  226220
<OTHER-EXPENSES>                               1338744                 2356897
<LOSS-PROVISION>                                     0                       0
<INTEREST-EXPENSE>                               88471                   77815
<INCOME-PRETAX>                              (1323386)               (2464904)
<INCOME-TAX>                                         0                       0
<INCOME-CONTINUING>                          (1323386)               (2464904)
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                 (1323386)               (2464904)
<EPS-PRIMARY>                                   (2.15)                  (4.35)
<EPS-DILUTED>                                   (2.15)                  (4.35)
        

</TABLE>


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