<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Period Ended September 30, 1998.
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From
________________to_______________.
Commission file number 333-25937
DIDAX INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 54-1831588
- ---------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4206F Technology Court
Chantilly, VA 20151
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(703-968-4808)
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Not applicable
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
----- -----
Applicable Only to Corporate Issuers
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date:
Common Stock, $ .01 Par Value: 3,656,630 shares outstanding as of September
30, 1998
Transitional Small Business Disclosure Format (check 0ne):
Yes No X
----- -----
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Balance Sheet--September 30, 1998 3
Statements of Operations--Three Months and Nine Months Ended
September 30, 1997 and 1998, and May 12, 1993 to September 30, 1998
Cumulative from Inception 4
Statements of Cash Flows--Three Months and Nine Months Ended
September 30, 1997 and 1998, and May 12, 1993 to September 30, 1998
Cumulative from Inception 5
Notes to Financial Statements--September 30, 1998 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
<PAGE> 3
DIDAX INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,969,303
Accounts receivable including unbilled of $68,696 192,972
Deposits 8,516
Deferred costs 77,183
------------
Total current assets 3,247,974
PROPERTY AND EQUIPMENT, net 284,741
OTHER ASSETS:
Notes receivable from officers 93,000
Deposits 16,984
Intangible assets, net 49,208
------------
Total other assets 159,192
------------
$3,691,907
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $118,669
Accrued liabilities 221,419
Deferred revenue 14,748
------------
Total current liabilities 354,836
OTHER LIABILITIES:
Accounts payable 45,023
------------
Total liabilities 399,859
COMMITMENTS AND CONTINGENCIES
COMMON STOCK SUBJECT TO POSSIBLE RECISSION:
$.01 par value, 21,250 shares issued and
outstanding at September 30, 1998 85,000
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 20,000,000 shares
authorized 3,656,630 shared issued and outstanding at September 30, 1998 36,566
Common stock warrants 666,722
Additional paid-in capital 12,630,783
Deficit accumulated during development stage (10,127,023)
------------
Total stockholders' equity 3,207,048
------------
$3,691,907
============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 4
DIDAX INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months Cumulative
Ended September 30, Ended September 30, from Inception
1997 1998 1997 1998 (May 12, 1993) to
---------- ----------- ------------ ------------ September 30, 1998
--------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Advertising/Sponsorship sales $3,425 $152,233 $4,813 $267,673 $284,549
Retail sales 26,425 40,435 40,523 100,330 175,794
Consulting services 73,299 50,921 223,608 127,045 528,158
Internet access 3,631 2,454 36,975 7,116 117,027
---------- ----------- ------------ ------------ -------------
Total operating revenues 106,780 246,043 305,919 502,164 1,105,528
OPERATING EXPENSES:
Cost of goods and services 50,947 106,911 161,395 205,174 672,279
Product development 105,814 106,433 351,059 266,137 1,616,287
Crosswalk operations 182,432 317,218 436,879 715,987 1,473,692
Sales and marketing 101,428 163,771 593,326 641,521 2,714,500
General and administrative 201,276 306,183 617,811 1,045,869 3,093,211
---------- ----------- ------------ ------------ -------------
Total operating expense 641,897 1,000,516 2,160,470 2,874,688 9,569,969
---------- ----------- ------------ ------------ -------------
LOSS FROM OPERATIONS (535,117) (754,473) (1,854,551) (2,372,524) (8,464,441)
OTHER INCOME (EXPENSE):
Interest income 527 63,616 15,980 183,971 289,881
Gain on exchange of assets 0 0 0 0 3,091
Miscellaneous income 63 1 577 350 1,749
Interest expense (53,281) 0 (142,777) (1,947) (1,957,303)
---------- ----------- ------------ ------------ -------------
Total other income (expense) (52,691) 63,617 (126,220) 182,374 (1,662,582)
---------- ----------- ------------ ------------ -------------
NET LOSS ($587,808) ($690,856) ($1,980,771) ($2,190,150) ($10,127,023)
========== =========== ============ ============ =============
Net loss per common share (basic) ($0.80) ($0.19) ($2.81) ($0.63)
========== =========== ============ ============
Weighted average number of common
shares outstanding 732,036 3,654,619 705,182 3,494,585
========== =========== ============ ============
Net loss per common share (diluted) ($0.80) ($0.19) ($2.81) ($0.63)
========== =========== ============ ============
Weighted average number of common
shares outstanding 732,036 3,654,619 705,182 3,494,585
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 5
DIDAX INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOW
UNAUDITED
<TABLE>
<CAPTION>
Cumulative
For the Nine Months from Inception
Ended September 30 (May 12, 1993) to
1997 1998 September 30, 1998
------------- ------------- ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,980,771) ($2,190,150) ($10,127,023)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 96,369 93,941 402,752
Amortization of debt discount charged to interest expense 86,270 0 127,660
Common stock issued in lieu of cash for professional services 11,062 0 161,062
Common stock donated 200,000 0 200,000
Common stock issued in lieu of cash for
interest on repayment of long term debt 0 0 1,733,750
Changes in assets and liabilities affecting operations:
Accounts receivable (27,683) (100,446) (192,972)
Notes receivable from officer 0 0 (93,000)
Deposits 9,893 (8,384) (25,500)
Deferred charges 0 (76,138) (77,183)
Accounts payable 61,169 90,828 163,392
Accrued liabilities 378,228 64,911 221,419
Deferred revenue 1,507 (1,270) 14,748
------------- ------------- -------------
Net cash used in operating activities (1,163,956) (2,126,708) (7,490,895)
------------- ------------- -------------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property and equipment (14,842) (238,126) (550,913)
Intangible assets 0 (5,000) (5,000)
------------- ------------- -------------
Net cash used in investing activities (14,842) (243,126) (555,913)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from long-term debt 1,564,241 0 1,564,241
Proceeds from notes payable 62,230 0 82,230
Repayment of notes payable 0 (82,230) (82,230)
Proceeds from short-term debt, officer and director 250,000 0 873,000
Proceeds from advances due to officer and director 0 0 242,000
Repayment of short-term debt 0 0 (1,700,000)
Repayment of advances due to officer and director (212,000) 0 (242,000)
Repayment of short-term debt, officer and director 0 0 (873,000)
Net proceeds from issuance of common stock and warrants 0 (22,414) 11,151,870
Deferred costs (502,099) 0 0
------------- ------------- -------------
Net cash provided by (used in) financing activities 1,162,372 (104,644) 11,016,111
------------- ------------- -------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (16,426) (2,474,478) 2,969,303
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 51,126 5,443,781 0
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $34,700 $2,969,303 $2,969,303
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Interest paid $2,238 $3,508 $88,100
============= ============= =============
</TABLE>
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.
As referenced in Note F, purchase of "Investigator" software methodology
for Common Stock totaling $50 and Additional Paid in Capital of $49,950
in August 1998.
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1998
A. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Certain items in the accompanying 1997 financial statements have been
reclassified to conform with the 1998 presentation. Operating results for the
nine month period ended September 30, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998. For further
information, refer to the financial statements and footnotes thereto included in
DIDAX INC.'s 1997 Form 10-KSB.
B. THE COMPANY AND ACQUISITION
On February 18, 1998, DIDAX INC. ("DIDAX") purchased all of the outstanding
shares of gofishnet.com, inc. for 130,292 shares of DIDAX's common stock.
gofishnet.com, inc. ("gofishnet"), an Internet retailer of Christian music and
videos, operates as a wholly owned subsidiary of DIDAX. DIDAX accounted for the
merger as a pooling of interests based on the guidelines described in Accounting
Principles Board No. 16, "Business Combinations". Accordingly, the financial
statements presented for the three months and the nine months ended September
30, 1998 and 1997, respectively are presented on a consolidated basis. Thus the
financial statements for the three months and the nine months ended September
30, 1997 have been restated to reflect gofishnet's revenues of $31,026 and
$41,519 and net losses of $27,409 and $96,983, respectively.
DIDAX's and gofishnet's (collectively "the Company") business includes the
development of computer communications and information services; advertising,
sponsorship and royalty sales; and the resale of products specifically designed
to meet the needs of Christian users of the Internet and World Wide Web. The
Company intends to increase expenditures in connection with marketing and
product development activities. The Company anticipates that losses will
continue 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.
C. NET LOSS PER COMMON SHARE
The following is a reconciliation of the basic and diluted earnings per share
("EPS") calculations for the periods presented:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss (numerator) $(587,808) $ (690,856) $(1,980,771) $(2,190,150)
Weighted average shares (denominator) 732,036 3,654,619 705,182 3,494,585
Basic net loss per share $ (0.80) $ (0.19) $ (2.81) $ (0.63)
========= ========== =========== ===========
Dilutive shares (denominator) 732,036 3,654,619 705,182 3,494,585
Diluted net loss per share $ (0.80) $ (0.19) $ (2.81) $ (0.63)
========= ========== =========== ===========
</TABLE>
6
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As required by Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 98, the above calculation of EPS is based on Statement of Financial
Accounting Standards ("SFAS") No. 128 "Earnings Per Share," for the three months
and the nine months ended September 30, 1998 and 1997. Thus 55,414 stock options
and purchase warrants granted at below market prices outstanding in the three
months and the nine months ended September 30, 1997, and 55,414 stock options
and purchase warrants granted at below market prices outstanding in the three
months and the nine months ended September 30, 1998, respectively, are not
included in the calculation of diluted EPS, as their inclusion would be
antidilutive. EPS for the periods ending September 30, 1997 is restated to
reflect the aforementioned SEC pronouncement and the merger with gofishnet.
D. REVENUE RECOGNITION
The Company's revenues are derived from the sale of banner advertising
and sponsorship contracts; various client based Internet services contracts,
including consulting, Internet access subscriptions, and web site development;
and electronic commerce transactions, primarily consisting of Christian music
sales. Advertising revenues are recognized ratably in the period in which the
advertisement is displayed, provided that no significant Company obligations
remain and collection of the resulting receivable is probable. Company
obligations typically include guarantees of minimum number of "impressions," or
times that an advertisement appears in pages viewed by users of
crosswalk.com(TM) ("crosswalk"), the Company's website, which was formerly
known as the Christian Community Network(TM). To the extent that minimum
guaranteed impressions are not met, the Company defers recognition of the
corresponding revenues until the remaining guaranteed impression levels are
achieved. On sponsorship contracts for prime website exposure where impressions
are not guaranteed and revenue sharing follows from the sale of the sponsors'
products, initial sponsorship fees are recorded as revenue upon contract
signing and the revenue share portion is recorded as reported to the Company by
the sponsor. Internet services revenue is recognized as earned on a percentage
of completion method in accordance with the provisions of the individual
customer contracts. Retail revenue is based on the sales price of products
offered before application of sales tax, if applicable. Internet access
revenues are recognized in the period earned based on the number of active
users and the contractual rate remitted by the Internet provider.
Barter transactions, amounting to approximately twenty-two percent of revenues
for the nine months ended September 30, 1998, are recorded at the lower of
estimated fair value of the goods or services received or the estimated fair
value of the services given. Barter transactions consist of providing hosting
services in return for product price discounts, web development services in
return for advertising space in the customer's magazine, and website presence on
crosswalk in exchange for advertising space on the customer's website or other
web related services. The revenues and equivalent cost of sales from these
barter transactions are recorded in the month in which the services are provided
are/or received and are recorded in the revenue category commensurate with the
product or service rendered.
E. COMMITMENTS AND CONTINGENCIES
SECURITIES
In 1996, the Company became aware that certain prior private placements 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 recission 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 recission actions, if initiated. The potential of inadvertent exemption
violations was communicated to the investors concerned in August of 1996 and in
writing in December 1996. All but 21,250 shares of common stock subject to
recission are beyond the statue of limitations under Section 13 of the
Securities Act of 1933 and Section 10b-5 of the Securities Exchange Act of 1934
along with the Securities Law of State jurisdictions, which the Company uses as
a reasonable basis for establishing the potential exposure. In December 1998,
these remaining 21,250 shares of common stock subject to recission will be
beyond the statute of limitations. Thus, common stock at par and paid in capital
will increase at that time by $213 and $84,787, respectively.
7
<PAGE> 8
F. INTANGIBLE ASSETS
INVESTIGATOR
In August 1998, the Company purchased the proprietary methodology and database
underlying the personal finance software known as eValueator, the Institute for
American Values Investing ("AVI") trade name, and the website (referred to
collectively as the "Investigator") by the same title (www.americanvalues.com)
for 15,000 non-registered shares of the Company's common stock, 5,000 of which
was issued upon consummation of the transaction, 5,000 will be issued in May,
1999, and the remaining 5,000 will be issued in February, 2000, contingent upon
the Company's continued employment of the founder of AVI as the Manager of
Crosswalk's Money Channel effective August 3, 1998.
Based on the guidance provided in SFAS No. 123 "Accounting of Stock Based
Compensation," the Company determined the value of the Investigator using the
Company's stock price on August 3, 1998, the transaction's closing date. The
Investigator will be amortized over five years.
CROSSWALK.COM
In September, 1998, the Company purchased the right, title, interest and
goodwill in the Crosswalk.com trade name, domain name, and related goodwill for
$5,000. The Company recorded this transaction by the addition of a $5,000
intangible asset to its balance sheet. This intangible asset will be amortized
over a period of five years.
G. SUBSEQUENT EVENTS
RELOCATION
On October 1, 1998 the Company moved to a new 6,000 square feet location due to
the expansion requirements commensurate with the expiration of its previous
lease agreement. Under the new lease, the Company paid a $16,734 security
deposit and prepaid the first month's rent. The Company's new monthly rent
amount is currently $7,242. The Company was previously paying $5,703 per month.
The Company continues to be located in Chantilly, Virginia.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
BACKGROUND
DIDAX INC. ("the Company") is primarily known as the creator of
CROSSWALK.COM(TM) (www.crosswalk.com), formerly known as the CCN: Christian
Community Network. Crosswalk.com(TM) (hereinafter "crosswalk(TM)") is an
interactive website which provides information and resources that the Company
believes generally appeals to the Christian community. The information and
resources are developed and made available both by the Company and by Christian
and secular retailers, publishers, charities and ministries. The Company
generates revenues through the sale of sponsorships and advertising; the online
retailing of Christian and family-friendly products manufactured or developed by
others (music, books, apparel, gifts, etc.); commissions and referral fees from
co-marketing relationships; memberships in affinity marketing programs
(affording participants price discounts and other benefits of group purchasing
power); and to a lesser extent, the continuing provision of technology services
to Christian organizations (including Promise Keepers, Christianity Today, World
Vision, Family Research Council, Young Life and the Presbyterian Church in
America).
The Company has transitioned from deriving the majority of its revenues from
providing Consulting Services, defined as Internet development and
hosting, to Christian organizations as mentioned above, to revenue generation
through: the sale of advertising and sponsorship opportunities on
crosswalk(TM); direct retail sales and royalties/fees from the sale of
Christian interest products manufactured or developed by others (primarily CDs,
tapes, and other articles generally appealing to the Christian marketplace);
and membership and/or purchase-driven fees from online promotional partners
(currently ranging from insurance, retailers, to affinity buying clubs). The
Company's strategy going forward is one of making crosswalk.com(TM) a community
portal with deep Channel content and a breadth of information for Christians,
not just Christian information. It is the Company's belief that this strategy,
coupled with crossmedia marketing and promotional activities will accelerate
traffic and thus revenue growth over time. The Company plans to continue
enhancing crosswalk(TM) in order to become the preferred online resource for
Christians in search of information, interaction and involvement opportunities
that help them apply a Christian world view across the breadth of their life
and interests.
The result of the transition to being a consumer-based developer of
Internet communities from being a client-based web services provider, is that
73% of total 1998 September year to date revenue is generated from advertising
and sponsorships and retail sales, as compared to less than 15% for the same
period in 1997. The increases in the Company's new revenue streams
(advertising, sponsorships, affinity memberships, and retail sales) exceeded
the decline in web consulting services and Internet access revenue streams by
154% in the first nine months of 1998. Overall, the Company also experienced a
130% increase in revenue in the third quarter of 1998 as compared to the same
period in 1997. Additionally, the Company's progress in developing
crosswalk(TM) is evidenced by the growth in membership, ad impressions and page
views. Membership in crosswalk(TM) is free and simply requires filling out an
online registration form with one's name, e-mail address, and limited
demographic data. An advertising (ad) impression is the display of one of
several types of ads on a given page seen during the course of a visit. As the
term connotes, page views are a measure of total pages viewed by visitors to
crosswalk(TM) in a month. At September 30, 1998, the company had 123,274
members as compared to 29,980 members at September 30, 1997, an annual growth
rate of 311%. Ad impressions grew 228% from 758,000 average per month in the
third quarter of 1997 to 2,490,000 in the same period in 1998. Average monthly
page views tallied in the third quarter reached 1,273,500 from less than
100,000 a year earlier. To the extent membership in crosswalk(TM) continues to
increase and the Company continues to place advertisements and generate
sponsorships on crosswalk(TM) for which it receives a fee, revenues from this
activity on crosswalk(TM) should increase. The opportunity for the Company to
begin generating significant advertising and retail revenues is predicated upon
increasing membership and traffic in the form of ad impressions and page views
on crosswalk(TM).
In the third quarter of 1998, one of the most significant Company events was the
relaunch of the Company's website to the newly branded crosswalk.com(TM),
replacing CCN: Christian Community Network (www.christcom.net). The Company
deemed it necessary to establish the simplified name and URL "crosswalk.com(TM)"
prior to initiating a considerable marketing and promotion campaign.
9
<PAGE> 10
Also in the third quarter, the Company signed several new agreements and
released several new products. The combination of these community building
activities has been instrumental in realizing this increased traffic pattern.
New agreements consisted of revenue sharing with M.A.I.N. Financial Services,
Inc. who will provide insurance products as part of the crosswalkMoney Channel,
the selection of Vignette's StoryServer 4.0 to accelerate web content
development and customer relationship management, and the acquisition of the
brand name and proprietary investment screens developed by the Institute for
American Values Investing, known for its development of database screening
methodologies that allow investors to evaluate current or potential holdings
based upon a range of conservative values. In addition, the Company signed
revenue sharing and sponsorship arrangements with Quote.com and Compassion
International for the provision of content to the crosswalkMoney and
crosswalkMusic Channels, respectively. Both of these Channels were released in
"beta" format in the third quarter, along with the crosswalkCareers Channel. In
this regard, the Company also announced two significant new hires in Scott
Fehrenbacher, General Manager of the crosswalkMoney Channel, and former founder
and president of American Values Investing Inc., and Neal Joseph, Vice President
and General Manager responsible for all aspects of entertainment on
crosswalk.com(TM), including, but not limited to, the crosswalkMusic Channel.
Prior to accepting this position, Mr. Joseph was the founder and president of
Warner Bros. Records' Christian music division Warner Alliance.
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 their 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 until sufficient revenues are generated to cover expenses. As of September
30, 1998, the Company had an accumulated deficit of approximately $10,127,023.
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 possible 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. The Company has just recently
begun to generate revenue from the commercial sale of advertising space on and
sponsorships of crosswalk(TM) and very limited sales of products via
crosswalk(TM). The Company plans to significantly increase its sales and
marketing efforts and fund greater levels of crosswalk(TM) operations. 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.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
NET LOSS
For the nine months ended September 30, 1998, the Company incurred a net loss of
$2,190,150 as compared to a net loss of $1,980,771 for the same period in 1997.
This increased loss of $209,379 (11%) was due primarily to an increase in
expenditures, the details of which follow, offset to an extent by an increase in
gross margin and other income. The increased loss consisted of a $670,439 (34%)
increase in Operating Expenses for the nine months ended September 30, 1998
($2,669,514) as compared to the nine months ended September 30, 1997
($1,999,075), offset to an extent by a $152,466 (106%) increase in gross margin
and a $308,594 (244%) increase in Other Income. Other Income increased as a
result of a $167,991 (1,051%) increase in interest income and a $140,830 (99%)
decrease in interest expense.
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<PAGE> 11
REVENUES
The Company earned $196,245 or 64% more revenue in the nine months ended
September 30, 1998 than in the same period in 1997. The $502,164 of revenue
earned in the first nine months of 1998 consisted of $127,045 from Consulting
Services, $7,116 from Internet Access, $100,330 from Retail Sales, and $267,673
from Advertising and Sponsorships while the $305,919 of revenue earned in the
first nine months of 1997 consisted of $223,608 from Consulting Services,
$36,975 from Internet Access, $40,523 from Retail Sales, and $4,813 from
Advertising and Sponsorships. The year on year change in revenue mix is a 5,461%
($262,860) increase in advertising/sponsorship revenue, a 148% ($59,807)
increase in retail revenue, a 43% ($96,563) decrease in consulting revenue and
an 81% ($29,859) decrease in Internet access revenue. Barter agreements which
allowed for equal exchanges of goods and services such as advertising and
content services on the Company's and the customer's Internet websites, amounted
to twenty-two percent of the nine month revenue. The decrease in Consulting
Service revenue is due to the Company's transition from being a web consulting
services provider to being a community builder, as previously described.
Internet access revenue decreased because of a one-time revenue adjustment
recorded in the first quarter of 1997 and the discontinuation of marketing
Internet access in the end of 1996. With continued growth in site traffic,
service enhancements, and marketing resources dedicated to retail and
advertising revenue opportunities, the Company hopes to achieve continued
progress in these revenue streams.
COST OF GOODS AND SERVICES
Cost of goods and services, consisting of costs related to development,
maintenance, and support of customer websites; retailing Christian interest
products on crosswalk(TM); and selling advertising space on and sponsorships of
crosswalk(TM), was $205,174 and $161,395 for the nine months ended September 30,
1998 and 1997, respectively. The Company experienced a gross margin improvement
to 59% from 47% for the nine months ended September 30, 1998 and 1997,
respectively. To the extent that the Company is able to continue to grow these
high margin revenues, cost of sales should continue to decrease as a percentage
of revenue. However, there can be no guarantee that this will occur due to the
volatile nature of the Internet industry.
PRODUCT DEVELOPMENT AND CROSSWALK(TM) OPERATIONS
Product development, which consists of labor and material costs
associated with the development of new crosswalk(TM) products and services,
decreased by $84,922 (24%) primarily due to a change in the staffing mix in the
first nine months of 1998 as compared to the same period in 1997. The Company
realigned its departments to better utilize its employees' talents and
abilities and thus advance further towards its goal of providing the number one
Christian community (or "portal") on the Internet. Crosswalk(TM) Operations
expenses, consisting primarily of costs related to the Company's maintenance
and enhancements for crosswalk(TM), increased to $715,987 for the nine months
ended September 30, 1998, as compared to $436,879 for the same period in 1997.
The cost of Crosswalk(TM) Operations increased by 64% ($279,108) due to the
Company's shift from being a consulting services company to being a consumer
focused community portal. A smaller portion of salary expense was charged to
cost of sales in 1998 due to the decrease in web consulting revenues. In
addition, there was an across the board wage increase in September 1997 and a
larger staff in Crosswalk(TM) Operations in 1998 as compared to 1997. There
were also increases in consulting services, content, and travel expense which
directly resulted from the expansion of crosswalk(TM) both in terms of services
offered on the website and, in management's opinion, the quality of those
services.
SALES AND MARKETING
Sales and marketing expenses increased by 8% ($48,193) to $641,521 from $593,327
for the nine months ended September 30, 1998 and 1997, respectively. However,
taking into account that there was a one time $200,000 stock donation to one of
the Company's ministry partners in the first nine months of 1997, operationally
there was a $248,194 (63%) increase in Sales and Marketing in the first nine
months of 1998 over the same period in 1997. This increase is a result of the
Company's efforts to improve crosswalk(TM)'s market recognition and to thus
increase the Company's retail and advertising sales. This increased investment
consisted of increases in staffing, wages, and advertising. The Company expanded
its sales and marketing staff in the first half of 1998. In addition, there was
an across the board wage increase in the end of 1997, subsequent to the
Company's IPO. Both print media and online
11
<PAGE> 12
media were utilized more extensively in 1998 to promote crosswalk(TM) for
purposes of market recognition, thus causing the increase in advertising costs.
However, this increase does not reflect the majority of the costs associated
with the Company's plans for a marketing and promotional campaign to be
implemented in the fourth quarter. The Company believes that it will continue
to incur substantial technical and marketing expenses as it seeks to expand the
market for crosswalk(TM).
GENERAL AND ADMINISTRATIVE
The Company increased its general & administrative (G&A) costs by 69% or
$428,059 in the nine months ended September 30, 1998 versus the same period in
1997 largely in response to the requirements of being a publicly held firm. In
order to address the Company's requirement to improve the operational processes
necessary to support crosswalk(TM) growth, the Company invested approximately
$76,000 in management consulting services. Lastly, salary expenses increased in
the first nine months of 1998 due to the appointment of a new Chief Executive
Officer and the discontinuance of salary abatements at the end of 1997.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased 1,051% to $183,971 from $15,980 for the nine months
ended September 30, 1998 and 1997, respectively. This $167,991 increase is
due to the investment of the proceeds from the Company's IPO.
Interest expense was $1,947 and $142,777 for the nine months ended September
30, 1998 and 1997, respectively. The $140,830 (99%) decrease in interest
expense is due primarily to the repayment in October 1997 of $623,000 of
interest bearing notes issued in 1996.
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
NET LOSS
For the three months ended September 30, 1998, the Company incurred a net loss
of $690,856 as compared to a net loss of $587,808 for the same period ended
September 30, 1997. This increased loss of $103,048 (18%) was due to an increase
in expenditures, the details of which follow, offset to an extent by an increase
in gross margin and other income. The increased loss consisted of a $302,655
(51%) increase in Operating Expenses for the three months ended September 30,
1998 ($893,605) as compared to the three months ended September 30, 1997
($590,950), offset to an extent by an $83,299 (149%) increase in gross margin
and a $116,308 (221%) increase in Other Income. Other Income increased as a
result of a $63,089 (11,917%) increase in interest income and a $53,281 (100%)
decrease in interest expense.
REVENUES
In the quarters ended September 30, 1998 and 1997, the Company earned $246,043
and $106,780 of revenue, respectively. Of the revenue recognized during the
quarter ended September 30, 1998, $50,921 was generated from Consulting
Services, $2,454 from Internet Access, $40,435 from Retail Sales, and $152,233
from Advertising and Sponsorships. This compares to $73,299 of Consulting
Service revenue, $3,631 of Internet Access revenue, $26,425 of Retail Sales
revenue and $3,425 of Advertising and Sponsorship revenue for the comparable
period in 1997. The $22,378 (31%) decrease in Consulting Service revenue is due
to DIDAX's transition from being a web consulting services provider to being a
community builder, as previously described, which is indicative of the $14,010
(53%) increase in retail sales and the $148,808 (4,345%) increase in Advertising
and Sponsorship sales. Internet access revenue decreased by $1,177 (32%) because
the Company discontinued actively marketing Internet access at the end of 1996.
Barter agreements which allowed for equal exchanges of goods and services such
as advertising and content services on the Company's and the customer's Internet
websites, amounted to forty percent of the third quarter revenue. With continued
growth in site traffic, service enhancements, and marketing resources dedicated
to retail and advertising and sponsorship revenue opportunities, the Company
hopes to achieve continued progress in these revenue streams.
12
<PAGE> 13
COST OF GOODS AND SERVICES
Cost of goods and services, consisting of costs related to development,
maintenance and support of customer websites; the cost of reselling Christian
interest products, primarily Christian music, on community based websites, and
the cost of selling advertising space on and sponsorships of these community
based websites was $106,911 and $50,947 for the quarters ended September 30,
1998, and 1997, respectively. Despite a $55,963 (110%) increase in the cost of
goods and services, there was a gross margin improvement to 57% from 52% for the
quarters ended September 30, 1998 and 1997, respectively. This trend establishes
the very reason the Company has transitioned to what the Company believes are
higher leverage Retail, Advertising and Sponsorship revenue streams. To the
extent that the Company is able to continue to grow these high margin revenues,
cost of sales should continue to decrease as a percentage of revenue. However,
there can be no guarantee that this will occur due to the volatile nature of the
Internet industry.
PRODUCT DEVELOPMENT AND CROSSWALK(TM) OPERATIONS
Product development expenses remained almost constant at $106,433 and $105,814
for the three months ended 1998 and 1997, respectively. The less than 1%
increase ($619) in the third quarter of 1998 over 1997 was primarily due to
increases in depreciation and consulting expenses offset by a decrease in salary
expenses. Depreciation expense increased due to the Company's investment of a
portion of the IPO proceeds in fixed assets starting in the fourth quarter of
1997 and continuing in 1998. Consulting expenses increased due to a greater
utilization of third party resources in order to achieve improved staffing
flexibility. Salary expenses decreased as a result of the staffing change
previously mentioned. Crosswalk(TM) Operations expenses, consisting primarily of
costs related to the Company's maintenance and enhancements for crosswalk(TM)
increased to $317,218 for the quarter ended September 30, 1998, as compared to
$182,433 for the same period in 1997. The cost of crosswalk(TM) Operations
increased by $134,785 (74%) due to the Company's shifted focus to consumer
revenues and thus the need to expend more resources in enhancing the website.
Salary expense increased in the three months ended September 30 1998 as compared
to the same period in 1997 as a result of charging a smaller portion of salary
expense to cost of sales and as a result of the reallocation of the staff
described earlier. Lastly, in an effort to expand crosswalk(TM)'s breadth and
depth, the Company invested in consultants, content, and travel to a greater
extent in the third quarter of 1998 as compared to the same period in 1997.
SALES AND MARKETING
Sales and marketing expenses increased $62,342 (61%) from $101,428 in the third
quarter of 1997 to $163,771 in the same period in 1998. This increase is
primarily due to an expansion of both the marketing and the sales departments in
1998. Thus salaries (up 77% or $35,461), travel (up 76% or $3,810), and
advertising expenses (up 88% or $28,013) were higher in the third quarter of
1998 as compared to the same quarter in 1997. These increases were offset in
part by a decrease in consulting fees (down 30% or $5,476). The Company has
expanded these departments as part of its efforts to increase crosswalk(TM)'s
name recognition and sales. The Company believes that it will continue to incur
substantial technical and marketing expenses as it seeks to expand the market
for crosswalk(TM).
GENERAL AND ADMINISTRATIVE
The Company's general & administrative (G&A) costs increased by 52% or $104,908
in the third quarter of 1998 versus the same quarter in 1997 mostly in response
to the requirements of being a publicly held firm. Salary expenses increased in
the third quarter of 1998 due in part to the Company's acquisition of a new
chief executive officer and the discontinuance of salary abatements at the end
of 1997. In addition, there were moderate increases in general office expenses
due in part to the expansion of the Company, the website name change, and the
shift from consulting services to community portal strategy. On account of this
shift, hosting costs are now charged to expense instead of to the cost of sales
as hosting costs are no longer incurred for the primary purpose of hosting
client site, but rather for the support of the community portal
crosswalk.com(TM).
13
<PAGE> 14
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased 11,971% to $63,616 from $527 for the quarters
ended September 30, 1998 and 1997, respectively. This $63,089 increase is
due to the investment of the proceeds from the Company's IPO.
Interest expense was $0 and $53,281 for the quarters ended September 30, 1998
and 1997, respectively. The decrease in interest expense is primarily due to the
repayment in October 1997 of $623,000 of interest bearing notes issued in 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1998 and 1997, net cash used in
operating activities was $2,126,708 and $1,163,956, respectively. Net cash used
in investment activities was $243,156 and $14,842 in the nine months ended
September 30, 1998 and 1997, respectively as the Company began purchasing the
technology tools necessary to support the traffic growth on crosswalk(TM). Net
cash (used) provided by financing activities was $(104,644) and $1,162,372 for
the nine months ended September 30, 1998 and 1997, respectively. In the nine
months ended September 30, 1998, cash use in financing activities consists of
the Company repayment of $82,230 of long term debt and the incurrance of $22,414
of syndication costs related to the Companys' IPO.
The Company currently anticipates that its $2,893,138 working capital balance at
September 30, 1998, consisting primarily of remaining proceeds from the
Company's initial public offering after the debt liquidation and liquidation of
accrued offering costs, will be sufficient to meet the Company's anticipated
working capital, lease commitments, and capital expenditure requirements for the
next twelve months. However, the Company anticipates that it may seek to raise
additional funds in order to expand its marketing campaign, and crosswalk(TM)
Channel deployment, and to pursue potential leveraged joint marketing
opportunities, or in the event that the Company's estimates of operating losses
and capital requirements change or prove inaccurate or in order that the Company
may respond to increased demand or to take advantage of other unanticipated
opportunities. There can be no assurance that additional financing will be
available to the Company or that such financing will be available on acceptable
terms.
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 multiple factors. Causes of such
significant fluctuations may include, among other factors, demand for the
Company's services, the number, timing and significance of new service
announcements by the Company and its competitors, acceptance of its marketing
initiatives, 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.
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.
14
<PAGE> 15
YEAR 2000 COMPLIANCE STATUS
Many existing computer programs use only two digits to identify a year in the
date field. These programs, which were developed without considering the impact
of the upcoming change in the century, could fail or create erroneous results by
or at the year 2000. The Company has reviewed its internal programs, and has
determined that there are no material year 2000 issues within the Company's
current systems or services. The Company is in the process of soliciting replies
from its material customers, vendors and financial service providers to
determine any risk of year 2000 issues. As of the date herein, no material year
2000 issues have been identified, however, the Company cannot be certain that
its customers, vendors or financial services providers will not have year 2000
issues until evaluation of replies to the Company's year 2000 initiative is
complete in the fourth quarter. Should such issues arise with any of these
parties, it could have a material adverse effect on the Company's business,
operating results and financial condition.
FORWARD LOOKING STATEMENTS
Certain information in this quarterly report on Form 10-QSB may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are forward-looking statements for purposes of these provisions,
including any projections of earnings, revenues or other financial items, any
statements of the plans and objectives of management for future operations, any
statements concerning proposed new products or services, any statements
regarding future economic conditions or performance, and any statement of
assumptions underlying any of the foregoing. In some cases, forward-looking
statements can be identified by the use of terminology such as "may," "expects,"
"believes," "plans," "anticipates," "estimates," "potential," or "continue," or
the negative thereof or other comparable terminology. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements.
15
<PAGE> 16
PART II
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 2. CHANGE IN SECURITIES
(c) In reliance upon Section 4 (2) of the Securities Act, in August 1998, 5,000
non-registered shares of Common Stock were issued to American Values Investing,
LLC, of a total of 15,000 non-registered shares committed, for the purchase of
the proprietary methodology and database underlying the personal finance
software known as eValueator, the Institute for American Values Investing
("AVI") trade name, and the website (referred to collectively as the
"Investigator") by the same title (www.americanvalues.com). 5,000 shares will be
issued in May, 1999, and the remaining 5,000 shares will be issued in February,
2000, contingent upon the Company's continued employment of the founder of AVI
as the Manager of Crosswalk's Money Channel effective August 3, 1998.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None to report.
ITEM 5. OTHER INFORMATION
None to report.
ITEM 6. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
11 Computation of Earnings Per Share
27.1 Financial Data Schedules - Restatement of Three Months Ended September 30, 1997
27.2 Financial Data Schedule - Restatement of Nine Months Ended September 30, 1997
27.3 Financial Data Schedule - For the Three Months Ended September 30, 1998
27.4 Financial Data Schedule - For the Nine Months Ended September 30, 1998
</TABLE>
(b) Reports on Form 8-K
None to report.
16
<PAGE> 17
SIGNATURES
In accordance with the requirements of Securities Act of 1934, DIDAX
INC., the registrant, has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIDAX INC.
November 10, 1998 By: /s/ William M. Parker
---------------------
William M. Parker
Chief Executive Officer and President
November 10, 1998 By: /s/ Gary A. Struzik
-------------------
Gary A. Struzik, Chief Financial Officer and
Secretary, Chief Accounting Officer
17
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
11 Computation of Earnings Per Share 1-2
27.1 Financial Data Schedule - Restatement of the Three Months Ended
September 30, 1997 3-5
27.2 Financial Data Schedule - Restatement of the Nine Months Ended
September 30, 1997 6-8
27.3 Financial Data Schedule - For Three Months Ended September 30, 1998 9-11
27.4 Financial Data Schedule - For Nine Months Ended September 30, 1998 12-13
</TABLE>
18
<PAGE> 1
DIDAX INC. & SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
30-Sep-97
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: NINE MONTHS ENDED SEPTEMBER 30, 1997
Common Exercise Assumed Estimated Assumed Net Shares
Shares Price Proceeds IPO Price Treas. Stk. Added
------ -------- -------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding -
beginning of period 1,160,376
Recission reduced by 6,000 shares on
8/1/97 1,160,376
Recission reduced by 6,000 shares on
8/4/97 1,160,376
Recission reduced by 25,000 shares on
9/5/97 1,160,376
Stock sold during the year: 122,055
gofishnet stock 40,000
PK 2,212
Lasmanis
Grant/Exercise of warrants: 50,962
Assumed issued and outstanding -
beginning of period 22,259 4.00 89,036 5.00 17,807 4,452
Detachable warrants
End of period 09/30/97 Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: NINE MONTHS ENDED SEPTEMBER 30, 1997 10/01/97 Diluted Basic
Shares subject Total Grant/Purch. Days Weighted Weighted
to Recission Shares Date Outstanding Shares Shares
-------------- ------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding -
beginning of period 607,433 552,943 01/01/97 212 117,223,916 117,223,916
Recission reduced by 6,000 shares on
8/1/97 601,433 558,943 08/01/97 3 1,676,829 1,676,829
Recission reduced by 6,000 shares on
8/4/97 595,433 564,943 08/04/97 32 18,078,176 18,078,176
Recission reduced by 25,000 shares on
9/5/97 570,433 589,943 09/05/97 26 15,338,518 15,338,518
-- ---------- ----------
273 152,317,439 152,317,439
Stock sold during the year:
gofishnet stock 0 122,055 01/01/97 273 33,321,015 33,321,015
PK 0 40,000 04/21/97 163 6,520,000 6,520,000
Lasmanis 0 2,212 04/23/97 161 356,132 356,132
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 50,962 01/01/97 273 13,912,626
Detachable warrants 4,452 7/10/97 83 369,516
-------------- --------------
206,796,728 192,514,586
273 273
-------------- --------------
757,497 705,182
(1,980,771) (1,980,771)
-------------- --------------
(2.61) (2.81)
</TABLE>
DIDAX INC. & SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
30-Sep-97
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: NINE MONTHS ENDED SEPTEMBER 30, 1997
Common Exercise Assumed Estimated Assumed Net Shares
Shares Price Proceeds IPO Price Treas. Stk. Added
------ -------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding -
beginning of period 1,160,376
Recission reduced by 6,000 shares on
8/1/97 1,160,376
Recission reduced by 6,000 shares on
8/4/97 1,160,376
Recission reduced by 25,000 shares on
9/5/97 1,160,376
Stock sold during the year:
gofishnet stock 122,055
PK 40,000
Lasmanis 2,212
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 50,962
Detachable warrants 22,259 4.00 89,036 5.00 17,807 4,452
End of period 09/30/97 Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: 10/01/97 Diluted Basic
Shares subject Total Grant/Purch. Days Weighted Weighted
to Recission Shares Date Outstanding Shares Shares
--------------- ------ ------------ ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding -
beginning of period 607,433 552,943 01/01/97 31 17,141,233 17,141,233
Recission reduced by 6,000 shares on
8/1/97 601,433 558,943 08/01/97 3 1,676,829 1,676,829
Recission reduced by 6,000 shares on
8/4/97 595,433 564,943 08/04/97 32 18,078,176 18,078,176
Recission reduced by 25,000 shares on
9/5/97 570,433 589,943 09/05/97 26 15,338,518 15,338,518
-- ---------- ----------
92 52,234,756 52,234,756
Stock sold during the year:
gofishnet stock 0 122,055 01/01/97 92 11,229,060 11,229,060
PK 0 40,000 04/21/97 92 3,680,000 3,680,000
Lasmanis 0 2,212 04/23/97 92 203,504 203,504
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 50,962 01/01/97 92 4,688,504
Detachable warrants 4,452 7/10/97 83 369,516
--------
55,414
---------- ----------
72,405,340 67,347,320
92 92
---------- ----------
787,015 732,036
(587,808) (587,808)
---------- ----------
(0.75) (0.80)
</TABLE>
<PAGE> 2
DIDAX INC.
COMPUTATION OF EARNINGS PER SHARE
30-Sep-98
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: NINE MONTHS ENDED SEPTEMBER 30, 1998
Common Exercise Assumed Assumed Net Shares
Shares Price Proceeds IPO Price Treas. Stk. Added
------ -------- -------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding -
beginning of period 3,542,588
Recission reduced on 3/20/98 by
553,184 shares 3,542,588
Stock sold during the year:
gofishnet stock: 130,292
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 55,414
AVI Asset Purchase 5,000
End of period 09/30/98 Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: NINE MONTHS ENDED SEPTEMBER 30, 1998 10/01/98 Diluted Basic
Shares subject Total Grant/Purch. Days Weighted Weighted
to Recission Shares Date Outstanding Shares Shares
-------------- ------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding -
beginning of period 574,434 2,968,154 01/01/98 78 231,516,012 231,516,012
Recission reduced on 3/20/98 by
553,184 shares 21,250 3,521,338 03/20/98 195 686,660,910 686,660,910
------------------------- --------------
273 918,176,922 918,176,922
Stock sold during the year:
gofishnet stock: 0 130,292 01/01/98 273 35,569,716 35,569,716
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 0 55,414 01/01/98 273 15,128,022
AVI Asset Purchase 0 5,000 08/07/98 55 275,000 275,000
-------------- --------------
969,149,660 954,021,638
273 273
-------------- --------------
3,549,999 3,494,585
(2,190,150) (2,190,150)
-------------- --------------
(0.62) (0.63)
</TABLE>
DIDAX INC.
COMPUTATION OF EARNINGS PER SHARE
30-Sep-98
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: THREE MONTHS ENDED SEPTEMBER 30, 1998
Common Exercise Assumed Assumed Net Shares
Shares Price Proceeds IPO Price Treas. Stk. Added
------ -------- -------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Common Stock 3,542,588
Recission reduced on 3/20/98 by
553,184 shares
Stock sold during the year:
gofishnet stock: 130,292
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 55,414
AVI Asset Purchase 5,000
End of period 09/30/98 Weighted average share outstanding
Net loss
Net loss per share
</TABLE>
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: THREE MONTHS ENDED SEPTEMBER 30, 1998 10/01/98 Diluted Basic
Shares subject Total Grant/Puch. Days Weighted Weighted
to Recission Shares Date Outstanding Shares Shares
-------------- ------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Common Stock
Recission reduced on 3/20/98 by
533,184 shares 21,250 3,521,338 03/20/98 92 323,963,096 323,963,096
------------------------- --------------
92 323,963,096 323,963,096
Stock sold during the year:
gofishnet stock: 0 130,292 01/01/98 92 11,986,864 11,986,864
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 0 55,414 01/01/98 92 5,098,088
AVI Asset Purchase 0 5,000 08/07/98 55 275,000 275,000
-------------- --------------
341,323,048 336,224,960
92 92
-------------- --------------
3,710,033 3,654,619
(690,856) (690,856)
-------------- --------------
(0.19) (0.19)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 34,700
<SECURITIES> 0
<RECEIVABLES> 74,133
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 757,692
<PP&E> 260,750
<DEPRECIATION> 128,835
<TOTAL-ASSETS> 900,746
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,152,689
<OTHER-SE> 127,659
<TOTAL-LIABILITY-AND-EQUITY> 900,746
<SALES> 0
<TOTAL-REVENUES> 106,780
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