<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 June 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.)
4501 Daly Dr., Suite 103
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: 3,651,630 shares outstanding as of June 30, 1998
Transitional Small Business Disclosure Format (check 0ne):
Yes No X
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<PAGE> 2
INDEX
<TABLE>
Part I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Balance Sheet--June 30, 1998 3
Statements of Operations--Three Months and Six Months Ended
June 30, 1997 and 1998, and May 12, 1993 to June 30, 1998
Cumulative from Inception 4
Statements of Cash Flows--Three Months and Six Months Ended
June 30, 1997 and 1998, and May 12, 1993 to June 30, 1998
Cumulative from Inception 5
Notes to Financial Statements--June 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 15
Signatures 16
</TABLE>
<PAGE> 3
DIDAX INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1998 (UNAUDITED)
<TABLE>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,845,081
Accounts receivable including unbilled of $49,930, net of
allowance for doubtful accounts of $255 144,376
Prepaid expenses 8,992
Deferred costs 8,250
------------------------------
Total current assets 4,006,699
PROPERTY AND EQUIPMENT, net 213,777
OTHER ASSETS:
Notes receivable from officers 93,000
------------------------------
Total other assets 93,000
------------------------------
$ 4,313,476
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 132,012
Accrued liabilities 172,382
Deferred revenue 8,690
------------------------------
Total current liabilities 313,084
OTHER LIABILITIES:
Accounts payable 40,097
------------------------------
Total liabilities 353,181
COMMITMENTS AND CONTINGENCIES -
COMMON STOCK SUBJECT TO POSSIBLE RECISSION:
$.01 par value, 21,250 shares issued and outstanding
at June 30, 1998 85,000
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 20,000,000 shares authorized
3,651,630 shares issued and outstanding at June 30, 1998 36,516
Common stock warrants 666,722
Additional paid-in capital 12,608,527
Deficit accumulated during development stage (9,436,470)
------------------------------
Total stockholders' equity 3,875,295
------------------------------
$ 4,313,476
==============================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
DIDAX INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
----------------- ------------------- -------------------- -------------------
1997 1998 1997 1998
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Advertising/Sponsorship sales $ 1,388 $ 99,710 $ 1,388 $ 115,440
Retail sales 10,757 33,790 14,099 59,910
Consulting services 87,874 30,219 155,711 76,100
Internet access 4,503 2,590 27,941 4,662
----------------- ------------------- -------------------- -------------------
Total operating revenues 104,522 166,309 199,139 256,112
OPERATING EXPENSES:
Cost of goods and services 72,548 58,862 110,448 98,263
Product development 128,730 80,804 245,245 159,704
CCN operations 137,704 241,148 254,447 398,770
Sales and marketing 399,370 228,121 491,898 477,747
General and administrative 224,439 367,195 416,531 739,549
----------------- ------------------- -------------------- -------------------
Total operating expenses 962,791 976,130 1,518,569 1,874,033
----------------- ------------------- -------------------- -------------------
LOSS FROM OPERATIONS (858,269) (809,821) (1,319,430) (1,617,921)
OTHER INCOME (EXPENSE):
Interest income 6,164 62,223 15,453 120,355
Gain on exchange of assets - - - -
Miscellaneous income 374 - 521 -
Interest expense (44,762) - (89,503) (1,752)
----------------- ------------------- -------------------- -------------------
Total other income (expense) (38,224) 62,223 (73,529) 118,603
----------------- ------------------- -------------------- -------------------
NET LOSS $ (896,493) $ (747,598) $ (1,392,959) $ (1,499,318)
================= =================== ==================== ===================
Net loss per common share (basic) $ (1.27) $ (0.20) $ (2.01) $ (0.44)
================= =================== ==================== ===================
Weighted average number of common
shares outstanding 708,249 3,651,630 691,532 3,413,241
================= =================== ==================== ===================
Net loss per common share (diluted) $ (1.27) $ (0.20) $ (2.01) $ (0.44)
================= =================== ==================== ===================
Weighted average number of common shares and
common share equivalents outstanding 708,249 3,651,630 691,532 3,413,241
================= =================== ==================== ===================
</TABLE>
<TABLE>
<CAPTION>
Cumulative
from Inception
(May 12, 1993)
to June
30, 1998
-------------------
OPERATING REVENUES:
<S> <C>
Advertising/Sponsorship sales $ 132,316
Retail sales 135,374
Consulting services 477,213
Internet access 114,573
-------------------
Total operating revenues 859,476
OPERATING EXPENSES:
Cost of goods and services 565,368
Product development 1,509,854
CCN operations 1,156,475
Sales and marketing 2,550,726
General and administrative 2,787,170
-------------------
Total operating expenses 8,569,593
-------------------
LOSS FROM OPERATIONS (7,710,117)
OTHER INCOME (EXPENSE):
Interest income 226,265
Gain on exchange of assets 3,091
Miscellaneous income 1,399
Interest expense (1,957,108)
-------------------
Total other income (expense) (1,726,353)
-------------------
NET LOSS $ (9,436,470)
===================
Net loss per common share (basic)
Weighted average number of common
shares outstanding
Net loss per common share (diluted)
Weighted average number of common shares and
common share equivalents outstanding
</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 FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Cumulative
For the Six Months from Inception
Ended June 30, (May 12, 1993)
--------------------------------------------- to June
1997 1998 30, 1998
--------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,392,959) $ (1,499,318) $ (9,436,470)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 62,887 55,317 364,128
Amortization of debt discount charged
to interest expense 55,594 - 127,660
Common stock issued in lieu of cash for
professional services 11,062 - 161,062
Common stock donated 200,000 - 200,000
Common stock issued in lieu of cash for
interest on repayment of long term debt - - 1,733,750
Changes in assets and liabilities affecting operations:
Accounts receivable (36,579) (51,850) (144,376)
Notes receivable from officer - - (93,000)
Prepaid expenses 10,400 8,123 (8,992)
Accounts payable (24,335) 99,245 172,109
Accrued liabilities 114,185 15,874 172,382
Deferred revenue (1,630) (7,328) 8,690
---------------- ------------------ -----------------
Net cash used in operating activities: (1,001,375) (1,379,937) (6,743,057)
---------------- ------------------ -----------------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property and equipment (13,695) (129,328) (442,137)
---------------- ------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short-term debt 1,564,241 - 1,564,241
Proceeds from notes payable 37,230 - 82,230
Repayment of notes payable - (82,230) (82,230)
Proceeds from short-term debt, officer and director - - 873,000
Proceeds from advances due to officer and director - - 242,000
Repayment of short-term debt - - (1,700,000)
Repayment of advances due to officer and director (212,000) - (242,000)
Repayment of short-term debt, officer and director - - (873,000)
Net proceeds from issuance of common stock
and warrants - - 11,174,284
Deferred costs (242,047) (7,205) (8,250)
---------------- ------------------ -----------------
Net cash provided by (used in) financing activities 1,147,424 (89,435) 11,030,275
---------------- ------------------ -----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 132,364 (1,598,700) 3,845,081
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 51,126 5,443,781 -
---------------- ------------------ -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 183,480 $ 3,845,081 $ 3,845,081
================ ================== =================
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.
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 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
six month period ended June 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 six months ended June 30, 1998
and 1997, respectively are presented on a consolidated basis. For the three
months and the six months ended June 30, 1997, gofishnet earned revenues of
$8,613 and $10,493 and incurred a net loss of $43,682 and $69,574, respectively.
DIDAX's and gofishnet's ("The Company's") 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. SHORT-TERM DEBT
In the first quarter of 1997, gofishnet borrowed $37,230 at an interest rate of
7% from a former principal. gofishnet borrowed an additional $45,000 at an
interest rate of 10% from the same source during the third and fourth quarters
of 1997. The Company recognized $0, $624, $1,752 and $1,032 interest expense for
the three months and the six months ended June 30, 1998 and 1997, respectively
in connection with these notes. Both notes were due and repaid in full on April
1, 1998.
D. RELATED PARTY TRANSACTIONS
To enhance process and achieve product efficiencies, the Company hired Corporate
Resource Development, Inc. ("CRD") in February 1998, for consulting services
commencing in March 1998 on a month to month basis, cancelable within 30 days of
notice from the firm in the month following such notice. Max Carey, a member of
DIDAX's board of directors, is CRD's Vice Chairman.
This contract was canceled effective May 31, 1998.
6
<PAGE> 7
E. 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 Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss (numerator) $(896,493) $ (747,598) $(1,392,959) $(1,499,318)
Weighted average shares (denominator) 708,249 3,651,630 691,532 3,413,241
Basic net loss per share $ (1.27) $ (0.20) $ (2.01) $ (0.44)
========= =========== =========== ===========
Dilutive shares (denominator) 708,249 3,651,630 691,532 3,413,241
Diluted net loss per share $ (1.27) $ (0.20) $ (2.01) $ (0.44)
========= =========== =========== ===========
</TABLE>
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 No. 128 "Earnings Per Share," for the three months and the
six months ended June 30, 1998 and 1997. Thus 50,962 stock options and purchase
warrants granted at below market prices outstanding in the three months and the
six months ended June 30, 1997, and 55,414 stock options and purchase warrants
granted at below market prices outstanding in the three months and the six
months ended June 30, 1998, respectively, are not included in the calculation of
diluted EPS, as their inclusion would be antidilutive. EPS for the periods
ending June 30, 1997 is restated to reflect the aforementioned SEC pronouncement
and the merger with gofishnet.
F. 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 and web site development; electronic commerce transactions,
primarily consisting of Christian music sales; and the sale of Internet access
subscriptions. 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 the Christian Community Network(TM) ("CCN"). 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 10% of revenues for the six
months ended June 30, 1998, are recorded at the lower of estimated fair value of
the goods or services received or the estimated fair value of the advertisements
given. Barter transactions consist of providing hosting services in return for
product price discounts and providing website advertising space on CCN in return
for advertising space on the customer's website. The revenues and equivalent
cost of sales from these barter transactions are recorded in the month in which
the services are provided and are reported as consulting services revenues and
advertising/sponsorship revenues.
7
<PAGE> 8
G. 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.
H. ANNUAL STOCKHOLDER MEETING
On Wednesday, April 29, 1998, the Company's shareholders of record, as of the
close of business on March 20, 1998, approved the election of the Board of
Directors, ratified and approved the adoption of the 1998 Stock Option Plan (the
"1998 Plan"). The Common Stock (the "shares") subject to the 1998 Plan that may
be purchased (through the exercise of options) shall not exceed in the aggregate
400,000 shares. If any stock options granted under the 1998 Plan shall
terminate, expire or be canceled as to any shares, new stock options may
thereafter be granted covering such shares. In addition, any shares purchased
under this 1998 Plan subsequently repurchased by the Company pursuant to the
terms hereof may again be granted under the 1998 Plan. The shares issued upon
exercise of stock options under the 1998 Plan may, in whole or in part, be
either authorized but unissued shares or issued shares reacquired by the
Company. The 1998 Plan will be administered by the Compensation Committee of the
Board of Directors or by the Board of Directors as a whole.
I. SUBSEQUENT EVENTS
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 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 CCN's Personal Finance Channel effective August
3, 1998.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
BACKGROUND
DIDAX INC. ("the Company") is the creator and builder of the Christian Community
Network(TM) (CCN) (WWW.CHRISTCOM.NET), 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. In the past, the Company has derived most
of its revenues from providing Consulting Services, defined as Internet
development and hosting, 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); and
World Vision, an international Christian relief agency (www.worldvision.org).
The Company's website services and development clients also include Mercy
Medical Airlift, Christian Management Association, Worship Media Resources,
Evangelical Council for Financial Accountability (ECFA), Young Life and
Presbyterian Church in America.
At present, the Company generally believes that it is positioned to generate the
majority of its revenues through: the sale of advertising and sponsorship
opportunities on CCN; direct retail sales and royalties/fees from the sale of
Christian interest products manufactured or developed by others (primarily
books, CDs, and other articles generally appealing to the Christian
marketplace); membership and/or purchase-driven fees from online promotional
partners (currently ranging from retailers to affinity buying clubs); and to a
much lesser extent, the continuing provision of Internet services to Christian
and nonprofit organizational clients.
The effectiveness of this transition to being a consumer-based developer of
Internet communities from being a client-based web services provider, is
evidenced by a tenfold year on year increase in revenue associated with
community building content, services and products, led by the sale of Christian
music from gofishnet.com which has quadrupled compared to last year. The
increases in the Company's new revenue streams (advertising, sponsorships,
affinity memberships, and retail sales) exceeded the decline in web consulting
services revenue by 60% in the first six months of 1998. Overall, the Company
also experienced a 59% increase in revenue in the second quarter of 1998 as
compared to the same period in 1997. Additionally, the Company's progress in
developing the CCN community is evidenced by the growth in membership and
advertising impressions. Membership on CCN 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. At June
30, 1998, the company had 100,586 members as compared to 21,467 members at June
30, 1997, an annual growth rate of 368%. Ad impressions grew 385% from 488,000
in the second quarter of 1997 to 2,368,000 in the same period in 1998. To the
extent membership in CCN continues to increase and the Company continues to
place advertisements and generate sponsorships on CCN for which it receives a
fee, revenues from this activity on CCN should increase. The opportunity for the
Company to begin generating significant advertising and retail revenues is
predicated upon increasing the membership in CCN. Until critical mass is
achieved in pursuing this consumer oriented business model, work effort shifted
from client services activities may have an adverse effect on overall revenue.
In the second quarter of 1998, the Company signed several new agreements,
released several new products, and enhanced several of its existing products.
The combination of these community building activities has been instrumental in
realizing this increased traffic pattern. DIDAX's wholly owned subsidiary,
gofishnet.com, inc. ("gofishnet"), an Internet retailer of Christian music and
videos, experienced a retail sales (music and videos) revenue growth of 276%
from $7,289 in the second quarter of 1997 to $27,392 in the second quarter of
1998. This growth occurred through the expansion of its services, and increased
exposure on CCN. The Company invested significant resources to improve site
content via CCN Women (provides information and interaction opportunities for
Christian women) and the launch of CCN Money (provides Biblically based
financial information including insurance opportunities). To support the growing
interest in these services, the Company continues to invest in technology
infrastructure - primarily server speed and capacity - to enable more visitors
to get involved. The Company plans to continue enhancing CCN for years to come
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.
9
<PAGE> 10
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 June 30,
1998, the Company had an accumulated deficit of approximately $9,436,000.
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 CCN and very limited sales of products via CCN. The Company
plans to significantly increase its sales and marketing efforts, and fund
greater levels of product development. 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
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
NET LOSS
For the six months ended June 30, 1998, the Company incurred a net loss of
$1,499,318 as compared to a net loss of $1,392,959 for the same period ended
June 30, 1997. This increased loss of $106,359 (8%) 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
$355,464 (23%) increase in Operating Expenses for the six months ended June 30,
1998 ($1,874,033) as compared to the six months ended June 30, 1997
($1,518,569), offset to an extent by a $69,158 (78%) increase in gross margin
and a $192,132 (261%) increase in Other Income. Other Income increased as a
result of a $104,902 (679%) increase in interest income and a $87,751 (98%)
decrease in interest expense.
REVENUES
The Company earned $56,973 or 29% more revenue in the six months ended June 30,
1998 than in the same period in 1997. The $256,112 of revenue earned in the
first six months of 1998 consisted of $76,100 from Consulting Services, $4,662
from Internet Access, $59,910 from Retail Sales, and $115,440 from Advertising
and Sponsorships while the $199,139 of revenue earned in the first six months of
1997 consisted of $155,741 from Consulting Services, $27,941 from Internet
Access, $14,099 from Retail Sales, and $1,388 from Advertising and Sponsorships.
The year on year change in revenue mix is a 8,217% ($114,052) increase in
advertising/sponsorship revenue, a 325% ($45,811) increase in retail revenue, a
51% ($79,611) decrease in consulting revenue and an 83% ($23,279) decrease in
Internet access revenue. A barter agreement which allowed for an equal exchange
of advertising services on the Company's and the customer's Internet websites,
amounted to less than ten percent of the second quarter 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 six months 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.
10
<PAGE> 11
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 CCN; and selling advertising space on and sponsorships of CCN was
$98,263 and $110,488 for the six months ended June 30, 1998 and 1997,
respectively. The result of this was a gross margin improvement to 62% from 45%
for the six months ended June 30, 1998 and 1997, respectively. However, taking
into account the one time favorable revenue adjustment in the first six months
of 1997, operationally this increase is really from 39% instead of 45% gross
margin. This trend establishes the very reason the Company has transitioned to
what the Company believes are higher leverage Retail and 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 CCN OPERATIONS
Product development, which consists of labor and material costs associated with
the development of new CCN products and services, decreased by $85,541 (35%)
primarily due to staffing reductions and realignments in the first six months of
1998 as compared to the same period in 1997, as the 1997 activity involved the
creation of CCN itself. CCN Operations expenses, consisting primarily of costs
related to the Company's maintenance and enhancements for CCN, increased to
$398,770 for the six months ended June 30, 1998, as compared to $254,447 for the
same period in 1997. The cost of CCN Operations increased by 57% ($144,323)
because a smaller portion of salary expense was charged to cost of sales 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 CCN Operations in
the first half of 1998 as compared to 1997 when the focus was on the development
of CCN.
SALES AND MARKETING
Sales and marketing expenses remained almost constant at $477,747 and $491,898
for the six months ended 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 six months of 1997, operationally there
was a $185,849 (64%) increase in Sales and Marketing in the first six months of
1998 over the same period in 1997. This increase is a result of the Company's
efforts to improve market recognition of CCN and to thus increase the Company's
retail and advertising sales. This increased investment consisted of increases
in staffing and wages. 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. The Company believes that it
will continue to incur substantial technical and marketing expenses as it seeks
to expand the market for CCN.
GENERAL AND ADMINISTRATIVE
The Company increased its general & administrative (G&A) costs by 78% or
$323,018 in the six months ended June 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 CCN growth, the Company invested approximately $76,000 in
management consulting services. Lastly, salary expenses increased in the first
six 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 679% to $120,355 from $15,453 for the six months ended
June 30, 1998 and 1997, respectively. This $104,902 increase is due to the
investment of the proceeds from the Company's IPO.
Interest expense was $1,752 and $89,503 for the six months ended June 30, 1998
and 1997, respectively. The $87,751 (98%) decrease in interest expense is due to
the repayment in October 1997 of $623,000 of interest bearing notes issued in
1996.
11
<PAGE> 12
THREE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED)
NET LOSS
For the three months ended June 30, 1998, the Company incurred a net loss of
$747,598 as compared to a net loss of $896,493 for the same period ended June
30, 1997. This decreased loss of $148,895 (17%) was due to a $75,473 (236%)
increase in gross margin and a $100,447 (263%) increase in other income offset
to an extent by a $27,025 (3%) increase in expenditures, the details of which
follow. Other Income increased primarily as a result of a $56,059 increase in
interest income and a $44,762 decrease in interest expense.
REVENUES
In the quarters ended June 30, 1998 and 1997, the Company earned $166,309 and
$104,522 of revenue, respectively. Of the revenue recognized during the quarter
ended June 30, 1998, $30,219 was generated from Consulting Services, $2,590 from
Internet Access, $33,790 from Retail Sales, and $99,710 from Advertising and
Sponsorships. This compares to $87,874 of Consulting Service revenue, $4,503 of
Internet Access revenue, $10,757 of Retail Sales revenue and $1,388 of
Advertising and Sponsorship revenue for the comparable period in 1997. The
$57,655 (66%) 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 $23,033 (214%)
increase in retail sales and the $98,322 (7,084%) increase in Advertising and
Sponsorship sales. Internet access revenue decreased by $1,913 (42%) because the
Company discontinued actively marketing Internet access at 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; 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 $58,862 and $72,548 for the quarters ended June 30, 1998, and
1997, respectively. The result of this was a gross margin improvement to 65%
from 31% for the quarters ended June 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 CCN OPERATIONS
Product development expenses decreased by $47,926 (37%) to $80,804 from $128,730
for the quarters ended June 30, 1998 and 1997 primarily because of a decrease in
salary expenses associated with staffing reductions and realignments in the
second quarter of 1998 as compared to the same period in 1997, as the 1997
activity involved the creation of CCN itself. There were two fewer employees in
product development in the second quarter of 1998 as compared to the same period
in 1997. CCN Operations expenses, consisting primarily of costs related to the
Company's maintenance and enhancements for CCN, increased to $241,148 for the
quarter ended June 30, 1998, as compared to $137,704 for the same period in
1997. The cost of CCN Operations increased by $103,444 (75%) because a smaller
portion of salary expense was charged to cost of sales due to the decrease in
web consulting revenues. In addition, there was an across the board wage
increase in September 1997.
SALES AND MARKETING
Sales and marketing expenses decreased $171,249 (43%) from $399,370 in the
second quarter of 1997 to $228,121 in the same period in 1998. This decrease is
primarily due to a one-time donation of 40,000 shares of the Company restricted
common stock, valued at $200,000, to a ministry partner, Promise Keepers, Inc.,
in the second quarter of 1997. The effects of this transaction are offset in
part by increases in staffing and wages. The Company believes that it will
continue to incur substantial technical and marketing expenses as it seeks to
expand the market for CCN.
12
<PAGE> 13
GENERAL AND ADMINISTRATIVE
The Company increased its general & administrative (G&A) costs by 64% or
$142,756 in the second quarter of 1998 versus the same quarter in 1997 mostly 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 CCN growth, the Company invested approximately $36,000 in management
consulting services. Lastly, salary expenses increased in the second 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.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased 909.5% to $62,223 from $6,164 for the quarters ended
June 30, 1998 and 1997, respectively. This $56,059 increase is due to the
investment of the proceeds from the Company's IPO.
Interest expense was $0 and $44,762 for the quarters ended June 30, 1998 and
1997, respectively. The decrease in interest expense is due to the repayment in
October 1997 of $623,000 of interest bearing notes issued in 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1998 and 1997, net cash used in operating
activities was $1,379,937 and $1,001,375, respectively. Net cash used in
investment activities was $129,328 and $13,695 in the six months ended June 30,
1998 and 1997, respectively as the Company began purchasing the technology tools
necessary to support the traffic growth on CCN. Net cash (used) provided by
financing activities was $(89,435) and $1,147,424 for the six months ended June
30, 1998 and 1997, respectively. This usage in the six months ended June 30,
1998, consisted of the Company's repayment of $82,230 of long term debt plus
accrued interest of $7,205.
The Company currently anticipates that its $3,693,615 working capital balance at
June 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
fifteen months. However, the Company anticipates that it may seek to raise
additional funds in order to pursue acquisitions, 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 generated most of its revenue in the second quarter of 1998 from
Advertising and Sponsorship sales. This is the first quarter in which Consulting
Services revenues were not the primary source of revenue for the Company. It is
generally believed that this shift demonstrates that the Company now has the
necessary resources to be fully focused on the development of CCN, that the
Company is offering consulting services to a lesser extent and is concentrating
on what the Company believes are high leverage opportunities that escalating
growth in consumer interest in CCN are expected to provide. This transition is
expected to cause significant fluctuations in near term future quarterly
operating results.
The Company expects to experience significant fluctuations in future quarterly
operating results that may be caused by other factors as well. 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
13
<PAGE> 14
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.
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.
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 third 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.
14
<PAGE> 15
PART II
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 2. CHANGE IN SECURITIES
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On Wednesday, April 29, 1998, the Company held its Annual Meeting of
Stockholders. Proxies for the meeting were solicited pursuant to Regulation 14A
under the Exchange Act.
(b) The Company's shareholders of record, as of the close of business on March
20, 1998, approved the election of the following individuals to the Company's
Board of Directors, all of whom served as directors of the Company on the date
of the meeting and made up the entire Board of Directors. Each director will
hold office until the annual meeting of stockholders in the year 1999 or until
his successor is duly elected and qualified.:
James G. Buick
William M. Parker
Dane B. West
William H. Bowers
Robert C. Varney, Ph.D.
Bruce E. Edgington
John J. Meindl, Jr.
Clay T. Whitehead
Earl E. Gjelde
W.R. 'Max' Carey
(c) The results of the vote on the election of nominees to the Company's Board
of Directors was 1,978,878 shares for all members with 26,800 shares
withholding, except Mr. Edgington who had 1,972,628 shares voted in favor with
33,050 shares withholding and there were 1,667,202 Broker non-votes. Thus by
plurality of the votes cast, the Board stands elected.
The second matter voted upon was the ratification of the selection of
Hoffman, Morrison and Fitzgerald, P.C. as the Company's independent accountants.
The result of the election was 1,938,578 shares voting for the proposal, 7,100
shares voted against, 60,000 shares voted to abstain, and there were. 1,667,202
Broker non-votes. Thus by majority of the votes cast, the selection of
independent auditor was ratified.
Lastly, the Stockholders ratified and approved the adoption of the 1998
Stock Option Plan (the "1998 Plan"). The Common Stock (the "shares") subject to
the 1998 Plan that may be purchased (through the exercise of options) shall not
exceed in the aggregate 400,000 shares. If any stock options granted under the
1998 Plan shall terminate, expire or be canceled as to any shares, new stock
options may thereafter be granted covering such shares. In addition, any shares
purchased under this 1998 Plan subsequently repurchased by the Company pursuant
to the terms hereof may again be granted under the 1998 Plan. The shares issued
upon exercise of stock options under the 1998 Plan may, in whole or in part, be
either authorized but unissued shares or issued shares reacquired by the
Company. The 1998 Plan will be administered by the Compensation Committee of the
Board of Directors or by the Board of Directors as a whole. The result of the
election was 1,924,178 shares voting for the proposal, 39,600 shares voted
15
<PAGE> 16
against, 41,900 shares voted to abstain and 1,667,202 Broker non-votes. Thus by
majority of the votes cast, the 1998 Stock Option Plan was adopted.
(d) There were no settlements to report.
ITEM 5. OTHER INFORMATION
None to report.
ITEM 6. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
11 Computation of Earnings Per Share
27.1 Financial Data Schedules - Restatement of Three Months Ended June
30, 1997
27.2 Financial Data Schedule - Restatement of Six Months Ended June
30, 1997
27.3 Financial Data Schedule - For the Three Months Ended June 30, 1998
27.4 Financial Data Schedule - For the Six Months Ended June 30, 1998
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the quarter ended June 30,
1998:
On April 10, 1998, the Company filed a Form 8-K pursuant to Item 5 of
such Form regarding the appointment of William M. Parker as the Company's Chief
Executive Officer and President, and a director, replacing Dr. Robert C. Varney,
who has agreed to continue to serve on the Company's Board of Directors as Vice
Chairman.
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.
August 13, 1998 By: /s/ William M. Parker
---------------------
William M. Parker
Chief Executive Officer and President
August 13, 1998 By: /s/ Gary A. Struzik
---------------------
Gary A. Struzik, Chief Financial Officer and
Secretary, Chief Accounting Officer
16
<PAGE> 17
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
June 30, 1997 3-5
27.2 Financial Data Schedule - Restatement of the Six Months Ended
June 30, 1997 6-8
27.3 Financial Data Schedule - For Three Months Ended June 30, 1998 9-11
27.4 Financial Data Schedule - For Six Months Ended June 30, 1998 12-13
</TABLE>
17
<PAGE> 1
DIDAX INC. & SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
6/30/97
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: SIX MONTHS ENDED JUNE 30, 1997
Common Exercise Assumed Estimated Assumed Net Shares Shares subject
Shares Price Proceeds IPO Price Treas. Stk. Added to Recission
------ ----- -------- --------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and
outstanding - beginning of
period 1,160,376 607,433
Stock sold during the year:
gofishnet stock 122,055 0
PK 40,000 0
Lasmanis 2,212 0
Grant/Exercise of warrants:
Assumed issued and
outstanding - beginning of period 50,962
End of period 06/30/97
</TABLE>
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: 07/01/97 Diluted Basic
Total Grant/Purch. Days Weighted Weighted
Shares Date Outstanding Shares Shares
------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and
outstanding - beginning of period 552,943 01/01/97 181 100,082,683 100,082,683
Stock sold during the year:
gofishnet stock 122,055 01/01/97 181 22,091,955 22,091,955
PK 40,000 04/21/97 71 2,840,000 2,840,000
Lasmanis 2,212 04/23/97 69 152,628 152,628
Grant/Exercise of warrants:
Assumed issued and
outstanding - beginning of period 50,962 01/01/97 181 9,224,122
------------- ------------
134,391,388 125,167,266
181 181
------------- ------------
End of period 06/30/97 Weighted average share outstanding 742,494 691,532
Net loss -1,392,959 -1,392,959
------------- ------------
Net loss per share -1.88 -2.01
</TABLE>
DIDAX INC. & SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
6/30/97
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: THREE MONTHS ENDED JUNE 30, 1997
Common Exercise Assumed Estimated Assumed Net Shares Shares subject
Shares Price Proceeds IPO Price Treas. Stk. Added to Recission
------ ----- -------- --------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and
outstanding - beginning of
period 1,160,376 607,433
Stock sold during the year:
gofishnet stock 122,055 0
PK 40,000 0
Lasmanis 2,212 0
Grant/Exercise of warrants:
Assumed issued and
outstanding - beginning of
period 50,962
End of period 06/30/97
</TABLE>
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE: 07/01/97 Diluted Basic
Total Grant/Purch. Days Weighted Weighted
Shares Date Outstanding Shares Shares
------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 552,943 01/01/97 90 49,764,870 49,764,870
Stock sold during the year:
gofishnet stock 122,055 01/01/97 90 10,984,950 10,984,950
PK 40,000 04/21/97 71 2,840,000 2,840,000
Lasmanis 2,212 04/23/97 69 152,628 152,628
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 50,962 01/01/97 90 4,586,580
------------- ------------
68,329,028 63,742,448
90 90
------------- ------------
End of period 06/30/97 Weighted average share outstanding 759,211 708,249
Net loss -896,493 -896,493
------------- ------------
Net loss per share -1.18 -1.27
</TABLE>
<PAGE> 2
DIDAX INC.
COMPUTATION OF EARNINGS PER SHARE
30-Jun-98
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: SIX MONTHS ENDED JUNE 30, 1998
Common Exercise Assumed Assumed Net Shares Shares subject
Shares Price Proceeds IPO Price Treas. Stk. Added to Recission
------ ----- -------- --------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and
outstanding - beginning
of period 3,542,588 574,434
Rescission reduced on
3/20/98 by 553,184 shares 3,542,588 21,250
Stock sold during the year:
gofishnet stock:
130,292 0
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 55,414 0
End of period 06/30/98
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: 07/01/98 Diluted Basic
Total Grant/Purch. Days Weighted Weighted
Shares Date Outstanding Shares Shares
------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C>
Common Stock
Assumed issued and outstanding - beginning of period 2,968,154 01/01/98 78 231,516,012 231,516,012
Rescission reduced on 3/20/98 by 553,184 shares 3,521,338 03/20/98 103 362,697,814 362,697,814
--------------------------------- -------------
181 594,213,826 594,213,826
Stock sold during the year:
gofishnet stock:
130,292 01/01/98 181 23,582,852 23,582,852
--------------------------------- -------------
181 23,582,852 23,582,852
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 55,414 01/01/98 181 10,029,934 -
---------------------- -------------
627,826,612 617,796,678
181 181
---------------------- -------------
End of period 06/30/98 Weighted average share outstanding 3,468,655 3,413,241
Net loss (1,497,831) (1,497,831)
---------------------- -------------
Net loss per share (0.43) (0.44)
</TABLE>
DIDAX INC.
COMPUTATION OF EARNINGS PER SHARE
30-Jun-98
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: THREE MONTHS ENDED JUNE 30, 1998
Common Exercise Assumed Assumed Net Shares Shares subject Total
Shares Price Proceeds IPO Price Treas. Stk. Added to Recission Shares
------ ----- -------- --------- ----------- ----- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock
Rescission reduced on
3/20/98 by 553,184 shares 3,542,588 21,250 3,521,338
Stock sold during the year:
gofishnet stock:
130,292 0 130,292
Grant/Exercise of
warrants:
Assumed issued and
outstanding - beginning
of period 55,414 0 55,414
End of period 06/30/98
</TABLE>
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE: 07/01/98 Diluted Basic
Grant/Purch. Days Weighted Weighted
Date Outstanding Shares Shares
---- ----------- ------ ------
<S> <C> <C> <C> <C>
Common Stock
Rescission reduced on 3/20/98 by 553,184 shares 03/20/98 90 316,920,420 316,920,420
---------------------------- -----------
90 316,920,420 316,920,420
Stock sold during the year:
gofishnet stock:
01/01/98 90 11,726,280 11,726,280
---------------------------- -----------
90 11,726,280 11,726,280
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 01/01/98 90 4,987,260 -
----------- -----------
333,633,960 328,646,700
90 90
----------- -----------
End of period 06/30/98 Weighted average share outstanding 3,707,044 3,651,630
Net loss (746,111) (746,111)
----------- -----------
Net loss per share (0.20) (0.20)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 183,480
<SECURITIES> 0
<RECEIVABLES> 83,029
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 667,253
<PP&E> 266,337
<DEPRECIATION> 113,398
<TOTAL-ASSETS> 830,192
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2,896,085
<OTHER-SE> 111,187
<TOTAL-LIABILITY-AND-EQUITY> 830,192
<SALES> 0
<TOTAL-REVENUES> 104,522
<CGS> 72,548
<TOTAL-COSTS> 890,243
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,762
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (896,493)
<EPS-PRIMARY> (1.27)
<EPS-DILUTED> (1.27)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 183,480
<SECURITIES> 0
<RECEIVABLES> 83,029
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 667,253
<PP&E> 266,337
<DEPRECIATION> 113,398
<TOTAL-ASSETS> 830,192
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2,896,085
<OTHER-SE> 111,187
<TOTAL-LIABILITY-AND-EQUITY> 830,192
<SALES> 0
<TOTAL-REVENUES> 199,139
<CGS> 110,448
<TOTAL-COSTS> 1,408,121
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 89,503
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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