Network Solutions Inc/DE – IPO: ‘S-1/A’ on 9/18/97

As of:  Thursday, 9/18/97   ·   Accession #:  950133-97-3298   ·   File #:  333-30705

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Initial Public Offering (IPO):  Pre-Effective Amendment to Registration Statement (General Form)   —   Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1/A       Network Solutions Inc. S-1/A                         113    743K 
 2: EX-1.1      Underwriting Agreement                                19    114K 
 3: EX-10.13    Asset Transfer Agreement                               4     19K 

S-1/A   —   Network Solutions Inc. S-1/A
Document Table of Contents

S-1/A
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1997

                                                      REGISTRATION NO. 333-30705
================================================================================

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

Amendment No. 3 

Form S-1
REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933
------------------------
NETWORK SOLUTIONS, INC. 
(Exact name of registrant as specified in its charter)

                                                                [Download Table]
                                                                                 
           DELAWARE                         7379                   52-1146119    
 (State or other jurisdiction   (Primary Standard Industrial    (I.R.S. Employer 
               of               Classification Code Number)   Identification No.)
incorporation or organization)                                                   

505 HUNTMAR PARK DRIVE, HERNDON, VIRGINIA 20170  (703) 742-0400 
(Address, including zip code, and telephone number, including area code, of 
registrant's principal executive offices) 
------------------------
GABRIEL A. BATTISTA 
Chief Executive Officer 
Network Solutions, Inc. 
505 Huntmar Park Drive, Herndon, Virginia 20170  (703) 742-0400 
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
------------------------
Copies to:

                                                                [Download Table]
                                                                                   
    JORGE DEL CALVO, ESQ.       DOUGLAS E. SCOTT, ESQ.    MICHAEL D. NATHAN, ESQ.  
   KEITH J. MENDELSON, ESQ.      ALOMA H. AVERY, ESQ.    SIMPSON THACHER & BARTLETT
    DAVINA K. KAILE, ESQ.        SCIENCE APPLICATIONS       425 Lexington Avenue   
PILLSBURY MADISON & SUTRO LLP       INTERNATIONAL            New York, NY 10017    
     2700 Sand Hill Road             CORPORATION               (212) 455-2000      
     Menlo Park, CA 94025      10260 Campus Point Drive                            
        (415) 233-4500           San Diego, CA 92121                               
                                    (619) 546-6000                                 

------------------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of  
1933, check the following box. [ ]                                              
 If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement numbers of the earlier       
effective registration statement for the same offering. [ ]                     
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. [ ]                                                      
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]                                             

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

  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME     
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), 
MAY DETERMINE.                                                                  
================================================================================

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A 
     REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
  SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
    MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
     BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
  THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
    SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
   UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.                                                    

SUBJECT TO COMPLETION, DATED SEPTEMBER 18, 1997 

PROSPECTUS                                                                      
2,300,000 SHARES

LOGO
CLASS A COMMON STOCK
All of the 2,300,000 shares of Class A Common Stock offered hereby are
being sold by Network Solutions, Inc. ("NSI" or the "Company"). The Company has 
two classes of authorized Common Stock, Class A Common Stock and Class B Common 
Stock. Holders of Class A Common Stock generally have identical rights to       
holders of Class B Common Stock, except that holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are        
entitled to ten votes per share on all matters submitted to a vote of           
stockholders. See "Relationship with SAIC and Certain Transactions" and         
"Description of Capital Stock."                                                 

The Company is a wholly-owned subsidiary of Science Applications      
International Corporation, a Delaware corporation ("SAIC"). Upon completion of  
this offering, SAIC will own 100% of the Company's outstanding Class B Common   
Stock, which will represent approximately 84.5% of the outstanding Common Stock 
of the Company (approximately 82.5% if the Underwriters' over-allotment option  
is exercised in full) and approximately 98.2% of the combined voting power of   
the Company's outstanding Common Stock (approximately 97.9% if the Underwriters'
over-allotment option is exercised in full), and will continue to control the   
Company. See "Principal Stockholders" and "Relationship with SAIC and Certain   
Transactions." The Underwriters have reserved up to 5% of the shares of the     
Class A Common Stock offered hereby for sale at the initial public offering     
price to certain employees, officers and directors of SAIC and the Company and  
other persons designated by the Company. See "Underwriting."                    

 Prior to this offering, there has been no public market for the Class A
Common Stock of the Company. It is currently estimated that the initial public  
offering price will be between $14.00 and $16.00 per share. See "Underwriting"  
for a discussion of the factors to be considered in determining the initial     
public offering price. The Class A Common Stock has been approved for quotation 
on the Nasdaq National Market under the symbol NSOL.                            

------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. 
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 

                                                        [Enlarge/Download Table]

===========================================================================================================
                                             PRICE TO             UNDERWRITING            PROCEEDS TO      
                                              PUBLIC               DISCOUNT(1)            COMPANY(2)       
-----------------------------------------------------------------------------------------------------------
                                                                                                           
Per Share............................            $                      $                      $           
-----------------------------------------------------------------------------------------------------------
Total(3).............................            $                      $                      $           
===========================================================================================================

(1) See "Underwriting" for indemnification arrangements with the several        
Underwriters.                                                           
(2) Before deducting expenses payable by the Company estimated at $1,100,000.   
(3) The Company has granted to the Underwriters a 30-day option to purchase up  
to 345,000 additional shares of Class A Common Stock solely to cover    
  over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be $    , 
$    and $    , respectively. See "Underwriting."                       

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

    The shares of Class A Common Stock are offered by the several Underwriters
subject to prior sale, receipt and acceptance by them and subject to the right  
of the Underwriters to reject any order in whole or in part and certain other   
conditions. It is expected that certificates for such shares will be available  
for delivery on or about        , 1997, at the office of the agent of Hambrecht 
& Quist LLC in New York, New York.                                              

HAMBRECHT & QUIST                                                               
J.P. MORGAN & CO. 
                                                        PAINEWEBBER INCORPORATED
, 1997                              

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[INSIDE FRONT COVER OF PROSPECTUS]

Bar graph depicting domain name registration growth from September 1995 to June 
1997 appears here 

   CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON   
STOCK, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING     
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,   
SEE "UNDERWRITING."                                                             

The Company's name and logo are service marks of the Company. This    
Prospectus also includes trademarks of companies other than the Company.        

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[GATE FOLD] 

Depiction of Registration Process 

                                                                [Download Table]
                                                        
THE REGISTRATION PROCESS                                

      DEPICTION OF                  DOMAIN NAME REQUEST 
     COMPUTER SCREEN               RECEIVED VIA INTERNET

 NETWORK SOLUTIONS LOGO             NSI ASSIGNS DOMAIN  
                                           NAME         

      DEPICTION OF                ROOT SERVERS POPULATED
      ROOT SERVERS                     DAILY BY NSI     

.GOV .NET .COM .ORG .NET           DOMAIN NAME GLOBALLY 
                                        ACCESSIBLE      

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PROSPECTUS SUMMARY

 The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere  
in this Prospectus. Unless the context requires otherwise, all references to the
"Company," "Network Solutions" and "NSI" shall refer to Network Solutions, Inc.,
a Delaware corporation, and its predecessor, Network Solutions Incorporated, a  
Washington, D.C. corporation. The Class A Common Stock offered hereby involves a
high degree of risk. See "Risk Factors." References in this Prospectus to the   
"Common Stock" shall include both the Company's Class A Common Stock, par value 
$0.001 per share (the "Class A Common Stock"), and the Company's Class B Common 
Stock, par value $0.001 per share (the "Class B Common Stock"). As used herein, 
net registrations are defined as the gross number of domain name registrations  
less management's estimates of uncollectible registrations and of non-renewals. 
Except as otherwise noted, all information in this Prospectus assumes no        
exercise of the Underwriters' over-allotment option. See "Description of Capital
Stock," "Underwriting" and Notes to Financial Statements.                       

THE COMPANY 

    Network Solutions is the leading Internet domain name registration service
provider worldwide. The Company currently acts as the exclusive registrar for   
second level domain names within the .com, .org, .net, .edu and .gov top-level  
domains ("TLDs"). By registering Internet domain names, the Company enables     
businesses, other organizations and individuals to establish a unique Internet  
presence from which to communicate and conduct commerce. Net registrations      
within the TLDs maintained by the Company increased by 206% from approximately  
340,000 domain names registered at June 30, 1996 to approximately 1,040,000     
domain names registered at June 30, 1997. The Company believes that commercial  
enterprises and individual Internet users worldwide are increasingly recognizing
the .com TLD as a desirable address for commercial presence on the Internet. Net
registrations in the .com TLD increased from approximately 304,000 at June 30,  
1996 to approximately 908,000 at June 30, 1997, representing 87% of the         
Company's total net registrations at June 30, 1997. With over 10 million        
businesses and over 750,000 active trademarks and service marks in the United   
States alone, the Company believes that the potential for continued growth of   
domain name registrations by commercial entities and services related to those  
registrations is substantial. Net revenue from Internet domain name registration
subscriptions accounted for 81.0% of the Company's net revenue for the six      
months ended June 30, 1997.                                                     

The Company also provides Intranet consulting and network design and  
implementation services to large companies that desire to establish or enhance  
their Internet presence or "re-engineer" legacy network infrastructures to      
accommodate the integration of both Internet connectivity and Intranet network  
technology into their information technology base. The Company's Intranet       
services presently include: (i) Intranet development and re-engineering; (ii)   
network and systems security; and (iii) Intranet-enabled business solutions.    
According to Zona Research, Inc., the market for Intranet services in the year  
1999 will exceed $14 billion, up from $3 billion in 1996. There can be no       
assurance that such market forecast will be achieved. Net revenue from Intranet 
services accounted for 19.0% of the Company's net revenue for the six months    
ended June 30, 1997.                                                            

   The Company currently acts as the registrar for second level domain names
within the .com, .org, .net, .edu and .gov TLDs pursuant to a cooperative       
agreement (the "Cooperative Agreement") with the National Science Foundation    
(the "NSF"). Prior to September 14, 1995, the Cooperative Agreement was a cost  
reimbursement plus fixed-fee contract and the Company was paid directly by the  
NSF for providing registration services. Effective September 14, 1995, the NSF  
and the Company amended the Cooperative Agreement to authorize the Company to   
charge customers a subscription fee of $50 per year for each second level domain
name registered. The Company's registration services customers in the .com, .org
and .net TLDs are invoiced for a two-year subscription fee of $100 for initial  
registrations and $50 per year for renewals of initial registrations. Pursuant  
to the Cooperative Agreement, the Company presently is required to set aside 30%
of the subscription fees collected for the enhancement of the intellectual      
infrastructure of the Internet. These funds are not recognized as revenue by the
Company and will be disbursed in a manner approved by the NSF. The Cooperative  
Agreement by its terms expires in March 1998, although the NSF may, at its      
option, extend the Cooperative Agreement through September 1998. The Cooperative
Agreement is subject to review by the NSF and may be terminated at any time by  
the NSF at its discretion or by mutual agreement. The NSF has stated that the   
Cooperative Agreement will not be re-awarded to the Company or awarded to any   
other entity. See "Risk Factors -- Uncertain Status of the Cooperative          
Agreement," "-- Recommendations and                                             

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Proposals to Increase Competition in Registration Services" and                 
"Business -- Relationship with the NSF; Recent Developments in the Internet     
Community."                                                                     

The Company believes that it has certain competitive advantages in the
domain name registration business, including: (i) a large established customer  
base; (ii) recognition of the .com TLD; (iii) strategic agreements with Internet
access providers; (iv) an established technical infrastructure; (v) experience  
in the administration of a domain name dispute policy; and (vi) skilled         
technical personnel who are experienced in the domain name registration         
business. The Company believes that the technical and procedural requirements to
build and to operate a competitive domain name registry are significant.        
Substantial portions of the Company's registration software have been custom-   
developed and are proprietary. The Company's in-house registration software     
includes an automated registration capability which currently processes in      
excess of 90% of all new registration requests without human intervention. In   
connection with the Company's domain name registration service, the Company: (i)
cooperates with government and nonprofit organizations that develop and         
implement Internet standards and policies; (ii) provides customer service       
support, which includes back office capability, a telephone help desk and       
electronic support via e-mail and the World Wide Web; and (iii) disseminates    
domain name database information to root servers throughout the world.          

    The Company is working to expand its domain name registration business and
to continue to improve the registration process by: (i) increasing the use of   
the .com TLD worldwide; (ii) expanding its relationships with Internet access   
providers by offering enhanced registration services to their customers; (iii)  
stimulating demand for domain names in targeted customer segments; (iv) working 
with major platform providers to embed the registration function into server    
software applications; (v) facilitating ease of use of and access to            
registration services; and (vi) establishing international alliances and        
developing multilingual capability. In addition, the Company intends to develop 
a portfolio of Internet-enabling products and services, which may include       
directory and distribution services, that allows the Company to build upon its  
position in the registration process and makes proper use of the customer data  
that the Company collects.                                                      

The Company was incorporated in Washington, D.C. in 1979 as Network   
Solutions Incorporated and was reincorporated as Network Solutions, Inc. in     
Delaware in November 1996. The Company's principal executive offices are located
at 505 Huntmar Park Drive, Herndon, Virginia 20170, and its telephone number is 
(703) 742-0400.                                                                 

THE OFFERING

                                                        [Enlarge/Download Table]
                                                                                           
Class A Common Stock offered by the Company......  2,300,000 shares                        
Common Stock to be outstanding after the offering                                          
  Class A Common Stock...........................  2,300,000 shares(1)                     
  Class B Common Stock...........................  12,500,000 shares(2)                    
          Total..................................  14,800,000 shares                       
Voting Rights....................................  Holders of Class A Common Stock vote    
                                                   together as a class with, and generally 
                                                   have identical rights, including as to  
                                                   dividends, to, those of holders of Class
                                                   B Common Stock, except that holders of  
                                                   Class A Common Stock are entitled to one
                                                   vote per share and holders of Class B   
                                                   Common Stock are entitled to ten votes  
                                                   per share. See "Description of Capital  
                                                   Stock -- Common Stock -- Voting Rights."
Use of Proceeds..................................  For payment of a $10,000,000 dividend to
                                                   SAIC and for working capital and general
                                                   corporate purposes. See "Use of         
                                                   Proceeds."                              
Proposed Nasdaq National Market symbol...........  NSOL                                    

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

(1) Excludes 2,556,250 shares of Class A Common Stock reserved for issuance     
under the Company's 1996 Stock Incentive Plan, of which 1,539,725 shares
were subject to options outstanding as of July 31, 1997, with a weighted
average exercise price of $13.18 per share. See "Capitalization" and    
 "Management -- 1996 Stock Incentive Plan" and Notes 10 and 14 of Notes to
Financial Statements.                                                   
(2) Upon completion of the offering, SAIC will own 100% of the Class B Common   
Stock.                                                                  

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SUMMARY FINANCIAL AND OPERATING INFORMATION 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                                                             SIX MONTHS    
                                                                  FISCAL YEAR ENDED DECEMBER 31,           ENDED JUNE 30,  
                                                           --------------------------------------------   -----------------
                                                            1992     1993     1994    1995(1)    1996      1996      1997  
                                                           ------   ------   ------   -------   -------   -------   -------
                                                                                                                           
STATEMENT OF OPERATIONS DATA:                                                                                              
  Net revenue............................................. $1,160   $4,369   $5,029   $ 6,486   $18,862   $ 6,829   $18,724
  Income (loss) from continuing operations................     93     (110)     189    (1,434)   (1,625)   (1,458)    1,256
  Net income (loss)....................................... $  681   $ (386)  $ (980)  $(2,837)  $(1,625)  $(1,458)  $ 1,256
  Unaudited pro forma net income (loss) per share.........                                      $ (0.12)  $ (0.11)  $  0.09
  Unaudited pro forma shares used in computing net income                                                                  
    (loss) per share(2)...................................                                       13,349    13,349    13,349
OTHER OPERATING DATA(3):                                                                                                   
  Net new registrations...................................     --       13       24       141       489       180       429
  Less: registrations not renewed.........................     --       --       --         1        39        17        16
  Net registrations at period end.........................     --       13       37       177       627       340     1,040

                                                        [Enlarge/Download Table]

                                                                                               JUNE 30, 1997      
                                                                                         -------------------------
                                                                                         ACTUAL     AS ADJUSTED(4)
                                                                                         -------    --------------
                                                                                                                  
BALANCE SHEET DATA:                                                                                               
  Cash and cash equivalents............................................................. $25,967       $ 46,952   
  Working capital(5)....................................................................   6,280         27,265   
  Total assets(6).......................................................................  92,250        113,235   
  Deferred revenue, net(5)..............................................................  45,628         45,628   
  Capital lease obligations.............................................................   2,348          2,348   
  Total stockholders' equity............................................................   2,693         23,678   

SUMMARY QUARTERLY FINANCIAL AND OPERATING INFORMATION 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                                                  QUARTER ENDED                               
                                                   ---------------------------------------------------------------------------
                                                   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,
                                                     1995       1996       1996       1996        1996       1997       1997  
                                                   --------   --------   --------   ---------   --------   --------   --------
                                                                                                                              
STATEMENT OF OPERATIONS DATA:                                                                                                 
  Net revenue.....................................  $1,533    $ 2,333    $ 4,496     $ 5,180    $ 6,853    $ 8,655    $10,069 
  Income (loss) from continuing operations........    (844)    (1,102)      (356)       (293)       126        516        740 
  Net income (loss)...............................  $ (851)   $(1,102)   $  (356)    $  (293)   $   126    $   516    $   740 
  Unaudited pro forma net income (loss) per                                                                                   
    share.........................................            $ (0.08)   $ (0.03)    $ (0.02)   $  0.01    $  0.04    $  0.06 
  Unaudited pro forma shares used in computing net                                                                            
    income (loss) per share(2)....................             13,349     13,349      13,349     13,349     13,349     13,349 
OTHER OPERATING DATA(3):                                                                                                      
  Net new registrations...........................      43         75        105         139        170        197        232 
  Less: registrations not renewed.................       1          6         11          18          4          6         10 
  Net registrations as of period end..............     177        246        340         461        627        818      1,040 

------------------------------                                                  
(1) The Summary Financial Data for the year ended December 31, 1995 was derived 
  by combining the Company's Results of Operations for the period January 1,
  1995 through March 10, 1995 and the period March 11, 1995 through December
  31, 1995 which, respectively, are periods before and after the date of the
SAIC acquisition discussed below. The data for these two periods were   
prepared on differing bases of accounting and, accordingly, the         
comparability of such data with other periods is limited, primarily as a
  result of goodwill amortization, new corporate services agreements and the
repayment of outstanding debt balances. See Note 1 of Notes to Financial
  Statements for a discussion of the presentation for each of these periods.
(2) See Note 2 of Notes to Financial Statements for an explanation of the       
    determination of shares used in computing the unaudited pro forma net income
(loss) per share.                                                       
(3) Net new registrations for each period include gross new registrations less  
an estimate of registrations that are uncollectible. Net registrations  
 include net new registrations less management's estimate of registrations
 not renewed. Prior to September 14, 1995, net registrations equaled gross
registrations because the Company was reimbursed by the NSF for all     
registrations under a cost reimbursement plus fixed-fee contract.       
(4) As adjusted to give effect to the $10,000 dividend to be paid to SAIC upon  
   consummation of the offering and to reflect the sale of 2,300,000 shares of
Class A Common Stock offered by the Company hereby at an assumed initial
  public offering price of $15.00 per share and the receipt of the estimated
net proceeds therefrom. See "Use of Proceeds," "Dividend Policy" and    
"Capitalization."                                                       
(5) Includes $31,990 of current deferred revenue at June 30, 1997.              
(6) Total assets include $31,056 of restricted assets at June 30, 1997. See     
Notes 2 and 3 of Notes to Financial Statements.                         

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RELATIONSHIP WITH SAIC AND FINANCIAL PRESENTATION 

    The Company was acquired by Science Applications International Corporation
("SAIC"), an employee-owned, diversified professional and technical services    
company, on March 10, 1995. The financial statements of the Company presented   
for periods subsequent to March 10, 1995 are presented on the new basis of      
accounting arising from the SAIC acquisition. The Company is currently a wholly-
owned subsidiary of SAIC. Upon completion of the offering, SAIC will own 100% of
the Company's outstanding Class B Common Stock, which will represent            
approximately 84.5% of the outstanding Common Stock of the Company              
(approximately 82.5% if the Underwriters' over-allotment option is exercised in 
full) and approximately 98.2% of the combined voting power of the Company's     
outstanding Common Stock (approximately 97.9% if the Underwriters'              
over-allotment option is exercised in full). As a result, SAIC will continue to 
have the ability to elect all of the directors of the Company and otherwise     
exercise control over the business and affairs of the Company. See "Principal   
Stockholders," "Risk Factors -- Control By SAIC," "-- Potential Conflicts of    
Interest" and "Relationship with SAIC and Certain Transactions."                

Upon completion of the offering, SAIC will continue to provide certain
services to the Company in a manner generally consistent with past practices.   
Prior to completion of the offering, the Company and SAIC will enter into a     
number of intercompany agreements with respect to such services and other       
matters, including a tax sharing agreement. See "Risk Factors -- Intercompany   
Agreements Not Subject to Arm's Length Negotiations; Reliance on SAIC for       
Certain Corporate Services," "-- Control of Tax Matters; Tax and ERISA          
Liability" and "Relationship With SAIC and Certain Transactions."               

 Prior to the acquisition of the Company by SAIC, the Company's business
included commercial and government contracts awarded to the Company on a        
competitive basis, including government contracts that were awarded to the      
Company based partially upon the Company's then minority-owned status. The      
contracts which had been awarded to the Company based partially upon the        
Company's then minority-owned status were transferred into a separately-owned   
entity prior to the acquisition of the Company by SAIC. In November 1995, SAIC  
adopted a plan to transfer the Company's remaining government-based business to 
SAIC in order to enable the Company to focus on the growth of its commercial    
business, which includes registration services and Intranet services. This      
transfer was effective as of February 1996. The operating results of both the   
minority-based government contracts business and the remaining government-based 
business are reflected as discontinued operations in the Company's financial    
statements for all periods presented.                                           

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RISK FACTORS

     An investment in the shares of Class A Common Stock offered hereby involves
a high degree of risk. Prospective investors should consider carefully the      
following risk factors, in addition to the other information presented in this  
Prospectus, before purchasing the shares of Class A Common Stock offered hereby.
This Prospectus contains forward-looking statements which involve risks and     
uncertainties. The Company's actual results may differ materially from the      
results discussed in the forward-looking statements as a result of certain      
factors, including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this Prospectus.                                                   

  Limited Operating History.  While the Company has been in business since
1979, it has only been involved in the domain name registration business        
pursuant to the Cooperative Agreement since 1993. Further, prior to September   
14, 1995, the Company operated its domain name registration business under a    
cost reimbursement plus fixed-fee contract with the NSF and the Company was paid
directly by the NSF for providing registration services. Accordingly, the       
Company has only a limited operating history under its current                  
subscription-based pricing model for its domain name registration business upon 
which an evaluation of the Company and its prospects can be based. In 1995 and  
1996, the Company incurred net losses in part as a result of the Company's      
transition to a subscription-based pricing model, where revenue is recognized on
a straight-line basis over the subscription period, combined with the increased 
costs to support the increase in its subscriber base, including costs for       
product and services development, increased sales and marketing operations,     
upgrading systems and infrastructure, developing new distribution channels and  
broadening customer support capabilities. The Company incurred a net loss of    
approximately $1.6 million for the year ended December 31, 1996 and had an      
accumulated deficit of approximately $1.8 million through June 30, 1997. The    
Company's prospects must be considered in light of the risks frequently         
encountered by companies in their early stages of development, particularly     
companies in new and rapidly evolving markets. To address these risks, the      
Company must, among other things, respond to competitive developments, increase 
its sales and marketing organization, continue to identify, attract, retain and 
motivate qualified persons and continue to upgrade its technologies and         
commercialize products and services incorporating such technologies. While the  
Company has been involved in network services and consulting since its          
inception, due to the rapidly evolving nature of Internet technologies, the     
Company's Intranet services business faces similar risks. An Intranet is an     
internal network which uses Internet technologies. There can be no assurance    
that the Company will be successful in addressing such risks or that the Company
will continue to obtain new registrations at current rates or renew the         
registration of a significant portion of its customers. See "-- Absence of Sales
and Marketing Experience; Evolving Distribution Channels" and "Management's     
Discussion and Analysis of Financial Condition and Results of Operations."      

 As a result of the Company's limited operating history, especially with
regard to its subscription-based registration services business, the Company    
does not have significant historical financial data on which to base planned    
operating expenses. Accordingly, the Company's expense levels are based in part 
on its expectations as to future revenue and to a large extent are fixed. As a  
result, quarterly sales and operating results generally depend on the volume of 
and ability to fulfill registration requests, which are difficult to forecast.  
The Company may be unable to adjust spending in a timely manner to compensate   
for any unexpected revenue shortfall. Accordingly, any significant shortfall of 
demand for the Company's services in relation to the Company's expectations     
would have an immediate adverse impact on the Company's business, operating     
results and financial condition. In addition, the Company expects a significant 
increase in its operating expenses as it funds greater levels of product and    
services development, increases its sales and marketing operations, upgrades    
systems and infrastructure, opens new offices, develops new distribution        
channels and broadens its customer support capabilities. To the extent that such
expenses precede or are not subsequently followed by an increase in revenue, the
Company's business, operating results and financial condition will be materially
and adversely affected.                                                         

Uncertain Status of the Cooperative Agreement.  In 1993, the Company  
entered into the Cooperative Agreement with the NSF to act as the registrar for 
second level domain names within the .com,                                      

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 .org, .net, .edu and .gov TLDs. With the commercialization of the Internet, the
role, if any, that the NSF will play in the Internet and the legal authority    
underlying its role are at present unclear. Withdrawal of or challenges to the  
NSF's sponsorship or authorization of the Company's activities could create a   
public perception or result in a finding that the Company lacks authority to    
continue in its role as registrar or to charge fees for its domain name         
registration services. The impact, if any, of any such public perception or     
finding is unknown but could materially and adversely affect the Company's      
business, financial condition and results of operations. Further, the           
Cooperative Agreement by its terms expires in March 1998, although the NSF may, 
at its option, extend the Cooperative Agreement through September 1998. The     
terms of the Cooperative Agreement are subject to review and adjustment by the  
NSF on an annual basis. In addition, the Cooperative Agreement may be terminated
by the NSF at any time at its discretion or by mutual agreement. When the       
Cooperative Agreement is terminated or if there is a change in the terms of the 
Cooperative Agreement or the Company's status as the exclusive registrar for    
domain names in the .com TLD, the Company's business, financial condition and   
results of operations could be materially and adversely affected. Although the  
impact of the termination of the Cooperative Agreement is uncertain, such       
termination could have a material adverse effect on the Company's revenue,      
particularly as the Company's revenue growth in recent periods has been         
primarily attributable to increases in registrations in the .com TLD. The NSF   
has stated that the Cooperative Agreement will not be re-awarded to the Company 
or awarded to any other entity. However, there can be no assurance that the NSF 
will not award the Cooperative Agreement to another entity and, if the          
Cooperative Agreement is awarded to another entity, the Company's business,     
financial condition and results of operations would be materially and adversely 
affected. See "-- Uncertainty of Internet Governance and Regulation" and        
"Business -- Relationship with the NSF; Recent Developments in the Internet     
Community."                                                                     

     Competition in Domain Name Registration Business.  The Company currently is
the exclusive registrar for second level domain names in the .com, .org, .net,  
.edu and .gov TLDs. Multiple registries do not currently register names in the
same TLD, but this may change in the future. The Company currently faces        
competition in the domain name registration business from registries for country
codes, third level domain name providers such as Internet access providers and  
registries of TLDs other than those TLDs currently being registered by the      
Company. A number of entities have already begun to offer competing registration
services using other TLDs. Future competition in the Company's domain name      
registration business could come from many different companies, including, but  
not limited to, major telecommunications firms, cable companies and Internet    
access providers. Such entities have core capabilities to deliver registration  
services, such as help desks, billing services and network management, along    
with strong name recognition and Internet industry experience. Other companies  
with some or all of these capabilities may also enter the registration business.
Also emerging is a growing contingent of domain name resellers. The Company's   
position as the leading registrar of domain names could be materially and       
adversely affected by the emergence of any of the foregoing competitors and     
potential competitors, many of which have longer operating histories and        
significantly greater name recognition and greater financial, technical,        
marketing, distribution and other resources than the Company. In addition, the  
Company's revenue and subscription fees could be reduced due to increasing      
competition. For example, other entities may bundle domain name registrations   
with other products or services, effectively providing such registration        
services for free. If operational and administrative arrangements or technology 
permitting multiple competitors to register domain names in the same or other   
TLDs are developed and competition occurs in the domain name registration       
business, the Company's business, financial condition and results of operations 
could be materially and adversely affected. See "Business -- Competition."      

Recommendations and Proposals to Increase Competition in Registration 
Services.  The Cooperative Agreement does not prohibit the establishment of     
competing registries. No single organization or entity (including the NSF)      
currently has formal authority over all aspects of the Internet and the Internet
currently operates under a system of mutual cooperation. As a result, it is     
unclear which organization or entity, if any, will govern the authorization for 
the registration of domain names. Various governmental, technical and Internet  
groups are currently discussing how the award and                               

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administration of future contracts for registration services in the .com TLD,   
other existing TLDs and new TLDs may take place and are considering whether and 
how to enable other parties to enter the domain name registration business. The 
Company is also an active participant in this process. A consensus regarding    
such issues could be reached and implemented in the near future and prior to the
expiration of the Cooperative Agreement. For example, some members of the       
Internet community have discussed various concepts such as adding new TLDs,     
which could result in significant competition for domain name registrations,    
including competition on the price charged by the Company for domain name       
registrations. In February 1997, an international ad hoc committee (the "IAHC"),
the members of which have been selected by certain entities involved in the     
Internet and intellectual property fields, issued its recommendation designed to
increase competition in domain name registration in which it proposed the       
creation of additional registries, additional TLDs and the possible sharing of  
new and existing TLDs. In April 1997, the IAHC issued a Memorandum of           
Understanding ("MOU") seeking support for its recommendations. This MOU has been
signed by a number of organizations in the Internet community. In April 1997,   
the Company issued its own recommendations to increase competition in domain    
name registration. The Company's recommendations focus on creating additional   
TLDs as well as on the future administration and technical operation of the     
Internet. Other groups or entities may also make other proposals concerning     
these and other issues. Implementation of competing registries, additional TLDs,
the sharing of the Company's TLDs or other recommendations or proposals of these
groups could have a material adverse effect on the Company's business, financial
condition and results of operations. See "-- Uncertainty of Internet Governance 
and Regulation" and "Business -- Relationship with the NSF; Recent Developments 
in the Internet Community."                                                     

Uncertainty of Internet Governance and Regulation.  The Internet      
historically has been loosely administered by a number of government agencies   
which were involved in the creation of its infrastructure, initially the        
Department of Defense's Advanced Research Projects Agency ("ARPA") and, more    
recently, the NSF. No single organization or entity (including the NSF)         
currently has formal authority over all aspects of the Internet and it currently
operates under a system of mutual cooperation. Since the original role of the   
Internet was to link computers at governmental and academic institutions to     
facilitate communication and research, the Internet was historically            
administered by entities which were involved in sponsoring research rather than 
by any of the traditional federal or state regulatory agencies. With the        
commercialization and internationalization of the Internet, the role of these   
entities in Internet administration has become less clear and private parties   
have begun to assume a larger role in the enhancement and maintenance of the    
Internet's infrastructure. This lack of regulation and the legal uncertainties  
arising from it poses risks to the Company and to the commercial Internet       
industry in general. As described above, it is unclear which organization or    
entity, if any, will govern the authorization for the registration of domain    
names in the future. The lack of an appropriate organization or entity to govern
the authorization for the registration of domain names could have a material    
adverse effect on the Company's business, financial condition and results of    
operations.                                                                     

The effective operation of the Internet is dependent on the continued 
mutual cooperation and consensus among an increasing number of entities, many of
which have widely divergent interests. For example, the IP addresses allocated  
by Internet service providers ("ISPs") to their customers are originally        
allocated by the Internet Assigned Numbers Authority (the "IANA"). Thus, the    
effective operation of the Internet is dependent on such continued allocation of
IP addresses by IANA. Continuing to achieve consensus may become difficult or   
impossible and may become extremely time-consuming and costly. Achieving        
consensus may be made more difficult because of the lack of leadership by any   
one entity. This lack of regulation also creates great uncertainty as to the    
legality of any action, making business planning and operations difficult.      
Conversely, the lack of regulation could theoretically result in individuals and
entities taking harmful or disruptive actions with respect to the Internet with 
impunity. There is a risk that a failure to achieve consensus among the various 
groups which are now informally administering the Internet could result in the  
disruption of Internet operations, the inability of any user to communicate with
another user or otherwise utilize the                                           

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Internet or the delay of infrastructure improvements necessary to the           
maintenance and expansion of the Internet.                                      

  Any disruption to the administration, effective operation or maintenance
and expansion of the Internet, in general, or the domain name registration      
system in particular, would have a material adverse effect on the Company's     
business, financial condition and results of operation. See "-- Uncertain Status
of the Cooperative Agreement," "-- Recommendations and Proposals to Increase    
Competition in Registration Services" and "Business -- Relationship with the    
NSF; Recent Developments in the Internet Community."                            

  The current lack of any centralized Internet management could also cause
the U.S. federal or other governments to intervene with uncertain results. The  
U.S. government has formed an interagency task force ("ITF") consisting of      
various federal agencies to study the issues surrounding domain name            
registration and governance of the Internet. The ITF is expected to solicit     
broad public input to these and other issues. This process is expected to be    
completed in early 1998. On July 1, 1997, the National Telecommunications       
Information Administration of the Department of Commerce ("the NTIA") published 
a request for comments on the registration and administration of Internet domain
names. This request appeared in the form of a notice of inquiry (the "NOI") in  
the U.S. Federal Register with August 18, 1997 as the closing date for receipt  
of comments. The NOI requested specific input in five broad areas: general      
principles, general/organizational framework issues, creation of new TLDs,      
policy issues for new registrars and trademark dispute issues. The Company has  
submitted a response to the NOI request which includes a recommendation, among  
others, that an international public advisory group with U.S. government        
sponsorship be established to manage the Internet, including the domain name    
system, and that the U.S. government sponsorship of this international public   
advisory group continue through a transition period until a suitable            
international sponsor is selected. The NTIA is expected to issue a report on the
results of this NOI and to recommend a future course of action prior to June    
1998 for the role of the U.S. government in Internet domain name registration.  
The ITF or NTIA processes or any other government-sponsored process could result
in policies which may not be favorable to the Company or consistent with the    
Company's current or future plans. The outcome of these activities, therefore,  
could have a material adverse effect on the Company's business, financial       
condition and results of operations.                                            

In the United States, apart from its obligations under the Cooperative
Agreement, the Company is not currently subject to direct regulation other than 
federal and state regulation applicable to businesses generally. However,       
changes in the regulatory environment could result in the Company being subject 
to direct regulation by the Federal Communications Commission (the "FCC") or    
other U.S. regulatory agencies. For example, the Company is aware of certain    
industry requests to the FCC to review the impact of Internet usage on the U.S. 
telecommunications service providers, in particular, the generally lower cost   
structure for data transmission versus voice. In addition, as Internet usage    
becomes more widespread internationally, there is an increased likelihood of    
international regulation. The Company cannot predict whether or to what extent  
any such new regulation will occur; however, such regulation could have a       
material adverse effect on the Company's business, financial condition and      
results of operations.                                                          

   Additionally, the applicability to the Company of existing laws governing
issues such as intellectual property ownership is uncertain. Courts have        
indicated that, under certain circumstances, ISPs could be held responsible for 
the failure to prevent the distribution of material that infringes on others'   
copyrights and other intellectual property. The future interpretation by the    
courts of the obligation of domain name registration providers to prevent       
trademark infringement and other legal issues is uncertain. See "-- Litigation; 
Antitrust Investigation" and "Business -- Litigation; Antitrust Investigation." 

 Costs incurred or decisions rendered as a result of government actions,
including enactment of new laws or adoption of new regulations, investigations  
or lawsuits relating to any of the foregoing, could have a material adverse     
effect on the Company's business, financial condition and results of operations.
See "Business -- Uncertainty of Internet Governance and Regulation."            

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   Reliance on Third Parties.  Reliable communications over the Internet are
dependent upon Internet root servers, which serve as the equivalent of master   
"white pages" of the Internet. Currently, there are 13 root servers, ten of     
which are located in the United States, two of which are located in Europe and  
one of which is located in Asia. Nine of the root servers currently are         
populated with the domain names registered by the Company, while these nine and 
the other four also contain information with respect to other TLDs, including   
country TLDs. When communication with a particular host within a domain name is 
required and the IP address of that host is not known locally, the root servers 
make that information available or "point" to a direct or indirect source of the
information. Multiple root servers are required for purposes of load balancing  
and redundancy.                                                                 

The location and control of these root servers has been determined by 
consensus of various members of the Internet community. The Company controls    
only one of these root servers and currently temporarily administers another    
root server. The other eleven root servers are maintained and controlled by     
independent operators on a volunteer basis. These volunteer operators may at any
time, for any reason, fail to properly maintain such servers or abandon such    
servers. The occurrence of any such events would have a material adverse effect 
on the Company's business, financial condition and results of operations.       

     Further, as no single organization or entity currently has formal authority
over all aspects of the Internet, no organization or entity (including the      
Company) has the legal authority to direct where the root servers are to be     
pointed. However, the operators of the root servers have historically taken     
guidance from the IANA. It is possible that IANA could direct the root servers  
not to accept information updates from the Company or that the operators of the 
root servers could choose to no longer carry the Company's information. In the  
event that the root servers were changed to exclude the information maintained  
by the Company, all new domain names registered by the Company since the last   
update of the data in the TLDs for which the Company acts as the registrar would
no longer be accessible by other users of the Internet. If some, but not all, of
the root servers were changed to exclude the Company's data, the multiple root  
servers would contain inconsistent information. The failure by any or all of the
root servers to include or provide accessibility to the Company's data would    
materially and adversely affect the Internet and the Company's business,        
financial condition and results of operations.                                  

  The Company's success and ability to compete are also dependent upon the
relationships between the Company and ISPs worldwide. Thus, if ISPs were to     
elect not to route Internet communications to or from domain names registered by
the Company or if enough ISPs were to elect to provide routing to a set of      
accepted root servers which did not point to the Company's TLD servers, the     
Company's business, financial condition and results of operations would be      
materially and adversely affected.                                              

    Litigation; Antitrust Investigation.  As of July 31, 1997, the Company had
received approximately 2,700 written objections to the registration and use of  
certain domain names. Of these, approximately 1,400 were disputes in which the  
Company's domain name dispute policy was involved. As of July 31, 1997, the     
Company had been named as a defendant in 36 lawsuits. As of such date, the      
Company had been dismissed as a party from 25 of the 36 lawsuits and no damages 
have been awarded against the Company to any plaintiff. The lawsuits have       
generally involved domain name disputes between trademark owners and domain name
holders. The Company's domain name dispute policy seeks to take a neutral       
position regarding these competing claims and is designed to address claims that
a domain name registered by the Company infringes a third party's federal       
trademark. The Company is drawn into such disputes, in part, as a result of     
claims by trademark owners that the Company is legally required, upon request by
a trademark owner, to terminate the right the Company granted to an alleged     
trademark infringer to register the domain name in question. Further, trademark 
owners have also alleged that the Company should be required to monitor future  
domain name registrations and reject registrations of domain names which are    
identical or similar to their federally registered trademark. The holders of the
domain name registrations in dispute have, in turn, questioned the Company's    
right, absent a court order, to take any action which suspends their            
registration or use of the domain names in question. Such litigation has        
resulted in, and any future litigation can be expected                          

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to result in, substantial legal and other expenses to the Company and a         
diversion of the efforts of the Company's personnel.                            

   On June 27, 1997, SAIC received a Civil Investigative Demand ("CID") from
the U.S. Department of Justice ("DOJ") issued in connection with an             
investigation to determine whether there is, has been, or may be a violation of 
antitrust laws under the Sherman Act relating to Internet registration products 
and services. The CID seeks documents and information from SAIC and the Company 
relating to their Internet registration business. Neither SAIC nor the Company  
is aware of the scope or nature of the investigation. The Company cannot        
reasonably estimate the potential impact of the investigation nor can it predict
whether a civil action will ultimately be filed by the DOJ or by private        
litigants as a result of the DOJ investigation or, if filed, what such action   
would entail. The Company is unable to predict the form of relief that might be 
sought in such an action or that might be awarded by a court or imposed as a    
result of any settlement between the Company and the DOJ or private litigants.  
Any such relief could have a material adverse effect on the Company's business, 
financial condition and results of operations.                                  

On March 20, 1997, PG Media, Inc., a New York-based corporation ("PG  
Media"), filed a lawsuit against the Company in the United States District      
Court, Southern District of New York alleging that the Company had restricted   
access to the Internet by not adding TLDs in violation of the Sherman Act. In   
its complaint, PG Media has, in addition to requesting damages, asked that the  
Company be ordered to amend the root zone configuration file so that the file   
includes reference to PG Media's TLDs and nameservers. The Company has answered 
the complaint, but no motions are pending. In addition, the Company recently    
received written direction from the NSF not to take any action to create        
additional TLDs or to add any new TLDs to the Internet root servers until       
further guidance is provided by the NSF. The Company believes that it has       
meritorious defenses and intends to vigorously defend itself against the claims 
made by PG Media. While the Company cannot reasonably estimate the potential    
impact of such claims, a successful claim under the plaintiff's theory could    
have a material adverse effect on the Company's business, financial condition   
and results of operations.                                                      

There can be no assurance that the Company will not be involved in    
additional litigation, investigations or other proceedings in the future,       
including proceedings challenging the Company's authority to continue in its    
role as a registrar or to charge fees for its domain name registration services.
Any such proceedings, with or without merit, could be costly and time-consuming 
to defend and could have a material adverse effect on the Company's business,   
financial condition and results of operations. See "Business -- Litigation;     
Antitrust Investigation."                                                       

System Interruption and Security Risks.  The Company's operations are 
dependent upon its ability to maintain its computer and telecommunications      
equipment in effective working order and to reasonably protect its systems      
against interruption from fire, natural disaster, sabotage, power loss,         
telecommunication failure, human error or similar events. The vast majority of  
the Company's computer and telecommunications equipment is located in a single  
facility. Although the Company is in the process of establishing back-up        
facilities at another site, this measure, when implemented, will not eliminate  
the significant risk to the Company's operations from a natural disaster or     
system failure at its principal site. Despite the implementation of security    
measures and standard operating procedures, the Company's infrastructure may    
also be vulnerable to computer viruses, hackers, human error or similar         
disruptive problems caused by its employees, customers or other Internet users. 
Computer break-ins and other disruptions may jeopardize the security of         
information stored in and transmitted through the computer systems of the       
Company and may deter potential customers from utilizing the Company's services.
In addition, growth of the Company's customer base may put strain on the        
capacity of its computers and telecommunications systems and the Company's      
inability to sufficiently maintain or upgrade its systems could lead to         
degradation in performance or system failure. Any damage, failure or delay that 
causes significant interruptions in the Company's systems would have a material 
adverse effect on the Company's business, financial condition and results of    
operations.                                                                     

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  On July 17, 1997, during a routine update of the root server domain name
files, the Company inadvertently released corrupted database files for the .com 
and .net TLDs, causing disruption throughout the Internet. The original problem,
which was caused by a database error, was compounded when the normal quality    
control mechanisms used to validate the .com and .net TLD files were incorrectly
overridden by Company personnel and the corrupted files were released. As a     
result, certain Internet users were unable to access certain websites. The      
database error was subsequently fixed and the corrected files were regenerated  
and re-released by the Company within four hours, although the length of time   
during which certain Internet users experienced disruption in accessing the     
Internet varied.                                                                

     The Company has taken several steps to avoid any future occurrences of this
or similar problems, including, but not limited to, adding software code to make
it more difficult to transmit a problematic file and additional quality checks  
by a senior level person prior to each file transmission. There can be no       
assurance, however, that the Company's standard operating procedure or the      
additional measures recently implemented by the Company will prevent or mitigate
a similar occurrence in the future.                                             

 Separately, in July 1997, an entity which offers competing registration
services using other TLDs exploited a security vulnerability in a third-party   
Internet software to temporarily redirect traffic intended for the Company's    
website. The Company is working with CERT (Computer Emergency Response Team)    
from Carnegie Mellon University to address this problem.                        

     If any of these or similar problems should recur or occur in the future, it
could result in, among other things, damage to the Company's reputation and     
credibility, increased intervention by government regulators or reduced customer
confidence, which could in turn materially and adversely affect the Company's   
business, financial condition and results of operations.                        

Competition in Intranet Services and Internet-Enabling                
Businesses.  Companies with Internet expertise are current or potential         
competitors to the Company's Intranet services business. Such companies include 
systems integrators and consulting firms, such as Andersen Consulting, IBM      
Global Services and International Network Services. The Company also competes   
with certain companies that have developed products that automate the management
of Internet Protocol ("IP") addresses and name maps throughout enterprise-wide  
Intranets and with companies with internally-developed systems integration      
efforts. An IP address allows a router, a computer which connects networks      
together, to determine the network to which the router should send the data it  
receives. A number of these competitors and potential competitors have longer   
operating histories, greater name recognition and significantly greater         
financial, technical, marketing, distribution and other resources than the      
Company. There can be no assurance that the Company will be able to successfully
compete in the Intranet services area. Failure by the Company to compete        
successfully in the Intranet services area could have a material adverse effect 
on the Company's business, financial condition and results of operations.       

In developing and distributing future products and services for the   
Internet-enabling services markets, the Company faces intense competition and   
expects to have multiple competitors for each of the products or services, if   
any, which it develops or sells. Many of the Company's potential competitors    
have longer operating histories, greater name recognition and significantly     
greater financial, technical, marketing, distribution and other resources than  
the Company. Furthermore, the industry in which the Company intends to compete  
is characterized by rapid changes and frequent product and service              
introductions. To the extent a competitor introduces a competitive product or   
service prior to the introduction of the same or similar product or service by  
the Company, market acceptance of the competitor's product or service may       
adversely affect the Company's competitive position. See                        
"Business -- Competition."                                                      

     Uncollectible Receivables; Modifications to Billing Practices.  The Company
was reimbursed by the NSF for providing domain name registration services prior 
to September 14, 1995, at which time the Company began charging its customers   
fees for new domain name registrations pursuant to an amendment to the          
Cooperative Agreement. Currently, the Company invoices customers and permits    

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them to pay the subscription fee after the domain name is registered. The       
Company believes it has experienced a high level of uncollectible receivables   
due to, among other factors, the large number of individuals and corporations   
that have registered multiple domain names with the apparent intention of       
reselling such names at a profit. The Company's experience has been that such   
resellers have a greater tendency than other customers to default on their      
subscription fees. Management has established a provision for uncollectible     
accounts which it believes to be adequate to cover anticipated uncollectible    
receivables; however, actual results could differ from management's estimate and
could have a material adverse effect on the Company's business, financial       
condition and results of operations. See "Management's Discussion and Analysis  
of Financial Condition and Results of Operations" and Note 3 of Notes to        
Financial Statements.                                                           

   The Company continually reviews its billing practices for modification to
respond to market conditions and to implement operational improvements. Any such
modification could have unanticipated consequences which could result in a      
material adverse effect on the Company's business, financial condition and      
results of operations.                                                          

 Limited Service Offerings to Date; Reliance on Domain Name Registration
Services and Intranet Services for Substantially All Revenue.  The Company's    
domain name registration services and Intranet services businesses have in the  
past generated substantially all of the Company's revenue from continuing       
operations and are expected to continue to account for substantially all of the 
Company's revenue from continuing operations in the near term. The Company's    
future success will be highly dependent upon the continued increase in domain   
name registrations with the Company, renewal rates of its customers, the ability
of the Company to maintain its current position both as a registrar of domain   
names and as the leading registrar of domain names within the .com TLD and the  
successful development, introduction and market acceptance of new services that 
address the demands of Internet users. Although the Company has experienced     
revenue growth in recent periods, such growth may not be sustainable and may not
be indicative of future operating results. There can be no assurance that the   
Company will be able to successfully retain its current position in providing   
domain name registration services or develop or market additional services.     
Failure to do so would materially and adversely affect the Company's business,  
financial condition and results of operations.                                  

The Company's future success will also be dependent on its ability to 
maintain and expand its Intranet services business. NationsBanc Services, Inc.  
("NationsBanc"), the Company's largest Intranet services customer, accounted for
41.3% of the Company's Intranet services net revenue and 7.8% of the Company's  
total net revenue from continuing operations for the six months ended June 30,  
1997. NationsBanc originally contracted with the Company in 1993 to provide     
ongoing analysis, design, implementation and support engineering for its        
enterprise network. The Company currently provides network design and           
engineering services as well as a variety of project specific services for      
NationsBanc. The Company's current contract with NationsBanc is a three-year    
contract which commenced January 1, 1997 and is a requirements contract under   
which the Company's services are ordered by task orders issued by NationsBanc.  
The NationsBanc contract may be terminated by NationsBanc at any time upon      
30-days' prior written notice to the Company. During the first quarter of 1997, 
task orders for a number of services the Company had historically performed for 
NationsBanc were not renewed. The Company believes that this reflects           
NationsBanc's focus on increasing its internal information technology staff as  
well as its continued efforts to integrate information technology staff from    
recent acquisitions. The Company believes NationsBanc will continue to be a     
significant customer for its Intranet services group but less so than in        
previous years, both in terms of dollars and as a percentage of the Company's   
total net revenue. There can be no assurance that the Company will obtain any   
additional task orders under the NationsBanc contract or maintain or be able to 
expand its Intranet services business. Failure to do so would materially and    
adversely affect the Company's business, financial condition and results of     
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."                                                         

     Technological Change and Additional Technology, Products and Services.  The
development of RWhois, a Company-developed, standard open protocol, and the     
associated technology, allows remote                                            

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registration by others. The Company's efforts to standardize and proliferate    
RWhois as the registration standard may result in a material adverse effect on  
the Company's future competitive position by enabling others to establish       
registries more easily. RWhois is also the protocol that the Company may utilize
for any global directory services which the Company might offer. The successful 
introduction of such directory services may blur the distinction between        
directory services and domain name registration. Should this or another global  
directory service become widely proliferated, domain name registration may be   
subsumed into such a service. In that case, should the Company fail to secure a 
leadership position in providing such a global directory service or establish a 
system for charging for such service, the Company's business, financial         
condition and results of operations would be materially and adversely affected. 
See "Business -- NSI Services -- Registration Services" and "-- Other Products  
and Services Development."                                                      

  The Company's future financial success will be highly dependent upon its
ability to develop and commercialize in a timely manner new technology, products
and services that can be offered in conjunction with the Company's current      
domain name registration and Intranet services and that can meet the changing   
requirements of its current and future customers. The market for such           
technology, products and services is characterized by rapidly changing          
technology, evolving industry standards and frequent introductions of new       
Intranet and Internet-related products and services. Generally, the successful  
development and commercialization of new technology, products and services      
involves many risks, including the identification of new Intranet and           
Internet-related product and service opportunities, the successful completion of
the development process, and the identification, retention and hiring of        
appropriate research, development and technical personnel. There can be no      
assurance that the Company can successfully identify new products and service   
opportunities and develop and bring to market in a timely manner new            
technologies, products or services, or that technologies, products or services  
developed by others will not render those of the Company noncompetitive or      
obsolete. Failure by the Company to develop new technologies, products or       
services and bring them to market in a timely manner could have a material      
adverse effect on the Company's business, financial condition and results of    
operations.                                                                     

Dependence on Future Growth of the Internet and Internet              
Infrastructure.  The Company's future success is substantially dependent upon   
continued growth in the use of the Internet. Rapid growth in the use of and     
interest in the Internet is a relatively recent phenomenon and there can be no  
assurance that use of the Internet will continue to grow at its current pace.   
Even if the Internet continues to experience significant growth in the number of
users and level of use, there can be no assurance that the Internet             
infrastructure will continue to be able to support the demands placed upon it by
such growth. The Company's success and the viability of the Internet as an      
information medium and commercial marketplace will depend in large part upon the
development of a robust infrastructure for providing Internet access and        
carrying Internet traffic. Failure to develop a reliable network system, or     
timely development of complementary products, such as high speed modems, could  
have a material adverse effect on the Company's business, financial condition   
and results of operations. In addition, the Internet could lose its viability   
due to delays in the development or adoption of new standards and protocols     
required to handle increased levels of Internet activity or due to increased    
government regulation. The lack of Internet governance or the future imposition 
of restrictive governance or regulation could adversely affect the growth of the
use of the Internet and have a material adverse effect on the Company's         
business, financial condition and results of operations. Because global commerce
and on-line exchange of information on the Internet are new and evolving, it is 
difficult to predict with any assurance that the infrastructure or complementary
products will be developed, or, if developed, that the Internet will become a   
viable information medium or commercial marketplace. If the use of the Internet 
does not continue to grow, if the necessary infrastructure or complementary     
products are not developed or do not effectively support growth that may occur, 
or if the Internet does not become a viable information medium or commercial    
marketplace, the Company's business, financial condition and results of         
operations would be materially and adversely affected. See "-- System           
Interruption and Security Risks" and "Business -- Industry Background."         

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Intellectual Property Rights.  The Company's principal intellectual   
property consists of, and its success is dependent upon, the Company's          
proprietary software utilized in its registration services business and certain 
methodologies and technical expertise it utilizes in both the design and planned
implementation of its current and future registration service and proposed      
Internet-enabling services businesses. Some of the software and protocols used  
by the Company in its registration service and proposed Internet-enabling       
services businesses are in the public domain or are otherwise available to the  
Company's competitors. In addition, in-depth technical knowledge and unique     
processes are critical to the Company's Intranet services business, in which a  
full range of consulting and systems integration services are offered in order  
to transition organizations from private, legacy networks to more scalable and  
efficient Intranets. The Company has no patents or registered copyrights but has
several trademarks and service marks, including the Company's logo.             

     The Company has compiled a database of information relating to customers in
its registration business. While a portion of this database is available to the 
public, the Company believes that it has certain ownership rights in this       
database and is seeking to protect such rights. If it were determined that the  
Company does not have ownership rights in this database or if the Company is    
unable to protect such rights in this database or is required to share the      
database with its potential competitors, there could be a material adverse      
effect on the Company's business, financial condition and results of operations.

The Company relies upon a combination of nondisclosure and other      
contractual arrangements with its employees and third parties and trade secret  
laws to protect its proprietary rights and limit the distribution of its        
proprietary information. There can be no assurance that the steps taken by the  
Company in this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use of its  
proprietary information and take appropriate steps to enforce its intellectual  
property rights. Furthermore, even if these steps are successful, there can be  
no assurance that others will not develop technologies that are similar or      
superior to the Company's proprietary technology. Although the Company believes 
that its services do not infringe on the intellectual property rights of others 
and that it has all rights necessary to utilize the intellectual property       
employed in its business, the Company is subject to the risk of claims alleging 
infringement of third party intellectual property rights. Any such claims could 
require the Company to spend significant sums in litigation, pay damages and    
develop non-infringing intellectual property or acquire licenses to the         
intellectual property which is the subject of asserted infringement. Failure by 
the Company to adequately protect its proprietary rights or litigation relating 
to intellectual property rights could have a material adverse effect on the     
Company's business, financial condition and results of operations. See          
"Business -- Intellectual Property Rights."                                     

 Potential Fluctuations in Quarterly Results.  The Company believes that
future operating results will be subject to quarterly fluctuations due to a     
variety of factors, many of which are beyond the Company's control. Such factors
may include, but are not limited to, termination of the Cooperative Agreement or
the award of the Cooperative Agreement to another entity, the introduction of   
additional competing registrars or TLDs, variations in the number of requests   
for domain name registrations or demand for the Company's services, introduction
or enhancements of services by the Company or its competitors, market acceptance
of new service offerings, increased competition, costs associated with providing
domain name registration services, litigation costs, patterns of growth in the  
use of and interest in the Internet and general economic conditions. The Company
is continuing to increase its operating expenses for personnel, facilities and  
new services development and, if its revenues do not correspondingly increase,  
the Company's business, financial condition and results of operations would be  
materially and adversely affected.                                              

    Since professional services revenue for Intranet services is recognized by
the Company only when network systems engineers are engaged on client projects, 
the relative utilization of network systems engineers directly affects the      
Company's operating results. In addition, a majority of the Company's Intranet  
services operating expenses, particularly personnel and related costs,          
depreciation and rent, are substantially fixed in advance of any particular     
quarter. As a result, any underutilization of network                           

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systems engineers may cause significant variations in operating results in any  
particular quarter and could result in losses for such quarter. Termination or  
completion of contracts in the Company's Intranet services business or failure  
to obtain additional contracts in its Intranet services business could have a   
material adverse effect on the Company's business, financial condition and      
results of operation. See "Management's Discussion and Analysis of Financial    
Condition and Results of Operations."                                           

Management of Growth; Dependence on Key Personnel.  The Company has   
recently experienced growth in the number of its employees and in the scope of  
its operating and financial systems. This growth has resulted in an increase in 
responsibilities for both existing and new management personnel. In addition,   
the Company is currently seeking additional key marketing and business          
development personnel. The Company's ability to manage growth effectively will  
require it to successfully integrate its management team, continue to implement 
and improve its operational, financial and management information systems and to
train, motivate, manage and retain its employees. There can be no assurance that
the Company will be able to manage its expansion effectively and a failure to do
so could have a material adverse effect on the Company's business, financial    
condition and results of operations.                                            

    The rapid growth of the Company's domain name registration business during
1995 and 1996 significantly exceeded the Company's back office capabilities and 
control infrastructure. As a result, the Company was unable to keep current in  
the processing, billing, collection, reconciliation and other administrative and
financial functions relating to the domain name registration business. In late  
1996, the Company entered into outsourcing arrangements with third parties,     
which, in conjunction with new invoicing procedures implemented in 1997, enabled
the Company to become current in these functions. There can be no assurance that
such outsourcing arrangements and procedural changes will continue to be        
successful in addressing the current or future needs of the Company's domain    
name registration business or that the Company will remain current on the       
various administrative and financial functions relating to the domain name      
registration business. In addition, growth of the Company's customer base may   
strain the capacity of its computers and telecommunications systems, and the    
Company's inability to sufficiently maintain or upgrade its systems could lead  
to degradation in performance or system failure.                                

  The Company's future success depends in part on the continued service of
its key engineering, sales, marketing, executive and administrative personnel,  
and its ability to identify, hire and retain additional personnel. In addition, 
the future success of the Company's Intranet services will depend in large part 
on its ability to hire, train and retain network systems engineers who have     
expertise in a wide array of network and computer systems and a broad           
understanding of the industries the Company serves. An inability of the Company 
to identify, hire, train and retain a sufficient number of qualified network    
systems engineers could impair the Company's ability to adequately manage and   
complete its existing projects or to obtain new projects, which, in turn, could 
have a material adverse effect on the Company's business, financial condition   
and results of operations and could impair the Company's expansion of its       
business. Competition for engineering, sales, marketing and executive personnel 
is intense and there can be no assurance that the Company can retain existing   
personnel or identify, hire or retain additional qualified personnel. See       
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations."                                                                    

Absence of Sales and Marketing Experience; Evolving Distribution      
Channels.  The Company has limited experience in marketing and selling its      
services under its current subscription-based pricing model. The Company's      
ability to achieve revenue growth in the future will depend in large part on its
ability to establish a sales and marketing organization. There can be no        
assurance that the Company will be able to identify, attract and retain         
experienced sales and marketing personnel with relevant experience, that the    
cost of such personnel will not exceed the revenue generated or that the        
Company's sales and marketing organization will be able to successfully compete 
against the significantly more extensive and well-funded sales and marketing    
operations of the Company's current or potential competitors.                   

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In addition to establishing its direct sales channels, the Company's  
distribution strategy is to develop multiple distribution channels. Accordingly,
the Company's ability to achieve revenue growth in the future will also depend  
in large part on establishing and maintaining relationships with Internet access
providers and other third parties and on effectively using the Internet as a    
medium of distribution. There can be no assurance that the Company will be able 
to successfully establish its sales and marketing organization, develop third   
party distribution channels, develop its own capabilities to distribute services
using the Internet or that any such expansion will result in an increase in     
revenue. Any failure by the Company to establish its sales and marketing        
organization, expand its distribution channels or use the Internet as a medium  
of distribution could materially and adversely affect the Company's business,   
financial condition and results of operations.                                  

   Control by SAIC.  Upon completion of this offering, SAIC will own 100% of
the Company's outstanding Class B Common Stock, which will represent            
approximately 84.5% of the outstanding Common Stock of the Company              
(approximately 82.5% if the Underwriters' over-allotment option is exercised in 
full) and approximately 98.2% of the combined voting power of the Company's     
outstanding Common Stock (approximately 97.9% if the Underwriters'              
over-allotment option is exercised in full). As a result, SAIC will be able to  
effectively control all matters requiring approval by the stockholders of the   
Company, including the election of members of the Company's Board of Directors, 
changing the size and composition of the Board of Directors and preventing a    
change in control of the Company. The Class B Common Stock is convertible into  
Class A Common Stock, subject to certain limitations set forth in the Company's 
Second Amended and Restated Certificate of Incorporation (the "Certificate of   
Incorporation"). See "Description of Capital Stock." SAIC has no agreement with 
the Company not to sell or distribute its shares of the Company's Common Stock  
and, except for the restrictions in the Underwriting Agreement set forth below, 
there can be no assurance that SAIC will maintain its ownership of the Company's
Class B Common Stock. Pursuant to the Underwriting Agreement, SAIC has agreed,  
subject to certain exceptions, not to sell or otherwise dispose of, directly or 
indirectly, any shares of Common Stock owned by it for a period of 180 days     
after the date of this Prospectus without the prior written consent of Hambrecht
& Quist LLC.                                                                    

The Internal Revenue Code of 1986, as amended (the "Code"), requires  
beneficial ownership by SAIC of at least 80% of the total voting power and value
of the outstanding Common Stock of the Company in order to include the Company  
in its consolidated group for federal income tax purposes. In addition, SAIC    
must beneficially own at least 80% of the total voting power and 80% of each    
class of nonvoting capital stock of the Company in order to be able to effect a 
tax-free spin-off of the Company under the Code. Because SAIC may seek to       
maintain its beneficial ownership percentage of the Company for tax planning    
purposes or otherwise and may not desire to acquire additional shares of Common 
Stock in connection with a future issuance of shares by the Company, the Company
may be constrained in its ability to raise equity capital in the future or to   
issue Common Stock or other equity securities in connection with acquisitions.  
See "Relationship with SAIC and Certain Transactions."                          

    Intercompany Agreements Not Subject to Arm's-Length Negotiations; Reliance
on SAIC for Certain Corporate Services.  Since its acquisition by SAIC, the     
Company has not been operated independently of SAIC. Prior to the completion of 
the offering, SAIC and the Company will enter into certain intercompany         
agreements, including an agreement pursuant to which SAIC will provide various  
corporate services to the Company that may be material to the conduct of the    
Company's business (the "Corporate Services Agreement"). These services include 
certain routine and ordinary corporate services, including financial, insurance,
accounting, employee benefits, payroll, tax and legal services as well as       
corporate planning, government relations and corporate quality assurance        
services as described in the Corporate Services Agreement. Subsequent to the    
acquisition of the Company by SAIC, the Company's Statements of Operations      
include revenue and costs directly attributable to the Company, as well as      
certain allocations from SAIC of indirect costs associated with such services   
and shared systems. Such allocations include allocations of: (i) costs for      
administrative functions and services performed on behalf of the Company by     
centralized staff groups within SAIC; (ii) SAIC's general corporate expenses;   
(iii) other benefit costs, including, but not limited to, health insurance,     
disability and retirement costs; and (iv) cost of capital (through December 31, 
1996). Through August 9, 1996,                                                  

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such allocations (excluding cost of capital) were generally based on the        
proportionate labor costs of the Company to the rest of SAIC and were included  
in selling, general and administrative expenses and cost of revenue,            
respectively. Effective August 10, 1996, SAIC stopped allocating costs based    
upon pro rata labor and began assessing the Company for corporate services      
provided by SAIC at a fee equal to 2.5% of net revenue, with such percentage to 
be re-evaluated by both parties on an annual basis. This fee is included in its 
entirety in selling, general and administrative expenses. With respect to       
matters covered by the Corporate Services Agreement, the relationship between   
SAIC and the Company is intended to continue in a manner generally consistent   
with past practices. Because the Company is currently a wholly-owned subsidiary 
of SAIC, none of the intercompany agreements will result from arm's-length      
negotiations. These agreements may include terms and conditions that may be more
or less favorable to the Company than terms contained in similar agreements     
negotiated with third parties. After SAIC's ownership of the Company's Common   
Stock drops below 50% of the Company's issued and outstanding Common Stock, the 
Corporate Services Agreement will be terminable by either party upon 180 days'  
prior written notice. Certain individual services are also terminable by either 
party upon 180 days' prior written notice, regardless of SAIC's stock holdings. 
In the event that SAIC elects to terminate the Corporate Services Agreement,    
there can be no assurance that the Company would be able to secure alternative  
sources for such services within 180 days or that such services could be        
obtained for costs comparable to costs to be charged by SAIC. See "Relationship 
with SAIC and Certain Transactions."                                            

Control of Tax Matters; Tax and ERISA Liability.  By virtue of its    
controlling ownership and the terms of a tax sharing agreement (the "Tax Sharing
Agreement") to be entered into between the Company and SAIC, SAIC will          
effectively control all of the Company's tax decisions. Under the Tax Sharing   
Agreement, SAIC will have sole authority to respond to and conduct all tax      
proceedings (including tax audits) relating to the Company, to file federal,    
state and local returns on behalf of the Company and to calculate the amount of 
the Company's liability to SAIC under the Tax Sharing Agreement. Further,       
pursuant to the terms of the Tax Sharing Agreement, upon deconsolidation, the   
Company's ability to recognize a benefit for tax losses it incurs is subject to 
SAIC's approval. SAIC may choose to contest, compromise or settle any adjustment
or deficiency proposed by the relevant taxing authority in a manner that may be 
beneficial to SAIC and detrimental to the Company.                              

Each member of a consolidated group for federal income tax purposes is
jointly and severally liable for the federal income tax liability of each other 
member of the consolidated group. In addition, under the Employee Retirement    
Income Security Act of 1974, as amended ("ERISA"), and federal income tax law,  
each member of the controlled group is jointly and severally liable for funding 
and termination liabilities of tax qualified defined benefit retirement plans as
well as certain plan taxes. Accordingly, during the period in which the Company 
is included in SAIC's consolidated or controlled group, the Company could be    
liable if such liability or tax is incurred, and not discharged, by any other   
member of SAIC's consolidated or controlled group. See "Relationship with SAIC  
and Certain Transactions -- Tax Sharing Agreement."                             

     Potential Conflicts of Interest.  Various conflicts of interest between the
Company and SAIC could arise following the completion of this offering, and     
persons serving as directors, officers and employees of both the Company and    
SAIC may have conflicting duties to each. Currently, Michael A. Daniels, the    
Company's Chairman of the Board, also serves as a Sector Vice President and     
Sector Manager of SAIC, Donald N. Telage, the Company's Senior Vice President,  
Internet Relations and Special Programs and one of the Company's directors, also
serves as a Group Senior Vice President of SAIC, Robert J. Korzeniewski, the    
Company's Chief Financial Officer, also serves as a Corporate Vice President for
Administration of SAIC, Raymond S. Corson, the Company's Senior Vice President, 
Business Development, also serves as a Vice President of SAIC, A. Scott         
Williamson, the Company's Vice President, Engineering, also serves as a Vice    
President of SAIC and Russell L. Helbert, the Company's Controller, also serves 
as an Assistant Vice President for Administration of SAIC. Further, J. Robert   
Beyster, a director of the Company, is also the Chief Executive Officer and     
Chairman of the Board of SAIC, John E. Glancy, a director of the Company, is    
also a Corporate Executive Vice President and a director of SAIC and William A. 
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Financial Officer of SAIC. It is currently contemplated that, upon completion of
the offering, all of the Company's executive officers who currently also hold   
positions with SAIC (other than Donald N. Telage) will resign from their        
respective positions with SAIC. Ownership interests of directors or officers of 
the Company in the common stock of SAIC could also create or appear to create   
potential conflicts of interest when directors and officers are faced with      
decisions that could have different implications for the Company and SAIC. In   
addition, for financial reporting purposes, the Company's financial results will
be included in SAIC's consolidated financial statements. The members of the     
Board of Directors of the Company and executive officers of the Company who are 
affiliated with SAIC will consider not only the short-term and long-term impact 
of financial and operating decisions on the Company, but also the impact of such
decisions on SAIC's consolidated financial results. In some instances, the      
impact of such decisions could be disadvantageous to the Company while          
advantageous to SAIC.                                                           

 Certain Charter Provisions and Limitations on Liability.  The Company's
Certificate of Incorporation includes provisions relating to competition by SAIC
with the Company, allocations of corporate opportunities, transactions with     
interested parties and intercompany agreements and provisions limiting the      
liability of certain persons. See "Description of Capital Stock -- Certain      
Certificate of Incorporation and Bylaw Provisions." The enforceability under    
Delaware corporate law of such provisions which eliminate certain rights that   
might have been available to stockholders under Delaware law had such provisions
not been included has not been established and thus counsel to the Company is   
not able to render an opinion regarding the enforceability of such provisions.  
The Company's Certificate of Incorporation provides that any person purchasing  
or acquiring an interest in shares of capital stock of the Company, including   
the Underwriters, shall be deemed to have consented to the provisions in the    
Certificate of Incorporation relating to competition by SAIC with the Company,  
conflicts of interest, corporate opportunities and intercompany agreements, and 
such consent may restrict such person's ability to challenge transactions       
carried out in compliance with such provisions. The Company intends to disclose 
the existence of such provisions in its Annual Reports on Form 10-K as well as  
in certain other filings with the Securities and Exchange Commission (the       
"Commission"). The corporate charter of SAIC does not include comparable        
provisions and, as a result, persons who are directors and/or officers of the   
Company and who are also directors and/or officers of SAIC may choose to take   
action in reliance on such provisions rather than act in a manner that might be 
favorable to the Company but adverse to SAIC. See "Description of Capital       
Stock -- Certain Certificate of Incorporation and Bylaw Provisions."            

 Under the Company's Certificate of Incorporation, the personal monetary
liability of the directors of the Company for breach of their fiduciary duty of 
care, including actions involving gross negligence, is eliminated to the fullest
extent permitted under Delaware law. See "Description of Capital Stock --       
Certain Certificate of Incorporation and Bylaw Provisions."                     

International Operations.  The Company anticipates that revenue from  
sources outside the U.S. may increase in the future. As a result, the Company   
will increasingly be subject to the risks of conducting business                
internationally, including unexpected changes in regulatory requirements,       
fluctuations in the U.S. dollar, tariffs and other barriers and restrictions and
the burdens of complying with a variety of foreign laws. In addition, the       
Company will increasingly be subject to general geo-political risks, such as    
political and economic instability and changes in diplomatic and trade          
relationships, in connection with its international operations. There can be no 
assurance that such regulatory, geo-political and other factors will not        
adversely impact the Company's operations in the future or require the Company  
to modify its business practice. In addition, the laws of certain foreign       
countries may not protect the Company's proprietary rights to the same extent as
do the laws of the United States.                                               

   Shares Eligible for Future Sale.  Sales of substantial amounts of Class A
Common Stock in the public market, whether by purchasers in the offering or     
other stockholders of the Company, or the perception that such sales could      
occur, may materially and adversely affect the market price of the Class A      
Common Stock.                                                                   

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Upon completion of the offering, SAIC will own 100% of the Company's  
outstanding Class B Common Stock, which will represent approximately 84.5% of   
the outstanding Common Stock of the Company (approximately 82.5% if the         
Underwriters' over-allotment option is exercised in full). A decision by SAIC to
sell such shares could materially and adversely affect the market price of the  
Class A Common Stock. The Company and SAIC have entered into a registration     
rights agreement (the "Registration Rights Agreement") which requires the       
Company to effect a registration statement covering some or all of the shares of
Class A Common Stock to be owned by SAIC upon conversion of the Class B Common  
Stock owned by SAIC and any other shares of Class A Common Stock otherwise      
acquired by SAIC, subject to certain terms and conditions. The Company has      
agreed to indemnify SAIC in connection with any such registration. The Company  
intends to register a total of 2,556,250 shares of Class A Common Stock reserved
for issuance under its 1996 Stock Incentive Plan as soon as practicable         
following the date of this Prospectus. See "Relationship with SAIC and Certain  
Transactions -- Registration Rights Agreement," "Shares Eligible for Future     
Sale" and "Description of Capital Stock."                                       

   In certain circumstances, including without limitation, a public offering
or distribution of Class B Common Stock by SAIC, the Class B Common Stock would 
trade separately from the Class A Common Stock in the public market. Separate   
trading of the Class B Common Stock in the public market, or the perception that
such trading could occur, may materially and adversely affect the market price  
of the Class A Common Stock.                                                    

     Upon completion of the offering, the shares of Class A Common Stock offered
hereby will be freely tradable without restriction or further registration under
the Securities Act by persons other than executive officers and directors of    
SAIC or the Company (the "Restricted Persons"). The shares of Common Stock which
are held by SAIC and certain Restricted Persons are subject to a "lock-up"      
agreement under which SAIC and such Restricted Persons have agreed, subject to  
certain exceptions, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock without the prior written consent of Hambrecht &     
Quist LLC, for a period of 180 days after the date of this Prospectus. Following
such period, SAIC and any such Restricted Person who is an affiliate of the     
Company may sell such shares only pursuant to the requirements of Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act") or pursuant to an 
effective registration statement under the Securities Act. The Securities and   
Exchange Commission has recently enacted revisions to Rule 144 which shortened  
the holding periods under Rule 144 from two years to one year and under Rule    
144(k) from three years to two years. See "Shares Eligible for Future Sale" and 
"Underwriting."                                                                 

    Lack of Prior Public Market and Possible Volatility of Stock Price.  Prior
to this offering, there has been no public market for the Company's Class A     
Common Stock and there can be no assurance that an active trading market will   
develop or be sustained after this offering. The initial public offering price  
will be determined through negotiations among the Company and the               
representatives of the Underwriters based on several factors and may not be     
indicative of the market price of the Class A Common Stock after this offering. 
See "Underwriting." The market price of the shares of Class A Common Stock is   
likely to be highly volatile and may be significantly affected by factors such  
as actual or anticipated fluctuations in the Company's results of operations,   
announcements of technological innovations, changes in Internet governance,     
announcement of additional competing registrars or TLDs, introduction of new    
products or services by the Company or its competitors, developments with       
respect to patents, copyrights or proprietary rights, conditions and trends in  
the networking and other technology industries, changes in or failure by the    
Company to meet securities analysts' expectations, general market conditions and
other factors. In addition, the stock market has from time to time experienced  
significant price and volume fluctuations that have particularly affected the   
market prices for the common stocks of technology companies. These broad market 
fluctuations may adversely affect the market price of the Company's Class A     
Common Stock. In the past, following periods of volatility in the market price  
of a particular company's securities, securities class action litigation has    
often been brought against that company. There can be no assurance that such    
litigation will not occur in the future with respect to the Company. Such       
litigation could result in substantial costs and a diversion of                 

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management's attention and resources, which could have a material adverse effect
upon the Company's business, financial condition and results of operations.     

   Dilution.  Based upon the assumed initial public offering price per share
of $15.00 (and assuming no exercise of the Underwriters' over-allotment option),
the Company's net tangible book value per share of Common Stock as of June 30,  
1997, after giving effect to the transactions set forth in "Capitalization,"    
would have been $1.47. This represents an immediate increase in net tangible    
book value of $2.21 per share to the existing stockholder and an immediate      
dilution of $13.53 per share to purchasers of the Class A Common Stock in the   
offering. See "Dilution."                                                       

    Effect of Certain Charter Provisions; Anti-takeover Effects of Certificate
of Incorporation and Delaware Law.  The holders of Class A Common Stock are     
entitled to one vote per share and holders of Class B Common Stock are entitled 
to ten votes per share. Holders of Class A Common Stock and Class B Common Stock
generally vote together as a single class. The Class B Common Stock held by SAIC
is convertible into Class A Common Stock under certain conditions set forth in  
the Company's Amended and Restated Certificate of Incorporation. See            
"Description of Capital Stock." Upon completion of this offering, the Company's 
Board of Directors will have the authority to issue up to 10,000,000 shares of  
Preferred Stock and to determine the price, rights, preferences, privileges and 
restrictions, including voting rights of such shares, without any further vote  
or action by the Company's stockholders. Such charter provisions could have the 
effect of delaying or preventing a change of control of the Company. The rights 
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the  
future. The issuance of Preferred Stock, while providing desirable flexibility  
in connection with possible acquisitions and other corporate purposes, could    
have the effect of making it more difficult for a third party to acquire a      
majority of the outstanding voting stock of the Company. The Company has no     
current plans to issue shares of Preferred Stock. Further, certain provisions of
the Company's Certificate of Incorporation and of Delaware law could delay or   
make more difficult a merger, tender offer or proxy contest involving the       
Company. See "Description of Capital Stock -- Preferred Stock" and "-- Delaware 
Antitakeover Law and Certain Charter Provisions."                               

    Discretion as to Use of Proceeds.  The Company intends to use the proceeds
of this offering for payment of a $10,000,000 dividend to SAIC and for working  
capital and other general corporate purposes, including business development,   
marketing and promotional activities, continued development of enhancements or  
new services complementary to the Company's registration business and other uses
as deemed appropriate by the Board of Directors. The amounts and timing of these
expenditures will vary significantly depending upon a number of factors,        
including the amount of cash generated by the Company's operations, the progress
of the Company's product and services development activities and the market     
response to the introduction of any new products and services. In addition, the 
Company may use a portion of the net proceeds of this offering to acquire or    
invest in businesses, products, services or technologies complementary to the   
Company's current business, through mergers, acquisitions, joint ventures or    
otherwise. However, the Company has no specific agreements or commitments and is
not currently engaged in any negotiations with respect to such transactions.    
Accordingly, the Company's management will retain broad discretion as to the    
allocation of the net proceeds of this offering. See "Use of Proceeds."         

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USE OF PROCEEDS 

  The net proceeds to the Company from the sale of the 2,300,000 shares of
Class A Common Stock offered by the Company hereby at an assumed initial public 
offering price of $15.00 per share are estimated to be $30,985,000 ($35,797,750 
if the Underwriters' over-allotment option is exercised in full). The Company   
intends to use $10,000,000 of the proceeds of this offering to pay a dividend to
SAIC and the remainder of the proceeds of this offering for working capital and 
other general corporate purposes, including business development, marketing and 
promotional activities, continued development of enhancements or new services   
complementary to the Company's registration business and other uses as deemed   
appropriate by the Board of Directors. The amounts and timing of these          
expenditures will vary significantly depending upon a number of factors,        
including the amount of cash generated by the Company's operations, the progress
of the Company's product and services development activities and the market     
response to the introduction of any new products and services. In addition, the 
principal purposes of this offering include increasing the Company's equity     
capital, creating a public market for the Company's Class A Common Stock,       
providing liquidity for the Company's stockholders and facilitating future      
access by the Company to public equity markets.                                 

In addition, the Company may use a portion of the net proceeds of this
offering to acquire or invest in businesses, products, services or technologies 
complementary to the Company's current business, through mergers, acquisitions, 
joint ventures or otherwise. However, the Company has no specific agreements or 
commitments and is not currently engaged in any negotiations with respect to    
such transactions. Accordingly, the Company's management will retain broad      
discretion as to the allocation of the net proceeds of this offering. Pending   
the uses described above, the Company intends to invest the net proceeds of this
offering in short-term, interest-bearing investment grade securities.           

DIVIDEND POLICY 

With the exception of a $10,000,000 dividend to be paid to SAIC upon  
consummation of the offering, to date, the Company has neither declared nor paid
dividends on its Common Stock. Other than the dividend to be paid to SAIC, the  
Company currently intends to retain its earnings, if any, for future growth and 
does not anticipate paying any dividends in the foreseeable future. The         
Company's future dividend policy will be determined by its Board of Directors on
the basis of various factors, including the Company's results of operations,    
financial condition, capital requirements and investment opportunities.         

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CAPITALIZATION

     The following table sets forth the capitalization of the Company as of June
30, 1997: (i) on an actual basis, (ii) on a pro forma basis to give effect to   
the dividend to be paid to SAIC from the proceeds of this offering and (iii) as 
adjusted to give effect to the sale by the Company of the 2,300,000 shares of   
Class A Common Stock offered hereby at an assumed initial public offering price 
of $15.00 per share and the application of the remainder of the estimated net   
proceeds therefrom. This table should be read in conjunction with the Financial 
Statements of the Company and the Notes thereto included elsewhere in this      
Prospectus.                                                                     

                                                        [Enlarge/Download Table]

                                                                        JUNE 30, 1997             
                                                           ---------------------------------------
                                                           ACTUAL     PRO FORMA(2)     AS ADJUSTED
                                                           ------     ------------     -----------
                                                           (IN THOUSANDS)                         
                                                                                                  
STOCKHOLDERS' EQUITY:                                                                             
     Preferred Stock, $0.001 par value, 10,000,000 shares                                         
       authorized; none issued and outstanding...........  $   --       $     --        $      -- 
     Class A Common Stock, $0.001 par value, 100,000,000                                          
       shares authorized; none issued and outstanding,                                            
       actual and pro forma; 2,300,000 issued and                                                 
       outstanding, as adjusted(1).......................      --             --                2 
     Class B Common Stock, $0.001 par value, 40,000,000                                           
       shares authorized; 12,500,000 issued and                                                   
       outstanding, actual and pro forma; 12,500,000                                              
       issued and outstanding, as adjusted...............      12             12               12 
     Additional paid-in capital..........................   4,468          4,468           35,451 
     Accumulated deficit.................................  (1,787)       (11,787)         (11,787)
                                                           ------     ------------     -----------
          Total stockholders' equity.....................   2,693         (7,307)          23,678 
                                                           ------     ------------     -----------
               Total capitalization......................  $2,693       $ (7,307)       $  23,678 
                                                           ======     ===========       ========= 

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

(1) Excludes 2,556,250 shares of Class A Common Stock reserved for issuance     
under the Company's 1996 Stock Incentive Plan, of which 1,539,725 shares
were subject to outstanding options as of July 31, 1997 at a weighted   
 average exercise price of $13.18 per share. See "Management -- 1996 Stock
Incentive Plan" and Notes 10 and 14 of Notes to Financial Statements.   

(2) Adjusted to reflect the dividend to be paid to SAIC. See policy regarding   
Pro Forma Balance Sheet and Earnings per Share at Note 2 of Notes to    
Financial Statements.                                                   

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DILUTION

  As of June 30, 1997, the Company had a pro forma net tangible book value
before the offering of approximately $(9,230,000) or $(0.74) per share of Common
Stock. Pro forma net tangible book value per share is equal to the amount of    
total tangible assets (including deferred tax assets of $17,470,000 at June 30, 
1997) of the Company less total liabilities after giving effect to the dividend 
to SAIC, divided by the number of shares of Common Stock outstanding. Without   
taking into account any other changes in the pro forma net tangible book value  
after June 30, 1997, other than to give effect to the receipt by the Company of 
the net proceeds from the sale of the 2,300,000 shares of Class A Common Stock  
offered by the Company hereby at an assumed initial public offering price of    
$15.00 per share and the application of the estimated net proceeds therefrom,   
the pro forma net tangible book value of the Company at June 30, 1997 after the 
offering would have been approximately $21,755,000 or $1.47 per share. This     
represents an immediate increase in such net tangible book value of $2.21 per   
share to the existing stockholder and an immediate dilution of $13.53 per share 
to new investors purchasing shares of Class A Common Stock in this offering. The
following table illustrates this per share dilution:                            

                                                                [Download Table]
                                                                                    
Assumed initial public offering price per share.....................          $15.00
                                                                              ------
     Net tangible book value per share before the offering.......... $ 0.06         
     Decrease in net tangible book value attributable to dividend...  (0.80)        
                                                                     ------         
     Pro forma net tangible book value per share before the                         
      offering......................................................  (0.74)        
     Increase per share attributable to new investors...............   2.21         
                                                                     ------         
Pro forma net tangible book value per share after the offering......            1.47
                                                                              ------
     Dilution per share to new investors............................          $13.53
                                                                              ======

    The following table summarizes, on a pro forma basis, as of June 30, 1997,
the differences between the existing stockholder and purchasers of shares in    
this offering with respect to the number of shares of Common Stock purchased    
from the Company, the total consideration paid and the average consideration per
share paid:                                                                     

                                                        [Enlarge/Download Table]

                                SHARES PURCHASED      TOTAL CONSIDERATION                 
                              ---------------------  ----------------------  AVERAGE PRICE
                                NUMBER      PERCENT    AMOUNT       PERCENT    PER SHARE  
                              ----------    -------  -----------    -------  -------------
                                                                                          
Existing stockholder......... 12,500,000     84.5%   $ 4,480,000     11.5%      $  0.36   
New investors................  2,300,000     15.5%    34,500,000     88.5%      $ 15.00   
                              ----------    -------  -----------    -------               
     Total................... 14,800,000    100.0%   $38,980,000    100.0%                
                               =========    =======   ==========    =======               

  The foregoing table is based on the total consideration paid by SAIC for
its shares based on the price of the shares of SAIC Class A Common Stock (as    
determined by the Board of Directors of SAIC in accordance with established     
procedures) used to acquire the entire Company, including the government-based  
business which was later transferred to SAIC, and does not give effect to the   
$10,000,000 dividend payable to SAIC. The foregoing table also assumes (i) an   
initial public offering price of $15.00 per share before deduction of estimated 
underwriting discounts and commissions and offering expenses payable by the     
Company and (ii) no exercise of the Underwriters' over-allotment option or of   
any outstanding stock options. As of July 31, 1997, there were outstanding      
options to purchase 1,539,725 shares of Class A Common Stock, with a weighted   
average exercise price of $13.18 per share. To the extent that options are      
granted and exercised, there may be further dilution to new investors. See      
"Management -- 1996 Stock Incentive Plan" and Notes 10 and 14 of the Notes to   
Financial Statements.                                                           

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SELECTED FINANCIAL DATA 

     The following table sets forth selected financial and operating data of the
Company for the periods indicated and should be read in conjunction with        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations," the Financial Statements and the Notes related thereto included    
elsewhere in this Prospectus. The selected financial data for the years ended   
December 31, 1996 and 1994 and for the periods January 1, 1995 to March 10, 1995
and March 11, 1995 to December 31, 1995 were derived from the Company's audited 
financial statements included elsewhere in this Prospectus. The information for 
fiscal years 1992 and 1993 and the six months ended June 30, 1996 and 1997 is   
derived from the Company's unaudited financial statements which, in the opinion 
of management, reflect all adjustments (consisting only of normal recurring     
items) necessary to present fairly the financial position and results of        
operations for the periods then ended. The selected financial data for the year 
ended December 31, 1995 was derived by combining the Company's Results of       
Operations for the period January 1, 1995 through March 10, 1995 and the period 
March 11, 1995 through December 31, 1995, both as derived from the Company's    
audited financial statements included elsewhere in this Prospectus.             
Comparability of pre-acquisition periods to post-acquisition periods is limited 
because the financial statements have been prepared on differing bases of       
accounting as a result of the acquisition by SAIC. See Note 1 of Notes to       
Financial Statements. The accompanying financial statements and "Management's   
Discussion and Analysis of Financial Condition and Results of Operations" for   
all periods presented for continuing operations reflect the results of          
operations of the commercial business of the Company, which includes            
registration services and Intranet services. See "Management's Discussion and   
Analysis of Financial Condition and Results of Operations -- Overview -- The    
SAIC Acquisition" and "-- Registration Services."                               

                                                        [Enlarge/Download Table]

                                                                                                SIX MONTHS     
                                                    FISCAL YEAR ENDED DECEMBER 31,            ENDED JUNE 30,   
                                             ---------------------------------------------   ----------------- 
                                              1992     1993     1994     1995(1)    1996      1996      1997   
                                             ------   ------   -------   -------   -------   -------   ------- 
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)                             
                                                                                                               
STATEMENT OF OPERATIONS DATA:                                                                                  
     Net revenue............................ $1,160   $4,369   $ 5,029   $ 6,486   $18,862   $ 6,829   $18,724 
     Cost of revenue........................    695    2,924     3,073     5,704    14,666     6,521    11,435 
                                             ------   ------   -------   -------   -------   -------   ------- 
     Gross profit...........................    465    1,445     1,956       782     4,196       308     7,289 
     Research and development expenses......     --       --        --        --       680        58       718 
     Selling, general and                                                                                      
       administrative expenses..............    275    1,401     1,544     2,394     6,280     2,370     4,788 
     Interest expense (income)..............     42      120       109        61      (496)      (86)     (484)
                                             ------   ------   -------   -------   -------   -------   ------- 
     Income (loss) from continuing                                                                             
       operations before income taxes and                                                                      
          cumulative effect of a change in                                                                     
          accounting principle..............    148      (76)      303    (1,673)   (2,268)   (2,034)    2,267 
     Provision (benefit) for income taxes...     55       34       114      (239)     (643)     (576)    1,011 
                                             ------   ------   -------   -------   -------   -------   ------- 
     Income (loss) from continuing                                                                             
       operations...........................     93     (110)      189    (1,434)   (1,625)   (1,458)    1,256 
     Income (loss) from discontinued                                                                           
       operations, net of income taxes(2)...    588     (936)   (1,169)   (1,403)       --        --        -- 
     Cumulative effect of change in                                                                            
       accounting for income taxes..........     --      660        --        --        --        --        -- 
                                             ------   ------   -------   -------   -------   -------   ------- 
     Net income (loss)...................... $  681   $ (386)  $  (980)  $(2,837)  $(1,625)  $(1,458)  $ 1,256 
                                             ======   ======   =======   =======   =======   =======   ======= 
     Unaudited pro forma net income (loss)                                                                     
       per share............................                                       $ (0.12)  $ (0.11)  $  0.09 
                                                                                   =======   =======   ======= 
     Unaudited pro forma shares used in                                                                        
       computing net income (loss) per                                                                         
       share(3).............................                                        13,349    13,349    13,349 
                                                                                   =======   =======   ======= 
OTHER OPERATING DATA(4):                                                                                       
     Net new registrations..................     --       13        24       141       489       180       429 
     Less: registrations not renewed........     --       --        --         1        39        17        16 
     Net registrations at period end........     --       13        37       177       627       340     1,040 

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                                                        [Enlarge/Download Table]

                                                                                             SIX MONTHS     
                                          FISCAL YEAR ENDED DECEMBER 31,                   ENDED JUNE 30,   
                             ---------------------------------------------------------  --------------------
                              1992        1993        1994         1995         1996     1996         1997  
                             ------      ------      -------      -------      -------  -------     --------
                             (IN THOUSANDS)                                                                 
                                                                                                            
BALANCE SHEET DATA:                                                                                         
     Cash and cash                                                                                          
       equivalents.........  $   --      $   --      $   136      $     5      $15,540  $    27      $25,967
     Working capital(5)....    (307)       (179)      (1,340)        (559)       1,362   (6,423)       6,280
     Total assets(6).......   1,272       3,124        2,448       11,748       66,118   30,220       92,250
     Deferred revenue,                                                                                      
       net.................      32          73          137        3,346       29,352   14,356       45,628
     Long-term obligations,                                                                                 
       excluding current                                                                                    
       portion.............     479         344           81        1,353        9,440    5,183       15,193
     Total stockholders'                                                                                    
       equity..............      56       1,221          252        3,062        1,437    1,604        2,693

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

(1) The Selected Financial Data for the year ended December 31, 1995 was derived
  by combining the Company's Results of Operations for the period January 1,
  1995 through March 10, 1995 and the period March 11, 1995 through December
   31, 1995, which, respectively, are periods before and after the date of the
   SAIC acquisition. The data for these two periods were prepared on differing
 bases of accounting and, accordingly, the comparability of such data with
 other periods is limited, primarily as a result of goodwill amortization,
new corporate services agreements and the repayment of outstanding debt 
 balances. See Note 1 of Notes to Financial Statements for a discussion of
the presentation for each of these periods.                             

(2) See Note 11 of Notes to Financial Statements for a discussion of            
discontinued operations.                                                

(3) See Note 2 of Notes to Financial Statements for an explanation of the       
    determination of shares used in computing the unaudited pro forma net income
(loss) per share.                                                       

(4) Net new registrations for each period include gross new registrations less  
an estimate of registrations that are uncollectible. Net registrations  
includes net new registrations less an estimate of registrations not    
renewed. Prior to September 14, 1995, net registrations equaled gross   
registration because the Company was reimbursed by the NSF for all      
registrations under a cost plus fixed-fee contract.                     

(5) Working capital calculation includes $32, $73, $137, $1,993, $19,912,       
$9,173, and $31,990 of current deferred revenue as of December 31, 1992,
1993, 1994, 1995 and 1996 and June 30, 1996 and 1997, respectively.     

(6) Total assets include $0, $0, $0, $1,408, $17,453, $7,453 and $31,056 of     
restricted assets as of December 31, 1992, 1993, 1994, 1995 and 1996 and
June 30, 1996 and 1997, respectively. See Notes 2 and 3 of Notes to     
Financial Statements.                                                   

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

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

OVERVIEW                                                                        

The SAIC Acquisition.  The Company was incorporated in the District of
Columbia in 1979 and was reincorporated in Delaware in 1996. The Company was    
acquired by SAIC on March 10, 1995 in a stock-for-stock transaction accounted   
for as a purchase and is currently a wholly-owned subsidiary of SAIC. Prior to  
the acquisition of the Company by SAIC, the Company's principal lines of        
business consisted of providing integration, engineering for computer and       
telecommunications networks for government and commercial customers and domain  
name registration services. The Company's business included commercial and      
government contracts awarded to the Company on a competitive basis, including   
government contracts that were awarded to the Company based partially upon the  
Company's then minority-owned status. The contracts which had been awarded to   
the Company based in part on the Company's then minority-owned status were      
transferred into a separately-owned entity prior to the acquisition of the      
Company by SAIC. In November 1995, SAIC adopted a plan to transfer the Company's
remaining government-based business to SAIC in order to enable the Company to   
focus on the growth of its commercial business, which includes registration     
services and Intranet services. This transfer was effective as of February 1996.
The operating results of both the minority-based government contracts business  
and the remaining government-based business are reflected as discontinued       
operations in the Company's financial statements for all periods presented.     

    The Company.  The Company currently acts as the registrar for second level
domain names within the .com, .org, .net, .edu and .gov TLDs pursuant to the    
Cooperative Agreement with the NSF. Net registrations (gross registrations less 
management's estimates of uncollectible registrations and of non-renewals)      
within the TLDs maintained by the Company increased by 206% from approximately  
340,000 domain names registered at June 30, 1996 to approximately 1,040,000     
domain names registered at June 30, 1997. Net registrations in the .com TLD     
represented 87% of the Company's total net registrations as of June 30, 1997.   
Net revenue from Internet domain name registration subscriptions accounted for  
59.1% and 81.0% of the Company's net revenue for the year ended December 31,    
1996 and the six months ended June 30, 1997, respectively.                      

   The Company also provides Intranet consulting services to large companies
that desire to establish or enhance their Internet presence or "re-engineer"    
legacy network infrastructures to accommodate the integration of both Internet  
connectivity and Intranet network technology into their information technology  
base. The Company's Intranet services presently include: (i) Intranet           
development and re-engineering; (ii) network and systems security; and (iii)    
Intranet-enabled business solutions. Net revenue from Intranet services         
accounted for 40.9% and 19.0% of the Company's net revenue for the year ended   
December 31, 1996 and the six months ended June 30, 1997, respectively.         

Registration Services.  In January 1993, the Company entered into the 
Cooperative Agreement with the NSF under which the Company provides Internet    
registration services for five TLDs: .com, .org, .net, .edu and .gov. With the  
commercialization of the Internet, the role, if any, that the NSF will          

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play in the Internet and the legal authority underlying its role are at present 
unclear. The Cooperative Agreement is subject to review by the NSF and may be   
terminated by the NSF at any time at its discretion or by mutual agreement. The 
Cooperative Agreement by its terms expires in March 1998, although the NSF may, 
at its option, extend the Cooperative Agreement through September 1998. The NSF 
has stated that the Cooperative Agreement will not be re-awarded to the Company 
or awarded to any other entity. When the Cooperative Agreement is terminated or 
if there is a change in the terms of the Cooperative Agreement or the Company's 
status as the exclusive registrar for domain names in the .com TLD, the         
Company's business, financial condition and results of operations could be      
materially and adversely affected. Although the impact of the termination of the
Cooperative Agreement is uncertain, such termination could have a material      
adverse effect on the Company's revenue, particularly as the Company's revenue  
growth in recent periods has been primarily attributable to increases in        
registrations in the .com TLD. See "Risk Factors -- Limited Operating History," 
"-- Uncertain Status of the Cooperative Agreement," and "-- Recommendations and 
Proposals to Increase Competition in Registration Services."                    

Originally, the Cooperative Agreement was structured as a cost        
reimbursement plus fixed-fee contract. Effective September 14, 1995, the NSF and
the Company amended the Cooperative Agreement to authorize the Company to begin 
charging customers a subscription fee of $50 per year for each second level     
domain name in the .com, .org, .net, .edu and .gov TLDs. The Company's          
registration services customers in the .com, .org and .net TLDs are invoiced for
a two-year subscription fee of $100 for initial registrations and $50 per year  
for renewals of initial registrations. The NSF has agreed to pay the            
registration and renewal fees for registrations within the .edu and .gov TLDs   
through March 31, 1997. The Company has recently agreed with the NSF to provide 
registrations in the .gov and .edu TLDs free of charge from April 1, 1997       
through March 31, 1998. The cost of providing these registration services is not
expected to have a material adverse effect on the Company's business, financial 
condition or results of operations. At September 14, 1995, the Company had      
approximately 131,000 registered domain names that were subject to annual       
renewal. From September 14, 1995 through June 30, 1997, the Company had         
approximately 965,000 net new registrations. At June 30, 1997, of the           
approximate 1,040,000 net registrations, 75,000 were subject to annual renewal. 
The remaining 965,000 represent the net new registrations since September 14,   
1995 and, therefore, will begin annual renewals commencing September 1997 based 
upon their respective two-year anniversaries of initial registration. There can 
be no assurance that the Company will continue to obtain new registrations at   
current rates or renew the registration of a significant portion of its         
customers.                                                                      

   Under the terms of the amendment to the Cooperative Agreement, 30% of the
new registration and renewal fees collected is required to be set aside to be   
reinvested for the enhancement of the intellectual infrastructure of the        
Internet and, as such, is not recognized as revenue by the Company. The Company 
reflects these funds along with the appropriate percentage of net accounts      
receivable as restricted assets and has recorded an equivalent, related current 
liability. The Company maintains the cash received relating to the set aside    
funds in a separate interest bearing account. These funds, plus any interest    
earned, will be disbursed in a manner approved by the NSF. At June 30, 1997, the
restricted assets totaled $31.1 million. None of the restricted set aside funds 
have been disbursed. Future disbursements of these funds will not have an effect
on the Company's business, financial condition or results of operations.        

The Company was reimbursed by the NSF for providing domain name       
registration services prior to September 14, 1995, at which time the Company    
began charging its customers fees for new domain name registrations pursuant to 
the amendment to the Cooperative Agreement. The Company began charging its      
customers fees for renewals of existing domain name registrations in December   
1995. Currently, the Company invoices customers and permits them to pay the     
subscription fee after the customer's domain name is registered. The Company's  
experience has been that, for the period from September 1995 to June 1997,      
approximately 30% of registrations have ultimately been deactivated for         
non-payment. As a consequence, the Company has recorded a comparable provision  
for uncollectible accounts in determining net registration revenue. This 30%    
provision has been consistently applied for the period September 1995 to June   
1997 and is considered adequate by the Company. The growth in                   

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the allowance for uncollectible accounts receivable is primarily driven by the  
growth of the Company's registration services business during this period.      
Write-offs of accounts receivable are charged to the allowance for uncollectible
accounts as registrations are deactivated. Due to the growth of the registration
business in 1995 and 1996, deactivations due to non-payment of fees were not    
current as of December 31, 1996. The Company is now current in this function.   
However, the delay in deactivation did not have an impact on the adequacy of the
allowance and the current provision rate of 30% is still considered adequate by 
the Company. See Note 3 of Notes to Financial Statements.                       

    The Company believes that it has experienced a high level of uncollectible
receivables due to, among other factors, the large number of individuals and    
corporations that have registered multiple domain names with the apparent       
intention of reselling such names at a profit. The Company's experience has been
that such resellers have a greater tendency than other customers to default on  
their subscription fees. The Company believes that the new procedures           
implemented in 1997 regarding invoicing and prompt deactivation of delinquent   
customers has significantly improved timeliness of customer payments. See "Risk 
Factors -- Limited Operating History," "-- Uncertain Status of the Cooperative  
Agreement," "-- Uncollectible Receivables; Modifications to Billing             
Practices," "-- Management of Growth; Dependence on Key Personnel" and          
"Business -- Operations."                                                       

Prior to September 14, 1995, the Company recognized revenue under the 
Cooperative Agreement on the basis of direct cost plus allowable indirect costs 
and the earned portion of the fee. Since September 14, 1995, fees for services  
provided by the Company pursuant to new registrations have been recognized as   
revenue evenly over the initial 24-month subscription period. Fees from renewals
are recognized as revenue evenly over the 12-month subscription period. The     
Company records revenue net of an estimated provision for uncollectible         
accounts. At June 30, 1997, the Company had net deferred revenue of $45.6       
million, of which $32.0 million will be recognized over the next twelve months. 
See Notes 2 and 3 of Notes to Financial Statements.                             

   Expenses for the Company increased each quarter during 1995, 1996 and the
first two quarters of 1997 as a result of increased business activities,        
primarily attributable to subscriber growth for the Company's registration      
services business. The Company believes continued investments in its back office
infrastructure as well as significant expansion of its sales and marketing and  
product development activities are critical to the achievement of its goals and 
anticipates that costs and expenses will continue to increase in each quarter   
for the forseeable future.                                                      

  Intranet Services.  Substantially all of the Company's Intranet services
revenue is derived from professional services which are generally provided to   
clients on a "time and expense" basis. Professional services revenue is         
recognized as services are performed. The Company also performs a limited number
of fixed-price projects under which revenue is recognized using the             
percentage-of-completion method. The Company also derives revenue from remote   
monitoring and hosting services; however, such revenue has not been significant 
to date. Remote monitoring and hosting revenue is recognized ratably over the   
term of the contract.                                                           

    Since professional services revenue for Intranet services is recognized by
the Company only when network systems engineers are engaged on client projects, 
the relative utilization of network systems engineers directly affects the      
Company's operating results. In addition, a majority of the Company's Intranet  
services operating expenses, particularly personnel and related costs,          
depreciation and rent, are substantially fixed in advance of any particular     
quarter. As a result, any underutilization of network systems engineers may     
cause significant variations in operating results in any particular quarter and 
could result in losses for such quarter. Termination or completion of contracts 
in the Company's Intranet services business or failure to obtain additional     
contracts in its Intranet services business could have a material adverse effect
on the Company's business, financial condition and results of operation. See    
"Risk Factors -- Potential Fluctuations in Quarterly Results."                  

NationsBanc is the Company's largest Intranet services customer and   
accounted for 47.6% and 41.3% of the Company's Intranet services net revenue and
19.5% and 7.8% of the Company's total net revenue for the year ended December   
31, 1996 and the six months ended June 30, 1997, respectively. NationsBanc      
originally contracted with the Company in 1993 to provide ongoing analysis,     
design,                                                                         

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implementation and support engineering for its enterprise network. The Company  
currently provides network design and engineering services as well as a variety 
of project specific services for NationsBanc. The Company's current contract    
with NationsBanc is a three-year contract which commenced January 1, 1997 and is
a requirements contract under which the Company's services are ordered by task  
orders issued by NationsBanc. The NationsBanc contract may be terminated by     
NationsBanc at any time upon 30-days' prior written notice to the Company.      
During the first quarter of 1997, task orders for a number of services the      
Company had historically performed for NationsBanc were not renewed. The Company
believes this reflects NationsBanc's focus on increasing its internal           
information technology staff as well as its continued efforts to integrate      
information technology staff from recent acquisitions. There can be no assurance
that the Company will obtain any additional task orders under the NationsBanc   
contract or maintain or be able to expand its Intranet services business.       
Failure to do so would materially and adversely affect the Company's business,  
financial condition and results of operations. See "Risk Factors -- Limited     
Service Offerings to Date; Reliance on Domain Name Registration Services and    
Intranet Services for Substantially All Revenue."                               

   Financial Presentation.  The accompanying historical financial statements
for all periods presented reflect the results of continuing operations related  
to the commercial activities of the Company only. The operating results of both 
the minority-based government contracts business, which was transferred into a  
separate entity prior to the acquisition of the Company by SAIC, and the        
remaining government-based business, which was transferred to SAIC effective    
February 1996, are reflected as discontinued operations in the Company's        
financial statements.                                                           

    Subsequent to the acquisition of the Company by SAIC, SAIC has provided to
the Company from time to time, upon request of the Company certain routine and  
ordinary corporate services, including financial, insurance, accounting,        
employee benefits, payroll, tax and legal services. SAIC has also provided      
corporate planning, government relations and corporate quality assurance        
services. The Company has also shared certain SAIC systems, including its       
management information system, accounting system and human resource system.     
Therefore, the Company's Statements of Operations include revenue and costs     
directly attributable to the Company, as well as certain allocations from SAIC  
of indirect costs associated with such services and shared systems. Such        
allocations include allocations of: (i) costs for administrative functions and  
services performed on behalf of the Company by centralized staff groups within  
SAIC; (ii) SAIC's general corporate expenses; (iii) other benefit costs,        
including, but not limited to, health insurance, disability and retirement      
costs; and (iv) cost of capital (through December 31, 1996). Through August 9,  
1996, such allocations (excluding cost of capital) were generally based on the  
proportionate labor costs of the Company to the rest of SAIC and were included  
in selling, general and administrative expenses and cost of revenue,            
respectively. Effective August 10, 1996, SAIC stopped allocating costs based    
generally upon pro rata labor and began assessing the Company for corporate     
services provided by SAIC at a fee equal to 2.5% of net revenue. This fee is    
included in its entirety in selling, general and administrative expenses with   
such percentage to be re-evaluated by both parties on an annual basis. The      
arrangement will continue indefinitely until terminated by either party upon 180
days' prior written notice. Current and deferred income taxes and related tax   
expense have been recorded by the Company as if it were a separate taxpayer. The
allocations and estimates in the financial statements are based on assumptions  
that the Company's management believes are reasonable under the circumstances.  

RESULTS OF OPERATIONS                                                           

   The following table sets forth, for the periods indicated, the percentage
relationship to net revenue of certain items in the Company's Statement of      
Operations. The percentage relationships for the year ended December 31, 1995   
were derived by combining the Company's results of operations for the period    
January 1, 1995 through March 10, 1995 and the period March 11, 1995 through    
December 31, 1995 which, respectively, are periods before and after the date of 
the SAIC acquisition. Accordingly, the data for these two periods and the       
periods preceding and following the acquisition were prepared on differing bases
of accounting and, as a result, the comparability of such percentage            

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relationships with other periods is limited, primarily as a result of the       
goodwill amortization, new corporate services agreements and interest expense   
related to outstanding debt balances.                                           

                                                        [Enlarge/Download Table]

                                                             PERCENTAGE OF NET REVENUE           
                                                   --------------------------------------------- 
                                                                                   SIX MONTHS    
                                                          FISCAL YEAR                 ENDED      
                                                      ENDED DECEMBER 31,             JUNE 30     
                                                   -------------------------     --------------- 
                                                   1994      1995      1996      1996      1997  
                                                   -----     -----     -----     -----     ----- 
                                                                                                 
Net revenue....................................... 100.0%    100.0%    100.0%    100.0%    100.0%
Cost of revenue...................................  61.1      87.9      77.8      95.5      61.1 
                                                   -----     -----     -----     -----     ----- 
Gross profit......................................  38.9      12.1      22.2       4.5      38.9 
Research and development expenses.................    --        --       3.6       0.8       3.8 
Selling, general and administrative expenses......  30.7      36.9      33.3      34.7      25.6 
Interest expense (income).........................   2.2       0.9      (2.7)     (1.2)     (2.6)
                                                   -----     -----     -----     -----     ----- 
Income (loss) from continuing operations before                                                  
  income taxes....................................   6.0     (25.7)    (12.0)    (29.8)     12.1 
Provision (benefit) for income taxes..............   2.2      (3.6)     (3.4)     (8.5)      5.4 
                                                   -----     -----     -----     -----     ----- 
Income (loss) from continuing operations, net of                                                 
  income taxes....................................   3.8%    (22.1)%    (8.6)%   (21.3)%     6.7%
                                                   =====     =====     =====     =====     ===== 

  In September 1995, the Cooperative Agreement between the Company and the
NSF was amended from a cost reimbursement plus fixed-fee contract to a fee-based
registration contract. The Company believes that the change to a                
subscription-based pricing model, combined with the Company's recent growth,    
make period to period comparisons of its operating results less meaningful and  
that the results for any period should not be relied upon as an indication of   
future performance. The limited operating history of the Company in its current 
business model makes the prediction of future results of operations difficult   
and, therefore, the recent revenue growth experienced by the Company should not 
be taken as being indicative of the rate of revenue growth, if any, that can be 
expected in the future. See "Risk Factors -- Limited Operating History" and     
"-- Potential Fluctuations in Quarterly Results."                               

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1997                           

Net Revenue.  Net revenue increased 174% from $6.8 million for the six
months ended June 30, 1996 to $18.7 million for the six months ended June 30,   
1997. This increase in net revenue was primarily attributable to the increase in
the number of domain name subscriptions, principally in the .com TLD.           
Subscription growth has been driven by the widespread use and adoption of the   
Internet and Intranets by businesses and individuals. Net revenue from          
registration services increased 424% from $2.9 million for the six months ended 
June 30, 1996 to $15.2 million for the six months ended June 30, 1997. There can
be no assurance that net revenue will continue to increase at such rates, or at 
all, or not decrease, when the Cooperative Agreement is terminated or if there  
is a change in the Company's status as the exclusive registrar for domain names 
in the .com TLD, particularly as a significant portion of the Company's net     
revenue is attributable to registrations in the .com TLD. Net registrations     
increased 206% from approximately 340,000 at June 30, 1996 to approximately     
1,040,000 at June 30, 1997. Notwithstanding the $45.6 million of deferred       
revenue at June 30, 1997, of which $32.0 million will be recognized over the    
next twelve months, the Company's revenue is dependent in large part on the     
continued growth of the Internet and the Company's ability to maintain its      
position as the leading Internet domain name registration service provider      
worldwide.                                                                      

    Net revenue from Intranet services decreased 10% from $4.0 million for the
six months ended June 30, 1996 to $3.6 million for the six months ended June 30,
1997. This decrease was primarily attributable to a decrease in business from   
NationsBanc.                                                                    

    NationsBanc, the Company's largest Intranet services client, accounted for
$1.5 million or 7.8% of the Company's total net revenue for the six months ended
June 30, 1997 and $1.8 million or 26.7% of the Company's total net revenue for  
the six months ended June 30, 1996. During the first quarter of                 

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1997, task orders for a number of services the Company had historically         
performed for NationsBanc were not renewed. The Company believes this reflects  
NationsBanc's focus on increasing its internal information technology staff as  
well as its continued efforts to integrate information technology staff from    
recent acquisitions. Though these actions will have a negative financial impact 
on the Company's Intranet services revenue for the balance of 1997, the Company 
believes NationsBanc will continue to be a significant customer of its Intranet 
services business, but to a lesser extent than in previous years, both in terms 
of dollars and as a percentage of the Company's total net revenue. See "Risk    
Factors -- Uncertain Status of the Cooperative Agreement," "-- Competition in   
Domain Name Registration Business," "-- Recommendations and Proposals to        
Increase Competition in Registration Services" "-- Limited Services to Date;    
Reliance on Domain Name Registration Services and Intranet Services for         
Substantially All Revenue," and "-- Dependence on Future Growth of the Internet 
and Internet Infrastructure."                                                   

Cost of Revenue.  Cost of revenue consists primarily of salaries and  
employee benefits, fees paid to subcontractors for work performed in connection 
with projects, depreciation, lease costs of the operations infrastructure and   
the associated operating overhead. Cost of revenue increased 75% from $6.5      
million for the six months ended June 30, 1996 to $11.4 million for the six     
months ended June 30, 1997. This increase was primarily associated with         
additional labor costs of $3.5 million required to support the Company's        
registration services business. The Company continues to invest in improvements 
to the back office component of its domain name registration business and has   
made investments in additional hardware, software, staffing and facilities and  
currently anticipates that it will continue to make significant investments in  
its back office for the foreseeable future. On June 16, 1997, the Company opened
a 31,000 square foot facility to support its Internet business operations. This 
leased facility is designed to meet current registration services customer      
support needs as well as to provide expansion capability for future business.   
See "Business -- Operations."                                                   

  As a percentage of net revenue, cost of revenue decreased from 95.5% for
the six months ended June 30, 1996 to 61.1% for the six months ended June 30,   
1997. This decrease primarily reflects economies of scale that the Company has  
begun to achieve due to the growth of its subscription-based domain name        
registration business. In the near term, the continued need for back-office     
investments is expected to significantly offset any overall margin improvements 
arising from economies of scale.                                                

Research and Development Expenses.  Research and development expenses 
consist primarily of compensation expenses to support the development and       
enhancement of the Company's technologies. Research and development expenses for
the six months ended June 30, 1996 were $58,000 and for the six months ended    
June 30, 1997 were $718,000, or 3.8% of net revenue. To date, all of the        
Company's development costs have been expensed as incurred. The Company expects 
that the level of research and development expenses will increase significantly 
in the near future in absolute dollars and as a percentage of net revenue as the
Company invests in new product and service offerings.                           

Selling, General and Administrative Expenses.  Selling, general and   
administrative expenses consist primarily of salaries of business development,  
general management, administrative and financial personnel, outside professional
fees and amortization of goodwill associated with the Company's acquisition by  
SAIC. Selling, general and administrative expenses increased 102% from $2.4     
million for the six months ended June 30, 1996 to $4.8 million for the six      
months ended June 30, 1997. The increase was primarily attributable to increased
management and administrative labor of $1.2 million and an increase in legal    
costs of $542,000 associated with the administration of the Company's domain    
name dispute policy. During the first quarter of 1997, the Company was notified 
that one of its Intranet services customers had filed for bankruptcy, resulting 
in a $194,000 bad debt write-off. These expenses include $325,000 of expenses   
allocated from SAIC during the six months ended June 30, 1996 in accordance with
the then current intercompany agreement and $468,000 of expenses which were     
charged by SAIC during the six months ended June 30, 1997 based on the fee of   
2.5% of net revenue. If the expenses for the six months ended June 30, 1996 were
based on the fee of 2.5% of net revenue under the current intercompany          
agreement, such expenses would have been $171,000.                              

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As a percentage of net revenue, selling, general and administrative   
expenses decreased from 34.7% for the six months ended June 30, 1996 to 25.6%   
for the six months ended June 30, 1997. The decrease in percentage of net       
revenue reflects economies the Company has begun to achieve due primarily to the
growth of its domain name registration business. The Company expects that the   
level of selling, general and administrative expenses will increase             
significantly in the near future in absolute dollars as operations expand.      

    Interest Expense (Income).  The Company had interest income of $86,000 for
the six months ended June 30, 1996 as compared to $484,000 for the six months   
ended June 30, 1997. The change is attributable to increased cash flow          
associated with the Company's registration services business.                   

  Income Taxes (Benefit).  The income tax benefit was $576,000 for the six
months ended June 30, 1996 as compared to an income tax expense of $1,011,000   
for the six months ended June 30, 1997. The effective tax rate changed from     
28.3% for the six months ended June 30, 1996 to 44.6% for the six months ended  
June 30, 1997. The difference between the effective rates was attributed to the 
relative impact that non-deductible goodwill had on pre-tax operating income or 
loss for the quarter. The goodwill amount is being amortized by the Company over
five years and is associated with the acquisition of the Company by SAIC.       

    Although the Company has a history of net losses, it has not established a
valuation allowance for its deferred tax assets since, in the opinion of        
management, it is more likely than not that all of the deferred tax assets will 
be realized. The deferred tax assets relate primarily to registration fee       
revenues which are taxable upon registration but are recognized in the financial
statements over the next 12 to 24 months -- the subscription period.            

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1996                            

     Net Revenue.  Net revenue increased 191% from $6.5 million in 1995 to $18.9
million in 1996. This increase in net revenue was primarily attributable to the 
increase in the number of domain name subscriptions, principally in the .com    
TLD, as well as the Company's shift to a subscription-based pricing model. Net  
revenue from registration services increased 594% from $1.6 million in 1995 to  
$11.1 million in 1996. Net revenue in 1995 primarily reflects the cost          
reimbursement plus fixed-fee contract with the NSF whereas net revenue for 1996 
reflects the Company's subscription-based pricing model. Net registrations to   
the Company's domain name registration service increased 254% from 177,000 at   
December 31, 1995 to approximately 627,000 at December 31, 1996.                

    Net revenue from Intranet services increased 57% from $4.9 million in 1995
to $7.7 million in 1996, including an increase in net revenue from NationsBanc, 
the Company's largest Intranet services customer, which increased 42% from $2.6 
million in 1995 to $3.7 million in 1996. The growth was primarily attributable  
to increased funding within NationsBanc to support internal network integration 
and expansion. The Company also experienced growth from a number of new Intranet
services customers, many of which were obtained through subcontracting with and 
utilizing leads from SAIC.                                                      

   NationsBanc accounted for 19.5% of total net revenue in 1996. NationsBanc
accounted for 40.8% of total net revenue and the NSF (under the cost            
reimbursement plus fixed-fee contract) accounted for 20.8% of total net revenue 
in 1995. No other source of revenue accounted for more than 7.1% of total net   
revenue in either year.                                                         

    Cost of Revenue.  Cost of revenue increased 157% from $5.7 million in 1995
to $14.7 million in 1996. The increase in cost was related primarily to an      
increase in the cost of labor of $3.7 million as a result of the Company's rapid
growth. Effective with the September 14, 1995 amendment to the Cooperative      
Agreement which implemented the subscription-based pricing model, the Company   
has established and continues to develop its back office capability. This       
required the Company to make significant investments in hardware and software as
well as to utilize a number of third-party vendors in support of back office    
requirements. In particular, the Company began to outsource portions of its back
office operations during the fourth quarter of 1996. The principal benefit of   
outsourcing was to increase the capacity and efficiency of its back office      
operations; however, such action alone has not significantly impacted operating 
margins.                                                                        

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 As a percentage of net revenue, cost of revenue decreased from 87.9% in
1995 to 77.8% in 1996. This decrease reflects economies of scale that the       
Company has begun to achieve due to the growth of its subscription-based        
registration business.                                                          

    Research and Development Expenses.  There were no research and development
expenses in 1995, in large part because registration system enhancements were   
reimbursable under the Cooperative Agreement. In 1996, research and development 
expenses were $680,000 or 3.6% of net revenue. To date, all of the Company's    
development costs have been expensed as incurred.                               

Selling, General and Administrative Expenses.  Selling, general and   
administrative expenses increased 162% from $2.4 million in 1995 to $6.3 million
in 1996. This increase was primarily attributable to increases in management,   
administrative and business development staff, as well as increased legal costs 
associated with the administration of the Company's domain name dispute policy. 
Selling, general and administrative expenses include $237,000 in 1995 and       
$822,000 in 1996 of expenses allocated from SAIC in accordance with the then    
current intercompany agreement. If the expenses were based on the fee of 2.5% of
net revenue under the current intercompany agreement, such expenses would have  
been $133,000 and $472,000, respectively.                                       

As a percentage of net revenue, selling, general and administrative   
expenses decreased from 36.9% in 1995 to 33.3% in 1996, reflecting the generally
fixed nature of certain general and administrative expenses as well as          
management's control of such costs.                                             

     Interest Expense (Income).  The Company had net interest expense of $61,000
in 1995 as compared to interest income of $496,000 in 1996. The change is       
primarily attributable to positive cash flow in 1996 associated with the        
Company's subscription-based registration business.                             

 Income Taxes (Benefit).  The income tax benefit was $239,000 in 1995 as
compared to $643,000 in 1996. The effective tax rate increased from 14.3% in    
1995 to 28.4% in 1996. The difference between the effective tax rates was       
primarily attributable to non-deductible goodwill comprising a higher percentage
of the Company's net loss in 1995.                                              

    Although the Company has a history of net losses, it has not established a
valuation allowance for its deferred tax assets since, in the opinion of        
management, it is more likely than not that all of the deferred tax assets will 
be realized. The deferred tax assets relate primarily to registration fee       
revenues which are taxable upon registration but are recognized in the financial
statements over the next 12 to 24 months -- the subscription period.            

Discontinued Operations.  Immediately prior to the acquisition of the 
Company by SAIC, the portion of the Company's business relating to the          
minority-based government business had been transferred into a separately-owned 
entity. In November 1995, SAIC adopted a plan to transfer the Company's         
remaining government-based business to SAIC in order to enable the Company to   
focus on the growth of its commercial business, which includes registration     
services and Intranet services. This transfer was effective as of February 1996.
November 1995 was the measurement date for discontinued operations for          
accounting purposes. The activities of both the minority-based government       
business and the remaining government-based business are reflected as           
discontinued operations. Net income (loss) from discontinued operations excludes
general corporate overhead of the Company. No gain or loss was incurred as a    
consequence of the transfer of these businesses.                                

   In 1995, discontinued operations incurred a net loss of $1.4 million. The
loss was primarily attributable to the Company's remaining government business, 
which increased the Company's provision for uncollectable accounts associated   
with the bankruptcy of a prime contractor, high interest costs associated with  
payment issues from other prime contractors and over-runs of fixed-price and    
fixed-rate contracts. As mentioned above, this business was transferred to SAIC 
effective as of February 1996.                                                  

COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1995                            

   Net Revenue.  Net revenue increased 29% from $5.0 million in 1994 to $6.5
million in 1995. The increase in net revenue was primarily attributable to the  
Company's Intranet services business which                                      

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increased its revenue 26% from $3.9 million in 1994 to $4.9 million in 1995. The
Company developed a number of new customers mainly in the banking industry, as  
well as subcontracting with and utilizing leads from SAIC. NationsBanc and the  
NSF (under the cost reimbursement plus fixed-fee contract) together accounted   
for 85.2% and 61.6% of net revenue in 1994 and 1995, respectively. No other     
source of revenue accounted for more than 7.1% of net revenue in either year.   

    Cost of Revenue.  Cost of revenue increased 86% from $3.1 million or 61.1%
of net revenue in 1994 to $5.7 million or 87.9% of net revenue in 1995. The 1995
increase in absolute dollars and as a percentage of net revenue was attributable
to increased costs in the Company's Intranet services business as the Company   
invested in technical support and additional infrastructure in order to attract 
and maintain clients in 1995. In addition, the Company began to significantly   
expand its back office capability in support of the September 14, 1995 amendment
to its Cooperative Agreement with the NSF, which introduced a subscription-based
pricing model for its domain name registration services.                        

Selling, General and Administrative Expenses.  Selling, general and   
administrative expenses increased 55% from $1.5 million or 30.7% of net revenue 
in 1994 to $2.4 million or 36.9% of net revenue in 1995. This increase was      
primarily attributable to additional costs necessary to support the growth in   
the Company's business and professional staff during 1995.                      

Interest Expense (Income).  Net interest expense decreased 44% from   
$109,000 or 2.2% of net revenue in 1994 to $61,000 or 0.9% of net revenue in    
1995. The decrease was primarily attributable to cash flow improvements from the
Company's Intranet services business.                                           

Income Taxes (Benefit).  The income tax provision was $114,000 in 1994
compared with a $239,000 benefit for income taxes in 1995. The 1994 effective   
tax rate was 37.6% as compared to the 1995 effective tax rate of 14.3%. The     
difference between the effective rates was attributed to the relative impact    
which non-deductible goodwill had on pre-tax operating income or loss for the   
year.                                                                           

  Discontinued Operations.  Discontinued operations incurred a net loss of
$1.2 million in 1994 as compared to a net loss of $1.4 million in 1995. The 1994
loss was primarily attributable to the minority-based government business which 
experienced several large over-runs related to fixed-price and fixed-rate       
contracts. This business was transferred into a separately-owned entity         
immediately prior to the acquisition of the Company by SAIC on March 10, 1995.  
The loss in 1995 was primarily attributable to the Company's remaining          
government business, which increased the Company's provision for uncollectable  
accounts associated with the bankruptcy of a prime contractor, high interest    
costs associated with payment issues from other prime contractors and over-runs 
of fixed-price and fixed-rate contracts. As mentioned above, this business was  
transferred to SAIC effective as of February 1996.                              

FACTORS AFFECTING OPERATING RESULTS                                             

 As a result of the Company's limited operating history, especially with
regard to its subscription-based registration service business, the Company does
not have significant historical financial data on which to base planned         
operating expenses. Accordingly, the Company's expense levels are based in part 
on its expectations as to future revenue and to a large extent are fixed. As a  
result, quarterly sales and operating results generally depend on the volume of 
and ability to fulfill registration requests, which are difficult to forecast.  
The Company may be unable to adjust spending in a timely manner to compensate   
for any unexpected revenue shortfall. Accordingly, any significant shortfall of 
demand for the Company's services in relation to the Company's expectations     
would have an immediate adverse impact on the Company's business, operating     
results and financial condition. In addition, the Company expects a significant 
increase in its operating expenses as it funds greater levels of product and    
services development, increases its sales and marketing operations, updates     
systems and infrastructure, expands its facilities, develops new distribution   
channels and broadens its customer support capabilities. The Company has not    
finalized its plans nor its budget with respect to the foregoing anticipated    
expenditures and thus cannot reasonably estimate the amount of such expenditures
at this time. While no individual expenditure is anticipated to have a material 
impact on the Company's operating results, the combined effect could be         
significant and cannot be reasonably estimated at this time. To the extent      

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that such expenses precede or are not subsequently followed by an increase in   
revenue, the Company's business, operating results and financial condition will 
be materially and adversely affected.                                           

The Company believes that future operating results will be subject to 
quarterly fluctuations due to a variety of factors, many of which are beyond the
Company's control. Such factors may include, but are not limited to, the        
introduction of competing TLDs, variations in the number of requests for domain 
name registrations, demand for the Company's services, introduction or          
enhancements of services by the Company or its competitors, market acceptance of
new service offerings, increased competition, costs associated with providing   
domain name registration services, litigation costs, termination or completion  
of contracts in the Company's Intranet service business or failure to obtain    
additional contracts in its Intranet services business, patterns of growth in   
the use of and interest in the Internet and general economic conditions.        
Operating results would be adversely affected by a downturn, or increased       
competition, in the market for domain name registrations or a failure to        
maintain existing or obtain anticipated contracts in its Intranet services      
business. Because the Company expects an increase in its operating expenses for 
personnel and new services development, the Company would be materially and     
adversely affected if its revenues did not correspondingly increase. The        
Company's operations are dependent upon its ability to maintain its computer and
telecommunications equipment in effective working order and to reasonably       
protect its systems against damage from fire, natural disaster, sabotage, power 
loss, telecommunication failure, human error or similar events. In addition,    
growth of the Company's customer base may put strain on the capacity of its     
computers and telecommunications systems and the Company's inability to         
sufficiently maintain or upgrade its systems could lead to degradation in       
performance or system failure. Any damage, failure or delay that causes         
significant interruptions in the Company's systems would have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, when the Cooperative Agreement is terminated or if there is a      
change in the Company's status as the exclusive registrar for domain names in   
the .com TLD the Company's business, financial condition and results of         
operations could be materially and adversely affected. Although the impact of   
the termination of the Cooperative Agreement is uncertain, such termination     
could have a material adverse effect on the Company's revenue, particularly as  
the Company's revenue growth in recent periods has been primarily attributable  
to increases in registrations in the .com TLD. See "Risk Factors -- Uncertain   
Status of the Cooperative Agreement," "-- Competition in Domain Name            
Registration Business," "-- Recommendations and Proposals to Introduce          
Competition in Registration Services," "-- Competition in Intranet Services and 
Internet-Enabling Businesses," "-- Uncollectible Receivables; Modifications to  
Billing Practices," "-- Technological Change and Additional Technology, Products
and Services," and "-- Potential Fluctuations in Quarterly Results."            

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SELECTED QUARTERLY RESULTS OF OPERATIONS                                        

The following tables set forth certain unaudited quarterly financial  
information for each of the seven quarters in the period ended June 30, 1997. In
the opinion of management, this information has been presented on the same basis
as the audited financial statements appearing elsewhere in this Prospectus, and 
all necessary adjustments (consisting only of normal recurring adjustments) have
been included in the amounts stated below to present fairly the unaudited       
quarterly results when read in conjunction with the audited financial statements
of the Company and notes thereto. The operating results for any quarter are not 
necessarily indicative of results for any future period.                        

                                                        [Enlarge/Download Table]

                                                                  QUARTER ENDED                                  
                                ---------------------------------------------------------------------------------
                                DEC. 31,    MAR. 31,    JUNE 30,    SEPT. 30,    DEC. 31,    MAR. 31,    JUNE 30,
                                  1995        1996        1996        1996         1996        1997        1997  
                                --------    --------    --------    ---------    --------    --------    --------
                                                                 (IN THOUSANDS)                                  
                                                                                                                 
Net revenue.................... $ 1,533     $ 2,333      $4,496      $ 5,180      $6,853      $8,655     $10,069 
Cost of revenue................   1,911       2,950       3,571        3,719       4,426       5,294       6,141 
                                --------    --------    --------    ---------    --------    --------    --------
Gross profit (loss)............    (378)       (617)        925        1,461       2,427       3,361       3,928 
Research and development                                                                                         
  expenses.....................      --          --          58          226         396         311         407 
Selling, general and                                                                                             
  administrative expenses......     607         921       1,449        1,932       1,978       2,301       2,487 
Interest expense (income)......      34          --         (86)        (288)       (122)       (149)       (335)
                                --------    --------    --------    ---------    --------    --------    --------
Income (loss) from continuing                                                                                    
  operations before income                                                                                       
  taxes........................  (1,019)     (1,538)       (496)        (409)        175         898       1,369 
Provision (benefit) for income                                                                                   
  taxes........................    (175)       (436)       (140)        (116)         49         382         629 
                                --------    --------    --------    ---------    --------    --------    --------
Income (loss) from continuing                                                                                    
  operations................... $  (844)    $(1,102)     $ (356)     $  (293)     $  126      $  516     $   740 
                                ========    ========    ========    ========     ========    ========    ========

                                                         PERCENTAGE OF TOTAL NET REVENUE                         
                                ---------------------------------------------------------------------------------
Net revenue....................   100.0%      100.0%      100.0%       100.0%      100.0%      100.0%      100.0%
Cost of revenue................   124.7       126.4        79.4         71.8        64.6        61.2        61.0 
                                --------    --------    --------    ---------    --------    --------    --------
Gross profit (loss)............   (24.7)      (26.4)       20.6         28.2        35.4        38.8        39.0 
Research and development                                                                                         
  expenses.....................      --          --         1.3          4.4         5.8         3.5         4.0 
Selling, general and                                                                                             
  administrative expenses......    39.6        39.5        32.2         37.3        28.9        26.6        24.7 
Interest expense (income)......     2.2          --        (1.9)        (5.6)       (1.8)       (1.7)       (3.2)
                                --------    --------    --------    ---------    --------    --------    --------
Income (loss) from continuing                                                                                    
  operations before income                                                                                       
  taxes........................   (66.5)      (65.9)      (11.0)        (7.9)        2.5        10.4        13.5 
Provision (benefit) for income                                                                                   
  taxes........................   (11.4)      (18.7)       (3.1)        (2.2)        0.7         4.4         6.2 
                                --------    --------    --------    ---------    --------    --------    --------
Income (loss) from continuing                                                                                    
  operations...................   (55.1)%     (47.2)%      (7.9)%       (5.7)%       1.8%        6.0%        7.3%
                                ========    ========    ========    ========     ========    ========    ========

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LIQUIDITY AND CAPITAL RESOURCES                                                 

     From its acquisition by SAIC in March 1995 until December 1996, the Company
participated in SAIC's centralized cash management system whereby cash received 
from operations was transferred to SAIC's centralized cash accounts and cash    
disbursements were funded from such centralized cash accounts. Accordingly, cash
requirements for operating purposes and for capital expenditures were met from  
this source. Beginning in 1997, the Company implemented its own cash management 
system.                                                                         

    At June 30, 1997, the Company's cumulative net obligations to SAIC of $6.6
million were classified under current liabilities on the balance sheet as due to
parent. The intercompany activity primarily comprises corporate tax payments    
made by SAIC on behalf of the Company in accordance with the tax sharing        
arrangement between the Company and SAIC and salaries and benefits paid by SAIC 
on behalf of the Company. Effective in the second quarter of 1997, corporate    
taxes are paid to SAIC on a quarterly basis, with all other intercompany        
balances between SAIC and the Company paid on a monthly basis.                  

  At June 30, 1997, the Company had unrestricted cash and cash equivalents
totaling $26.0 million, as well as $3.6 million of short-term investments.      
Pursuant to the terms of the September 14, 1995 amendment to the Cooperative    
Agreement, the Company is required to set aside 30% of collected registration   
and renewal fees. The Company reflects NSF's set aside funds along with the     
appropriate percentage of net accounts receivable as restricted assets and has  
recorded an equivalent, related current liability. At June 30, 1997, the        
restricted assets totaled $31.1 million. See Notes 2 and 3 to the Financial     
Statements.                                                                     

     Revenue from the Company's two-year initial registration fee is effectively
taxable in full in the year of registration, while for financial reporting      
purposes, the revenue is deferred and recognized ratably over the 24-month      
period. Thus, the provision (benefit) for income taxes based on book income     
(loss) from operations is significantly different from the required tax payments
based on taxable income. Due to this accelerated revenue recognition for tax    
purposes, the Company's resultant tax liability is funded in advance of the     
corresponding financial reporting revenue. At June 30, 1997, the Company had    
$17.5 million of deferred tax assets primarily due to this revenue timing       
difference. See "Relationship with SAIC -- Corporate Services Agreement."       

  The rapid growth of the Company's registration business in 1995 and 1996
significantly exceeded the Company's back office capabilities. As a result, the 
Company was unable to keep current in the processing, billing, collection,      
reconciliation and other administrative and financial functions related to the  
registration services business. Although the delay did not have a material      
impact on the Company's financial performance, it did have a significant impact 
on the Company's 1996 cash flows. During 1997, the Company became current in    
these functions. Accordingly, the Company's cash flows for 1997 were higher than
normal and may not be indicative of future cash flows.                          

     In addition, the Company believes that the historical and anticipated costs
associated with its legal proceedings are part of the Company's normal operating
costs. There can be no assurance that the Company will not be involved in       
additional litigation, investigations or other proceedings in the future.       
Certain current and future proceedings, with or without merit, could be costly  
and time-consuming to defend and could have a material adverse effect on the    
Company's liquidity. See "Business -- Litigation; Antitrust Investigation."     

   Capital expenditures for continuing operations were $1.9 million and $2.9
million for the year ended December 31, 1996 and the six months ended June 30,  
1997, respectively. These expenditures were primarily for computer equipment.   
Commencing in August 1996, the Company adopted a program of leasing most of its 
computer equipment under noncancellable 24- and 36-month leases to allow the    
Company to maintain the latest technology within its operating infrastructure.  
The Company is currently reviewing its 1997 capital expenditure plans and       
anticipates expenditures of approximately $5 million to $7 million for the      
balance of 1997. The Company expects that a majority of these expenditures will 
be financed under lease agreements ranging from 24 to 36 months.                

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    The Company believes that the net proceeds from the sale of Class A Common
Stock offered hereby, together with its current cash balances, will be          
sufficient to meet its working capital and capital expenditure requirements for 
at least the next 12 months. Although operating activities may provide cash in  
certain periods, to the extent that the Company experiences growth in the       
future, the Company anticipates that its operating and investing activities may 
use cash. Consequently, any such growth may require the Company to obtain       
additional equity or debt financing. There can be no assurance that such        
additional financing will be available to the Company. The sale of additional   
equity or convertible debt securities will result in additional dilution to the 
Company's stockholders. In addition, although there are no present              
understandings, commitments or agreements with respect to any acquisitions of   
other businesses, products or technologies, the Company from time to time       
evaluates potential acquisitions of other businesses, products and technologies 
and may in the future require additional equity or debt financings to consummate
such potential acquisitions.                                                    

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BUSINESS

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

    Network Solutions is the leading Internet domain name registration service
provider worldwide. The Company currently acts as the exclusive registrar for   
second level domain names within the .com, .org, .net, .edu and .gov TLDs. By   
registering Internet domain names, the Company enables businesses, other        
organizations and individuals to establish a unique Internet presence from which
to communicate and conduct commerce. Net registrations within the TLDs          
maintained by the Company increased by 206% from approximately 340,000 domain   
names registered at June 30, 1996 to approximately 1,040,000 domain names       
registered at June 30, 1997. The Company believes that commercial enterprises   
and individual Internet users worldwide are increasingly recognizing the .com   
TLD as a desirable address for commercial presence on the Internet. Net         
registrations in the .com TLD increased from approximately 304,000 at June 30,  
1996 to approximately 908,000 at June 30, 1997, representing 87% of the         
Company's total net registrations at June 30, 1997. With over 10 million        
businesses and over 750,000 active trademarks and service marks in the United   
States alone, the Company believes that the potential for continued growth of   
domain name registrations by commercial entities and services related to those  
registrations is substantial. Net revenue from Internet domain name registration
subscriptions accounted for 81.0% of the Company's net revenue for the six      
months ended June 30, 1997.                                                     

   The Company also provides Intranet consulting services to large companies
that desire to establish or enhance their Internet presence, or "re-engineer"   
legacy network infrastructures to accommodate the integration of both Internet  
connectivity and Intranet network technology into their information technology  
base. The Company's Intranet services include: (i) Intranet development and     
re-engineering; (ii) network and systems security; and (iii) Intranet-enabled   
business solutions. According to Zona Research, Inc., the market for Intranet   
services in the year 1999 will exceed $14 billion, up from approximately $3     
billion in 1996. There can be no assurance that such market forecast will be    
achieved. Net revenue from Intranet services accounted for 19.0% of the         
Company's net revenue for the six months ended June 30, 1997.                   

The Company also intends to develop a portfolio of Internet-enabling  
products and services, which may include directory and distribution services,   
that allows the Company to build upon its position in the registration process  
and makes proper use of the customer data that it collects.                     

INDUSTRY BACKGROUND                                                             

  The Internet is a global network of millions of interconnected computers
and computer networks that allow businesses, other organizations and individuals
to communicate. Historically, the Internet had been used by a limited number of 
academic institutions, defense contractors and government agencies to facilitate
remote access to host computers and transmit electronic mail. Recently, however,
use of the Internet has increasingly become dominated by a broad range of       
commercial organizations and individuals who utilize the Internet to communicate
electronically, to distribute and retrieve information and to conduct commerce. 
Advances in technology, low-cost Internet access and an increasing corporate    
reliance on distributed information environments have fueled the rapid growth of
the Internet. According to estimates published by the International Data        
Corporation, the number of World Wide Web users will be approximately 163       
million by the end of 2000, compared to approximately 35 million at the end of  
1996.                                                                           

    The Internet has been and continues to be loosely administered by a number
of government agencies that were involved in the creation of its infrastructure 
(initially ARPA and, more recently, the NSF) and a number of nonprofit groups   
formed to address specific Internet governance issues. As no single organization
has formal authority over all aspects of the Internet, it continues to operate  
under a system of mutual collaboration and cooperation. With the                
commercialization of the Internet, the role of many of these entities in future 
Internet administration has become less clear and private parties               

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have begun to assume a larger role in the enhancement and maintenance of the    
Internet's infrastructure. The NSF, for example, has completed a two-year phased
withdrawal of its funding for the Internet "backbone" and has transferred this  
responsibility to a group of private telecommunications carriers that are       
commercially funded.                                                            

  The Company believes that in order to support the demands placed on this
evolving and rapidly growing medium of commerce and information exchange, a wide
range of products and services will need to be developed and enhanced,          
including: (i) domain name registration services; (ii) Intranet services; and   
(iii) Internet-enabling products and services.                                  

Domain Name Registration Services.  All communication on the Internet 
requires an electronic address. Currently, the Internet functions through the   
establishment of a unique Internet identity (a "domain name") for an electronic 
address and the proliferation of such domain name in the global Internet root   
servers. Currently, there are 13 root servers, ten of which are located in the  
United States, two of which are located in Europe and one of which is located in
Asia. When communication with a particular host within a domain name is required
and the IP address of that host is not known locally, the root servers make that
information available or "point" to a direct or indirect source of the          
information. See "Risk Factors -- Reliance on Third Parties."                   

   An Internet domain name is made up of a top-level domain ("TLD"), such as
.com or .net, and additional domain levels consisting of at least one additional
domain level, referred to as a second level domain name. For example, in the    
domain name "companyX.com," "companyX" is the second level domain name. With the
increased commercialization of the Internet, second level domain names are being
utilized not only by large corporations but also increasingly by other users,   
including small businesses, organizations and individuals. Particularly within  
the .com TLD, users are also registering domain names to establish Internet     
identities for other purposes such as trademarks, products and events. The most 
common TLDs include .com, used primarily by commercial entities, .org for       
nonprofit organizations, .net for network service providers, .edu for           
universities and .gov for United States governmental entities, as well as       
country code TLDs represented by "." followed by two letter country codes (e.g.,
.us for the United States, .uk for the United Kingdom and .de for Germany).   

Because the Internet is not bound by geography or lines of business,  
coordination and administrative services are required for the registration,     
allocation and use of TLDs and for the effective operation of the Internet.     
Initially, in the United States, registration of domain names was primarily     
performed by government or nonprofit agencies. In 1993, the NSF entered into the
Cooperative Agreement with the Company for the performance of these functions   
for the .com, .org, .net, .edu and .gov TLDs. The Cooperative Agreement by its  
terms expires in March 1998, although the NSF may, at its option, extend the    
Cooperative Agreement to September 1998. The Cooperative Agreement is subject to
review by the NSF and may be terminated at any time by the NSF at its discretion
or by mutual agreement. See "Risk Factors -- Uncertain Status of the Cooperative
Agreement," "-- Recommendations and Proposals to Increase Competition in        
Registration Services" and "-- Relationship with the NSF; Recent Developments in
the Internet Community."                                                        

   Intranet Services.  Many enterprises are adopting "Intranets" that employ
Internet data formats and communications protocols. Intranets enhance user      
productivity and connectivity allowing users controlled access to internal      
information while also accessing and exchanging information on the Internet. As 
more businesses, organizations and individuals establish an Internet presence   
and begin to deploy Intranets, there will be an increasing demand for Intranet  
development and re-engineering services, network and systems security services  
and Intranet-enabled business solutions. In addition, the Company believes that 
Intranets are becoming increasingly sophisticated and are allowing users        
increased capabilities and improved access to information. As a result,         
corporations are increasingly seeking experienced networking firms to enable all
of these services. According to Zona Research, Inc., the market for Intranet    
services in the year 1999 will exceed $14 billion, up from approximately $3     
billion in 1996.                                                                

 Internet-Enabling Products and Services.  The proliferation of Internet
users provides businesses, other organizations and individuals with new means by
which to conduct business. To facilitate                                        

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business-to-business and business-to-consumer transactions, Internet users are  
seeking important enabling products and services, such as transaction security  
services, electronic payment mechanisms and directory and information services. 
The Company believes there will be opportunities for entities which can         
facilitate, develop and distribute such products and services and make them more
readily accessible and easy to use.                                             

THE NSI SOLUTION                                                                

    Network Solutions is the leading Internet domain name registration service
provider worldwide. The Company currently acts as the exclusive registrar of    
second level domain names within the .com, .org, .net, .edu and .gov TLDs. In   
this capacity, the Company enables the efficient operation of the Internet by   
supplying each of the Internet root servers located around the world with an    
identical copy of the file for all second level domain names in these TLDs. By  
registering Internet domain names, the Company enables businesses, other        
organizations and individuals to establish a unique Internet presence from which
to communicate and conduct commerce. The Company believes that it has been at   
the forefront of the development, administration and coordination of standards, 
policies and functions needed to facilitate the registration process, including 
dissemination of domain name database information to root servers throughout the
world and administration of a domain name dispute policy.                       

    The Company is working to expand its domain name registration business and
to continue to improve the registration process by: (i) increasing the use of   
the .com TLD worldwide; (ii) expanding its relationships with Internet access   
providers by offering enhanced registration services to their customers; (iii)  
stimulating demand for domain name registrations in targeted customer segments; 
(iv) working with major platform providers to embed the registration function   
into server software applications; (v) facilitating ease of use of and access to
its registration service; and (vi) establishing international alliances and     
developing multilingual capability. The Company intends to develop a portfolio  
of Internet-enabling products and services, which may include directory and     
distribution services, that allows the Company to build upon its position in the
registration process and makes proper use of the customer data that it collects.

The Company also provides Intranet consulting and network design and  
implementation services to large companies that desire to establish or enhance  
their Internet presence or "re-engineer" legacy network infrastructures to      
accommodate the integration of both Internet connectivity and Intranet network  
technology into their information technology base. The Company's Intranet       
services have evolved from the Company's Internet pioneering efforts that date  
back to 1979 and presently include: (i) Intranet development and re-engineering;
(ii) network and systems security; and (iii) Intranet-enabled business          
solutions.                                                                      

THE NSI STRATEGY                                                                

  The Company's goal is to maintain its position as the leader in Internet
domain name registration services and to build on this position to be a leading 
provider of Intranet services and Internet enabling products and services. The  
Company's strategy includes the following key elements:                         

Maintain Position as a Leading Provider of Registration Services.  The
Company intends to maintain and enhance its position as a leader in domain name 
registration by promoting the .com TLD as the accepted and preferred Internet   
address for commercial presence on the Internet worldwide. The Company also     
intends to develop and implement standards, policies and functions designed to  
enhance the ease, speed and security of the registration process by adding new  
capabilities to facilitate the registration process and providing quality       
customer service and support.                                                   

Establish and Expand Marketing Relationships.  The Company intends to 
establish and expand relationships with companies worldwide to promote its      
services, penetrate new customer bases and integrate third party products and   
services. The Company has established, and is seeking to further pursue         
relationships with, Internet access providers to enhance its ability to offer   
second level domain names and pursue its Intranet services opportunities.       

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Maintain Active Role in Establishment of Future Internet Standards and
Policies.  The Internet currently operates under a system of mutual             
collaboration and cooperation and has historically been administered by         
governmental and nonprofit organizations. The Company intends to continue to    
cooperate with these organizations and maintain an active role in the global    
Internet community to ensure that the Internet continues to flourish and that   
the Company remains at the forefront of continuing change in the Internet. The  
Company believes that its expertise in the Internet and its participation in the
Internet community should enable it to facilitate the proliferation of Internet 
usage worldwide and provide it with a competitive advantage in the development  
of its service offerings.                                                       

  Build and Strengthen Intranet Services Business.  The Company intends to
further develop its existing in-depth knowledge of and experience in Internet   
technologies to develop a leading Intranet services business. The Company       
believes that delivering dependable, high-quality Intranet solutions is critical
to strengthening its relationships with existing clients, gaining repeat        
business and generating new business from referrals. Further, the Company       
intends to utilize its relationship with SAIC in this area by continuing to work
with SAIC on a subcontract basis and seeking referrals to SAIC's customers and  
strategic partners.                                                             

    Provide Complementary Enabling Products and Services.  The Company intends
to develop a portfolio of Internet-enabling products and services that build on 
its registration activities and the customer data that the Company collects.    
These enabling products and services could include directory and other services 
to be developed by the Company and distribution of third party product and      
service offerings through on-line enrollment for such products and services     
embedded within the Company's domain name registration home page.               

   Leverage Technology Leadership.  The Company has assembled management and
engineering teams with extensive experience in the information technology       
industry and specifically the Internet and intends to leverage this experience  
in the development of enabling technologies to support the continued enhancement
of infrastructure flexibility and scalability, customer ease of use and         
embeddedness in access sources. The Company is committed to integrating         
state-of-the-art technology in its service offerings and believes that service  
quality and reliability should be a significant differentiating factor in its   
market.                                                                         

    Pursue Strategic Acquisitions.  The Company intends to identify and, where
appropriate, pursue acquisition opportunities which would provide businesses,   
products, services or technologies complementary to the Company's current       
business, although it is not currently contemplating any such acquisitions.     

     The Company's strategy involves substantial risk. There can be no assurance
that the Company will be successful in implementing its strategy or that its    
strategy, even if implemented, will lead to successful achievement of the       
Company's objectives. If the Company is unable to implement its strategy        
effectively, the Company's business, financial condition and results of         
operations would be materially and adversely affected.                          

NSI SERVICES                                                                    

Registration Services.  Registration services is the Company's core   
business. The Company registers second level domain names in the .com, .org,    
.net, .edu and .gov TLDs, enabling registrants to establish a unique identity on
the Internet. The Company's largest source of customers are Internet access     
providers, which request domain names on behalf of their subscribers.           

Prior to September 14, 1995, the Company was reimbursed by the NSF for
providing registration services under a cost reimbursement plus fixed-fee       
contract. On September 14, 1995, the NSF and the Company amended the Cooperative
Agreement to authorize the Company to begin charging customers a subscription   
fee of $50 per year for each second level domain name registered. The Company's 
registration services customers in the .com, .org and .net TLDs are invoiced for
a two-year subscription fee of $100 for initial registrations and $50 per year  
for renewals of initial registrations. Under the terms of the amendment to the  
Cooperative Agreement, 30% of the subscription fees collected are               

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required to be set aside to be disbursed in a manner approved by the NSF for the
enhancement of the intellectual infrastructure of the Internet. See             
"-- Relationship with the NSF; Recent Developments in the Internet Community."  

    The Company believes that high quality customer support is vital to client
satisfaction. The registration subscription fee provides the customer with      
access to a registry help desk and an on-line processing facility and account   
information updates. The Company's help desk and on-line processing facility are
factors in the success of the Company's registration business because they are  
the front line to the customer and provide initial and ongoing customer service 
and support. This facility currently processes over 40,000 telephone calls and  
over 300,000 electronic transactions monthly. At the end of 1996, the Company   
entered into arrangements to outsource certain back office operations, which the
Company believes has improved customer service and account handling and expanded
the Company's capacity to service larger volumes of registrants. See            
"-- Operations."                                                                

   The Company has been registering domain names pursuant to the Cooperative
Agreement since 1993 and has made significant investments in its registration   
services business. The Company believes that it currently possesses the         
following competitive advantages in the domain name registration business:      

-   Large, Established Customer Base.  The Company currently maintains in excess
 of one million unique domain name registrations. As a result, the Company
believes it has the infrastructure required to realize significant scale
 efficiencies throughout the registration process and believes that it has
  established credibility in the Internet community. In addition, this large
  customer base allows the Company to benefit from its policy which requires
that customers prepay for two years for rights to a unique domain name  
registration. As customers invest in their web sites for advertising,   
  branding and other business-critical activities, the Company believes they
 will be increasingly inclined to renew at the end of the initial two-year
subscription period.                                                    

-   Recognition of the .com TLD.  The Company believes that the .com TLD, of    
   which the Company is currently the exclusive registrar, has perceived value
to commercial users on the Internet. Further, the Company believes that 
  there is an emerging trend among commercial entities outside of the United
 States to establish an Internet presence within the .com TLD, rather than
within or in addition to a country code TLD.                            

-   Strategic Agreements with Internet Access Providers.  The Company has       
   entered into agreements to provide specialized services to certain Internet
 access providers who register a significant number of second-level domain
   names with the Company on behalf of such providers' customers. This program
provides such Internet access providers with customized registration    
    services and provides the Company with a multi-year registration stream from
such providers. To date, the Company has entered into agreements with 29
Internet access providers, including: MCI, Inc., America Online,        
Incorporated (PrimeHost Division), TABNet and Rapidsite, Inc.           

-   Established Technical Infrastructure.  The Company believes that the        
technical requirements to build and to operate a competitive domain name
   registry are significant. Substantial portions of the Company's software is
  custom-developed and proprietary. The Company's internal software includes
   an automated registration capability which currently processes in excess of
90% of all new registration requests without human intervention. See    
"-- Operations."                                                        

-   Experience in the Administration of Domain Name Dispute Policy.  The        
 Company's staff is experienced in the establishment and administration of
  the Company's domain name dispute policy, which is an integral part of the
maintenance and administration of the Company's domain name registration
  business. As of July 31, 1997, the Company had received over 2,700 written
 objections to the registration and use of certain domain names. Of these,
    approximately 1,400 were disputes in which the Company's domain name dispute
policy was involved. Although 36 of these objections have resulted in   
   litigation involving the Company, as of July 31, 1997, no damages have been
awarded against the Company to any plaintiff. The Company expends       
  considerable management and legal resources in the development, refinement
and administration of its domain name dispute policy.                   

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-   Skilled Technical Personnel.  The Company believes that significant         
   engineering talent is required to create a registration services capability
 and that knowledge of DNS structures, Internet security, data routing and
    routing protocols is critical to creating and enhancing registration service
  capabilities. The Company developed RWhois, a standard open protocol, that
 is used for the registration services business. The Company's engineering
    staff has significant expertise in the RWhois protocol. The Company believes
 that engineers skilled in protocol development are difficult to identify,
hire and retain and thus its staff of engineers represents a valuable   
resource.                                                               

The Company believes that these competitive advantages are significant and that 
existing and additional competing registries will need similar capabilities.    

    In addition, the Company is working to expand its domain name registration
business and to continue to improve the registration process by:                

-   Increasing the Use of the .com TLD Worldwide.  The Company believes that it 
   can continue to grow its Internet registration business by promoting global
  recognition of the .com TLD. The Company has begun and intends to continue
to promote the use of the .com TLD and to establish .com as the most    
  recognized domain for individuals and organizations conducting business on
the Internet.                                                           

-   Expanding Relationships With Internet Access Providers.  The Company intends
to build upon its current relationships with certain Internet access    
    providers that have agreed to participate in its Premier Domain Registration
    Service program and intends to pursue relationships with additional Internet
   access providers. Through these relationships, the Company believes it will
 be able to deliver enhanced registration services and identify additional
opportunities to expand its registration services business.             

-   Stimulating Demand for Domain Name Registrations in Targeted Customer       
  Segments.  The Company is seeking to expand the number of registrations in
targeted customer segments both domestically and internationally. The   
Company believes that customer segments such as small business users,   
individuals, holders of trademarks, service marks and product marks and 
  event sponsors could offer significant potential for growth if the Company
actively markets a portfolio of registration services to these segments.

-   Working with Major Platform Providers to Embed the Registration             
Function.  The Company is seeking to expand its domain name registration
  business through agreements with major platform providers (i.e., operating
system manufacturers or hardware vendors who provide bundled operating  
system software) to embed an automated registration function through a  
  "point-and-click" interface directly into the installation procedures. For
example, in December 1996, the Company entered into an agreement with   
    Microsoft Corporation ("Microsoft") to provide a "point-and-click" interface
intended to allow users to automatically register a domain name with the
Company upon initialization of the server.                              

-   Facilitating Ease of Use and Access to Registration Services.  The Company  
has undertaken a number of initiatives that are intended to make the    
registration process easier, more streamlined and more accessible. The  
   Company believes that ease of use is becoming increasingly important as the
Internet is being more widely adopted by users who are less technically 
 sophisticated. The Company is currently in the process of simplifying the
registration template accessed by customers to effect registration of a 
    domain name. To facilitate payment of registration renewal fees, the Company
   intends to implement electronic payment mechanisms that will allow the user
to pay for the domain name directly from the user's host machine.       

-   Establishing International Alliances and Developing Multilingual            
Capability.  The Company intends to establish strategic alliances with  
international registries to build a foundation for its international    
 operations. As these entities add Internet service to their offerings for
 their customers, the Company intends to offer "ease of use" solutions for
entities worldwide for registration in the .com, .org and .net TLDs. The
  Company also intends to establish a multilingual call center capability to
further assist with international registrations.                        

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 Intranet Services.  The Company provides consulting and network systems
integration services for clients utilizing Internet technologies for internal   
networks (i.e., Intranets). The Company's network systems engineers have        
extensive knowledge of and experience in such areas as local area network       
("LAN")/wide area network ("WAN") Internet protocols, router technology,        
switching technology, remote access technology, virtual private network         
technology, network security technology, network management technology, network 
components, IP addressing strategy, domain name architecture, efficient IP      
address space usage, Web applications development, UNIX systems (highly modular 
and flexible computer systems) and network operating systems. By leveraging this
knowledge and experience, the Company is able to provide solutions to clients'  
complex network needs.                                                          

  As part of its Intranet services offering, the Company provides Intranet
development and re-engineering; network and systems security; and               
Intranet-enabled business solutions.                                            

-   Intranet Development and Re-engineering.  The Company offers a full line of 
 services to help develop, optimize, and integrate Intranet solutions in a
    manner tailored to individual clients. Some of the more significant services
 include Intranet business workflow and service level analysis; IP address
    space engineering; domain name system ("DNS") and dynamic host configuration
protocol ("DHCP") architecture engineering; routing and switching       
   architecture engineering; Extranet (IP networks through which companies run
Web applications for external use by their customers) architecture      
 engineering; virtual private network architecture engineering; electronic
messaging architecture engineering; network capacity and performance    
management; and new technology integration. The Company also provides   
  planning and analysis to implement disaster recovery and contingencies for
network system failures.                                                

-   Network and Systems Security.  The Company provides a full range of security
 consulting services, including security architecture assessment, planning
and implementation. The security architecture establishes the access and
protection controls that will permit internal and remote users to access
computer systems, databases and applications on the network, while      
protecting against unauthorized or inadvertent access to information or 
 misuse of systems services. The Company's methods to secure the backbone,
 LAN-to-WAN access, remote access and facilities can supplement or replace
    existing systems security measures. The Company maintains resident expertise
  in emerging network protocols, encryption and key technologies, firewalls,
  packet filters, proxy services, secure remote access strategies and secure
Intranet servers.                                                       

-   Intranet-Enabled Business Solutions.  The Company offers Intranet- and      
    Extranet-enabled solutions for client business applications and services. In
this regard, the Company leverages Internet technologies to deliver     
  enterprise-wide solutions and develop business automation systems that can
be accessed by any client system, are quickly adaptable, and are easily 
maintained. Such solutions may include: implementation of Extranets to  
support clients' electronic commerce applications; planning and         
implementation of clients' Internet presence and commerce capabilities; 
re-engineering of legacy applications for Intranet-based delivery; and  
hosting of private and public Intranet servers.                         

The Company also maintains an Intranet Solutions Center which provides
outsourcing services for remote network and security systems monitoring, network
performance management and management of the development and hosting of clients'
total Web presence.                                                             

  NationsBanc is currently the Company's largest Intranet services client,
accounting for 41.3% of the Company's Intranet services business net revenue and
7.8% of the Company's total net revenue in the six months ended June 30, 1997.  
NationsBanc originally contracted with the Company in 1993 and the Company      
currently provides network design and engineering services as well as a variety 
of project specific services for NationsBanc. The Company's current contract    
with NationsBanc is a three-year contract commencing January 1, 1997 and is a   
requirements contract under which the Company's services are ordered by task    
orders issued by NationsBanc.                                                   

   The Company sells and markets its Intranet services business primarily to
large companies that desire to establish or enhance their Internet presence. The
Company's Intranet services are generally                                       

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provided to customers on a time and expense basis. The Company also performs a  
limited number of engagements on a fixed-price basis. Many of the Company's     
recent Intranet services clients have been developed through direct contact or  
referrals from its parent company, SAIC. The Company intends to continue to     
leverage its relationship with SAIC to access SAIC's major customers and        
strategic partners. The Company has recently begun to provide Intranet services 
on a limited basis in the Latin American market through Informatica, Negocios y 
Tecnologia S.A. ("INTESA"), SAIC's joint venture with Petroleos de Venezuela,   
S.A., the Venezuela National Oil Company. As part of this joint venture, the    
Company is currently subject to a noncompetition arrangement pursuant to which  
the Company has agreed to provide, with certain limited exceptions, Intranet    
services in the Latin American market solely through INTESA. See "Risk          
Factors -- Limited Service Offerings to Date; Reliance on Domain Name           
Registration Services and Intranet Services for Substantially All Revenue."     

MARKETING AND DISTRIBUTION RELATIONSHIPS                                        

  The Company intends to establish and expand relationships with companies
worldwide to promote its services, penetrate new customer bases and integrate   
third party products and services.                                              

Strategic Agreements with Internet Access Providers.  The Company has 
developed a service offering which provides specialized services to Internet    
access providers who register a significant number of second-level domain names 
per month on behalf of their customers. The Company's Premier Domain            
Registration Service offering provides an Internet access provider with         
personalized account management, customized billing and financial reports,      
priority registration with 24-hour customer support, private e-mail boxes and   
other customized features. To date, the Company has entered into agreements with
29 Internet access providers, including: MCI, Inc., America Online, Incorporated
(PrimeHost Division), TABNet and Rapidsite, Inc.                                

  Server Software Applications.  The Company has entered into an agreement
with Microsoft to provide a "point-and-click" interface for an automated        
registration function. This interface is designed to facilitate the ease of the 
registration process for users of the server software and to allow for the      
Company to have a preferred provider position on the registration wizard screen 
that appears during the server initialization process. The Company is currently 
in discussions with certain other server platform providers pursuant to which   
such a "point-and-click" interface will be embedded in their server software.   

Internet-Enabling Products and Services.  The Company has entered into
several agreements designed to allow the Company to build upon its strategy of  
becoming an Internet-enabling business center where a business or individual can
have access to companies which provide the enabling products and services to    
conduct business on the Internet.                                               

    The Company has entered into an agreement with VeriSign, Inc. ("VeriSign")
pursuant to which the Company provides its customers with direct access to      
VeriSign's server security certificates through the Company's domain name       
registration process. The Company will receive a portion of VeriSign's          
subscription fees for providing such access to VeriSign subscribers. The Company
has also entered into an agreement with First Virtual Holdings Corporation      
("First Virtual") pursuant to which the Company implemented First Virtual's     
VirtualPIN as a form of payment for the Company's customers. Under the          
agreement, users may register for First Virtual VirtualPINs through the         
registration process for which the Company receives a portion of the fee,       
assuming certain targets are met. Several other initiatives are being pursued,  
all focusing on utilizing the registration process to provide access to Internet
enabling products and services.                                                 

OPERATIONS                                                                      

    To register a domain name within the .com, .org, .net, .edu and .gov TLDs,
the Company's customer or the customer's Internet access provider completes a   
registration template which is submitted to the Company via e-mail. Once the    
customer is registered, the Company loads the domain name into the root servers 
located around the United States and in Europe. The Company believes that the   
technical requirements to build and to operate a competitive domain name        
registry are significant. Substantial                                           

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portions of the Company's in-house registration software have been              
custom-developed and are proprietary. The Company's in-house registration       
software includes an automated registration capability which currently processes
in excess of 90% of all new registration requests without human intervention.   
The Company maintains a help desk and on-line processing facility which provides
initial and ongoing customer service and support. This facility currently       
processes over 40,000 telephone calls and over 300,000 electronic transactions  
monthly.                                                                        

  The Company's registration services are supported by seven T1 and one T3
(high speed data communications line) links connected to five ISPs. The         
aggregate capacity of the Company's T1 links is 10.5 megabits per second. In    
addition, the Company recently added the T3 link with a capacity of 45 megabits 
per second, thus the aggregate capacity of the T1 and T3 links is 55.5 megabits 
per second. By connecting to five different providers, the Company seeks        
redundancy to ensure constant access to the Internet should any given ISP or    
link develop complications. The Company believes its current network is adequate
and that any additional capacity will be available in the future as needed.     

The Company leases its computer equipment which allows the Company to 
maintain the latest technology within its operating infrastructure. The Company 
has approximately 100 UNIX workstations running a variety of applications to    
evenly distribute operations. Additionally, the Company utilizes several large  
network file servers to support its directory and registration services. These  
servers provide a mirrored file system for enhanced reliability and back-up     
coverage.                                                                       

On June 16, 1997, the Company opened a 31,000 square foot facility to 
support its Internet business operations. This leased facility is designed to   
meet current registration services customer support needs as well as to provide 
expansion capability for future business. It includes: (i) a call center; (ii) a
training center equipped for both computer and telephone training, including a  
simulated operations environment; and (iii) a new computer room with expanded   
systems and telecommunications services. The Company believes that this new     
facility with the accompanying system enhancements should provide the           
environment and tools that are essential for quality customer support.          

   Since November 1996, the Company has been outsourcing certain back office
functions, including invoicing, check processing and credit card payment        
processing. The Company is not outsourcing its core proprietary automated       
registration process and associated security system. These outsourcing efforts, 
in conjunction with new invoicing procedures implemented in 1997, have improved 
customer service and account handling and expanded the Company's capacity to    
service larger volumes of registrants.                                          

OTHER PRODUCTS AND SERVICES DEVELOPMENT                                         

   The Company's products and services development activities in areas other
than registration services and Intranet services are focused primarily on the   
development of Internet-enabling products and services, including a possible    
directory service based on the RWhois protocol (an enhanced server version of   
the Whois protocol) developed by the Company. The Company's current directory   
service technology, which is made available free of charge, employs a look-up   
method called "Whois," a widely accepted Internet protocol and the interface to 
the Company's global registry database. Whois allows a user to perform simple   
queries for second level domain names and to retrieve additional information    
about a customer, including the customer's name, location and points of contact.
The Company's Whois server currently receives more than 15 million queries per  
month. The Company intends to develop a portfolio of Internet-enabling products 
and services that allows the Company to build upon its position in the          
registration process and makes proper use of the customer data that it collects.

There were no research and development expenses in 1995, in large part
because any such expenditures were generally reimbursable under the NSF         
contract. In 1996, research and development expenses were $680,000 or 3.6% of   
net revenue. For the six months ended June 30, 1997, research and development   
expenses were $718,000 or 3.8% of net revenues. The Company believes that       
significant and continuing investments in products and services development will
be required to maintain its                                                     

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position as the leader in the domain name registration business and to achieve  
its strategy of leveraging its registration services business to offer and      
distribute other enabling services. The Company's future financial performance  
will be dependent upon its ability to develop and commercialize in a timely     
manner new services that can be offered in conjunction with the Company's       
current domain name registration services and that meet the changing            
requirements of its customers.                                                  

The successful development and commercialization of new technology,   
products and services involves many risks, including the identification of new  
Intranet and Internet-related product and service opportunities, the successful 
completion of the development process, and the identification, retention and    
hiring of appropriate research, development and technical personnel. There can  
be no assurance that the Company can successfully identify new products and     
service opportunities and develop and bring to market in a timely manner new    
technologies, products or services, or that technologies, products or services  
developed by others will not render those of the Company noncompetitive or      
obsolete. Failure by the Company to develop new technologies, products or       
services and bring them to market in a timely manner could have a material      
adverse effect on the Company's business, financial condition and results of    
operations. See "Risk Factors -- Technological Change and Additional Technology,
Products and Services."                                                         

RELATIONSHIP WITH THE NSF; RECENT DEVELOPMENTS IN THE INTERNET COMMUNITY        

   In 1993, the Company entered into the Cooperative Agreement with the NSF,
which had been funding the Defense Information Systems Agency, to act as the    
registrar for second level domain names within the .com, .org, .net, .edu and   
.gov TLDs. Under the Cooperative Agreement, the Company was given the         
responsibility for ensuring the quality, timeliness and effective management of 
registration services to non-military Internet users and networks. The          
registration services to be provided by the Company under the Cooperative       
Agreement included domain name registration, domain name server registration,   
network number assignment and autonomous system number assignment and IP address
mapping and allocation worldwide. During the term of the Cooperative Agreement, 
the Company is required to file periodic reports regarding its status and       
proposed budget and goals. At the conclusion of the Cooperative Agreement, the  
Company will be required to submit a final report describing all work performed 
and problems encountered.                                                       

Originally, the Cooperative Agreement was a cost reimbursement plus   
fixed-fee contract but expressly contemplated that possible future changes under
the Cooperative Agreement could include the imposition of a user-based fee      
structure. In 1995, in response to the rapidly growing volume of registrations  
from commercial entities (primarily in the .com TLD), the NSF and the Company   
mutually agreed to move from a cost reimbursement plus fixed-fee contract to a  
subscription fee based contract. Effective September 14, 1995, the NSF and the  
Company amended the Cooperative Agreement to authorize the Company to begin     
charging customers a subscription fee of $50 per year for each second level     
domain name registered. The Company's registration services customers in the    
.com, .org and .net TLDs are invoiced for a two-year subscription fee of $100 
for initial registrations and $50 per year payable for renewals of initial      
registrations. Under the terms of the amendment to the Cooperative Agreement,   
70% of the subscription fees collected is retained by the Company and 30% is    
required to be set aside to be disbursed in a manner approved by the NSF for the
enhancement of the intellectual infrastructure of the Internet.                 

    With the commercialization of the Internet, the role, if any, that the NSF
will play in the Internet and the legal authority underlying its role are at    
present unclear. Withdrawal of or challenges to the NSF's sponsorship or        
authorization of the Company's activities could create a public perception or   
result in a finding that the Company lacks authority to continue in its role as 
registrar or to charge fees for its domain name registration services. The      
impact, if any, of any such public perception or finding is unknown but could   
materially and adversely affect the Company's business, financial condition and 
results of operations. Further, the Cooperative Agreement by its terms expires  
in March 1998, although the NSF may, at its option, extend the Cooperative      
Agreement through September 1998. The terms of the Cooperative Agreement are    
subject to review and adjustment by the NSF on an annual basis. In addition, the
Cooperative Agreement may be terminated by the NSF at any time at its discretion
or by                                                                           

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mutual agreement. When the Cooperative Agreement is terminated or if there is a 
change in the terms of the Cooperative Agreement or the Company's status as the 
exclusive registrar for domain names in the .com TLD, the Company's business,   
financial condition and results of operations could be materially and adversely 
affected. Although the impact of the termination of the Cooperative Agreement is
uncertain, such termination could have a material adverse effect on the         
Company's revenue, particularly as the Company's revenue growth in recent       
periods has been primarily attributable to increases in registrations in the    
.com TLD. The NSF has stated that the Cooperative Agreement will not be       
re-awarded to the Company or awarded to any other entity. However, there can be 
no assurance that the NSF will not award the Cooperative Agreement to another   
entity and, if the Cooperative Agreement is awarded to another entity, the      
Company's business, financial condition and results of operations would be      
materially and adversely affected.                                              

    The Cooperative Agreement does not prohibit the establishment of competing
registries. No single organization or entity (including the NSF) currently has  
formal authority over all aspects of the Internet and the Internet currently    
operates under a system of mutual cooperation. As a result, it is unclear which 
organization or entity, if any, will govern the authorization for the           
registration of domain names. Various governmental, technical and Internet      
groups are currently discussing how the award and administration of future      
contracts for registration services in the .com TLD, other existing TLDs and new
TLDs may take place, and are considering whether and how to enable other parties
to enter the domain name registration business. The Company is also an active   
participant in this process. A consensus regarding such issues could be reached 
and implemented in the near future and prior to the expiration of the           
Cooperative Agreement. For example, some members of the Internet community have 
discussed various concepts such as adding new TLDs, which could result in       
significant competition for domain name registrations, including competition on 
the price charged by the Company for domain name registrations. In February     
1997, the IAHC issued its recommendation designed to increase competition in    
domain name registrations in which it proposed the creation of additional       
registries, additional TLDs and the possible sharing of new and existing TLDs.  
In April 1997, the IAHC issued an MOU seeking support for its recommendations.  
This MOU has been signed by a number of organizations in the Internet community.
In April 1997, the Company issued its own recommendations to increase           
competition in domain name registration. The Company's recommendations focus on 
creating additional TLDs as well as on the future administration and technical  
operation of the Internet. Other groups or entities may also make other         
proposals concerning these and other issues. Implementation of competing        
registries, additional TLDs, the sharing of the Company's TLDs or other         
recommendations or proposals of these groups could have a material adverse      
effect on the Company's business, financial condition and results of operations.
See "-- Uncertainty of Internet Governance and Regulation" and "Risk            
Factors -- Uncertain Status of the Cooperative Agreement" and                   
"-- Recommendations and Proposals to Increase Competition in Registration       
Services."                                                                      

    The description of the Cooperative Agreement set forth above and elsewhere
herein is intended to be a summary, and, while, material terms of the           
Cooperative Agreement are set forth herein, the description is qualified by     
reference to the Cooperative Agreement and the amendments thereto filed as      
exhibits to the Registration Statement of which this Prospectus forms a part.   

   The Company has recently received authorization from the NSF to shift the
allocation and administration of IP addresses to a not-for-profit organization. 
In support of this initiative, the Company has incorporated a not-for-profit    
organization named the American Registry for Internet Numbers (the "ARIN") to   
administer IP addresses for North and South America and parts of Africa. The    
Company anticipates that the responsibility for the allocation and              
administration of IP addresses will be transferred to ARIN by the fourth quarter
of 1997. The Company has agreed with the NSF to provide financial support to    
ARIN through the end of the first quarter of 1998. The Company believes that the
amount of such support will not differ materially from the amount which the     
Company currently pays in support of such activities.                           

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COMPETITION                                                                     

  The Company currently is the exclusive registrar for second level domain
names within the .com, .org, .net, .edu and .gov TLDs. Multiple registries do   
not currently register names in the same TLD, but this may change in the future.
The Company currently faces competition in the domain name registration business
from registries for country codes, third level domain name providers such as    
Internet access providers and registries of TLDs other than those TLDs currently
being registered by the Company. A number of entities have already begun to     
offer competing registration services using other TLDs. Future competition in   
the Company's domain name registration business could come from many different  
companies, including, but not limited to, major telecommunications firms, cable 
companies and Internet access providers. Such entities have core capabilities to
deliver registration services, such as help desks, billing services and network 
management, along with strong name recognition and Internet industry experience.
Other companies with some or all of these capabilities may also enter the       
registration business. Also emerging is a growing contingent of domain name     
resellers. The Company's position as the leading registrar of domain names could
be materially and adversely affected by the emergence of any of the foregoing   
competitors and potential competitors, many of which have longer operating      
histories and significantly greater name recognition and greater financial,     
technical, marketing, distribution and other resources than the Company. In     
addition, the Company's revenue and subscription fees could be reduced due to   
increasing competition. For example, other entities may bundle domain name      
registrations with other products or services, effectively providing such       
registration services for free. If operational and administrative arrangements  
or technology permitting multiple competitors to register domain names in the   
same or other TLDs are developed or if competition occurs in the domain name    
registration business, the Company's business, financial condition and results  
of operations could be materially and adversely affected. See "Risk             
Factors -- Competition in Domain Name Registration Business."                   

   Companies with Internet expertise are current or potential competitors to
the Company's Intranet consulting services. Such companies include systems      
integrators and consulting firms, such as Andersen Consulting, IBM Global       
Services and International Network Services. The Company also competes with     
certain companies that have developed products that automate the management of  
IP addresses and name maps throughout enterprise-wide Intranets, and with       
companies with internally-developed systems integration efforts. A number of    
these competitors and potential competitors have longer operating histories and 
greater name recognition and significantly greater financial, technical,        
marketing, distribution and other resources than the Company. There can be no   
assurance that the Company will be able to successfully compete in the Intranet 
services area. Failure by the Company to successfully compete in the Intranet   
services area could have a material adverse effect on the Company's business,   
financial condition and results of operations.                                  

In developing and distributing future products and services for the   
Internet-enabling services markets, the Company faces intense competition and   
expects to have multiple competitors for each of the products or services, if   
any, which it develops or sells. Many of the Company's potential competitors    
have longer operating histories, greater name recognition and significantly     
greater financial, technical, marketing, distribution and other resources than  
the Company. Furthermore, the industry in which the Company intends to compete  
is characterized by rapid changes and frequent product and service              
introductions. To the extent a competitor introduces a competitive product or   
service prior to introduction of the same or similar product or service by the  
Company, market acceptance of the competitor's product or service may adversely 
affect the Company's competitive position. See "Risk Factors -- Competition in  
Intranet Services and Internet-Enabling Businesses."                            

UNCERTAINTY OF INTERNET GOVERNANCE AND REGULATION                               

The Internet historically has been loosely administered by a number of
government agencies which were involved in the creation of its infrastructure,  
initially ARPA and, more recently, the NSF. No single organization or entity    
(including the NSF) currently has formal authority over all aspects of the      
Internet and it currently operates under a system of mutual cooperation. Since  
the original role of the Internet was to link computers at governmental and     
academic institutions to facilitate communica-                                  

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tion and research, the Internet was historically administered by entities which 
were involved in sponsoring research rather than by any of the traditional      
federal or state regulatory agencies. With the commercialization and            
internationalization of the Internet, the role of these entities in Internet    
administration has become less clear and private parties have begun to assume a 
larger role in the enhancement and maintenance of the Internet's infrastructure.
The NSF, for example, has completed a two-year phased withdrawal of its funding 
for the Internet "backbone" and has transferred this responsibility to a group  
of private telecommunications carriers which are commercially funded. This lack 
of regulation and the legal uncertainties arising from it poses risks to the    
Company and to the commercial Internet industry in general. As described above, 
it is unclear which organization or entity, if any, will govern the             
authorization for the registration of domain names in the future. The lack of an
appropriate organization or entity to govern the authorization for the          
registration of domain names could have a material adverse effect on the        
Company's business, financial condition and results of operations.              

The effective operation of the Internet is dependent on the continued 
mutual cooperation and consensus among an increasing number of entities, many of
which have widely divergent interests. For example, the IP addresses allocated  
by ISPs to their customers are originally allocated by the IANA. Thus, the      
effective operation of the Internet is dependent on such continued allocation of
IP addresses by IANA. Continuing to achieve consensus may become difficult or   
impossible and may become extremely time-consuming and costly. Achieving        
consensus may be made more difficult because of the lack of leadership by any   
one entity. This lack of regulation also creates great uncertainty as to the    
legality of any action, making business planning and operations difficult.      
Conversely, the lack of regulation could theoretically result in individuals and
entities taking harmful or disruptive actions with respect to the Internet with 
impunity. There is a risk that a failure to achieve consensus among the various 
groups which are now informally administering the Internet could result in the  
disruption of Internet operations, the inability of any user to communicate with
another user or the delay of infrastructure improvements necessary to the       
maintenance and expansion of the Internet. Any disruption to the administration,
effective operation or maintenance and expansion of the Internet, in general, or
the domain name registration system in particular, would have a material adverse
effect on the Company's business, financial condition and results of operation. 
See "-- Relationship with the NSF; Recent Developments in the Internet          
Community" and "Risk Factors -- Uncertain Status of the Cooperative Agreement"  
and "-- Recommendations and Proposals to Increase Competition in Registration   
Services."                                                                      

  The current lack of any centralized Internet management could also cause
the U.S. federal or other governments to intervene with uncertain results. The  
U.S. government formed the ITF to study the issues surrounding domain name      
registration and governance of the Internet. The ITF is expected to solicit     
broad public input to these and other issues. This process is expected to be    
completed in early 1998. On July 1, 1997, the NTIA published a request for      
comments on the registration and administration of Internet domain names. This  
request appeared in the form of the NOI in the U.S. Federal Register with August
18, 1997 as the closing date for receipt of comments. The NOI requested specific
input in five broad areas: general principles, general/organizational framework 
issues, creation of new TLDs, policy issues for new registrars and trademark    
dispute issues. The Company has submitted a response to the NOI request which   
includes a recommendation, among others, that an international public advisory  
group with U.S. government sponsorship be established to manage the Internet,   
including the domain name system, and that the U.S. government sponsorship of   
this international public advisory group continue through a transition period   
until a suitable international sponsor is selected. NTIA is expected to issue a 
report on the results of this NOI and to recommend a future course of action    
prior to June 1998 for the role of the U.S. government in Internet domain name  
registration. The ITF or NTIA processes or any other government-sponsored       
process could result in policies which may not be favorable to the Company or   
consistent with the Company's current or future plans. The outcome of these     
activities, therefore, could have a material adverse effect on the Company's    
business, financial condition and results of operations.                        

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In the United States, apart from its obligations under the Cooperative
Agreement, the Company is not currently subject to direct regulation other than 
federal and state regulation applicable to businesses generally. However,       
changes in the regulatory environment could result in the Company being subject 
to direct regulation by the FCC or other U.S. regulatory agencies. For example, 
the Company is aware of certain industry requests to the FCC to review the      
impact of Internet usage on the U.S. telecommunications service providers, in   
particular, the generally lower cost structure for data transmission versus     
voice. In addition, as the Internet becomes more widespread internationally,    
there is an increased likelihood of international regulation. The Company cannot
predict whether or to what extent any such new regulation will occur; however,  
such regulation could have a material adverse effect on the Company's business, 
financial condition and results of operations.                                  

   Additionally, the applicability to the Company of existing laws governing
issues such as intellectual property ownership is uncertain. Courts have        
indicated that, under certain circumstances, ISPs could be held responsible for 
the failure to prevent the distribution of material that infringes on others'   
copyrights and other intellectual property. The future interpretation by the    
courts of the obligation of domain name registration providers to prevent       
trademark infringement and other legal issues is uncertain. See "-- Litigation; 
Antitrust Investigation" and "Risk Factors -- Litigation; Antitrust             
Investigation."                                                                 

 Costs incurred or decisions rendered as a result of government actions,
including enactment of new laws or adoption of new regulations, investigations  
or lawsuits relating to any of the foregoing, could have a material adverse     
effect on the Company's business, financial condition and results of operations.
See "Risk Factors -- Uncertainty of Internet Governance and Regulation."        

LITIGATION; ANTITRUST INVESTIGATION                                             

   As of July 31, 1997, the Company had received approximately 2,700 written
objections to the registration and use of certain domain names. Of these,       
approximately 1,400 were disputes in which the Company's domain name dispute    
policy was involved. As of July 31, 1997, the Company had been named as a       
defendant in 36 lawsuits. As of such date, the Company has been dismissed as a  
party from 25 of the 36 lawsuits and no damages have been awarded against the   
Company to any plaintiff. The lawsuits have generally involved domain name      
disputes between trademark owners and domain name holders. The Company's domain 
name dispute policy seeks to take a neutral position regarding these competing  
claims and is designed to address claims that a domain name registered by the   
Company infringes a third party's federal trademark. The Company is drawn into  
such disputes, in part, as a result of claims by trademark owners that the      
Company is legally required, upon request by a trademark owner, to terminate the
right it granted to an alleged trademark infringer to register the domain name  
in question. Further, trademark owners have also alleged that the Company should
be required to monitor future domain name registrations and reject registrations
of domain names which are identical or similar to their federally registered    
trademark. The holders of the domain name registrations in dispute, have, in    
turn, questioned the Company's right, absent a court order, to take any action  
which suspends their registration or use of the domain names in question. Such  
litigation has resulted in, and any future litigation can be expected to result 
in, substantial legal and other expenses to the Company and a diversion of the  
efforts of the Company's personnel.                                             

   Currently, domain name registration requests are allocated by the Company
on a first-come, first-serve basis. The Company's domain name dispute policy is 
triggered when the Company is presented with a certified copy of a federal      
trademark certificate, proof that the trademark owner gave prior notice to the  
domain name registrant and an allegation of legal harm to the trademark owner.  
This policy provides for a detailed set of procedures designed to facilitate the
resolution of such disputes between the parties. The policy also provides for   
the Company to be indemnified for any damages arising in connection with any    
litigation arising out of a dispute between claimants regarding the registration
of a domain name. The Company bears its own costs and expenses associated with  
any litigation.                                                                 

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 On June 27, 1997, SAIC received a CID from the DOJ issued in connection
with an investigation to determine whether there is, has been, or may be a      
violation of antitrust laws under the Sherman Act relating to Internet          
registration products and services. The CID seeks documents and information from
SAIC and the Company relating to their Internet registration business. Neither  
SAIC nor the Company is aware of the scope or nature of the investigation. The  
Company cannot reasonably estimate the potential impact of such investigation,  
nor can it predict whether a civil action will ultimately be filed by the DOJ or
by private litigants as a result of the DOJ investigation or, if filed, what    
such action would entail. The Company is unable to predict the form of relief   
that might be sought in such an action or that might be awarded by a court or   
imposed as a result of any settlement between the Company and the DOJ or private
litigants. Any such relief could have a material adverse effect on the Company's
business, financial condition and results of operations.                        

On March 20, 1997, PG Media filed a lawsuit against the Company in the
United States District Court, Southern District of New York alleging that the   
Company had restricted access to the Internet by not adding TLDs in violation of
the Sherman Act. In its complaint, PG Media has, in addition to requesting      
damages, asked that the Company be ordered to amend the root zone configuration 
file so that the file includes reference to PG Media's TLDs and nameservers. The
Company has answered the complaint, but no motions are pending. In addition, the
Company recently received written direction from the NSF not to take any action 
to create additional TLDs or to add any new TLDs to the Internet root servers   
until further guidance is provided by the NSF. The Company believes that it has 
meritorious defenses and intends to vigorously defend itself against the claims 
made by PG Media. While the Company cannot reasonably estimate the potential    
impact of such claims, a successful claim under the plaintiff's theory could    
have a material adverse effect on the Company's business, financial condition   
and results of operations.                                                      

There can be no assurance that the Company will not be involved in    
additional litigation, investigations or other proceedings in the future,       
including proceedings challenging the Company's authority to continue in its    
role as a registrar or to charge fees for its domain name registration services.
Any such proceedings, with or without merit, could be costly and time-consuming 
to defend, could divert management's attention and resources and could have a   
material adverse effect on the Company's business, financial condition and      
results of operations. See "Risk Factors -- Litigation; Antitrust               
Investigation."                                                                 

INTELLECTUAL PROPERTY RIGHTS                                                    

    The Company's principal intellectual property consists of, and its success
is dependent upon, the Company's proprietary software utilized in its           
registration services business and certain methodologies and technical expertise
it utilizes in both the design and planned implementation of its current and    
future registration service and proposed Internet-enabling services businesses. 
Some of the software and protocols used by the Company in its registration      
service and, proposed Internet-enabling businesses are in the public domain or  
are otherwise available to the Company's competitors. In addition, in-depth     
technical knowledge and unique processes are critical to the Company's Intranet 
services business, in which a full range of consulting and systems integration  
services are offered in order to transition organizations from private, legacy  
networks to more scalable and efficient Intranets. The Company has no patents or
registered copyrights but has several trademarks and service marks, including   
the Company's logo.                                                             

     The Company has compiled a database of information relating to customers in
its registration business. While a portion of this database is available to the 
public, the Company believes that it has certain ownership rights in this       
database and is seeking to protect such rights. If it were determined that the  
Company does not have ownership rights in this database or if the Company is    
unable to protect such rights in this database or is required to share the      
database with its potential competitors, there could be a material adverse      
effect on the Company's business, financial condition and results of operations.

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The Company relies upon a combination of nondisclosure and other      
contractual arrangements with its employees and third parties and trade secret  
laws to protect its proprietary rights and limit the distribution of its        
proprietary information. There can be no assurance that the steps taken by the  
Company in this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use of its  
proprietary information and take appropriate steps to enforce its intellectual  
property rights. Furthermore, even if these steps are successful, there can be  
no assurance that others will not develop technologies that are similar or      
superior to the Company's proprietary technology. Although the Company believes 
that its services do not infringe on the intellectual property rights of others 
and that it has all rights necessary to utilize the intellectual property       
employed in its business, the Company is subject to the risk of claims alleging 
infringement of third party intellectual property rights. Any such claims could 
require the Company to spend significant sums in litigation, pay damages and    
develop non-infringing intellectual property or acquire licenses to the         
intellectual property which is the subject of asserted infringement. Failure by 
the Company to adequately protect its proprietary rights, or litigation relating
to intellectual property rights, could have a material adverse effect on the    
Company's business, financial condition and results of operations. See "Risk    
Factors -- Intellectual Property Rights."                                       

EMPLOYEES                                                                       

     As of June 30, 1997, the Company had approximately 220 full-time employees.
None of the Company's employees are covered by collective bargaining agreements.
The Company believes that its relations with its employees are good.            

FACILITIES                                                                      

   The Company's principal executive office is located in Herndon, Virginia,
in a 45,000 square foot facility subleased from SAIC under a sublease expiring  
in November 2002. The Company also leases an additional 31,000 square feet in a 
facility in Herndon, Virginia under a lease expiring in July 2002 and subleases 
a 10,000 square foot facility, also in Herndon, from SAIC under a sublease      
expiring in October 1999. Additionally, the Company subleases approximately     
10,000 square feet in a facility in Charlotte, North Carolina, with portions of 
the sublease expiring in August 1998 and July 2002. The Company believes that   
its current facilities will be adequate for the next 12 months and that any     
additional facilities will be available in the future as needed on commercially 
reasonable terms.                                                               

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS                                                

   Executive officers and directors of the Company and their ages as of July
31, 1997 are as follows:                                                        

                                                        [Enlarge/Download Table]

                NAME                   AGE                      POSITION                     
-------------------------------------  ---  -------------------------------------------------
                                                                                             
Gabriel A. Battista..................  52   Chief Executive Officer and Director             
Michael A. Daniels(1)................  51   Chairman of the Board                            
Donald N. Telage.....................  52   Senior Vice President, Internet Relations and    
                                            Special Programs and Director                    
Robert J. Korzeniewski...............  40   Chief Financial Officer                          
Raymond S. Corson....................  51   Senior Vice President, Business Development      
David H. Holtzman....................  40   Senior Vice President, Engineering               
A. Scott Williamson..................  39   Vice President, Engineering                      
Michael G. Voslow....................  37   Treasurer                                        
Russell L. Helbert...................  40   Controller                                       
J. Robert Beyster(1).................  72   Director                                         
Craig I. Fields(2)...................  51   Director                                         
John E. Glancy(2)....................  51   Director                                         
William A. Roper, Jr.(2).............  51   Director                                         
Stratton D. Sclavos(1)...............  35   Director                                         

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

(1) Member of Compensation Committee.                                           

(2) Member of Audit Committee.                                                  

  Gabriel A. Battista has served as Chief Executive Officer of the Company
since October 1996 and as a director of the Company since November 1996. From   
September 1995 to October 1996, Mr. Battista served as President and Chief      
Executive Officer of Cable & Wireless, Inc., a telecommunications company and   
U.S. subsidiary of Cable & Wireless, P.L.C. From 1991 to 1995, Mr. Battista     
served as President and Chief Operating Officer of Cable & Wireless, Inc. and   
from 1987 to 1991, he served as the Chief Operating Officer of National         
Telephone Services, a long distance operator service company. Mr. Battista also 
serves as a director of Axent Technologies, Inc. and Systems & Computer         
Technology Corporation. Mr. Battista received a BSEE from Villanova University, 
an MSEE from Drexel University and an MBA from Temple University.               

     Michael A. Daniels has served as Chairman of the Board of the Company since
May 1995. Since 1986, Mr. Daniels has served in various positions with SAIC and 
has served as a Sector Vice President and Sector Manager for the Technology     
Applications Sector of SAIC since 1993. Prior thereto, Mr. Daniels served as a  
Group Senior Vice President of SAIC from 1991 to 1993. Mr. Daniels received a   
B.S. and an M.A. from Northwestern University and received a J.D. from the      
University of Missouri School of Law.                                           

    Donald N. Telage has served as Senior Vice President of Internet Relations
and Special Programs since February 1997 and as a director since May 1995. Dr.  
Telage also served as President and Chief Operating Officer of the Company from 
May 1995 to February 1997. Since 1986, Dr. Telage has served in various         
positions with SAIC and has served as a Group Senior Vice President of SAIC     
since 1993. Prior thereto, Dr. Telage served as a Corporate Vice President of   
SAIC from 1992 to 1993. Based on Dr. Telage's seniority, it was deemed          
appropriate for Dr. Telage to retain his titles with both SAIC and the Company. 
It is currently contemplated, however, that Dr. Telage will be devoting         
substantially all of his working time to the affairs of the Company. Dr. Telage 
received his B.A. in Psychology from the University of Connecticut and received 
an M.A. and a Ph.D. in Mathematics from Clark University.                       

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     Robert J. Korzeniewski has served as Chief Financial Officer of the Company
since March 1996. Since 1987, Mr. Korzeniewski has held a variety of senior     
financial positions with SAIC and has served as a Corporate Vice President for  
Administration of SAIC since 1989. Prior to SAIC, Mr. Korzeniewski was the      
Corporate Controller of Halifax Corporation, a publicly traded technology       
services company. Mr. Korzeniewski is a Certified Public Accountant and received
a B.S. in Business Administration from Salem State College.                     

Raymond S. Corson has served as Senior Vice President, Business       
Development, of the Company since July 1996. Mr. Corson has also served as a    
Vice President of SAIC since 1995. Since 1987, Mr. Corson served in various     
positions with the Company, including serving as Vice President of Marketing    
from March 1995 to July 1996, Vice President of Operations from January 1994 to 
March 1995 and Vice President of Network Support Services from July 1989 to     
January 1994. Prior to joining the Company, Mr. Corson served as Department     
Manager of Command, Control, and Intelligence in Unisys' Defense Systems. Mr.   
Corson attended Virginia Polytechnic Institute and State University from 1963   
through 1966, majoring in Economics.                                            

David H. Holtzman has served as Senior Vice President for Product     
Development and Technology of the Company since February 1997. From September   
1995 until January 1997, he served as Chief Scientist, IBM Internet Information 
Technology (InfoMarket) group. Prior to this, he served as a Senior Associate at
Booz-Allen & Hamilton. Mr. Holtzman has a B.A. in Philosophy from the University
of Pittsburgh and a B.S. in Computer Science from the University of Maryland.   

A. Scott Williamson rejoined the Company as Vice President, Directory 
Services, in March 1996 and has served as Vice President, Engineering, of the   
Company since November 1996. Mr. Williamson has also served as a Vice President 
of SAIC since 1996. Prior to rejoining the Company, Mr. Williamson served as    
Thomson Technology Internet Lab's Principal Researcher for the Thomson          
Corporation, a publishing company, from January 1995 to March 1996. Mr.         
Williamson originally joined the Company in 1985 and served in a variety of     
positions, including serving as a program manager from January 1992 to December 
1994. Mr. Williamson received an A.A. from Northern Virginia Community College. 

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

   Russell L. Helbert has served as Controller of the Company since December
1990 and as Manager of Finance for the Company since August 1985. Mr. Helbert   
has also served as an Assistant Vice President for Administration of SAIC since 
1995. Prior to joining the Company, Mr. Helbert was a Division Controller with  
Browning-Ferris, Industries, a waste management services company. Mr. Helbert   
received his B.A. in Business Administration from the University of Buffalo.    

  J. Robert Beyster has served as a director of the Company since November
1996. Dr. Beyster is the Chief Executive Officer and Chairman of the Board of   
SAIC, a company he founded in 1969. Dr. Beyster is a Fellow of the American     
Nuclear Society and a Fellow of the American Physical Society. Dr. Beyster is   
also the founder, President and a member of the Board of Trustees of the        
Foundation for Enterprise Development, a non-profit organization that promotes  
employee ownership. Dr. Beyster received his B.S.E. in Engineering and Physics  
and an M.S. and Ph.D. in Nuclear Physics from the University of Michigan.       

     Craig I. Fields has served as a director of the Company since January 1997.
Dr. Fields has served as a consultant to SAIC since 1994. Prior thereto, Dr.    
Fields served as Vice Chairman of Alliance Gaming Corporation, a diversified    
entertainment company, from 1994 to 1997. From 1990 until 1994, Dr. Fields      
served as Chairman and Chief Executive Officer of the Microelectronics and      
Computer Technology Corporation, a research and development consortium. In      
addition, Dr. Fields serves as a director of                                    

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ENSCO International Incorporated, Projectavision, Inc., Perot Systems           
Corporation, Muzak Incorporated, Intertech and Firearms Training Systems, Inc.  
Dr. Fields received a B.S. from the Massachusetts Institute of Technology and a 
Ph.D. from the Rockefeller University.                                          

     John E. Glancy has served as a director of the Company since July 1996. Dr.
Glancy has held a number of senior positions with SAIC since February 1980. Dr. 
Glancy has served as a Corporate Executive Vice President of SAIC since January 
1994 and as a director of SAIC since July 1994. From April 1991 until January   
1994, Dr. Glancy served as a Sector Vice President of SAIC. Dr. Glancy received 
a B.S. in Physics from the University of Pittsburgh, an M.S. degree in Nuclear  
Engineering from Cornell University and a Ph.D. in Applied Physics from Cornell 
University.                                                                     

  William A. Roper, Jr. has served as a director of the Company since July
1996. Since April 1990, Mr. Roper has served as Senior Vice President and Chief 
Financial Officer of SAIC. Mr. Roper received a B.A. in Mathematics from the    
University of Mississippi.                                                      

   Stratton D. Sclavos has served as a director of the Company since January
1997. Mr. Sclavos has served as the President and Chief Executive Officer of    
VeriSign, Inc. since July 1995. From 1994 until July 1995, Mr. Sclavos served as
Vice President of Worldwide Marketing and Sales for Taligent, Inc., a joint     
venture of Apple Computer, Inc., IBM Corporation and The Hewlett-Packard        
Company, Inc. From 1992 until 1993, Mr. Sclavos served as Vice President of     
Worldwide Sales and Business Development for GO Corporation, a mobile computing 
company. From 1988 until 1993, Mr. Sclavos served in various executive positions
with MIPS Computers Systems. Mr. Sclavos received a B.S. in Electrical and      
Computer Engineering from the University of California, Davis.                  

     The Company currently has authorized eight (8) directors. All directors are
elected to hold office until the next annual meeting of stockholders of the     
Company and until their successors have been elected. Officers are elected at   
the first board of directors meeting following the stockholders' meeting at     
which the directors are elected and serve at the discretion of the Board of     
Directors. There are no family relationships among any of the directors or      
executive officers of the Company.                                              

COMPENSATION OF DIRECTORS                                                       

The Company's non-employee directors ("Outside Directors") currently  
receive no cash fees or annual retainer payments as part of their compensation. 
All directors are reimbursed for expenses incurred in connection with attending 
Board and committee meetings. The Company's 1996 Stock Incentive Plan provides  
that the Board of Directors may determine to allow an Outside Director to elect 
to receive his or her annual retainer payments, if any, and meeting fees from   
the Company in the form of cash, NSOs, Stock Units or a combination thereof. The
number of NSOs to be granted to Outside Directors in lieu of annual retainers   
and meeting fees that would otherwise be paid in cash will be calculated in a   
manner determined by the Board of Directors. The number of Stock Units to be    
granted to Outside Directors will be calculated by dividing the amount of the   
annual retainer or the meeting fee that would otherwise be paid in cash by the  
arithmetic mean of the fair market values of one share of Common Stock on the 10
consecutive trading days ending with the date such retainer or fee is payable.  
In January 1997, Craig I. Fields and Stratton D. Sclavos each received NSOs to  
purchase 30,750 shares of the Company's Class A Common Stock with exercise      
prices of $14.00 per share (which was equal to 100% of the fair market value as 
determined in the good faith judgment of the Board of Directors on the date of  
grant). All such stock options vest as to 30%, 30%, 20% and 20% on the first,   
second, third and fourth year anniversaries of the date of grant, respectively. 

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EXECUTIVE COMPENSATION                                                          

  The following table summarizes all compensation earned by or paid to the
Company's current and former Chief Executive Officer and to each of the         
Company's four most highly compensated executive officers other than the Chief  
Executive Officer whose total annual salary and bonus exceeded $100,000 for     
services rendered in all capacities to the Company and SAIC during the fiscal   
year ended December 31, 1996 (the "Named Executive Officers").                  

SUMMARY COMPENSATION TABLE

                                                        [Enlarge/Download Table]

                                                              LONG-TERM COMPENSATION                       
                                                         --------------------------------                  
                                 ANNUAL COMPENSATION      RESTRICTED          SECURITY                     
                                ----------------------       STOCK           UNDERLYING       ALL OTHER    
 NAME AND PRINCIPAL POSITION    SALARY ($)   BONUS ($)   AWARDS ($)(1)     OPTIONS (#)(2)  COMPENSATION ($)
------------------------------  ----------   ---------   -------------     --------------  ----------------
                                                                                                           
Gabriel A. Battista(3)........     60,577      37,500            --            461,250               --    
Chief Executive Officer                                                                                    
Donald N. Telage..............    165,719      35,010(4)     29,984(5)         153,750           13,209(6) 
Senior Vice President,                                                                                     
Internet Relations and Special                                                                             
Programs                                                                                                   
Robert J. Korzeniewski........    120,731      20,011        19,989(7)         115,300            9,954(6) 
Chief Financial Officer                                                                                    
Raymond S. Corson.............    118,519       7,524         7,476(8)          30,750            9,815(6) 
Senior Vice President,                                                                                     
Business Development                                                                                       
Emmit J. McHenry(9)...........     17,523          --            --                 --          875,011(10)

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

(1) Represents restricted shares of SAIC Class A Common Stock. The amount     
  reported represents the market value on the date of grant (calculated by
     multiplying the Formula Price of SAIC's Class A Common Stock on the date of
grant by the number of shares awarded), without giving effect to the  
  diminution in value attributable to the restriction on such stock. As of
   December 31, 1996, the aggregate restricted stock holding of SAIC Class A
   Common Stock for the Named Executive Officers were as follows: Gabriel A.
    Battista -- none; Donald N. Telage -- 1,930 shares, with a market value as
of such date of $44,062; Robert J. Korzeniewski -- 261 shares, with a 
   market value as of such date of $5,959; Raymond S. Corson  -- 220 shares,
  with a market value as of such date of $5,023; Emmit J. McHenry -- none;
   and all other employees -- 571,260 shares, with a market value as of such
    date of $13,041,866. Dividends are payable on such restricted stock if and
    when declared. However, SAIC has never declared or paid a cash dividend on
its capital stock and no cash dividends on its capital stock are      
contemplated in the foreseeable future.                               

 (2) Represents options to acquire shares of the Company's Class A Common Stock.

(3) Gabriel A. Battista joined the Company in October 1996. Mr. Battista's    
annual salary for 1996 would have been $350,000.                      

(4) Includes the award of 193 shares of SAIC Class A Common Stock which had a 
  market value on the date of grant (calculated by multiplying the Formula
   Price of the SAIC Class A Common Stock on the date of grant by the number
of shares awarded) of $5,010.                                         

(5) Represents 1,155 shares of SAIC Class A Common Stock which vest as to 20%,
    20%, 20% and 40% on the first, second, third and fourth year anniversaries
of the date of grant, respectively.                                   

(6) Represents amounts contributed by SAIC for the Named Executive Officers   
   under SAIC's Cash or Deferred Arrangement, SAIC's Profit Sharing Plan and
SAIC's Employee Stock Ownership Plan.                                 

(7) Represents 770 shares of SAIC Class A Common Stock which vest as to 20%,  
    20%, 20% and 40% on the first, second, third and fourth year anniversaries
of the date of grant, respectively.                                   

(8) Represents 288 shares of SAIC Class A Common Stock which vest as to 20%,  
    20%, 20% and 40% on the first, second, third and fourth year anniversaries
of the date of grant, respectively.                                   

(9) Emmit J. McHenry served as Chief Executive Officer of the Company until   
January 1996.                                                         

(10) Represents amounts paid to Emmit J. McHenry in connection with the         
 settlement of an earnout, covenant not to compete and other agreements.

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STOCK OPTION GRANTS                                                             

   The following table summarizes options to acquire shares of the Company's
Class A Common Stock granted during the Company's fiscal year ended December 31,
1996 to the Company's Named Executive Officers. The amounts shown as potential  
realizable values on the options identified in the table are based on assumed   
annualized rates of appreciation in the price of the Company's Class A Common   
Stock of five percent and ten percent over the term of the options, as set forth
in the rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent upon the future performance of the         
Company's Class A Common Stock. There can be no assurance that the potential    
realizable values reflected in this table will be achieved. No stock            
appreciation rights were granted during the Company's 1996 fiscal year.         

NSI OPTION GRANTS IN LAST FISCAL YEAR 

                                                        [Enlarge/Download Table]

                                                                                   POTENTIAL REALIZABLE   
                           NUMBER OF                                                 VALUE AT ASSUMED     
                           SECURITIES  PERCENTAGE OF                               ANNUAL RATES OF STOCK  
                           UNDERLYING  TOTAL OPTIONS                              PRICE APPRECIATION FOR  
                            OPTIONS     GRANTED TO     EXERCISE OR                   OPTION TERM($)(5)    
                            GRANTED    EMPLOYEES IN    BASE PRICE    EXPIRATION  -------------------------
          NAME               (#)(1)       1996(2)     ($/SHARE)(3)    DATE(4)        5%            10%    
-------------------------  ----------  -------------  -------------  ----------  ----------     ----------
                                                                                                          
Gabriel A. Battista......    461,250        37.6           11.25       10/14/01   1,433,642      3,167,975
Chief Executive Officer                                                                                   
Donald N. Telage.........    153,750        12.6           14.00       11/24/01     594,696      1,314,123
Senior Vice President,                                                                                    
Internet Relations and                                                                                    
Special Programs                                                                                          
Robert J. Korzeniewski...    115,300         9.4           14.00       11/24/01     445,974        985,485
Chief Financial Officer                                                                                   
Raymond S. Corson........     30,750         2.5           14.00       11/24/01     118,939        262,825
Senior Vice President,                                                                                    
Business Development                                                                                      
Emmit J. McHenry(6)......         --          --              --             --          --             --

------------------------------                                                  
(1) The stock options vest as to 30%, 30%, 20% and 20% on the first, second,    
third and fourth year anniversaries of the date of grant, respectively. 
Under the terms of the Company's 1996 Stock Incentive Plan (the "Stock  
    Plan"), the committee designated by the Board of Directors to administer the
    Stock Plan retains the discretion, subject to certain limitations within the
 Stock Plan, to modify, extend or renew outstanding options and to reprice
outstanding options. Options may be repriced by canceling outstanding   
  options and reissuing new options with an exercise price equal to the fair
 market value on the date of reissue, which may be lower than the original
exercise price of such canceled options.                                

(2) Based on options to purchase an aggregate of 1,225,725 shares of Class A    
    Common Stock granted to NSI employees in 1996, including the Named Executive
Officers.                                                               

(3) The exercise price on the date of grant was equal to 100% of the fair market
  value on the date of grant as determined in the good faith judgment of the
Board of Directors. The exercise price may be paid in cash, check, by   
delivery of already-owned shares of the Company's Class A Common Stock  
   subject to certain conditions, or pursuant to a cashless exercise procedure
 under which the optionee provides irrevocable instructions to a brokerage
 firm to sell the purchased shares and to remit to the Company, out of the
sale proceeds, an amount equal to the aggregate exercise price plus all 
applicable withholding taxes.                                           

(4) The options have a term of 5 years, subject to earlier termination in       
certain events related to termination of employment.                    

(5) Based on a base price per share equal to the exercise price. The exercise   
price was equal to 100% of the fair market value on the date of grant as
 determined in the good faith judgment of the Board of Directors. The fair
market value of Mr. Battista's options was determined by the Board of   
   Directors prior to the fair market valuation date of the options granted to
the other Named Executive Officers and was based on several factors,    
including, but not limited to, the status of the Company's back office  
operations, strategic agreements and market conditions. The 5% and 10%  
 assumed rates of appreciation are mandated by the rules of the Securities
and Exchange Commission and do not represent the Company's estimate or  
projection of the future Class A Common Stock price. There can be no    
 assurance that any of the values reflected in the table will be achieved.

(6) Emmit J. McHenry served as Chief Executive Officer of the Company until     
January 1996.                                                           

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  The following table summarizes options to acquire shares of SAIC Class A
Common Stock granted during the Company's fiscal year ended December 31, 1996 to
the Company's Named Executive Officers. The amounts shown as potential          
realizable values on the options identified in the table are based on assumed   
annualized rates of appreciation in the price of SAIC Class A Common Stock of   
five percent and ten percent over the term of the options, as set forth in the  
rules of the Securities and Exchange Commission. Actual gains, if any, on stock 
option exercises are dependent upon the future performance of SAIC Class A      
Common Stock. There can be no assurance that the potential realizable values    
reflected in this table will be achieved. No SAIC stock appreciation rights were
granted during the Company's 1996 fiscal year.                                  

SAIC OPTION GRANTS IN LAST FISCAL YEAR

                                                        [Enlarge/Download Table]

                                                                                   POTENTIAL REALIZABLE 
                                                                                     VALUE AT ASSUMED   
                                                                                   ANNUAL RATES OF STOCK
                           NUMBER OF     PERCENTAGE OF                              PRICE APPRECIATION  
                           SECURITIES    TOTAL OPTIONS                                      FOR         
                           UNDERLYING      GRANTED TO    EXERCISE OR                 OPTION TERM($)(5)  
                            OPTIONS       EMPLOYEES IN    BASE PRICE   EXPIRATION  ---------------------
         NAME            GRANTED (#)(1)  FISCAL YEAR(2)  ($/SHARE)(3)   DATE(4)      5%            10%  
-----------------------  --------------  --------------  ------------  ----------  ------         ------
                                                                                                        
Gabriel A. Battista....          --            --               --            --       --             --
Chief Executive Officer                                                                                 
Donald N. Telage.......       7,000            *             19.33       3/28/01   37,384         82,608
Senior Vice President,                                                                                  
Internet Relations and                                                                                  
Special Programs                                                                                        
Robert J.                                                                                               
Korzeniewski...........       5,100            *             19.33       3/28/01   27,237         60,186
Chief Financial Officer                                                                                 
Raymond S. Corson......         810            *             19.33       2/08/01    4,326          9,559
Senior Vice President,        1,000            *             19.33       3/28/01    5,341         11,801
Business Development                                                                                    
Emmit J. McHenry(6)....          --            --               --            --       --             --

------------------------------                                                  
*  Less than 1% of the total options granted to employees in 1996.            

(1) Although the following grants of options were made during 1996, such grants 
 relate to the individual's service during 1995. These non-qualified stock
options vest as to 20%, 20%, 20% and 40% on the first, second, third and
fourth year anniversaries of the date of grant, respectively. Under the 
terms of SAIC's 1995 Stock Option Plan (the "Stock Plan"), the committee
 designated by the Board of Directors to administer the Stock Plan retains
the discretion, subject to certain limitations within the Stock Plan, to
modify, extend or renew outstanding options and to reprice outstanding  
options. Options may be repriced by canceling outstanding options and   
   reissuing new options with an exercise price equal to the fair market value
   on the date of reissue, which may be lower than the original exercise price
of such canceled options.                                               

(2) Based on options to purchase an aggregate of 3,581,132 shares granted to    
  employees, consultants and directors of SAIC and its subsidiaries in 1996,
including the Company's Named Executive Officers.                       

(3) The exercise price on the date of grant was equal to the Formula Price of   
the SAIC Class A Common Stock on the date of grant.                     

(4) The options have a term of 5 years, subject to earlier termination in       
certain events related to termination of employment.                    

(5) The 5% and 10% assumed rates of appreciation are mandated by the rules of   
 the Securities and Exchange Commission and do not represent the Company's
    estimate or projection of the future price of the SAIC Class A Common Stock.
    There can be no assurance that any of the values reflected in the table will
be achieved.                                                            

(6) Emmit J. McHenry served as Chief Executive Officer of the Company until     
January 1996.                                                           

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The following table summarizes the value realized on the exercise of  
options to acquire SAIC Class A Common Stock during the fiscal year ended       
December 31, 1996. No options to acquire shares of the Company's Common Stock   
were exercised during the Company's 1996 fiscal year. The following table also  
presents the number and value of unexercised options to acquire SAIC Class A    
Common Stock and unexercised options to acquire the Company's Common Stock as of
December 31, 1996 for the Company's Named Executive Officers.                   

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR 
AND FISCAL YEAR-END OPTION VALUES 

                                                        [Enlarge/Download Table]

                                                          NUMBER OF SECURITIES                                     
                                                         UNDERLYING UNEXERCISED          VALUE OF UNEXERCISED      
                                                               OPTIONS AT               IN-THE-MONEY OPTIONS AT    
                                                          DECEMBER 31, 1996 (#)          DECEMBER 31, 1996 ($)     
                       SHARES ACQUIRED      VALUE      ---------------------------  -------------------------------
         NAME          ON EXERCISE (#)  REALIZED ($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE    UNEXERCISABLE  
---------------------- ---------------  -------------  -----------   -------------  -------------  ----------------
                                                                                                                   
Gabriel A. Battista              --(N)          --(N)        --(N)      461,250(N)          --(N)   1,268,438(N)(2)
Chief Executive                  --(S)          --(S)        --(S)           --(S)          --(S)          --(S)   
  Officer                                                                                                          
Donald N. Telage                 --(N)          --(N)        --(N)      153,750(N)          --(N)          --(N)(2)
Senior Vice President,        6,100(S)   60,771(S)(1)     4,580(S)       14,970(S)   40,887(S)(3)      89,138(S)(3)
Internet Relations and                                                                                             
Special Programs                                                                                                   
Robert J. Korzeniewski           --(N)          --(N)        --(N)      115,300(N)          --(N)          --(N)(2)
Chief Financial                  --(S)          --(S)     9,000(S)       14,100(S)      91,310(S)(3)   90,530(S)(3)
Officer                                                                                                            
Raymond S. Corson                --(N)          --(N)        --(N)       30,750(N)          --(N)          --(N)(2)
Senior Vice President,           --(S)          --(S)       200(S)        2,610(S)       1,284(S)(3)   11,471(S)(3)
Business Development                                                                                               
Emmit J. McHenry(4)              --(N)          --(N)        --(N)           --(N)          --(N)          --(N)(2)
                                 --(S)            (S)     2,000(S)        8,000(S)      12,840(S)(3)   51,360(S)(3)

------------------------------                                                  
(N) Options to acquire the Company's Class A Common Stock.                      

(S)  Options to acquire SAIC's Class A Common Stock.                            

(1)  Calculated by multiplying the difference between the Formula Price of      
SAIC's Class A Common Stock underlying the option as of the date of   
  exercise and the exercise price of the option by the number of shares of
SAIC's Class A Common Stock acquired on exercise of the option.       

(2)  Based on the fair market value of the Company's Class A Common Stock as of 
   such date as determined by the Board of Directors less the exercise price
of such options. The fair market value of Mr. Battista's options was  
 determined by the Board of Directors prior to the fair market valuation
   date of the options granted to the other Named Executive Officers and was
    based on several factors, including, but not limited to, the status of the
Company's back office operations, strategic agreements and market     
conditions.                                                           

(3)  Based on the Formula Price of SAIC's Class A Common Stock as of such date  
less the exercise price of such options.                              

(4)  Emmit J. McHenry served as Chief Executive Officer of the Company until    
January 1996.                                                         

1996 STOCK INCENTIVE PLAN                                                       

 The 1996 Stock Incentive Plan (the "Incentive Plan") of the Company was
adopted by the Board of Directors and approved by the Company's stockholder on  
September 18, 1996. The Incentive Plan provides for awards in the form of       
restricted shares, stock units, options (including incentive stock options      
("ISOs") and nonstatutory stock options ("NSOs")) or stock appreciation rights  
("SARs"). Employees, Outside Directors, consultants and advisors of the Company 
are eligible for the grant of restricted shares, stock units, SARs and NSOs.    
Only employees are eligible for the grant of ISOs. The Outside Directors may    
elect to receive any director fees in NSOs, stock units or a combination        
thereof. As of June 30, 1997, a total of 2,556,250 shares of Common Stock has   
been reserved for issuance under the Incentive Plan. The Incentive Plan will be 
amended to reflect two classes of Common Stock.                                 

   The Incentive Plan will be administered by a Compensation Committee and a
Non-Insider Option Committee. The Compensation Committee will consist of at     
least two directors who are "non-employee directors," as defined in Rule 16b-3. 
The Board of Directors may amend the Incentive Plan as desired without further  
action by the Company's stockholders except as required by applicable law.      

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The Incentive Plan will continue in effect until terminated by the Board or,    
with respect to ISOs, for a term of 10 years from its original adoption date,   
whichever is earlier.                                                           

The consideration for each award under the Incentive Plan will be     
established by the Compensation Committee, but in no event will the option price
for ISOs be less than 100% of the fair market value of the stock on the date of 
grant. Awards will have such terms and be exercisable in such manner and at such
times as the Compensation Committee may determine. However, each ISO must expire
within a period of not more than ten (10) years from the date of grant.         

The Incentive Plan provides that, in the event of a merger or         
reorganization of the Company, outstanding options, SARs, restricted shares and 
stock units shall be subject to the terms of the agreement of merger or         
reorganization.                                                                 

   As of July 31, 1997, a total of 100,900 ISOs and 1,438,825 NSOs have been
granted under the Incentive Plan. Such options have exercise prices ranging from
$11.25 to $14.00 per share and a weighted average per share exercise price of   
$13.18 and were held by 72 persons. None of such options has been exercised.    

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL        
ARRANGEMENTS                                                                    

     The Company does not currently have any employment contracts in effect with
any of the Named Executive Officers other than Gabriel A. Battista, the         
Company's Chief Executive Officer.                                              

The Company and Mr. Battista are parties to a letter agreement dated  
September 24, 1996 governing his employment with the Company. The agreement sets
forth Mr. Battista's compensation level and eligibility for bonuses, benefits   
and option grants under the 1996 Stock Incentive Plan. Pursuant to the          
agreement, if Mr. Battista's employment is terminated for other than cause or   
non-performance, Mr. Battista will be eligible to receive, if terminated during 
his first year of employment, his first year base salary and an additional      
$150,000 in bonus, and, if terminated during his second year of employment, his 
first year base salary and an amount equal to the bonus awarded to him for his  
first year of employment. If Mr. Battista resigns during this initial two-year  
period, he will not receive any separation compensation. Mr. Battista's         
employment under the letter agreement is voluntary and may be terminated by the 
Company or Mr. Battista at any time with or without cause or notice.            

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS                             

     The Company has adopted provisions in its Certificate of Incorporation that
limit the liability of its directors for monetary damages for breach of their   
fiduciary duty as directors, except for liability that cannot be eliminated     
under the Delaware General Corporation Law (the "Delaware Law"). The Delaware   
Law provides that directors of a company will not be personally liable for      
monetary damages for breach of their fiduciary duty as directors, except for    
liability (i) for any breach of their duty of loyalty to the Company or its     
stockholders, (ii) for acts or omissions not in good faith or which involve     
intentional misconduct or a knowing violation of law, (iii) for unlawful payment
of dividend or unlawful stock repurchase or redemption, as provided in section  
174 of the Delaware Law, or (iv) for any transaction from which the director    
derived an improper personal benefit. Any amendment or repeal of these          
provisions requires the approval of the holders of shares representing at least 
66-2/3% of the shares of the Company entitled to vote in the election of        
directors, voting as one class. The effect of these provisions will be to       
eliminate the rights of the Company and its stockholders (through stockholders' 
derivative suits on behalf of the Company) to recover monetary damages against a
director for breach of fiduciary duty as a director (including breaches         
resulting from grossly negligent behavior), except in the situations described  
above.                                                                          

     The Company's Certificate of Incorporation and Bylaws also provide that the
Company shall indemnify its directors and officers to the fullest extent        
permitted by the Delaware Law. The Company intends to enter into separate       
indemnification agreements with its directors that could require the Company,   
among other things, to indemnify them against certain liabilities that may arise
by reason of their status or service as directors and to advance their expenses 
incurred as a result of any proceeding against them as to which they could be   
indemnified. The Company believes that the limitation of                        

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liability provision in its Certificate of Incorporation and the indemnification 
agreements will facilitate the Company's ability to continue to attract and     
retain qualified individuals to serve as directors and officers of the Company. 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER INFORMATION                       

   Compensation information with respect to the Named Executive Officers for
1996 reflects compensation earned while the Company was a wholly-owned          
subsidiary of SAIC. During 1996, the Company had no Compensation Committee.     
Executive compensation levels during 1996 were established by SAIC. The Company 
has established a Compensation Committee for fiscal 1997, the members of which  
are Michael A. Daniels, J. Robert Beyster and Stratton D. Sclavos. Dr. Beyster  
and Mr. Sclavos are independent directors of the Company. See                   
"Management -- Executive Officers and Directors."                               

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RELATIONSHIP WITH SAIC AND CERTAIN TRANSACTIONS 

The Company was acquired by SAIC, an employee-owned, diversified      
professional and technical services company, on March 10, 1995. The Company is  
currently a wholly-owned subsidiary of SAIC. Upon completion of the offering,   
SAIC will own 100% of the Company's outstanding Class B Common Stock (12,500,000
shares), which will represent approximately 84.5% of the outstanding Common     
Stock of the Company (approximately 82.5% if the Underwriters' over-allotment   
option is exercised in full) and approximately 98.2% of the combined voting     
power of the Company's outstanding Common Stock (approximately 97.9% if the     
Underwriters' over-allotment option is exercised in full) and thus will continue
to have the ability to elect all of the directors of the Company and otherwise  
exercise a controlling influence over the business and affairs of the Company.  

 Prior to the acquisition of the Company by SAIC, the Company's business
included commercial and government contracts awarded to the Company on a        
competitive basis, including government contracts that were awarded to the      
Company based partially upon the Company's then minority-owned status. The      
contracts which had been awarded to the Company based partially upon the        
Company's then minority-owned status were transferred into a separately-owned   
entity prior to the acquisition of the Company by SAIC. In November 1995, SAIC  
adopted a plan to transfer the Company's remaining government-based business to 
SAIC in order to enable the Company to focus on the growth of its commercial    
business, which includes registration services and Intranet services. Such      
transfer was effective as of February 1996. In connection with such transfer,   
the Company assigned to SAIC all of its rights and title to certain contracts,  
accounts and assets, all of which were part of the Company's remaining          
government-based business. In addition, the Company assigned to SAIC certain    
liabilities associated with such government-based business. No gain or loss was 
incurred as a consequence of the transfer of this business. SAIC agreed to      
indemnify the Company and any director, officer, employee, agent or             
representative of the Company from any loss or liability associated with such   
government-based business or the transferred assets. Finally, SAIC agreed to    
indemnify the same entities against any loss or liability associated with       
certain other government contracts whose award was based partially upon the     
Company's then minority-owned status which had been transferred to a            
separately-owned entity prior to the acquisition of the Company by SAIC. The    
operating results of both the minority-based government contracts business, and 
the remaining government-based business are reflected as discontinued operations
in the Company's financial statements for all periods presented.                

  For as long as SAIC continues to own shares of Common Stock representing
more than 50% of the voting power of the Common Stock of the Company, SAIC will 
be able, among other things, to determine the outcome of any corporate action   
requiring approval of holders of Common Stock representing a majority of the    
voting power of the Common Stock, including the election of the entire Board of 
Directors of the Company, without the consent of the other stockholders of the  
Company. In addition, through its control of the Board of Directors and         
ownership of Common Stock, SAIC will be able to control certain decisions,      
including decisions with respect to the Company's dividend policy, the Company's
access to capital (including borrowing from third party lenders and the issuance
of additional equity securities), mergers or other business combinations        
involving the Company, the acquisition or disposition of assets by the Company  
and any change in control of the Company.                                       

     SAIC has advised the Company that its current intent is to continue to hold
all of its outstanding shares of Class B Common Stock. Further, pursuant to the 
Underwriting Agreement, SAIC has agreed, subject to certain exceptions, not to  
sell or otherwise dispose of any shares of Common Stock (or any security        
convertible into or exchangeable or exercisable for Common Stock) owned by it   
for a period of 180 days following the date of this Prospectus without the prior
written consent of Hambrecht & Quist LLC. However, after such 180 day period,   
there can be no assurance concerning the period of time during which time SAIC  
will maintain its ownership of Class B Common Stock. Beneficial ownership of at 
least 80% of the total voting power and value of the outstanding Common Stock is
required in order for SAIC to continue to include the Company in its            
consolidated group for federal income tax purposes, and ownership of at least   
80% of the total voting power and 80% of each class of                          

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nonvoting capital stock is required in order for SAIC to be able to effect a    
tax-free spin-off of the Company under the Code. See "Description of Capital    
Stock -- Common Stock -- Conversion Rights."                                    

    The Company's Certificate of Incorporation contains provisions relating to
competition by SAIC with the Company, potential conflicts of interest that may  
arise between the Company and SAIC, the allocation of business opportunities    
that may be suitable for either SAIC or the Company and the approval of         
transactions between the Company and SAIC. The Company's Certificate of         
Incorporation also limits the liability of its directors for monetary damages   
arising from a breach of their fiduciary duty as directors, except to the extent
otherwise required by the Delaware General Corporations Law. Such limitation of 
liability does not affect the availability of equitable remedies such as        
injunctive relief or rescission.                                                

     The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in      
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has also entered into indemnification agreements with its      
officers and directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain          
liabilities that may arise by reason of their status or service as directors or 
officers (other than liabilities arising from willful misconduct of a culpable  
nature), to advance their expenses incurred as a result of any proceeding       
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance if available on reasonable terms.                           

     The Company's relationship with SAIC will also be governed by the following
agreements to be entered into prior to completion of the offering: the Corporate
Services Agreement, a noncompetition agreement, a registration rights agreement 
and the Tax Sharing Agreement, the material terms of which are summarized below.
Because the Company is a wholly-owned subsidiary of SAIC, none of these         
arrangements will result from arm's length negotiations and, therefore, the     
prices charged to the Company for services provided thereunder may be higher or 
lower than prices that may be charged by third parties.                         

     The descriptions of agreements set forth below are intended to be summaries
and, while material terms of the agreements are set forth herein, the           
descriptions are qualified by reference to the relevant agreements filed as     
exhibits to the Registration Statement of which this Prospectus forms a part.   

  The Company believes that the transactions contemplated by the following
agreements are in its best interests. It is the Company's current policy that   
all transactions by the Company with its officers, directors, five percent      
stockholders and their affiliates will be entered into (or amended) only if such
transactions are approved by a majority of the disinterested independent        
directors, are on terms no less favorable to the Company than could be obtained 
from unaffiliated parties and are reasonably expected to benefit the Company.   

CORPORATE SERVICES AGREEMENT                                                    

    Subsequent to the acquisition of the Company by SAIC, SAIC has provided to
the Company from time to time, upon request of the Company certain routine and  
ordinary corporate services, including financial, insurance, accounting,        
employee benefits, payroll, tax and legal services. SAIC has also provided      
corporate planning, government relations and corporate quality assurance        
services. The Company has also shared certain SAIC systems, including its       
management information system, accounting system and human resource system.     
Prior to the completion of the offering, the Company and SAIC will enter into   
the Corporate Services Agreement pursuant to which SAIC will continue to provide
such services to the Company and the Company will continue to share such systems
in a manner generally consistent with past practices. The Company's Statements  
of Operations include revenue and costs directly attributable to the Company, as
well as certain allocations from SAIC of indirect costs associated with such    
services and shared systems. Such allocations include allocations of: (i) costs 
for administrative functions and services performed on behalf of the Company by 
centralized staff groups within SAIC; (ii) SAIC's general corporate expenses;   
(iii) other benefit costs, including, but not limited to, health insurance,     
disability and retirement costs; and (iv) cost of capital (through              

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December 31, 1996). Through August 9, 1996, such allocations (excluding cost of 
capital) were generally based on the proportionate labor costs of the Company to
the rest of SAIC and were included in selling, general and administrative       
expenses and cost of revenue, respectively. Effective August 10, 1996, SAIC     
stopped allocating costs based generally upon pro rata labor and began assessing
the Company for corporate services provided by SAIC at a fee equal to 2.5% of   
net revenue with such percentage to be re-evaluated by both parties on an annual
basis. This fee is included in its entirety in selling, general and             
administrative expenses. The Company believes that the charges under the        
Corporate Services Agreement are reasonable. The initial term of this agreement 
will be one year. Thereafter, the Corporate Services Agreement will be          
automatically renewed for successive one-year terms until terminated. After     
SAIC's ownership of the Company's Common Stock drops below 50% of the Company's 
issued and outstanding Common Stock, the agreement may be terminated by either  
party upon 180 days' prior written notice. Certain individual services are also 
terminable by either party upon 180 days' prior written notice, regardless of   
SAIC's stock ownership. See Note 9 of Notes to Financial Statements.            

NONCOMPETITION AGREEMENT                                                        

  Prior to the completion of the offering, the Company and SAIC will enter
into a noncompetition agreement (the "Noncompetition Agreement") pursuant to    
which SAIC agrees that it will not compete with the Company in the domain name  
registration business within the .com, .org, .net, .edu and .gov TLDs for a     
period of five years. The Noncompetition Agreement does not restrict SAIC from  
competing with the Company in the domain name registration business in other    
TLDs or other lines of business. The initial term of this agreement will be five
years but either party will have the right to terminate the agreement if SAIC   
ceases to beneficially own 20% of the Company's Common Stock.                   

REGISTRATION RIGHTS AGREEMENT                                                   

    Prior to the completion of the offering, the Company and SAIC will execute
the Registration Rights Agreement pursuant to which SAIC may, on not more than  
two occasions, demand registration under the Securities Act of some or all of   
the shares of Class A Common Stock to be owned by SAIC upon conversion of the   
Class B Common Stock owned by SAIC or any other shares of Class A Common Stock  
acquired by SAIC, subject to its agreement not to sell any shares prior to the  
expiration of 180 days from the date of this Prospectus. The first such         
registration will be at the Company's expense and the second such registration  
will be at SAIC's expense. The Company may postpone such a demand under certain 
circumstances. In addition, SAIC may request the Company to include shares of   
the Class A Common Stock held by SAIC in any registration proposed by the       
Company of such Class A Common Stock under the Securities Act. See "Description 
of Capital Stock -- Registration Rights."                                       

TAX SHARING AGREEMENT                                                           

The taxable income and losses of the Company will be included in the  
consolidated federal income tax returns filed by SAIC's consolidated group for  
so long as SAIC maintains beneficial ownership of at least 80% of the total     
voting power and value of the outstanding Common Stock of the Company. Prior to 
the completion of the offering, the Company and SAIC plan to enter into the Tax 
Sharing Agreement which will require the Company to pay SAIC an amount in       
respect of federal income taxes generally equal to the amount of the federal    
income taxes that the Company generally would be required to pay if the Company 
were to file its own federal income tax return and was never part of SAIC's     
consolidated group. Effectively, this will result in the Company's annual income
tax payable/receivable being computed as if the Company filed a separate tax    
return.                                                                         

Further, pursuant to the terms of the Tax Sharing Agreement, upon     
deconsolidation, the Company's ability to recognize a benefit for tax losses it 
incurs is subject to SAIC's approval. SAIC may choose to contest, compromise or 
settle any adjustment or deficiency proposed by the relevant taxing authority in
a manner that may be beneficial to SAIC and detrimental to the Company.         

   In general, the Company will be included in SAIC's consolidated group for
federal income tax purposes for so long as SAIC beneficially owns at least 80%  
of the total voting power and value of the outstanding Common Stock. Each member
of a consolidated group is jointly and severally liable for the                 

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federal income tax liability of each other member of the consolidated group.    
Accordingly, although the Tax Sharing Agreement allocates tax liabilities       
between the Company and SAIC, during the period in which the Company is included
in SAIC's consolidated group, the Company could be liable in the event that any 
federal tax liability is incurred, but not discharged, by any other member of   
SAIC's consolidated group. See "Risk Factors -- Control by SAIC," "-- Control of
Tax Matters; Tax and ERISA Liability" and "-- Potential Conflicts of Interest." 

OTHER TRANSACTIONS WITH SAIC                                                    

In fiscal 1996, the Company provided the following services under     
subcontracts to SAIC: (i) telecommunications design and support services to     
Kaiser Permanente for which the Company received $155,000; (ii) engineering and 
network services to Banco de Credito for which the Company received $864,000;   
(iii) engineering support to KUB/Malaysia for which the Company received        
$107,000; (iv) engineering services to the Center for Information Protection for
which the Company received $103,000 and (v) other subcontracts for which the    
Company received $276,000.                                                      

In addition, in fiscal 1996, SAIC provided database, applications and 
installation services to UUNET Technologies, Inc. under a subcontract to the    
Company for which SAIC received $133,000 and on other subcontracts to the       
Company for which SAIC received $95,000.                                        

   The Company currently subleases from SAIC facilities in Herndon, Virginia
and Charlotte, North Carolina. In fiscal 1996, the Company made lease payments  
of $737,000 to SAIC.                                                            

   For information concerning indemnification of directors and officers, see
"Management -- Limitation of Liability and Indemnification Matters."            

DUE TO PARENT LIABILITY                                                         

The cumulative result of the transactions and relationship with SAIC  
outlined above at December 31, 1996 was a liability due SAIC of $15,295,000. The
most significant component of this balance was the income taxes payable by the  
Company that SAIC will report on its consolidated tax return. This balance has  
subsequently been paid to SAIC.                                                 

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PRINCIPAL STOCKHOLDERS

OWNERSHIP OF THE COMPANY'S COMMON STOCK                                         

  As of the date of this Prospectus, no shares of Class A Common Stock are
outstanding. Upon completion of this offering, the only shares of Class A Common
Stock that will be outstanding are those that will be issued in the offering    
(including any shares issued if the Underwriters' over-allotment option is      
exercised) and those issued under the Company's stock incentive plans. See      
"Management -- Executive Compensation." The only stockholder of the Company is  
SAIC. The address of SAIC is 10260 Campus Point Drive, San Diego, California    
92121. Upon completion of the offering, SAIC will own 100% of the Company's     
outstanding Class B Common Stock (12,500,000 shares), which will represent      
approximately 84.5% of the outstanding Common Stock of the Company              
(approximately 82.5% if the Underwriters' over-allotment option is exercised in 
full). Under Delaware law, SAIC is able, acting alone, to elect the entire Board
of Directors of the Company and to control the vote on all matters submitted to 
a vote of the Company's stockholders, including extraordinary corporate         
transactions. Currently, five of the Company's eight directors are also         
directors and/or officers of SAIC.                                              

OWNERSHIP OF SAIC CLASS A COMMON STOCK                                          

    The following table sets forth, at July 31, 1997, the beneficial ownership
of SAIC Class A Common Stock held by the Company's directors, the Named         
Executive Officers, and all directors and executive officers as a group.        

                                                        [Enlarge/Download Table]

                                               NUMBER OF SHARES OF SAIC   PERCENTAGE OF SHARES 
              BENEFICIAL OWNER                CLASS A COMMON STOCK(1)(2)     OUTSTANDING(3)    
--------------------------------------------  --------------------------  ---------------------
                                                                                               
Gabriel A. Battista.........................                  --                     --        
J. Robert Beyster...........................             779,252                    1.6%(4)    
Raymond S. Corson...........................               6,329                      *        
Michael A. Daniels..........................              52,330                      *        
Craig I. Fields.............................               3,000                      *        
John E. Glancy..............................             137,546                      *        
Robert J. Korzeniewski......................              29,820                      *        
Emmit J. McHenry............................              30,428                      *        
William A. Roper, Jr........................              43,610                      *        
Stratton D. Sclavos.........................                  --                     --        
Donald N. Telage............................              38,237                      *        
State Street Bank and Trust Company.........          24,204,594(5)                48.8%(6)    
  One Enterprise Drive                                                                         
  North Quincy, MA 02171                                                                       
All directors and executive officers                                                           
  as a group (14 persons)...................           1,092,579                    2.2%(7)    

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

*   Less than 1% of the outstanding shares of SAIC's Class A Common Stock and   
   less than 1% of the voting power of SAIC's Class A Common Stock and Class B
Common Stock on a combined basis.                                       

(1) Beneficial ownership is determined in accordance with the rules of the      
    Commission and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community   
   property laws where applicable, to the best of the Company's knowledge, the
   persons named in the table above have sole voting and investment power with
respect to all shares of SAIC Class A Common Stock shown as             
beneficially-owned by them. Options to purchase shares of SAIC Class A  
    Common Stock that are exercisable within 60 days of July 31, 1997 are deemed
   to be beneficially-owned by the person holding such options for the purpose
    of computing the percentage ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.                                                           

(2) The beneficial ownership depicted in the table includes: (i) shares held for
the account of the individual by the Trustee of SAIC's Employee Stock   
Ownership Plan, Profit Sharing Plan and Cash or Deferred Arrangement, as
follows: J.R. Beyster (1,005 shares), Raymond S. Corson (2,901 shares), 
    Michael A. Daniels (5,124 shares), John E. Glancy (26,757 shares), Robert J.
    Korzeniewski (5,675 shares), Emmit J. McHenry (97 shares), William A. Roper,
Jr. (4,145 shares), Donald N. Telage (4,461 shares), and all executive  
 officers and directors as a group (50,259 shares); (ii) shares subject to
  options which are exercisable within 60 days of July 31, 1997, as follows:
    Raymond S. Corson (762 shares), Michael A. Daniels (12,800 shares), Craig I.
Fields (3,000 shares), John E. Glancy (13,800 shares), Robert J.        
 Korzeniewski (12,120 shares), Emmit J. McHenry (4,000 shares), William A.
Roper, Jr. (6,200 shares), Donald N. Telage (8,850 shares), and all     
 executive officers and directors as a group (58,032 shares); (iii) shares
   held by spouses, minor children or other relatives sharing a household with
    the individuals, as follows: John E. Glancy (2,870 shares) and all executive
 officers and directors as a group (2,870 shares); and (iv) shares held by
certain trusts established by the individual, as follows: J.R. Beyster  
(778,247 shares) and all executive officers and directors as a group    
(778,247 shares).                                                       

(3) Applicable percentage of beneficial ownership is based on 49,568,419 shares 
of SAIC Class A Common Stock outstanding as of July 31, 1997.           

(4) Represents 1.5% of the voting power of SAIC's Class A Common Stock and Class
B Common Stock on a combined basis.                                     

(5) As Trustee of certain retirement and stock benefit plans of SAIC and its    
subsidiaries.                                                           

(6) Represents 47.3% of the voting power of SAIC's Class A Common Stock and     
Class B Common Stock on a combined basis.                               

(7) Represents 2.1% of the voting power of SAIC's Class A Common Stock and Class
B Common Stock on a combined basis.                                     

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DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK                                                        

    The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common Stock, par value $0.001 per share, 40,000,000 shares of Class 
B Common Stock, par value $0.001 per share, and 10,000,000 shares of Preferred  
Stock, par value $0.001 per share. None of the Class A Common Stock and         
Preferred Stock are outstanding as of the date hereof. Of the 100,000,000 shares
of Class A Common Stock authorized, 2,300,000 are being offered hereby          
(2,645,000 shares if the Underwriters' over-allotment option is exercised in    
full), 12,500,000 shares will be reserved for issuance upon conversion of Class 
B Common Stock into Class A Common Stock and 2,556,250 shares have been reserved
for issuance pursuant to certain employee benefits plans. See "Management --    
Executive Compensation." Of the 40,000,000 shares of Class B Common Stock       
authorized, 12,500,000 shares, or 100% of the outstanding shares of Class B     
Common Stock, are held by SAIC. The following summary description of the capital
stock of the Company is qualified in its entirety by reference to the form of   
Certificate of Incorporation of the Company and the Bylaws of the Company, a    
copy of each of which is filed as an exhibit to the Registration Statement of   
which this Prospectus forms a part.                                             

COMMON STOCK                                                                    

Voting Rights.  The holders of Class A Common Stock and Class B Common
Stock generally have identical rights except that holders of Class A Common     
Stock are entitled to one vote per share while holders of Class B Common Stock  
are entitled to ten votes per share on all matters to be voted on by            
stockholders. The holders of Common Stock are not entitled to cumulative voting 
rights. Generally, all matters to be voted on by stockholders must be approved  
by a majority (or, in the case of election of directors, by a plurality) of the 
votes entitled to be cast by all shares of Class A Common Stock and Class B     
Common Stock present in person or represented by proxy, voting together as a    
single class, subject to any voting rights granted to holders of any Preferred  
Stock. In the event of a voluntary or involuntary liquidation, dissolution or   
winding up of the Company, the holders of shares of Common Stock would be       
entitled to share ratably in all assets remaining after payment of liabilities  
subject to prior distribution rights and payment of any distributions owing to  
holders of shares of Preferred Stock then outstanding, if any. Holders of the   
shares of Common Stock have no preemptive rights, and the shares of Common Stock
are not subject to further calls or assessment by the Company. There are no     
redemption or sinking fund provisions applicable to the shares of Common Stock. 

   Holders of Class A Common Stock and Class B Common Stock will share in an
equal amount per share in any dividend declared by the Board of Directors,      
subject to any preferential rights of any outstanding Preferred Stock. Dividends
consisting of shares of Class A Common Stock and Class B Common Stock may be    
paid only as follows: (i) shares of Class A Common Stock may be paid only to    
holders of Class A Common Stock and shares of Class B Common Stock may be paid  
only to holders of Class B Common Stock and (ii) shares shall be paid           
proportionally with respect to each outstanding share of Class A Common Stock   
and Class B Common Stock.                                                       

Conversion Rights.  While SAIC does not have a current intention of   
effecting a Tax-Free Spin-Off (as hereinafter defined), SAIC will continually   
evaluate its ownership of the Company and there can be no assurances whether    
SAIC will effect a Tax-Free Spin-Off in the future. Each outstanding share of   
Class B Common Stock is convertible at the holder's option into one share of    
Class A Common Stock at any time prior to a Tax-Free Spin-Off. Additionally,    
each share of Class B Common Stock shall automatically convert into one share of
Class A Common Stock if at any time prior to a Tax-Free Spin-Off the number of  
outstanding shares of Class B Common Stock owned by SAIC or any of its          
subsidiaries (or a Class B Transferee or any of its subsidiaries) represents    
less than 30% of the economic ownership represented by the aggregate number of  
shares of Common Stock then outstanding. If a Tax-Free Spin-Off occurs, shares  
of Class B Common Stock shall not be convertible into shares of Class A Common  
Stock at the option of the holder thereof.                                      

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     Except as provided below, any shares of Class B Common Stock transferred to
a person other than SAIC or any of its subsidiaries shall automatically convert 
to shares of Class A Common Stock upon such disposition. Prior to a Tax-Free    
Spin-Off, shares of Class B Common Stock representing more than a 50% economic  
interest in the Company transferred in a single transaction to one unrelated    
person (a "Class B Transferee") or among such Class B Transferee and its        
subsidiaries shall not automatically convert to shares of Class A Common Stock  
upon such disposition. Any shares of Class B Common Stock retained by SAIC      
following any such transfer of shares of Class B Common Stock to a Class B      
Transferee shall automatically convert into shares of Class A Common Stock upon 
such transfer. Shares of Class B Common Stock transferred to stockholders of    
SAIC or of a Class B Transferee in a transaction intended to be on a tax-free   
basis (a "Tax-Free Spin-Off") under the Code shall not convert to shares of     
Class A Common Stock upon the occurrence of such Tax-Free Spin-Off.             

Following a Tax-Free Spin-Off, shares of Class B Common Stock shall be
transferred as Class B Common Stock; provided, however, that shares of Class B  
Common Stock shall automatically convert into shares of Class A Common Stock on 
the fifth anniversary of the Tax-Free Spin-Off, unless prior to such Tax-Free   
Spin-Off, SAIC, or the Class B Transferee, as the case may be, delivers to the  
Company written advice of counsel reasonably satisfactory to the Company to the 
effect that (i) such conversion could adversely affect the ability of SAIC or   
the Class B Transferee, as the case may be, to obtain a favorable ruling from   
the Internal Revenue Service that the distribution would be a Tax-Free Spin-Off 
or (ii) the Internal Revenue Service has adopted a general non-ruling policy on 
tax-free spinoffs and that such conversion could adversely affect the status of 
the transaction as a Tax-Free Spin-Off. If such written advice is received,     
approval of such conversion shall be submitted to a vote of the holders of the  
Common Stock as soon as practicable after the fifth anniversary of the Tax-Free 
Spin-Off, unless SAIC or the Class B Transferee, as the case may be, delivers to
the Company written advice of counsel reasonably satisfactory to the Company    
prior to such anniversary that such vote could adversely affect the status of   
the distribution as a Tax-Free Spin-Off, including the ability to obtain a      
favorable ruling from the Internal Revenue Service. If such written advice is   
delivered, such vote shall not be held. Approval of such conversion will require
the affirmative vote of the holders of a majority of the shares of both Class A 
Common Stock and Class B Common Stock present and voting, voting together as a  
single class, with each share entitled to one vote for such purpose. No         
assurance can be given that such conversion would be consummated. The foregoing 
requirements are intended to ensure that tax-free treatment of a Tax-Free       
Spin-Off is preserved should the Internal Revenue Service challenge such        
automatic conversion as violating the 80% vote requirement currently required by
the Code for a Tax-Free Spin-Off.                                               

PREFERRED STOCK                                                                 

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

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REGISTRATION RIGHTS                                                             

     Pursuant to the Registration Rights Agreement between the Company and SAIC,
which holds 12,500,000 shares of Class B Common Stock, SAIC is entitled to      
certain rights with respect to the registration under the Securities Act of the 
shares of Class A Common Stock issuable upon conversion of the Class B Common   
Stock owned by SAIC. If the Company proposes to register any of its securities  
under the Securities Act, either for its own account or for the account of other
securityholders, SAIC is entitled to notice of the registration and is entitled 
to include, at the Company's expense, such shares therein, provided, among other
conditions, that the underwriters have the right to limit the number of such    
shares included in the registration. In addition, SAIC may require the Company  
on not more than two occasions, to file a registration statement under the      
Securities Act with respect to its shares of Class A Common Stock, and the      
Company is required to use its best efforts to effect the registration, subject 
to certain conditions and limitations. The first such registration will be at   
the Company's expense and the second such registration will be at SAIC's        
expense. Further, SAIC may require the Company at its expense to register their 
shares of Class A Common Stock on Form S-3 when such form becomes available to  
the Company, subject to certain conditions and limitations. The Company has     
agreed to indemnify SAIC in connection with any such registration. See          
"Relationship with SAIC and Certain Transactions -- Registration Rights         
Agreement."                                                                     

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS                       

   Certificate of Incorporation.  The Company's Certificate of Incorporation
provides that the Company's Bylaws may be repealed or amended only by a         
two-thirds vote of the Board of Directors or a two-thirds stockholder vote. In  
addition, those provisions of the Amended and Restated Certificate of           
Incorporation may only be amended or repealed by the holders of at least        
two-thirds of the voting power of all the then-outstanding shares of stock      
entitled to vote generally for the election of directors voting together as a   
single class. The provisions described above, together with the ability of the  
Board of Directors to issue Preferred Stock as described under "Description of  
Capital Stock -- Preferred Stock," may have the effect of deterring a hostile   
takeover or delaying a change in control or management of the Company. See "Risk
Factors -- Effect of Certain Charter Provisions; Anti-takeover Effects of       
Certificate of Incorporation and Delaware Law."                                 

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

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the 
corporation involving the interested stockholder; (iii) subject to certain      
exceptions, any transaction that results in the issuance or transfer by the     
corporation of any stock of the corporation to the interested stockholder; (iv) 
any transaction involving the corporation that has the effect of increasing the 
proportionate share of the stock of any class or series of the corporation      
beneficially-owned by the interested stockholder; or (v) the receipt by the     
interested stockholder of                                                       

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the benefit of any loans, advances, guarantees, pledges or other financial      
benefits provided by or through the corporation. In general, Section 203 defines
an interested stockholder as any entity or person beneficially owning 15% or    
more of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person. As       
permitted by Section 203, the Company has elected not to be governed by the     
provisions of Section 203.                                                      

CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS                       

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

Transactions with Interested Parties.  The Company's Certificate of   
Incorporation provides that no contract, agreement, arrangement or transaction  
(or any amendment, modification or termination thereof) between the Company and 
SAIC or any Related Entity (as such terms are defined below) or between the     
Company and any director or officer of the Company, SAIC or any Related Entity  
shall be void or voidable solely for the reason that SAIC, a Related Entity or  
any one or more of the officers or directors of the Company, SAIC or any Related
Entity are parties thereto, or solely because any such directors or officers are
present at, participate in or vote with respect to the authorization of such    
contract, agreement, arrangement or transaction (or any amendment, modification 
or termination thereof). Further, the Company's Certificate of Incorporation    
provides that neither SAIC nor any officer or director thereof or of any Related
Entity shall be presumed liable to the Company or its stockholders for breach of
any fiduciary duty or duty of loyalty or failure to act in (or not opposed to)  
the best interests of the Company or the derivation of any improper personal    
benefit by reason of the fact that SAIC or an officer or director thereof or of 
such Related Entity in good faith takes any action or exercises any rights or   
gives or withholds any consent in connection with any agreement or contract     
between SAIC or such Related Entity and the Company. No vote cast or other      
action taken by any person who is an officer, director or other representative  
of SAIC or such Related Entity, which vote is cast or action is taken by such   
person in his capacity as a director of the Company, shall constitute an action 
of or the exercise of a right by or a consent of SAIC, such subsidiary or       
Related Entity for the purpose of any such agreement or contract. For purposes  
of the foregoing, the "Company" and "SAIC" include all corporations and other   
entities in which the Company or SAIC, as the case may be, owns fifty percent or
more of the outstanding voting stock, and "Related Entity" means one or more    
corporations or other entities in which one or more of the directors of the     
Company have a direct or indirect financial interest.                           

Competition by SAIC with the Company; Corporate Opportunities.  The   
Company's Certificate of Incorporation provides that except as SAIC may         
otherwise agree in writing: (i) neither SAIC nor any subsidiary of SAIC (other  
than the Company) shall have a duty to refrain from engaging directly or        
indirectly in the same or similar business activities or lines of business as   
the Company; and (ii) neither SAIC nor any subsidiary (other than the Company), 
officer or director thereof will be presumed liable to the Company or to its    
stockholders for breach of any fiduciary duty by reason of any such activities  
or of such person's participation therein.                                      

  The Company's Certificate of Incorporation also provides that if SAIC or
any subsidiary of SAIC (other than the Company) acquires knowledge of a         
potential transaction or matter which may be a corporate opportunity both for   
SAIC or such subsidiary and for the Company, SAIC shall be entitled to offer    
such corporate opportunity to the Company or SAIC as SAIC deems appropriate     
under the circumstances in its sole discretion and shall not be presumed liable 
to the Company or its stockholders for breach of fiduciary duty as a stockholder
of the Company or controlling person of a stockholder by reason of the fact that
SAIC or such subsidiary pursues or acquires such opportunity for itself, directs
such corporate opportunity to another person, or does not communicate           
information regarding such corporate opportunity to the Company.                

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  Further, the Company's Certificate of Incorporation provides that in the
event that a director, officer or employee of the Company who is also a         
director, officer or employee of SAIC acquires knowledge of a potential         
transaction or matter that may be a corporate opportunity both for the Company  
and SAIC (whether such potential transaction or matter is proposed by a third   
party or is conceived by such director, officer or employee of the Company),    
such director, officer or employee shall be entitled to offer such corporate    
opportunity to the Company or SAIC as such director, officer or employee deems  
appropriate under the circumstances in his or her sole discretion, and no such  
director, officer or employee shall be presumed liable to the Company or its    
stockholders for breach of any fiduciary duty or duty of loyalty or failure to  
act in (or not opposed to) the best interests of the Company or the derivation  
of any improper personal benefit by reason of the fact that (i) such director,  
officer or employee offered such corporate opportunity to SAIC (rather than the 
Company) or did not communicate information regarding such corporate opportunity
to the Company or (ii) SAIC pursues or acquires such corporate opportunity for  
itself or directs such corporate opportunity to another person or does not      
communicate information regarding such corporate opportunity to the Company.    

The enforceability of the provisions discussed above under Delaware   
corporate law has not been established and, due to the absence of relevant      
judicial authority, counsel to the Company is not able to deliver an opinion as 
to the enforceability of such provisions. These provisions of the Company's     
Certificate of Incorporation eliminate certain rights that might have been      
available to stockholders under Delaware law had such provisions not been       
included in the Certificate of Incorporation, although the enforceability of    
such provisions has not been established.                                       

   At the time of the consummation of the offering, certain of the directors
of the Company will also be directors and/or officers of SAIC.                  

The foregoing provisions of the Company's Certificate of Incorporation
shall expire on the date that SAIC ceases to own beneficially Common Stock      
representing at least 20% of the number of outstanding shares of Common Stock   
and no person who is a director or officer of the Company is also a director or 
officer of SAIC or its subsidiaries.                                            

Actions Under Intercompany Agreements.  The Company's Certificate of  
Incorporation will also limit the liability of SAIC and its subsidiaries for    
certain breaches of their fiduciary duties in connection with action that may be
taken or not taken in good faith under the intercompany agreements. See         
"Relationship with SAIC and Certain Transactions."                              

Advance Notice Provision.  The Company's Amended and Restated Bylaws  
provide for an advance notice procedure for the nomination, other than by or at 
the direction of the Board of Directors, of candidates for election as directors
as well as for other stockholder proposals to be considered at annual meetings  
of stockholders. In general, notice of intent to nominate a director or raise   
matters at such meetings will have to be received by the Company not less than  
120 days prior to any meeting of the stockholders called for the election of    
directors, and must contain certain information concerning the person to be     
nominated or the matters to be brought before the meeting and concerning the    
stockholder submitting the proposal.                                            

NASDAQ NATIONAL MARKET LISTING                                                  

    Prior to the date of this Prospectus, there has been no established public
trading market for the Class A Common Stock. The Company has applied to have the
Class A Common Stock approved for quotation on the Nasdaq National Market under 
the symbol NSOL.                                                                

TRANSFER AGENT AND REGISTRAR                                                    

The transfer agent and registrar for the Class A Common Stock is      
ChaseMellon Shareholder Services, LLC.                                          

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SHARES ELIGIBLE FOR FUTURE SALE 

     Prior to this offering there has been no public market for the Common Stock
of the Company, and no predictions can be made regarding the effect, if any,    
that market sales of shares or the availability of shares for sale will have on 
the market price prevailing from time to time. As described below, only a       
limited number of shares will be available for sale shortly after this offering 
due to certain contractual and legal restrictions on resale. Nevertheless, sales
of substantial amounts of Common Stock of the Company in the public market after
the restrictions lapse could adversely affect the prevailing market price.      

     Upon completion of this offering, the Company will have 2,300,000 shares of
Class A Common Stock outstanding (assuming no exercise of the Underwriters'     
over-allotment option). In addition, as of July 31, 1997, the Company had       
granted stock options to certain employees and directors for the purchase of an 
aggregate of 1,539,725 shares of Class A Common Stock. The 2,300,000 shares of  
Class A Common Stock being sold hereby will be freely tradable (other than by an
"affiliate" of the Company as such term is defined in Rule 144 of the Securities
Act) without restriction or registration under the Securities Act. All remaining
shares were issued and sold by the Company in a private transaction ("Restricted
Shares") and are eligible for public sale if registered under the Securities Act
or sold in accordance with Rule 701 thereunder.                                 

SAIC, which owns 12,500,000 shares of Class B Common Stock and certain
Restricted Persons have agreed they will not sell any shares of Common Stock    
owned by them without the prior written consent of the Representatives of the   
Underwriters for a period of 180 days from the effective date of the            
Registration Statement of which this Prospectus is a part (the "Lockup Period").
Following the expiration of the Lockup Period, SAIC and such Restricted Persons 
may sell such shares only pursuant to the requirements of Rule 144 or pursuant  
to an effective registration statement under the Securities Act. Furthermore,   
the shares held by SAIC and such Restricted Persons are "restricted securities" 
within the meaning of Rule 144. Following the expiration of the Lockup Period,  
the 12,500,000 shares of Class B Common Stock held by SAIC will be eligible for 
sale in the public market subject to compliance with Rule 144. See              
"Underwriting."                                                                 

Subject to certain limitations on the aggregate offering price of a   
transaction and other conditions, Rule 701 may be relied upon with respect to   
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisers prior to the closing of this       
offering, pursuant to written compensatory benefit plans or written contracts   
relating to the compensation of such persons. In addition, the Commission has   
indicated that Rule 701 will apply to stock options granted by the Company      
before this offering, along with the shares acquired upon exercise of such      
options. Securities issued in reliance on Rule 701 are deemed to be Restricted  
Shares and, beginning 90 days after the date of this Prospectus (unless subject 
to the contractual restrictions described above), may be sold by persons other  
than affiliates subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with its one-year minimum holding  
period requirements.                                                            

    In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an affiliate of the Company, or a holder of        
Restricted Shares who owns beneficially shares that were not acquired from the  
Company or an affiliate of the Company within the previous year, would be       
entitled to sell within any three-month period a number of shares that does not 
exceed the greater of 1% of the then outstanding shares of Common Stock         
(approximately 125,000 shares immediately after this offering, assuming no      
exercise of the Underwriters' over-allotment option) or the average weekly      
trading volume of Class A Common Stock during the four calendar weeks preceding 
the date on which notice of the sale is filed with the Commission. Sales under  
Rule 144 are subject to certain requirements relating to manner of sale, notice 
and availability of current public information about the Company. However, a    
person (or persons whose shares are aggregated) who is not deemed to have been  
an affiliate of the Company at any time during the 90 days immediately preceding
the sale and who owns beneficially Restricted Shares is entitled to sell such   
shares under                                                                    

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Rule 144(k) without regard to the limitations described above, provided that at 
least two years have elapsed since the later of the date the shares were        
acquired from the Company or from an affiliate of the Company. The foregoing is 
a summary of Rule 144 and is not intended to be a complete description of it.   

    The Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 2,556,250 shares of Class A Common Stock  
reserved for issuance under the 1996 Stock Incentive Plan. Such registration    
statement is expected to be filed soon after the date of this Prospectus and    
will automatically become effective upon filing. Accordingly, shares registered 
under such registration statements will be available for sale in the open       
market, unless such shares are subject to vesting restrictions with the Company 
or the contractual restrictions described above.                                

In addition, after this offering and the Lockup Period, SAIC will be  
entitled to certain rights to cause the Company to register the sale of its     
shares of Common Stock under the Securities Act. Registration of such shares    
under the Securities Act would result in such shares becoming freely tradable   
without restriction under the Securities Act (except for shares purchased by    
affiliates of the Company) immediately upon the effectiveness of such           
registration. See "Description of Capital Stock -- Registration Rights."        

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UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC, 
J.P. Morgan Securities Inc. and PaineWebber Incorporated have severally agreed  
to purchase from the Company the following respective numbers of shares of Class
A Common Stock:                                                                 

                                                                [Download Table]

                                                                  NUMBER OF
                             NAME                                  SHARES  
---------------------------------------------------------------   ---------
                                                                           
Hambrecht & Quist LLC..........................................            
J.P. Morgan Securities Inc. ...................................            
PaineWebber Incorporated.......................................            

                                                                  ---------
Total..........................................................   2,300,000
                                                                  =========

The Underwriting Agreement provides that the obligations of the       
Underwriters are subject to certain conditions precedent, including the absence 
of any material adverse change in the Company's business and the receipt of     
certain certificates, opinions and letters from the Company and its counsel and 
independent auditors. The nature of the Underwriters' obligations is such that  
they are committed to purchase all shares of Class A Common Stock offered hereby
if any of such shares are purchased.                                            

The Underwriters propose to offer the shares of Class A Common Stock  
directly to the public at the initial public offering price set forth on the    
cover page of this Prospectus and to certain dealers at such price less a       
concession not in excess of $     per share. The Underwriters may allow, and    
such dealers may re-allow, a concession not in excess of $     per share to     
certain other dealers. After the initial public offering of the shares, the     
offering price and other selling terms may by changed by the Representatives of 
the Underwriters.                                                               

     The Company has granted to the Underwriters an option, exercisable no later
than 30 calendar days after the date of this Prospectus, to purchase up to an   
aggregate of 345,000 additional shares of Class A Common Stock at the initial   
public offering price, less the underwriting discount, set forth on the cover   
page of this Prospectus. To the extent that the Underwriters exercise this      
option, each of the Underwriters will have a firm commitment to purchase        
approximately the same percentage thereof which the number of shares of Class A 
Common Stock to be purchased by it shown in the above table bears to the total  
number of shares of Class A Common Stock offered hereby. The Company will be    
obligated, pursuant to the option, to sell shares to the Underwriters to the    
extent the option is exercised. The Underwriters may exercise such option only  
to cover over-allotments made in connection with the sale of shares of Class A  
Common Stock offered hereby.                                                    

     The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or   
modification of the offering without notice. The Underwriters reserve the right 
to reject an order for the purchase of shares in whole or in part.              

The Company and SAIC have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, or to      
contribute to payments the Underwriters may be required to make in respect      
thereof.                                                                        

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    The Company, SAIC and certain Restricted Persons have agreed, with certain
exceptions, that they will not, without the prior written consent of Hambrecht &
Quist LLC, offer, sell or otherwise dispose of any Common Stock, options or     
warrants to acquire shares of Common Stock or securities exchangeable for or    
convertible into shares of Common Stock during the 180-day period following the 
date of this Prospectus.                                                        

    The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of Class A Common Stock offered hereby to any accounts  
over which they exercise discretionary authority.                               

Prior to the offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock    
will be determined by negotiation among the Company and the Representatives.    
Among the factors considered in determining the initial public offering price   
are prevailing market conditions, revenues and earnings of the Company, market  
valuations of other companies engaged in activities similar to those of the     
Company, estimates of the business potential and prospects of the Company, the  
present state of the Company's business operations, the Company's management and
other factors deemed relevant. The estimated initial public offering price range
set forth on the cover of this preliminary prospectus is subject to change as a 
result of market conditions and other factors.                                  

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of  
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering    
transactions or imposing penalty bids. A stabilizing bid means the placing of   
any bid or effecting of any purchase, for the purpose of pegging, fixing or     
maintaining the price of the Common Stock. A syndicate covering transaction     
means the placing of any bid on behalf of the underwriting syndicate or the     
effecting of any purchase to reduce a short position created in connection with 
the offering. A penalty bid means an arrangement that permits the Underwriters  
to reclaim a selling concession from a syndicate member in connection with the  
offering when shares of Common Stock sold by the syndicate member are purchased 
in syndicate covering transactions. Such transactions may be effected on the    
Nasdaq National Market, in the over-the-counter market, or otherwise. Such      
stabilizing, if commenced, may be discontinued at any time.                     

 The Underwriters have reserved up to 5% of the shares of Class A Common
Stock offered hereby for sale at the initial public offering price to certain   
employees, officers and directors of SAIC and the Company and other persons     
designated by the Company. The number of shares available for sale to the       
general public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares not so purchased on the effectiveness of the        
offering will be offered by the Underwriters to the general public on the same  
basis as the other shares offered hereby.                                       

 In 1997, the Company and Hambrecht & Quist LLC entered into an Intranet
services agreement pursuant to which the Company performed certain Intranet     
services for Hambrecht & Quist LLC. The terms of such agreement were negotiated 
by the parties at arm's length after the Company's selection of Hambrecht &     
Quist LLC as a Representative.                                                  

LEGAL MATTERS 

  Certain legal matters with respect to the validity of the Class A Common
Stock offered hereby are being passed upon for the Company by Pillsbury Madison 
& Sutro LLP, Menlo Park, California and Washington D.C. Certain legal matters in
connection with the offering will be passed upon for the Underwriters by Simpson
Thacher & Bartlett (a partnership which includes professional corporations), New
York, New York.                                                                 

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EXPERTS 

    The financial statements as of December 31, 1995 and 1996 and for the year
ended December 31, 1994, the periods from January 1, 1995 to March 10, 1995 and 
from March 11, 1995 to December 31, 1995 and for the year ended December 31,    
1996 included in this Prospectus have been so included in reliance on the       
reports of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.                             

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act and the rules   
and regulations promulgated thereunder, with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement 
and the exhibits and schedules thereto. For further information with respect to 
the Company and the Common Stock offered hereby, reference is hereby made to    
such Registration Statement and the exhibits and schedules thereto. Statements  
contained in this Prospectus regarding the contents of any contract or other    
document are not necessarily complete; with respect to each such contract or    
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each    
such statement shall be deemed qualified in its entirety by such reference. A   
copy of the Registration Statement, including the exhibits and schedules,       
thereto, may be inspected without charge at the principal office of the         
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the        
Regional Offices of the Commission at 7 World Trade Center, Suite 1300, New     
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,  
Chicago, Illinois 60661. Copies of such material may also be obtained from the  
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, 
D.C. 20549 upon payment of the fees prescribed by the Commission. The Commission
maintains a World Wide Web site that contains reports, proxy and information    
statements and other information regarding registrants that file electronically 
with the Commission. The address of the Commission's web site is                
http://www.sec.gov.                                                             

   The Company is not currently subject to the informational requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). As a  
result of the offering of the Company's Common Stock, the Company will become   
subject to the informational requirements of the Exchange Act.                  

The Company intends to furnish its stockholders with annual reports   
containing financial statements audited by independent certified public         
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year.                                   

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INDEX TO FINANCIAL STATEMENTS 

                                                        [Enlarge/Download Table]

                                                                                      PAGE  
                                                                                    --------
                                                                                            
Report of Independent Accountants.................................................  F-2, F-3
Statements of Financial Position as of                                                      
  December 31, 1995 and 1996 and June 30, 1997 (Unaudited)........................  F-4     
Statements of Operations for the Year Ended December 31, 1994, for the Periods              
  from January 1, 1995 to March 10, 1995 and March 11, 1995 to December 31, 1995,           
  for the Year Ended December 31, 1996, and for the Six Months Ended June 30, 1996          
  and 1997 (Unaudited)............................................................  F-5     
Statements of Changes in Stockholder's Equity for the Year Ended December 31,               
  1994, for the Periods from January 1, 1995 to March 10, 1995 and March 11, 1995           
  to December 31, 1995, for the Year Ended December 31, 1996, and for the Six               
  Months Ended June 30, 1997 (Unaudited)..........................................  F-6     
Statements of Cash Flows for the Year Ended December 31, 1994, for the Periods              
  from January 1, 1995 to March 10, 1995 and March 11, 1995 to December 31, 1995,           
  for the Year Ended December 31, 1996, and for the Six Months Ended June 30, 1996          
  and 1997 (Unaudited)............................................................  F-7     
Notes to Financial Statements.....................................................  F-8     

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REPORT OF INDEPENDENT ACCOUNTANTS 

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

   In our opinion, the accompanying statements of financial position and the
related statements of operations, of changes in stockholder's equity and of cash
flows present fairly, in all material respects, the financial position of       
Network Solutions, Inc. (a wholly-owned subsidiary of Science Applications      
International Corporation) at December 31, 1996 and 1995, and the results of its
operations and cash flows for the year ended December 31, 1996 and for the      
period from March 11, 1995 to December 31, 1995 in conformity with generally    
accepted accounting principles. These financial statements are the              
responsibility of the Company's management; our responsibility is to express an 
opinion on these financial statements based on our audits. We conducted our     
audits of these statements in accordance with generally accepted auditing       
standards which require that we plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free of material           
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits provide a reasonable basis for the opinion expressed above.              

As discussed in Note 1 to the financial statements, on March 10, 1995,
Science Applications International Corporation acquired the outstanding stock of
the Company. The financial statements for the periods subsequent to March 10,   
1995 have been prepared on the basis of accounting arising from this            
acquisition. The financial statements for the period from January 1, 1995 to    
March 10, 1995 and for the year ended December 31, 1994 are presented on the    
Company's previous basis of accounting.                                         

PRICE WATERHOUSE LLP                                                            

Falls Church, VA                                                                
March 17, 1997, except as to Note 13                                            
which is as of June 26, 1997                                                    

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REPORT OF INDEPENDENT ACCOUNTANTS 

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

  In our opinion, the accompanying statements of operations, of changes in
stockholder's equity and of cash flows present fairly, in all material respects,
the results of operations and cash flows for Network Solutions, Inc.            
("Predecessor") for the period from January 1, 1995 to March 10, 1995 and for   
the year ended December 31, 1994 in conformity with generally accepted          
accounting principles. These financial statements are the responsibility of the 
Company's management; our responsibility is to express an opinion on these      
financial statements based on our audits. We conducted our audits of these      
statements in accordance with generally accepted auditing standards which       
require that we plan and perform the audit to obtain reasonable assurance about 
whether the financial statements are free of material misstatement. An audit    
includes examining, on a test basis, evidence supporting the amounts and        
disclosures in the financial statements, assessing the accounting principles    
used and significant estimates made by management, and evaluating the overall   
financial statement presentation. We believe that our audits provide a          
reasonable basis for the opinion expressed above.                               

As discussed in Note 1 to the financial statements, on March 10, 1995 
Science Applications International Corporation acquired the outstanding stock of
the Company. The financial statements for the periods subsequent to March 10,   
1995 have been prepared on the basis of accounting arising from this            
acquisition. The financial statements for the period from January 1, 1995 to    
March 10, 1995 and for the year ended December 31, 1994 are presented on the    
Company's previous basis of accounting.                                         

PRICE WATERHOUSE LLP                                                            

Falls Church, VA                                                                
March 17, 1997, except as to Note 13                                            
which is as of June 26, 1997                                                    

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NETWORK SOLUTIONS, INC. 

STATEMENTS OF FINANCIAL POSITION

                                                        [Enlarge/Download Table]

                                                                              JUNE 30, 1997         
                                                 DECEMBER 31,          ---------------------------- 
                                          --------------------------                    PRO FORMA   
                                             1995           1996          ACTUAL         (NOTE 2)   
                                          -----------    -----------   ------------    ------------ 
                                                                               (UNAUDITED)          
                                                                                                    
ASSETS                                                                                              
Current assets:                                                                                     
  Cash and cash equivalents.............  $     5,000    $15,540,000   $ 25,967,000    $ 25,967,000 
  Short-term investments................           --             --      3,625,000       3,625,000 
  Accounts receivable, net..............    4,040,000     12,587,000      6,387,000       6,387,000 
  Prepaids and other assets.............       11,000        936,000      1,361,000       1,361,000 
  Restricted assets.....................    1,408,000     17,453,000     31,056,000      31,056,000 
  Deferred tax asset....................    1,310,000     10,087,000     12,248,000      12,248,000 
                                          -----------    -----------   ------------    ------------ 
Total current assets....................    6,774,000     56,603,000     80,644,000      80,644,000 
Furniture and equipment, net............    1,067,000      2,266,000      4,461,000       4,461,000 
Deferred tax asset......................      911,000      4,968,000      5,222,000       5,222,000 
Goodwill, net...........................    2,996,000      2,281,000      1,923,000       1,923,000 
                                          -----------    -----------   ------------    ------------ 
Total Assets............................  $11,748,000    $66,118,000   $ 92,250,000    $ 92,250,000 
                                          ===========    ===========   ============    ============ 
LIABILITIES AND STOCKHOLDER'S EQUITY                                                                
Current liabilities:                                                                                
  Accounts payable and accrued                                                                      
     liabilities........................  $ 1,355,000    $ 2,581,000   $  3,959,000    $  3,959,000 
  Deferred revenue, net.................    1,993,000     19,912,000     31,990,000      31,990,000 
  Net liabilities of discontinued                                                                   
     operations.........................      208,000             --             --              -- 
  Due to parent.........................    2,369,000     15,295,000      6,566,000      16,566,000 
  Internet fund liability...............    1,408,000     17,453,000     31,056,000      31,056,000 
  Current portion of capital lease                                                                  
     obligations........................           --             --        793,000         793,000 
                                          -----------    -----------   ------------    ------------ 
Total current liabilities...............    7,333,000     55,241,000     74,364,000      84,364,000 
Long-term deferred revenue, net.........    1,353,000      9,440,000     13,638,000      13,638,000 
Capital lease obligations...............           --             --      1,555,000       1,555,000 
                                          -----------    -----------   ------------    ------------ 
Total liabilities.......................    8,686,000     64,681,000     89,557,000      99,557,000 
Stockholder's equity:                                                                               
  Preferred stock, $.001 par value,                                                                 
     authorized 10,000,000 shares; none                                                             
     issued and outstanding.............           --             --             --              -- 
  Class A Common stock, $.001 par value;                                                            
     authorized 100,000,000 shares; none                                                            
     issued and outstanding.............           --             --             --              -- 
  Class B Common stock, $.001 par value,                                                            
     authorized 40,000,000 shares;                                                                  
     12,500,000 issued and                                                                          
     outstanding........................       12,000         12,000         12,000          12,000 
  Additional paid-in capital............    4,468,000      4,468,000      4,468,000       4,468,000 
  Accumulated deficit...................   (1,418,000)    (3,043,000)    (1,787,000)    (11,787,000)
                                          -----------    -----------   ------------    ------------ 
Total stockholder's equity..............    3,062,000      1,437,000      2,693,000      (7,307,000)
Commitments and contingencies...........           --             --             --              -- 
                                          -----------    -----------   ------------    ------------ 
Total Liabilities and Stockholder's                                                                 
  Equity................................  $11,748,000    $66,118,000   $ 92,250,000    $ 92,250,000 
                                          ===========    ===========   ============    ============ 

The accompanying notes are an integral part of these financial statements.

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NETWORK SOLUTIONS, INC. 

STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]

                                       PREDECESSOR                         COMPANY                       COMPANY           
                             --------------------------------  -------------------------------  -------------------------- 
                              YEAR ENDED     JANUARY 1, 1995   MARCH 11, 1995      YEAR ENDED        SIX MONTHS ENDED      
                             DECEMBER 31,      TO MARCH 10,    TO DECEMBER 31,    DECEMBER 31,           JUNE 30,          
                                 1994              1995             1995              1996         1996           1997     
                             ------------    ----------------  ---------------    ------------  -----------    ----------- 
                                                                                                                           
                                                                                                       (UNAUDITED)         


                                                                                                                           
Net revenue................  $ 5,029,000       $  1,177,000      $ 5,309,000      $18,862,000   $ 6,829,000    $18,724,000 
Cost of revenue............    3,073,000            884,000        4,820,000       14,666,000     6,521,000     11,435,000 
                             -----------       ------------      -----------      -----------   -----------    ----------- 
Gross profit...............    1,956,000            293,000          489,000        4,196,000       308,000      7,289,000 
Research and development                                                                                                   
  expenses.................           --                 --               --          680,000        58,000        718,000 
Selling, general and                                                                                                       
  administrative                                                                                                           
  expenses.................    1,544,000            280,000        2,114,000        6,280,000     2,370,000      4,788,000 
Interest expense (income)                                                                                                  
  (includes related party                                                                                                  
  interest expense of                                                                                                      
  $52,000 for the period                                                                                                   
  March 11, 1995 to                                                                                                        
  December 31, 1995 and                                                                                                    
  interest income of                                                                                                       
  $496,000 for 1996).......      109,000              9,000           52,000         (496,000)      (86,000)      (484,000)
                             -----------       ------------      -----------      -----------   -----------    ----------- 
Income (loss) from                                                                                                         
  continuing operations                                                                                                    
  before income taxes......      303,000              4,000       (1,677,000)      (2,268,000)   (2,034,000)     2,267,000 
Provision (benefit) for                                                                                                    
  income taxes.............      114,000             48,000         (287,000)        (643,000)     (576,000)     1,011,000 
                             -----------       ------------      -----------      -----------   -----------    ----------- 
Income (loss) from                                                                                                         
  continuing operations....      189,000            (44,000)      (1,390,000)      (1,625,000)   (1,458,000)     1,256,000 
Loss from discontinued                                                                                                     
  operations, net of income                                                                                                
  taxes....................   (1,169,000)        (1,375,000)         (28,000)              --            --             -- 
                             -----------       ------------      -----------      -----------   -----------    ----------- 
Net income (loss)..........  $  (980,000)      $ (1,419,000)     $(1,418,000)     $(1,625,000)  $(1,458,000)   $ 1,256,000 
                             ===========       ============      ===========      ===========   ===========    =========== 
Unaudited pro forma net                                                                                                    
  income (loss) per                                                                                                        
  share....................                                                       $     (0.12)  $     (0.11)   $      0.09 
                                                                                  ===========   ===========    =========== 
Unaudited pro forma shares                                                                                                 
  used in computing net                                                                                                    
  income (loss) per                                                                                                        
  share....................                                                        13,349,000    13,349,000     13,349,000 
                                                                                  ===========   ===========    =========== 

The accompanying notes are an integral part of these financial statements.

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NETWORK SOLUTIONS, INC. 

STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY 

                                                        [Enlarge/Download Table]

                                                 COMMON STOCK        TREASURY STOCK     ADDITIONAL   RETAINED        TOTAL     
                                             --------------------  ------------------    PAID-IN     EARNINGS     STOCKHOLDER'S
                                               SHARES     AMOUNT   SHARES    AMOUNT      CAPITAL     (DEFICIT)      EQUITY     
                                             ----------   -------  -------  ---------   ----------  -----------   -----------  
                                                                                                                               
PREDECESSOR                                                                                                                    
Balance, December 31, 1993.................   1,159,000   $12,000  115,000  $(673,000)  $1,275,000  $   607,000   $ 1,221,000  
  Purchase of treasury stock...............          --       --     7,000    (25,000)         --            --       (25,000) 
  Issuance of treasury stock...............          --       --   (12,000)    70,000     (34,000)           --        36,000  
  Net loss for the year ended December 31,                                                                                     
    1994...................................          --       --        --         --          --      (980,000)     (980,000) 
                                             ----------   -------  -------  ---------   ----------  -----------   -----------  
Balance, December 31, 1994.................   1,159,000   12,000   110,000   (628,000)  1,241,000      (373,000)      252,000  
  Purchase of treasury stock...............          --       --     7,000    (30,000)         --            --       (30,000) 
  Net loss for the period from January 1 to                                                                                    
    March 10, 1995.........................          --       --        --         --          --    (1,419,000)   (1,419,000) 
                                             ----------   -------  -------  ---------   ----------  -----------   -----------  
Balance, March 10, 1995....................   1,159,000   $12,000  117,000  $(658,000)  $1,241,000  $(1,792,000)  $(1,197,000) 
                                             ==========   =======  =======  =========   ==========   ==========   ===========  
COMPANY                                                                                                                        
Purchase of outstanding common shares by                                                                                       
  SAIC on March 10, 1995...................  12,500,000   $12,000                       $4,468,000  $        --   $ 4,480,000  
Net loss for the period from March 11 to                                                                                       
  December 31, 1995........................          --       --                               --    (1,418,000)   (1,418,000) 
                                             ----------   -------                       ----------  -----------   -----------  
Balance, December 31, 1995.................  12,500,000   12,000                        4,468,000    (1,418,000)    3,062,000  
  Net loss for the year ended December 31,                                                                                     
    1996...................................          --       --                               --    (1,625,000)   (1,625,000) 
                                             ----------   -------                       ----------  -----------   -----------  
Balance, December 31, 1996.................  12,500,000   12,000                        4,468,000    (3,043,000)    1,437,000  
Net income for the six months ended June                                                                                       
  30, 1997.................................          --       --                               --     1,256,000     1,256,000  
                                             ----------   -------                       ----------  -----------   -----------  
Balance, June 30, 1997 (Unaudited).........  12,500,000   $12,000                       $4,468,000  $(1,787,000)  $ 2,693,000  
                                             ==========   =======                       ==========  ===========   ===========  

The accompanying notes are an integral part of these financial statements.

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NETWORK SOLUTIONS, INC. 

STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                        PREDECESSOR                         COMPANY                        COMPANY            
                              --------------------------------  -------------------------------  ---------------------------- 
                               YEAR ENDED     JANUARY 1, 1995   MARCH 11, 1995      YEAR ENDED         SIX MONTHS ENDED       
                              DECEMBER 31,      TO MARCH 10,    TO DECEMBER 31,    DECEMBER 31,            JUNE 30,           
                                  1994              1995             1995              1996          1996            1997     
                              ------------    ----------------  ---------------    ------------  ------------    ------------ 
                                                                                                         (UNAUDITED)          
                                                                                                                              
CASH FLOWS FROM OPERATING                                                                                                     
  ACTIVITIES:                                                                                                                 
Net income (loss)............  $ (980,000)      $ (1,419,000)     $(1,418,000)     $(1,625,000)  $ (1,458,000)   $  1,256,000 
Adjustments to reconcile net                                                                                                  
  loss to net cash provided                                                                                                   
  by (used in) operating                                                                                                      
  activities:                                                                                                                 
  Net loss from discontinued                                                                                                  
    operations...............   1,169,000          1,376,000           28,000               --             --              -- 
  Depreciation and                                                                                                            
    amortization.............     338,000             68,000          765,000        1,417,000        714,000       1,017,000 
  Provision for uncollectible                                                                                                 
    accounts receivable......          --                 --          124,000        3,597,000      1,223,000       3,624,000 
  Deferred income taxes......          --                 --       (2,221,000)     (12,834,000)    (5,770,000)     (2,415,000)
  Change in operating assets                                                                                                  
    and liabilities:                                                                                                          
    Decrease (increase) in                                                                                                    
      accounts receivable....     322,000           (161,000)      (3,385,000)     (12,144,000)    (6,711,000)      2,576,000 
    Decrease (increase) in                                                                                                    
      prepaid and other                                                                                                       
      assets.................      22,000            (36,000)          45,000         (925,000)        11,000        (425,000)
    (Increase) decrease in                                                                                                    
      deposits...............          --            (49,000)       1,053,000               --             --              -- 
    Increase in accounts                                                                                                      
      payable and accrued                                                                                                     
      liabilities............     219,000            233,000          282,000        1,226,000        246,000       1,378,000 
    (Decrease) increase in                                                                                                    
      other liabilities......      (7,000)             8,000          (89,000)              --             --              -- 
    Increase (decrease) in                                                                                                    
      deferred revenue.......      64,000            (30,000)       3,239,000       26,006,000     11,010,000      16,276,000 
                              -----------       ------------      -----------      -----------   ------------    ------------ 
      Net cash provided by                                                                                                    
        (used in) operating                                                                                                   
        activities...........   1,147,000            (10,000)      (1,577,000)       4,718,000       (735,000)     23,287,000 
                              -----------       ------------      -----------      -----------   ------------    ------------ 
CASH FLOWS FROM INVESTING                                                                                                     
  ACTIVITIES:                                                                                                                 
  Purchase of furniture and                                                                                                   
    equipment................    (266,000)          (134,000)        (518,000)      (1,901,000)    (1,870,000)       (317,000)
  Purchase of short-term                                                                                                      
    investments..............          --                 --               --               --             --      (3,625,000)
  Net investment in net                                                                                                       
    assets of discontinued                                                                                                    
    operations...............    (759,000)           331,000          563,000         (208,000)      (208,000)             -- 
                              -----------       ------------      -----------      -----------   ------------    ------------ 
      Net cash (used in)                                                                                                      
        provided by investing                                                                                                 
        activities...........  (1,025,000)           197,000           45,000       (2,109,000)    (2,078,000)     (3,942,000)
                              -----------       ------------      -----------      -----------   ------------    ------------ 
CASH FLOWS FROM FINANCING                                                                                                     
  ACTIVITIES:                                                                                                                 
  Proceeds from bank                                                                                                          
    borrowings...............     173,000                 --               --               --             --              -- 
  Repayment of bank                                                                                                           
    borrowings...............    (170,000)          (293,000)        (834,000)              --             --              -- 
  Capital lease                                                                                                               
    obligations..............          --                 --               --               --             --        (189,000)
  Net transactions with                                                                                                       
    SAIC.....................          --                 --        2,371,000       12,926,000      2,835,000      (8,729,000)
  Issuance of treasury                                                                                                        
    stock....................      36,000                 --               --               --             --              -- 
  Purchase of treasury                                                                                                        
    stock....................     (25,000)           (30,000)              --               --             --              -- 
                              -----------       ------------      -----------      -----------   ------------    ------------ 
      Net cash provided by                                                                                                    
        (used in) financing                                                                                                   
        activities...........      14,000           (323,000)       1,537,000       12,926,000      2,835,000      (8,918,000)
                              -----------       ------------      -----------      -----------   ------------    ------------ 
      Net increase (decrease)                                                                                                 
        in cash and cash                                                                                                      
        equivalents..........     136,000           (136,000)           5,000       15,535,000         22,000      10,427,000 
Cash and cash equivalents,                                                                                                    
  beginning of period........          --            136,000               --            5,000          5,000      15,540,000 
                              -----------       ------------      -----------      -----------   ------------    ------------ 
Cash and cash equivalents,                                                                                                    
  end of period..............  $  136,000       $         --      $     5,000      $15,540,000   $     27,000    $ 25,967,000 
                              ===========       ============      ===========      ===========   ============    ============ 

The accompanying notes are an integral part of these financial statements.

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS 

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION                                

     Network Solutions, Inc. (the "Company") was incorporated in the District of
Columbia in 1979 and was reincorporated in Delaware in 1996. The Company        
currently acts as the exclusive registrar for second level domain names within  
the .com, .org, .net, .edu and .gov top level domains ("TLDs") pursuant to a    
Cooperative Agreement with the National Science Foundation ("NSF") (Note 2). The
Company also provides Intranet consulting services to large companies that      
desire to establish or enhance their Internet presence or "re-engineer" legacy  
network infrastructures to accommodate the integration of both Internet         
connectivity and Intranet network technology into their information technology  
base.                                                                           

    The Company was acquired by Science Applications International Corporation
("SAIC") on March 10, 1995. The Company is currently a wholly-owned subsidiary  
of SAIC. Prior to the acquisition of the Company by SAIC, the Company's business
included commercial and government contracts awarded to the Company on a        
competitive basis, including government contracts that were awarded to the      
Company partially upon the Company's then minority-owned status. The contracts  
which had been awarded to the Company based partially upon the Company's then   
minority-owned status were transferred into a separately-owned entity prior to  
the acquisition of the Company by SAIC.                                         

   In November 1995, SAIC adopted a plan to transfer the Company's remaining
government-based business to SAIC in order to enable the Company to focus on the
growth of its commercial business, which includes registration services and     
Intranet services. This transfer was effective as of February 1996. The         
operating results of both the minority-based government contracts business and  
the remaining government-based business are reflected as discontinued operations
in the Company's financial statements for all periods presented (Note 11).      

   Under the terms of the acquisition agreement, the Company was acquired by
SAIC on March 10, 1995 in a stock-for-stock transaction accounted for as a      
purchase. The fair market value of the SAIC stock exchanged for the outstanding 
stock of the Company was approximately $3.9 million. The acquisition agreement  
provided for certain purchase adjustments and related additional stock issuance 
payments of approximately $600,000. After reflecting certain purchase accounting
adjustments, the net assets included on the opening balance sheet were as       
follows:                                                                        

                                                                [Download Table]
                                                                                   
Current assets.......................................................... $  929,000
Furniture and equipment.................................................    734,000
Goodwill................................................................  3,576,000
Other non-current assets................................................  1,047,000
                                                                         ----------
                                                                          6,286,000
Current liabilities.....................................................  1,625,000
Net liabilities of discontinued operations..............................    181,000
                                                                         ----------
     Net assets acquired at March 11, 1995.............................. $4,480,000
                                                                         ==========

The excess of the purchase price over the estimated fair value of net 
assets acquired has been reflected as goodwill and is being amortized over five 
years.                                                                          

The financial statements for periods subsequent to March 10, 1995 are 
presented on the new basis of accounting arising from the acquisition. The      
financial statements for the period from January 1, 1995 to March 10, 1995 and  
for the year ended December 31, 1994 are presented on the Company's previous    
basis of accounting. Subsequent to the acquisition, the results of continuing   
and discontinued operations include allocations by SAIC of: (i) costs for       
administrative functions and services per-                                      

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)                    

formed on behalf of the continuing and discontinued operations of the Company by
centralized staff groups within SAIC, (ii) SAIC's general corporate expenses,   
(iii) pension and other retirement benefit costs, and (iv) cost of capital      
(Notes 5, 9 and 10). Only costs directly attributable to the Company's          
government-based business that will not be incurred by the Company subsequent to
the transfer of this business to SAIC have been included in discontinued        
operations.                                                                     

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                            

NSF COOPERATIVE AGREEMENT                                                       

  In January 1993, the Company entered into the Cooperative Agreement with
the NSF under which the Company provides Internet registration services for five
TLDs: .com, .org, .net, .edu and .gov. The Cooperative Agreement is subject to  
review by the NSF and may be terminated by the NSF at any time at its discretion
or by mutual agreement. The Cooperative Agreement by its terms expires in March 
1998, although the NSF may, at its option, extend the Cooperative Agreement to  
September 1998. The NSF has stated that the Cooperative Agreement will not be   
re-awarded to the Company or awarded to any other entity.                       

Originally, the Cooperative Agreement was structured as a cost        
reimbursement plus fixed-fee contract (with a fee of 8%). Effective September   
14, 1995, the NSF and the Company amended the Cooperative Agreement to authorize
the Company to begin charging customers a subscription fee of $50 per year for  
each second level domain name in the .com, .org, .net, .edu and .gov TLDs. The  
Company's registration services customers in the .com, .org and .net TLDs are   
invoiced for a two-year subscription fee of $100 for initial registrations and  
$50 per year for renewals of initial registrations. Under the terms of the      
amendment to the Cooperative Agreement, 30% of the new registration or renewal  
fees collected by the Company is required to be set aside to be reinvested for  
the enhancement of the intellectual infrastructure of the Internet and, as such,
is not recognized as revenue by the Company. The Company has reflected these    
funds with the appropriate percentage of net accounts receivable (Note 3) as    
restricted assets and has recorded an equivalent, related current liability. The
Company maintains the cash received relating to the set aside funds in a        
separate interest-bearing account. Restricted cash at December 31, 1996 and 1995
was approximately $13,049,000 and $122,000, respectively. These funds, plus any 
interest earned, will be disbursed in a manner approved by the NSF. As of       
December 31, 1996, none of these funds have been disbursed. Future receipts and 
disbursements of these funds will not have an effect on the Company's business, 
net financial position, or results of operations. For purposes of the Statement 
of Cash Flows, amounts relating to Restricted Assets and the Internet Fund      
Liability have been excluded in their entirety.                                 

REVENUE RECOGNITION                                                             

Prior to September 14, 1995, net revenue was recognized under the     
Cooperative Agreement on the basis of direct costs plus allowable indirect costs
and the earned portion of the fee. Since September 14, 1995, fees for Internet  
registration services provided by the Company have been recognized on a         
straight-line basis over the life of the registration term. The Company records 
revenue net of an estimated provision for uncollectible accounts receivable     
(Note 3).                                                                       

 Substantially all of the Company's Intranet services revenue is derived
from professional services which are generally provided to clients on a "time   
and expense" basis. Professional services revenue is recognized as services are 
performed. The Company performs a limited number of fixed-price projects under  
which revenue is recognized using the percentage-of-completion method, based    
upon costs incurred in comparison to total anticipated costs. The Company also  
derives revenue from remote                                                     

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                

monitoring and hosting services; however, such revenue has not been significant 
to date. Remote monitoring and hosting revenue is recognized ratably over the   
term of the contract.                                                           

Certain aspects of a number of the Company's contracts are subject to 
audits at the customer's discretion. Management believes that the results of any
such audits will not have a material effect on NSI's financial position or      
results of operations.                                                          

DEFERRED REVENUE                                                                

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

CASH AND CASH EQUIVALENTS                                                       

 The Company's policy is to include short-term investments with original
maturities of ninety days or less within cash and cash equivalents.             

FINANCIAL INSTRUMENTS                                                           

  The recorded value of the Company's financial instruments, which include
accounts receivable and accounts payable, approximates market value. Net revenue
from two customers approximated 63% and 22% in 1994, 45% and 21% for the period 
from January 1, 1995 to March 10, 1995, 40% and 21% for the period from March   
11, 1995 to December 31, 1995, and 20% and 0% for the year ended December 31,   
1996. One of these customers was the NSF, whose impact on the above percentage  
of revenues was reflective of activity prior to the September 14, 1995 amendment
of the Cooperative Agreement. Concentration of credit risk with respect to      
registration receivables is limited due to the wide variety and number of       
customers, as well as their dispersion across geographic areas. The Company has 
no derivative financial instruments.                                            

FURNITURE AND EQUIPMENT                                                         

Furniture and equipment are stated at cost. Depreciation on furniture,
office and computer equipment is calculated principally using a                 
declining-balance method over the useful lives of three to seven years.         
Leasehold improvements are amortized using the straight-line method over the    
shorter of the lease term or the estimated lives of the assets, generally six   
years. The Company periodically reviews the carrying amounts of its furniture   
and equipment to assess recoverability, and impairments are recognized in the   
results of operations, as appropriate. The measurement of possible impairment is
based primarily on the ability to recover the balance of the furniture and      
equipment from expected future operating cash flows on an undiscounted basis. At
December 31, 1996, management believed that there were no such impairments to   
the carrying value of its property and equipment.                               

GOODWILL                                                                        

    Goodwill represents the excess of the purchase cost over the fair value of
net assets acquired in the acquisition and is amortized over five years using   
the straight-line method. The Company periodically reviews goodwill to assess   
recoverability, and impairments are recognized in the results of operations, as 
appropriate. The measurement of possible impairment is based primarily on the   
ability to recover the balance of the goodwill from expected future operating   
cash flows on an undiscounted basis. Amortization expense for the period from   
March 11, 1995 to December 31, 1995 of $580,000 and $715,000 for the year ended 
December 31, 1996 was included in general and administrative expenses.          

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                

SOFTWARE DEVELOPMENT COSTS                                                      

     Research and development costs are expensed as incurred. In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86 "Accounting for the 
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed," the      
Company has not capitalized software development costs incurred as of December  
31, 1996. Research and development costs incurred for all periods presented     
prior to December 31, 1995 were reimbursed to the Company by direct charges to  
contracts and are included in cost of revenue for those periods.                

INCOME TAXES                                                                    

    Deferred taxes are accounted for under SFAS No. 109 "Accounting for Income
Taxes," which is an asset and liability method of accounting for income taxes.  
The liability method requires the recognition of deferred tax assets and        
liabilities for the expected future tax consequences of temporary differences   
between carrying amounts and tax bases of assets and liabilities. A valuation   
allowance is recorded if it is "more likely than not" that some portion of or   
all of a deferred tax asset will not be realized. Additionally, under the       
liability method, changes in tax rates and laws will be reflected in income in  
the period such changes are enacted. For federal income tax purposes, the       
Company's results will be included in SAIC's consolidated tax return.           

   For periods subsequent to the acquisition, income taxes are determined as
if the Company was a separate taxpayer. Income taxes currently payable have been
charged by the Company to the due to parent account in the period that the      
liability arose. Income taxes currently receivable have been charged to the due 
to parent account in the period that a refund could have been recognized by the 
Company had the Company been a separate taxpayer.                               

USE OF ESTIMATES                                                                

The preparation of financial statements in conformity with generally  
accepted accounting principles requires management to make reasonable estimates 
and assumptions, based upon all known facts and circumstances that affect the   
reported amounts of assets and liabilities and disclosure of contingent assets  
and liabilities at the date of the financial statements. Actual results could   
differ from those estimates. Estimates requiring relatively greater levels of   
judgment include the allowance for uncollectible accounts receivable, the       
assessment of the need for a tax valuation allowance and the amortization period
for goodwill.                                                                   

STOCK BASED COMPENSATION                                                        

    The Company accounts for stock option and employee stock purchase plans in
which its employees participate in accordance with the provisions of Accounting 
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to        
Employees." No compensation cost has been recognized by the Company for such    
employee stock plans. SFAS No. 123, "Accounting for Stock-Based Compensation,"  
provides an alternative accounting method to APB No. 25 and requires additional 
pro forma disclosures (Note 10). The Company expects to continue to account for 
such employee stock plans in accordance with the provisions of APB No. 25.      

PRO FORMA BALANCE SHEET AND EARNINGS PER SHARE (UNAUDITED)                      

     On August 21, 1997, the Company's Board of Directors approved a $10,000,000
dividend payable to SAIC (Note 13). This dividend is to be paid upon            
consummation of the public offering. Pursuant to Securities and Exchange        
Commission Staff Accounting Bulletin ("SAB") No. 55, a pro forma balance sheet  
is presented to reflect this dividend. Additionally, as required by SAB No. 55, 
historical earnings                                                             

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                

per share are not presented and pro forma per share data is presented which     
gives effect to the number of shares from the public offering necessary to fund 
the amount of the $10,000,000 dividend payable to SAIC in excess of the         
Company's net income for the twelve months ended June 30, 1997.                 

Pro forma net income (loss) per share of common stock is calculated by
dividing the net income (loss) by the sum of (i) the number of shares issued to 
SAIC in connection with the Company's reincorporation in Delaware, (ii) common  
stock equivalent shares from common stock options granted within one year of the
initial public offering, and (iii) the number of shares whose proceeds will be  
used to pay the dividend in excess of the prior twelve months' net income as    
described above. Common stock equivalent shares are calculated using the        
treasury stock method. Pursuant to Securities and Exchange Commission SAB No.   
83, common stock and common stock equivalent shares issued by the Company at    
prices below the public offering price during the twelve month period prior to  
the proposed offering date have been included in the calculations as if they    
were outstanding since January 1, 1996 regardless of whether they are dilutive. 

INTERIM FINANCIAL INFORMATION (UNAUDITED)                                       

  Interim financial information for the six months ended June 30, 1996 and
1997 included herein is unaudited. However, in the opinion of the Company, the  
interim financial information includes all adjustments, consisting of only      
normal recurring adjustments, necessary for a fair presentation of the results  
for the interim periods. The results of operations for the six months ended June
30, 1997 are not necessarily indicative of the results to be expected for the   
full year ending December 31, 1997.                                             

NOTE 3 -- RECEIVABLES                                                           

Receivables consist of the following amounts as of December 31:       

                                                        [Enlarge/Download Table]

                                                                1995         1996     
                                                             ----------   ----------- 
                                                                                      
Billed...................................................... $6,060,000   $27,430,000 
Unbilled....................................................  1,384,000     5,000,000 
                                                             ----------   ----------- 
     Total accounts receivable before allowances............  7,444,000    32,430,000 
Less -- Allowance for uncollectible accounts................ (2,118,000)  (15,439,000)
     -- Accounts receivable allocable to 30% NSF                                      
        set-aside........................................... (1,286,000)   (4,404,000)
                                                             ----------   ----------- 
Accounts receivable, net.................................... $4,040,000   $12,587,000 
                                                             ==========   =========== 

    Unbilled receivables consist of costs which have been incurred on time and
expense contracts and Internet domain name registration fees which have not yet 
been billed. Under the Cooperative Agreement, thirty percent of collected       
registration fees is required to be set aside for disbursement at the direction 
of the NSF.                                                                     

     In accounting for registration subscriptions, the Company initially records
the gross amount of the registration fees to accounts receivable and deferred   
revenue. The allowance for estimated uncollectible accounts is recorded against 
both accounts receivable and deferred revenue balances. (See Note 2 for         
treatment of the 30% NSF set aside). From the net deferred revenue balance, the 
Company records revenue on a straight-line basis over the subscription period.  

     The provision for uncollectible accounts receivable, which is recorded on a
straight-line basis over the subscription period and deducted from gross        
registration fees in determining net revenue, was $124,000 and $3,597,000 for   
the period from March 11, 1995 to December 31, 1995 and for the year            

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3 -- RECEIVABLES (CONTINUED)                                               

ended December 31, 1996, respectively. There was no provision necessary for the 
year ended December 31, 1994 and for the period from January 1, 1995 to March   
10, 1995. The Company's allowance for uncollectible accounts receivable is      
associated solely with its registration business. The Company believes it has   
been necessary to establish its provision for uncollectible accounts receivable 
principally due to the large number of individuals and corporations that have   
registered multiple domain names with the apparent intention of reselling such  
names at a profit. The Company's experience has been that, in contrast to other 
subscribers, such resellers have a higher tendency of default on their          
subscription fees.                                                              

NOTE 4 -- FURNITURE AND EQUIPMENT                                               

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

                                                        [Enlarge/Download Table]

                                                               1995          1996     
                                                            -----------   ----------- 
                                                                                      
Furniture and office equipment............................. $   782,000   $   879,000 
Computer equipment.........................................   2,248,000     4,033,000 
Leasehold improvements.....................................     214,000       234,000 
                                                            -----------   ----------- 
     Furniture and equipment, at cost......................   3,244,000     5,146,000 
Less accumulated depreciation and amortization.............  (2,177,000)   (2,880,000)
                                                            -----------   ----------- 
     Furniture and equipment, net.......................... $ 1,067,000   $ 2,266,000 
                                                            ===========   =========== 

NOTE 5 -- DEBT                                                                  

Interest expense reflected in continuing operations for the year ended
December 31, 1994 and the period January 1, 1995 to March 10, 1995 was $109,000 
and $9,000, respectively. Interest expense reflected in discontinued operations 
for the year ended December 31, 1994 and for the period from January 1, 1995 to 
March 10, 1995 was $495,000 and $51,000, respectively. Interest charges prior to
the acquisition have been reflected in continuing and discontinued operations   
based on the debt balances associated with each of the continuing and           
discontinued operations for each of the periods. In addition, interest expense  
of $52,000 and $164,000 for the period from March 11, 1995 to December 31, 1995 
was allocated by SAIC to the Company's continuing operations and discontinued   
operations, respectively, based upon SAIC's cost of capital calculation. For the
year ended December 31, 1996, interest revenue of $496,000 was allocated by SAIC
based upon the cost of capital calculation. From its acquisition by SAIC in     
March 1995 until December 1996, the Company participated in SAIC's centralized  
cash management system whereby cash received from operations was transferred to 
SAIC's centralized cash accounts and cash disbursements were funded from such   
centralized cash accounts. Accordingly, the SAIC cost of capital formula        
provides for charges and credits to the Company based upon management of certain
assets, including accounts receivable and fixed assets. Such amounts are not    
necessarily indicative of the cost that would have been incurred if the Company 
had been operated as a separate entity.                                         

    Effective January 1, 1997, the Company will no longer be subject to SAIC's
cost of capital calculation in connection with the Company fulfilling its own   
treasury function. Interest paid for the year ended December 31, 1994, for the  
periods from January 1, 1995 to March 10, 1995 and March 11, 1995 to December   
31, 1995 and for the year ended December 31, 1996 was $74,000, $0, $103,000 and 
$0, respectively.                                                               

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 6 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                 

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

                                                                [Download Table]

                                                                 1995        1996   
                                                              ----------  ----------
                                                                                    
Accounts payable............................................. $   80,000  $1,054,000
Accrued expenses.............................................    565,000   1,412,000
Accrued payroll..............................................    710,000     115,000
                                                              ----------  ----------
Total accounts payable and accrued expenses.................. $1,355,000  $2,581,000
                                                              ==========  ==========

NOTE 7 -- PROVISION FOR INCOME TAXES                                            

The results of the Company subsequent to its acquisition by SAIC were 
included in SAIC's consolidated tax returns. The tax expense allocation         
methodology is set forth in Note 2.                                             

The provision for (benefit) from income taxes charged to continuing   
operations consists of the following:                                           

                                                        [Enlarge/Download Table]

                                                       FOR THE PERIOD                       
                                                            1995                            
                                    YEAR ENDED   ---------------------------    YEAR ENDED  
                                   DECEMBER 31,  JANUARY 1 TO    MARCH 11 TO   DECEMBER 31, 
                                       1994        MARCH 10      DECEMBER 31       1996     
                                   ------------  ------------    -----------   ------------ 
                                                                                            
Current:                                                                                    
     Federal......................   $ 95,000      $ 40,000      $ 1,521,000   $ 10,171,000 
     State........................     19,000         8,000          311,000      2,020,000 
                                     --------      --------      -----------   ------------ 
          Total current                                                                     
            provision.............    114,000        48,000        1,832,000     12,191,000 
                                     --------      --------      -----------   ------------ 
Deferred:                                                                                   
     Federal......................                                (1,759,000)   (10,716,000)
     State........................                                  (360,000)    (2,118,000)
                                                                 -----------   ------------ 
          Total deferred                                                                    
            benefit...............                                (2,119,000)   (12,834,000)
                                                                 -----------   ------------ 
Provision for (benefit) from                                                                
  income taxes....................   $114,000      $ 48,000      $  (287,000)  $   (643,000)
                                     ========      ========      ===========   ============ 

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

                                                                [Download Table]

                                                                1995        1996    
                                                             ----------  -----------
                                                                                    
Deferred revenue............................................ $2,082,000  $13,846,000
Accrued vacation pay........................................     87,000      118,000
Provision for uncollectible accounts receivable.............     48,000    1,091,000
Other.......................................................      4,000           --
                                                             ----------  -----------
Total deferred tax asset.................................... $2,221,000  $15,055,000
                                                             ==========  ===========

   Tax valuation allowances were provided through March 10, 1995 against the
net deferred tax assets of both continuing operations and discontinued          
operations. In connection with the acquisition purchase accounting, a           
determination was made that tax valuation allowances were no longer required.   

    Although the Company has a history of net losses, it has not established a
valuation allowance for its deferred tax assets since, in the opinion of        
management, it is more likely than not that all of the deferred tax assets will 
be realized. The deferred tax assets relate primarily to registration fee       
revenues                                                                        

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 7 -- PROVISION FOR INCOME TAXES (CONTINUED)                                

which are taxable upon registration but are recognized in the financial         
statements over the next 12 to 24 months -- the subscription period.            

   A reconciliation of the provision for income taxes to the amount computed
by applying the statutory federal income tax rate to income (loss) before income
taxes is provided below. The statutory federal income tax rate used was 34% for 
all periods presented through December 31, 1995 and 35% for the year ended      
December 31, 1996.                                                              

                                                        [Enlarge/Download Table]

                                                               FOR THE PERIOD 1995      YEAR ENDED 
                                              YEAR ENDED   ---------------------------   DECEMBER  
                                             DECEMBER 31,  JANUARY 1 TO    MARCH 11 TO      31,    
                                                 1994        MARCH 10      DECEMBER 31     1996    
                                             ------------  ------------    -----------  -----------
                                                                                                   
Federal tax at statutory rate...............   $103,000      $  1,000       $(570,000)   $(794,000)
State income taxes, net of Federal tax                                                             
  benefit...................................     13,000            --         (68,000)     (96,000)
Nondeductible goodwill amortization.........                                  348,000      281,000 
Other.......................................      4,000         1,000           3,000      (34,000)
Valuation allowance.........................     (6,000)       46,000              --           -- 
                                               --------      --------       ---------    --------- 
Provision for (benefit) from income taxes...   $114,000      $ 48,000       $(287,000)   $(643,000)
                                               ========      ========       =========    ========= 

     The Company paid taxes of $212,000 and $119,000 for the year ended December
31, 1994 and for the period from January 1, 1995 to March 10, 1995,             
respectively.                                                                   

NOTE 8 -- COMMITMENTS AND CONTINGENCIES                                         

COMMITMENTS                                                                     

Future minimum lease payments under noncancelable operating leases,   
primarily for facilities, are:                                                  

                                                                [Download Table]

                                                                          OPERATING 
                       YEARS ENDING DECEMBER 31:                            LEASES  
------------------------------------------------------------------------  ----------
                                                                                    
     1997...............................................................  $1,874,000
     1998...............................................................   1,959,000
     1999...............................................................   1,832,000
     2000...............................................................   1,007,000
     2001...............................................................     946,000
     Thereafter.........................................................     869,000
                                                                          ----------
Total future minimum lease payments.....................................  $8,487,000
                                                                          ==========

In December 1992, the Company entered into a lease agreement for the  
Company's headquarters in Herndon, Virginia that extended the lease term through
2002. Subsequent to the acquisition, SAIC re-negotiated the lease with the      
landlord whereby SAIC has posted a $1,000,000 letter of credit. The Company     
historically has not entered directly into leases; leases are generally entered 
into by SAIC and then SAIC subleases the related assets to the Company under    
identical terms of the head lease. Lease expense related to the continuing      
operations based upon space utilized for the year ended December 31, 1994, for  
the periods from January 1, 1995 to March 10, 1995 and March 11, 1995 to        
December 31, 1995 and for the year ended December 31,1996 was $194,000, $36,000,
$342,000, and $924,000, respectively. Lease expense incurred by the discontinued
operations for the year ended December 31, 1994 and for the periods from January
1, 1995 to March 10, 1995 and March 11, 1995 to December 31, 1995 was           
$1,079,000, $208,000 and $328,000, respectively. Subsequent to March 10, 1995,  

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)                             

COMMITMENTS (CONTINUED)                                                         

the Company generated rental income in 1995 of $135,000 and $187,000 for the    
year ended December 31, 1996, from two subleases, which was recorded on the same
basis as rent expense.                                                          

CONTINGENCIES                                                                   

The Company is involved as plaintiff and defendant in litigation and  
administrative proceedings primarily arising in the normal course of its        
business. In the opinion of management, the Company's recovery, if any, or the  
Company's liability, if any, under any pending litigation or administrative     
proceeding will not materially affect its financial condition, results of       
operations or cash flow.                                                        

     As it relates to registration services, the applicability to the Company of
existing laws governing issues such as intellectual property ownership is       
uncertain. Courts have indicated that, under certain circumstances, Internet    
service providers could be held responsible for the failure to prevent the      
distribution of material that infringes on others' copyrights and other         
intellectual property. As further discussed below, there exists the likelihood  
that the Company will become involved in future actions regarding disputes over 
domain names. The future interpretation by the courts relating to the obligation
of domain name registration providers to prevent trademark infringement and     
other legal issues is uncertain. Costs incurred or decisions rendered as a      
result of any future government inquiry or other proceedings relating to any of 
the foregoing could have a material adverse effect on the Company's business,   
financial position and results of operations.                                   

 The Company has been named as a defendant in a number of lawsuits which
have generally involved domain name disputes between trademark owners and domain
name holders. Through July 31, 1997, no damages have been awarded to the        
plaintiffs in any of the domain name lawsuits. The Company's domain name dispute
policy seeks to take a neutral position between these competing claims and is   
designed to address claims that a domain name registered by the Company         
infringes a third party's trademark. The Company is drawn into such disputes, in
part, as a result of claims by trademark owners that the Company is legally     
required to, upon being requested to do so by a trademark holder, terminate the 
right it granted to an alleged trademark infringer to register the domain name  
in question. Further, trademark owners have also alleged that the Company should
be required to monitor future domain name registrations and reject registrations
of domain names which are identical or similar to their registered trademark.   
The holders of the domain names registrations in dispute have, in turn,         
questioned the Company's right to, absent a court order, take any action which  
restricts or terminates their registration of the domain names in question. The 
Company intends to vigorously defend itself in all such matters. In the opinion 
of the management, the outcome of the existing lawsuits will not materially     
affect the Company's financial condition, results of operations or cash flow.   
However, such litigation has resulted in, and any future litigation can be      
expected to result in, substantial legal and other expenses to the Company and a
diversion of the efforts of the Company's personnel. Such future potential      
expenses cannot be reasonably estimated at this time.                           

See Note 14 "Subsequent Events (Unaudited)."                          

NOTE 9 -- TRANSACTIONS WITH SAIC                                                

  The financial statements as of and for the period from March 11, 1995 to
December 31, 1995 and for the year ended December 31, 1996 include significant  
transactions with other SAIC business units involving functions and services    
(such as cash management, tax administration, accounting, legal, data processing
and employee benefit plans) that were provided to the Company by centralized    
SAIC                                                                            

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 9 -- TRANSACTIONS WITH SAIC (CONTINUED)                                    

organizations. The costs of these functions and services have been directly     
charged and/or allocated to the Company using methods that management believes  
are reasonable; primarily a percentage of budgeted administrative and overhead  
costs. Such charges and allocations are not necessarily indicative of the costs 
that would have been incurred if the Company had been a separate entity. Through
August 9, 1996, the amounts allocated by SAIC to the Company included both      
administrative and overhead costs which are included in selling, general and    
administrative expenses and cost of revenue respectively. Effective August 10,  
1996, SAIC stopped allocating costs based generally upon pro rata labor and     
began assessing the Company for corporate services provided by SAIC at a fee    
equal to 2.5% of net revenue with such percentage to be re-evaluated by both    
parties on an annual basis. This fee is included in its entirety in selling,    
general and administrative expenses. The arrangement will continue indefinitely 
until terminated by either party upon 180 days' prior written notice.           

Amounts charged and allocated to the Company for these functions and  
services for the period from March 11, 1995 to December 31, 1995 and for the    
year ended December 31, 1996 were $516,000 and $1,196,000, respectively, and are
principally included in selling, general and administrative expenses.           
Additionally, certain interest charges/credits are allocated by SAIC to the     
Company (Note 5). Sales as a subcontractor to SAIC for the period from March 11,
1995 to December 31, 1995 and for the year ended December 31, 1996 were $509,000
and $1,505,000, respectively. In addition, because the Company is included in   
SAIC's consolidated tax returns, the Company is obligated to make payment for   
its current tax liability to SAIC in accordance with the tax sharing            
arrangement. (See Note 7). Due to parent represents the cumulative net activity 
of all transactions between the Company and SAIC.                               

     From the time of its acquisition by SAIC in March 1995 until December 1996,
the Company participated in SAIC's centralized cash management system whereby   
cash received from operations was transferred to SAIC's centralized cash        
accounts and cash disbursements were funded from such SAIC centralized cash     
accounts. The Company reflects this activity in the statement of cash flows on a
net basis because of the quick turnover, the large amounts and the short        
maturities of these related party cash transactions. Beginning in 1997, the     
Company implemented its own cash management system whereby the remaining net    
intercompany transactions with SAIC are generally funded on a monthly basis.    

NOTE 10 -- EMPLOYEE BENEFIT PLANS                                               

SAIC BENEFIT PLANS                                                              

     Employees of the Company participate in various SAIC benefit plans, subject
to the applicable eligibility requirements. SAIC charges the Company directly   
for the costs of such employee benefit plans. Charges related to the            
administration of the SAIC benefit plans in which employees of the Company      
participate are included within SAIC general corporate allocations (Notes 1 and 
9).                                                                             

  In 1995, SAIC merged two of its profit sharing retirement plans into one
principal Profit Sharing Retirement Plan in which eligible employees            
participate. Participants' interests vest 25% per year in the third through     
sixth year of service. Participants also become fully vested upon reaching age  
59 1/2, permanent disability or death.                                          

  SAIC has an Employee Stock Ownership Plan (the "Plan") in which eligible
employees participate. Cash contributions to the Plan are based upon amounts    
determined annually by the SAIC Board of Directors and are allocated to         
participants' accounts based on their annual compensation. The vesting          
requirements for the Plan are the same as for the Profit Sharing Retirement     
Plan.                                                                           

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10 -- EMPLOYEE BENEFIT PLANS (CONTINUED)                                   

SAIC BENEFIT PLANS (CONTINUED)                                                  

   SAIC has one principal Cash or Deferred Arrangement ("CODA") which allows
eligible participants to defer a portion of their income through contributions. 
Such deferrals are fully vested, are not taxable to the participant until       
distributed from the CODA upon termination, retirement, permanent disability or 
death and may be matched by SAIC.                                               

 SAIC has a Bonus Compensation Plan which provides for bonuses to reward
outstanding performance. Bonuses are paid in the form of cash, fully vested     
shares of SAIC Class A common stock or vesting shares of SAIC Class A common    
stock. Awards of vesting shares of SAIC Class A common stock vest at the rate of
20%, 20%, 20% and 40% after one, two, three and four years, respectively. During
the period from March 11, 1995 to December 31, 1995 and during the year ended   
December 31, 1996 a total of 24,450 and 53,040 SAIC options were granted to the 
Company's employees, respectively, with exercise prices ranging from $15.72 to  
$17.79 and $19.33 to $22.83 per share, respectively, with a weighted average    
price of $16.17 and $20.51, respectively.                                       

    In 1995, SAIC adopted the Stock Compensation Plan and the Management Stock
Compensation Plan, together referred to as the "Stock Compensation Plans." The  
Stock Compensation Plans provide for awards of share units to eligible          
employees, which share units generally correspond to shares of SAIC Class A     
common stock which are held in trust for the benefit of participants.           
Participants' interests in these share units vest on a seven year schedule at   
the rate of one-third at the end of each of the fifth, sixth and seventh years  
following the date of the award.                                                

SAIC also has an Employee Stock Purchase Plan which allows eligible   
employees to purchase shares of SAIC's Class A common stock, with SAIC          
contributing 5% of the purchase price.                                          

PRE-ACQUISITION BENEFIT PLANS                                                   

Prior to the acquisition, the Company had a plan (the "401(k) Plan")  
covering substantially all employees which provided for employee savings under  
Internal Revenue Code Section 401(k). Eligible employees under the 401(k) Plan  
contributed from one percent to ten percent of gross pay to their plan savings  
account. The Company matched employee contributions to the 401(k) Plan, up to   
six percent of base salary. Contributions to the 401(k) Plan for the year ended 
December 31, 1994 and for the period from January 1, 1995 to March 10, 1995 were
not significant. At the time of SAIC's acquisition of the Company, all          
contributions to the 401(k) Plan ceased and the 401(k) Plan was subsequently    
terminated.                                                                     

1996 STOCK INCENTIVE PLAN                                                       

 The 1996 Stock Incentive Plan (the "Incentive Plan") of the Company was
adopted by the Board of Directors on September 18, 1996. The Incentive Plan     
provides for awards in the form of restricted shares, stock units, options      
(including incentive stock options ("ISOs") and nonstatutory stock options      
("NSOs")) or stock appreciation rights ("SARs"). Employees, outside directors,  
consultants and advisors of the Company are eligible for the grant of restricted
shares, stock units, SARs and NSOs. Only employees are eligible for the grant of
ISOs. A total of 2,306,250 shares of Common Stock has been initially reserved   
for issuance under the Incentive Plan. Such number of shares may be increased by
up to 2% of the total number of common shares of the Company outstanding at the 
end of the most recent calendar year, subject to a cumulative increase of       
1,000,000 common shares.                                                        

   Consideration for each award under the Incentive Plan will be established
by the Compensation Committee of the Board of Directors, but in no event will   
the option price for ISOs be less than 100%                                     

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10 -- EMPLOYEE BENEFIT PLANS (CONTINUED)                                   

1996 STOCK INCENTIVE PLAN (CONTINUED)                                           

of the fair market value of the stock on the date of grant. Awards will have    
such terms and be exercisable in such manner and at such times as the           
Compensation Committee may determine. However, each ISO must expire within a    
period of not more than ten years from the date of grant.                       

  As of December 31, 1996, a total of 100,900 ISOs and 1,124,825 NSOs have
been granted under the Incentive Plan, of which 461,250 will be exercisable at  
$11.25 per share and 764,475 at $14.00 per share. The stock options become      
exercisable one year after the date of the grant, vest 30%, 30%, 20% and 20% on 
each anniversary date of the grant and have a term of five years. No options    
have been exercised or forfeited. The weighted average contractual life of      
options outstanding at December 31, 1996 was 4.9 years. No restricted shares,   
stock units or SARs have been granted to date.                                  

PRO FORMA DISCLOSURES                                                           

  The weighted-average fair value of the options granted during the period
from March 11, 1995 to December 31, 1995 and during the year ended December 31, 
1996 under the SAIC Bonus Compensation Plan were estimated at $3.66 and $4.30,  
respectively, and $2.76 for the options granted during the year ended December  
31, 1996 under the Company's Incentive Plan using the Black-Scholes model. The  
following weighted average assumptions were used in calculating the option fair 
values:                                                                         

                                                        [Enlarge/Download Table]

                                                                                         COMPANY   
                                                                                          STOCK    
                                                           SAIC STOCK OPTIONS            OPTIONS   
                                                    ---------------------------------  ------------
                                                     MARCH 11, 1995       YEAR ENDED    YEAR ENDED 
                                                     TO DECEMBER 31,     DECEMBER 31,  DECEMBER 31,
                                                          1995               1996          1996    
                                                    -----------------    ------------  ------------
                                                                                                   
Expected life (years)..............................         4.0               4.0           4.0    
Risk-free interest rate............................        6.45%             5.91%         5.98%   
Volatility.........................................        0.00%             0.00%         0.00%   
Dividend yield.....................................        0.00%             0.00%         0.00%   

Under the above models, the total value of SAIC stock options granted 
during 1995 and 1996 was approximately $89,000 and $228,000, respectively, and  
$3,379,000 for the Company stock options granted in 1996, all of which would be 
amortized ratably on a pro forma basis over the four year option terms. Had the 
Company recorded compensation costs for these plans in accordance with SFAS No. 
123, the Company's pro forma net loss would have been $1,430,000 for the period 
March 11, 1995 to December 31, 1995 and $1,763,000 for the year ended December  
31, 1996. Pro forma (unaudited) net loss per share would have been $(0.13) for  
the year ended December 31, 1996.                                               

NOTE 11 -- DISCONTINUED OPERATIONS                                              

  As discussed in Note 1, in November 1995 SAIC adopted a plan to transfer
the Company's government-based business to SAIC in order for the Company to     
focus on the growth of the commercial business. Such transfer was substantially 
completed in February 1996. Prior to SAIC's acquisition of the Company, the     
portion of the Company's business relating to the minority-based government     
business had been transferred into a separately-owned entity of the then        
majority shareholder. The activities of both the minority-based government      
business and the remaining government-based business are reflected as           
discontinued operations in the financial statements of the Company for all      
periods presented. Net income (loss) from discontinued operations exclude       
general                                                                         

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 11 -- DISCONTINUED OPERATIONS (CONTINUED)                                  

corporate overhead of the Company. No gain or loss was incurred as a consequence
of the transfer of these businesses.                                            

    The net liabilities for discontinued operations consisted of the following
as of December 31, 1995:                                                        

                                                                [Download Table]
                                                                                    
Assets:                                                                             
     Current............................................................ $5,306,000 
     Non-current........................................................    249,000 
                                                                         ---------- 
                                                                          5,555,000 
                                                                         ---------- 
Liabilities:                                                                        
     Current............................................................  5,763,000 
     Non-current........................................................         -- 
                                                                         ---------- 
                                                                          5,763,000 
                                                                         ---------- 
Net liabilities -- discontinued operations.............................. $ (208,000)
                                                                         ========== 

   Summary operating results of the discontinued operations were as follows:

                                                        [Enlarge/Download Table]

                                                                                                 
                                                                        FOR THE PERIOD 1995      
                                                      YEAR ENDED    ---------------------------- 
                                                     DECEMBER 31,   JANUARY 1 TO     MARCH 11 TO 
                                                         1994         MARCH 10       DECEMBER 31 
                                                     ------------   ------------     ----------- 


                                                                                                 
Revenue............................................. $ 25,264,000   $  4,270,000     $ 7,882,000 
Costs and expenses..................................  (26,338,000)    (5,478,000)     (7,773,000)
                                                     ------------   ------------     ----------- 
Income (loss) from discontinued operations before                                                
  income taxes......................................   (1,074,000)    (1,208,000)        109,000 
Provision for income taxes..........................       95,000        167,000         137,000 
                                                     ------------   ------------     ----------- 
Loss from discontinued operations, net of income                                                 
  taxes............................................. $ (1,169,000)  $ (1,375,000)    $   (28,000)
                                                     ============   ============     =========== 

NOTE 12 -- EFFECT OF NEW ACCOUNTING PRONOUNCEMENT                               

    In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." This statement establishes standards for computing   
and presenting earnings per share, simplifying previous standards for computing 
earnings per share ("EPS") and making them comparable to international          
standards. It replaces the presentation of primary EPS with a presentation of   
basic EPS, and requires dual presentation of basic and diluted EPS on the face  
of the income statement for all entities with complex capital structures. Basic 
EPS excludes dilution and is computed by dividing income available to common    
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if         
securities or other contracts to issue common stock were exercised or converted 
into common stock or resulted in the issuance of common stock that then shared  
in the earnings of the entity. SFAS No. 128 requires restatement of all prior   
period earnings per share data presented, and is effective for financial        
statements issued for periods ending after December 15, 1997, including interim 
periods. Earlier application is not permitted.                                  

     The Company will adopt this statement during the fourth quarter of 1997, as
required. Accordingly, all prior period EPS data will be restated. To illustrate
the effect of adoption, the Company has elected to disclose pro forma basic and 
diluted EPS amounts computed using SFAS 128, as permitted                       

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 12 -- EFFECT OF NEW ACCOUNTING PRONOUNCEMENT (CONTINUED)                   

by the standard. The pro forma basic and diluted EPS for the year ended December
31, 1996, and for the six months ended June 30, 1996 and 1997 are set forth     
below:                                                                          

                                                        [Enlarge/Download Table]

                                                                                SIX MONTHS ENDED        
                                                                                    JUNE 30,            
                                                      YEAR ENDED             ----------------------     
                                                   DECEMBER 31, 1996      1996                   1997   
                                                   -----------------     -------                ------  
                                                                                                        
Pro forma basic earnings per share................      $ (0.12)      $      (0.11)          $      0.09
                                                        =======       ============           ===========
Pro forma diluted earnings per share..............      $ (0.12)      $      (0.11)          $      0.09
                                                        =======       ============           ===========

NOTE 13 -- RECAPITALIZATION                                                     

On June 26, 1997, the Board of Directors amended the Certificate of   
Incorporation to provide for two classes of common stock, designated as Class A 
and Class B. The accompanying financial statements have been adjusted to reflect
this change.                                                                    

NOTE 14 -- SUBSEQUENT EVENTS (UNAUDITED)                                        

Stock Incentive Plan                                                        

  On April 18, 1997, the Board of Directors increased the number of shares
initially reserved for issuance under the Incentive Plan to 2,556,250. Between  
January 1, 1997 and July 31, 1997, the Company granted options to purchase      
340,000 shares of the Company's Class A common stock at $14.00 per share. In    
addition, options to purchase 26,000 shares were canceled during that period.   

Commitments                                                                 

     On May 30, 1997, the Company entered into an operating lease for additional
office facilities for the period from May 30, 1997 through July 31, 2002. During
the period from January 1, 1997 through May 31, 1997, the Company acquired      
$2,537,000 of equipment under a capital lease.                                  

Contingencies                                                               

On March 20, 1997, PG Media, Inc., a New York-based corporation ("PG  
Media"), filed a lawsuit against the Company in the United States District      
Court, Southern District of New York alleging that the Company had restricted   
access to the Internet by not adding TLDs in violation of antitrust laws under  
the Sherman Act. In its complaint, PG Media has asked, in addition to requesting
damages, that the Company be ordered to amend the root zone configuration file  
so that the file includes reference to PG Media's TLDs and name servers. The    
Company has answered the complaint, but no motions are pending and no schedule  
has yet been set by the court for these proceedings. In addition, the Company   
recently received written direction from the NSF not to take any action to      
create additional TLDs or to add any new TLDs to the Internet root servers until
further guidance is provided by the NSF. The Company believes that it has       
meritorious defenses and intends to vigorously defend itself against the claims 
made by PG Media and cannot reasonably estimate the potential impact of such    
claims.                                                                         

   On June 27, 1997, SAIC received a Civil Investigative Demand ("CID") from
the U.S. Department of Justice ("DOJ") issued in connection with an             
investigation to determine whether there is, has been, or may be a violation of 
antitrust laws under the Sherman Act relating to Internet registration products 
and services. The CID seeks documents and information from SAIC and the Company 
relating to their Internet registration business. Neither SAIC nor the Company  
is aware of the scope or nature of the                                          

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NETWORK SOLUTIONS, INC. 

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 14 -- SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)                            

investigation. The Company cannot reasonably estimate the potential impact of   
such investigation, nor can it predict whether a civil action will ultimately be
filed by the DOJ or by private litigants as a result of the DOJ investigation   
or, if filed, what such action would entail. The Company is unable to predict   
the form of relief that might be sought in such an action or that might be      
awarded by a court or imposed as a result of any settlement between the Company 
and the DOJ or private litigants. Any such relief could have a material adverse 
effect on the Company's financial condition and results of operations.          

Dividend                                                                    

    On August 21, 1997, the Board of Directors declared a $10,000,000 dividend
to be paid to SAIC upon consummation of the public offering.                    

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[INSIDE BACK COVER OF PROSPECTUS] 

DEPICTION OF INTRANET SERVICES BUSINESS APPEARS HERE

Intranet-Enabled
Business Solutions

INTRANET
SERVICES

                                                                [Download Table]
                                                        
Intranet Development                   Network & Systems
 and Re-Engineering                         Security    

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

NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE 
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN    
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST 
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE       
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A         
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH 
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER    
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO   
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.                           

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

TABLE OF CONTENTS 

                                                                [Download Table]

                                        PAGE
                                        ----
                                            
Prospectus Summary...................     3 
Risk Factors.........................     7 
Use of Proceeds......................    23 
Dividend Policy......................    23 
Capitalization.......................    24 
Dilution.............................    25 
Selected Financial Data..............    26 
Management's Discussion and Analysis        
  of Financial Condition and Results        
  of Operations......................    28 
Business.............................    41 
Management...........................    57 
Relationship with SAIC and Certain          
  Transactions.......................    66 
Principal Stockholders...............    70 
Description of Capital Stock.........    71 
Shares Eligible for Future Sale......    76 
Underwriting.........................    78 
Legal Matters........................    79 
Experts..............................    80 
Additional Information...............    80 
Index to Financial Statements........   F-1 

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

UNTIL        , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN       
ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS   
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.      

2,300,000 SHARES  

[NETWORK SOLUTIONS LOGO]  

CLASS A COMMON STOCK  

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

HAMBRECHT & QUIST   

J. P. MORGAN & CO.  

PAINEWEBBER INCORPORATED  

        , 1997

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

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PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION                           

     The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All 
amounts are estimated except the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee.        

                                                                [Download Table]

                                                                PAYABLE BY 
                                                                REGISTRANT*
                                                                -----------
                                                                           
SEC registration fee.........................................   $    12,825
National Association of Securities Dealers, Inc. filing                    
  fee........................................................         4,000
Nasdaq Filing Fee............................................        18,000
Blue Sky fees and expenses...................................         1,000
Accounting fees and expenses.................................       600,000
Legal fees and expenses......................................       300,000
Printing and engraving expenses..............................       100,000
Registrar and transfer agent's fees..........................        11,000
Miscellaneous fees and expenses..............................        53,175
                                                                -----------
     Total...................................................   $ 1,100,000
                                                                ===========

---------------                                                                 
* All expenses listed above are estimates except for the SEC registration fee   
and the NASD filing fee.                                                    

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS                             

Section 145 of the Delaware General Corporation Law provides for the  
indemnification of officers, directors, and other corporate agents in terms     
sufficiently broad to indemnify such persons under certain circumstances for    
liabilities (including reimbursement for expenses incurred) arising under the   
Securities Act of 1933, as amended (the "Act"). Article VIII of the Registrant's
Certificate of Incorporation (Exhibit 3(i) hereto) provides for indemnification 
of the Registrant's directors, officers, employees and other agents to the      
extent and under the circumstances permitted by the Delaware General Corporation
Law. The Registrant has also entered into agreements with its directors and     
officers that will require the Registrant, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or service 
as directors or officers to the fullest extent not prohibited by law.           

  The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
the Underwriters of the Registrant, its directors and officers, and by the      
Registrant and SAIC of the Underwriters, for certain liabilities, including     
liabilities arising under the Act, and affords certain rights of contribution   
with respect thereto.                                                           

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES                               

    Since January 1, 1994, the Registrant has issued and sold (without payment
of any selling commission to any person) the following unregistered securities: 

     1. From October 14, 1996 to July 31, 1997, the Registrant granted incentive
stock options to purchase an aggregate of 100,900 shares of the Registrant's    
Class A Common Stock to employees, officers and directors of the Registrant     
under its 1996 Stock Incentive Plan at exercise prices ranging from $11.25 to   
$14.00 per share. Certain of these options vest over a period of time following 
their respective dates of grant pursuant to the Registrant's 1996 Stock         
Incentive Plan.                                                                 

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2. From October 14, 1996 to July 31, 1997, the Registrant granted     
nonstatutory stock options to purchase an aggregate of 1,438,825 shares of the  
Registrant's Class A Common Stock to employees, officers and directors of the   
Company under its 1996 Stock Incentive Plan at exercise prices ranging from     
$11.25 to $14.00 per share. Certain of these options vest over a period of time 
following their respective dates of grant, pursuant to the Registrant's 1996    
Stock Incentive Plan.                                                           

The sales of the above securities were deemed to be exempt from       
registration under the Securities Act in reliance on Section 4(2) of the        
Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated 
under Section 3(b) of the Securities Act, as transactions by an issuer not      
involving a public offering or transactions pursuant to compensatory benefit    
plans and contracts relating to compensation as provided under such Rule 701.   
The recipients of securities in each such transaction represented their         
intention to acquire the securities for investment only and not with a view to  
or for sale in connection with any distribution thereof and appropriate legends 
were affixed to the share certificates and instruments issued in such           
transactions. All recipients had access, through their relationship with the    
Company, to information about the Registrant.                                   

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                            

(a) EXHIBITS                                                          

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                      
 NUMBER                                 DESCRIPTION OF DOCUMENT                              
--------  -----------------------------------------------------------------------------------
                                                                                             
1.1       Form of Underwriting Agreement.                                                    
3(i)**    Second Amended and Restated Certificate of Incorporation.                          
3(ii)**   Bylaws of the Registrant, as amended.                                              
4.1**     Form of Common Stock Certificate.                                                  
4.2**     Reference is made to Exhibits 3(i) and 3(ii).                                      
5.1**     Opinion of Pillsbury Madison & Sutro LLP.                                          
10.1**    Cooperative Agreement between the National Science Foundation and Network          
          Solutions, Inc., as amended by Amendments Nos. 1, 2, 3 and 5.                      
10.2**    Amendment No. 4 to the Cooperative Agreement dated September 13, 1995.             
10.3**    Master Services Agreement for System Management Services dated January 21, 1997 by 
          and between NationsBanc Services, Inc. and Network Solutions, Inc.                 
10.4**    1996 Stock Incentive Plan and forms of agreements thereunder.                      
10.5**    Corporate Services Agreement between Network Solutions, Inc. and Science           
          Applications International Corporation.                                            
10.6**    Tax Sharing Agreement between Network Solutions, Inc. and Science Applications     
          International Corporation.                                                         
10.7**    Registration Rights Agreement between Network Solutions, Inc. and Science          
          Applications International Corporation.                                            
10.8**    Noncompetition and Corporate Opportunities Agreement between Network Solutions,    
          Inc. and Science Applications International Corporation.                           
10.9**    Letter Agreement dated September 16, 1996 between the Registrant and Gabriel A.    
          Battista, as amended as of September 23, 1996.                                     
10.10**   Science Applications International Corporation Employee Stock Ownership Plan and   
          amendments thereto.                                                                
10.11**   Science Applications International Corporation 1995 Stock Option Plan.             
10.12**   Letter dated September 13, 1995 regarding Amendment No. 4 to the Cooperative       
          Agreement.                                                                         
10.13     Asset Transfer Agreement between Network Solutions, Inc. and Science Applications  
          International Corporation.                                                         
11.1**    Statement of computation of earnings per share.                                    
23.1      Consent of Price Waterhouse LLP (see Page II-5).                                   
23.2**    Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).                
24.1**    Power of Attorney.                                                                 
24.2**    Power of Attorney of John E. Glancy.                                               
27.1**    Financial Data Schedule.                                                           

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

** Previously filed.                                                            

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(b) FINANCIAL STATEMENT SCHEDULES                                     

     Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included       
elsewhere in the Financial Statements or the notes thereto.                     

ITEM 17.  UNDERTAKINGS                                                          

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and    
controlling persons of the Registrant pursuant to the foregoing provisions, or  
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as        
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the     
Registrant of expenses incurred or paid by a director, officer or controlling   
person of the Registrant in the successful defense of any action, suit or       
proceeding) is asserted by such director, officer or controlling person in      
connection with the securities being registered, the Registrant will, unless in 
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such         
indemnification by it is against public policy as expressed in the Act and will 
be governed by the final adjudication of such issue.                            

The undersigned Registrant hereby undertakes that:                    

   (1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed as  
part of this registration statement in reliance upon Rule 430A and contained in 
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)  
or 497(h) under the Securities Act shall be deemed to be part of this           
registration statement as of the time it was declared effective.                

   (2) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of      
prospectus shall be deemed to be a new registration statement relating to the   
securities offered therein, and the offering of such securities at that time    
shall be deemed to be the initial bona fide offering thereof.                   

(3) The Registrant will provide to the underwriters at the closing(s) 
specified in the underwriting agreement certificates in such denominations and  
registered in such names as required by the underwriters to permit prompt       
delivery to each purchaser.                                                     

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SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement to be signed 
on its behalf by the undersigned, thereunto duly authorized, in the City of     
Herndon, State of Virginia, on the 18th day of September, 1997.                 

                           NETWORK SOLUTIONS, INC.

                                  BY     /s/ GABRIEL A. BATTISTA
                                            ------------------------------------
                                           Gabriel A. Battista
                                           Chief Executive Officer

    Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed below by the following      
persons in the capacities and on the dates indicated.                           

                                                        [Enlarge/Download Table]

                  NAME                                   TITLE                        DATE        
----------------------------------------  -----------------------------------  -------------------

                                                                                                  
        /s/ GABRIEL A. BATTISTA           Chief Executive Officer and          September 18, 1997 
----------------------------------------  Director                                                
          Gabriel A. Battista                                                                     

       /s/ ROBERT J. KORZENIEWSKI         Chief Financial Officer (Principal   September 18, 1997 
----------------------------------------  Financial Officer)                                      
         Robert J. Korzeniewski                                                                   

          RUSSELL L. HELBERT*             Controller (Principal Accounting     September 18, 1997 
----------------------------------------  Officer)                                                
           Russell L. Helbert                                                                     

          MICHAEL A. DANIELS*             Chairman of the Board                September 18, 1997 
----------------------------------------                                                          
           Michael A. Daniels                                                                     

           J. ROBERT BEYSTER*             Director                             September 18, 1997 
----------------------------------------                                                          
           J. Robert Beyster                                                                      

            CRAIG I. FIELDS*              Director                             September 18, 1997 
----------------------------------------                                                          
            Craig I. Fields                                                                       

            JOHN E. GLANCY*               Director                             September 18 1997  
----------------------------------------                                                          
             John E. Glancy                                                                       

         WILLIAM A. ROPER, JR.*           Director                             September 18, 1997 
----------------------------------------                                                          
         William A. Roper, Jr.                                                                    

          STRATTON D. SCLAVOS*            Director                             September 18, 1997 
----------------------------------------                                                          
          Stratton D. Sclavos                                                                     

           DONALD N. TELAGE*              Director                             September 18, 1997 
----------------------------------------                                                          
            Donald N. Telage                                                                      

    *By: /s/ ROBERT J. KORZENIEWSKI                                                               
----------------------------------------                                                          
        (Robert J. Korzeniewski,                                                                  
           Attorney-in-Fact)                                                                      

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                                                                    EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

  We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 17, 1997, except as
to Note 13 which is as of June 26, 1997, relating to the financial statements of
Network Solutions, Inc., for the year ended December 31, 1996 and for the period
from March 11, 1995 to December 31, 1995 and of our report dated March 17, 1997,
except as to Note 13 which is as of June 26, 1997, relating to the financial    
statements of Network Solutions, Inc., for the period from January 1, 1995 to   
March 10, 1995 and for the year ended December 31, 1994, which appear in such   
Prospectus. We also consent to the application of such reports to the Financial 
Statement Schedule for the year ended December 31, 1996, the period from March  
11, 1995 to December 31, 1995, the period from January 1, 1995 to March 10, 1995
and for the year ended December 31, 1994 listed under Item 16(b) of this        
Registration Statement when such schedule is read in conjunction with the       
financial statements referred to in our reports. The audits referred to in such 
reports also included this schedule. We also consent to the reference to us     
under the heading "Experts" in such Prospectus.                                 

PRICE WATERHOUSE LLP                                                            
Falls Church, VA                                                                

September 15, 1997                                                              

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                                                                     SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                                                        [Enlarge/Download Table]

================================================================================================================   
               COLUMN A                   COLUMN B             COLUMN C               COLUMN D        COLUMN E     
                                                               ADDITIONS                                           
                                                       -------------------------                                   
                                                                     CHARGED TO                                    
                                         BALANCE AT    CHARGED TO       OTHER                                      
                                         BEGINNING     COSTS AND     ACCOUNTS--      DEDUCTIONS--    BALANCE AT    
             DESCRIPTION                  OF YEAR       EXPENSES      DESCRIBE        DESCRIBE       END OF YEAR   
----------------------------------------------------------------------------------------------------------------   
                                                                                                                   
Year ended December 31, 1994                                                                                       
    Allowance for uncollectible                                                                                    
      accounts, included in net assets                                                                             
      (liabilities) of discontinued                                                                                
      operations......................   $  345,000    $  464,000    $        --     $       --      $   809,000   
    Deferred tax valuation allowance,                                                                              
      continuing operations...........       61,000        (5,000)            --             --           56,000   
    Deferred tax valuation allowance,                                                                              
      discontinued operations.........      377,000       135,000             --             --          512,000   
For the period from January 1, 1995 to                                                                             
  March 10, 1995                                                                                                   
    Allowance for uncollectible                                                                                    
      accounts, included in net assets                                                                             
      (liabilities) of discontinued                                                                                
      operations......................      809,000       344,000             --             --        1,153,000   
    Deferred tax valuation allowance,                                                                              
      continuing operations...........       56,000        46,000             --             --          102,000(1)
    Deferred tax valuation allowance,                                                                              
      discontinued operations.........      512,000       276,000             --             --          788,000(1)
----------------------------------------------------------------------------------------------------------------   

For the period from March 11, 1995 to                                                                              
  December 31, 1995                                                                                                
    Allowance for uncollectible                                                                                    
      accounts, continuing                                                                                         
      operations......................   $       --    $  124,000    $ 1,994,000(2)  $       --      $ 2,118,000   
    Allowance for uncollectible                                                                                    
      accounts, included in net assets                                                                             
      (liabilities) of discontinued                                                                                
      operations......................    1,153,000       465,000             --             --        1,618,000   
Year ended December 31, 1996                                                                                       
    Allowance for uncollectible                                                                                    
      accounts, continuing                                                                                         
      operations......................    2,118,000     3,597,000     19,270,000(2)   9,546,000 (3)   15,439,000   
    Allowance for uncollectible                                                                                    
      accounts, included in net assets                                                                             
      (liabilities) of discontinued                                                                                
      operations......................    1,618,000            --             --      1,618,000 (4)           --   

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

(1) In connection with the acquisition purchase accounting, a determination was 
   made that the tax valuation allowances were no longer required. (See Note 7
of Notes to Financial Statements.)                                      

(2) Charged to allowance for deferred revenue (See Notes 2 and 3 of Notes to    
Financial Statements).                                                  

(3) Amounts are write-offs of uncollectible accounts receivable.                

(4) Disposition associated with discontinued operations (See Note 11 of Notes to
Financial Statements).                                                  

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EXHIBIT INDEX 

                                                        [Enlarge/Download Table]

EXHIBIT                                                                                 PAGE 
NUMBER                             DESCRIPTION OF DOCUMENT                             NUMBER
------   ----------------------------------------------------------------------------  ------
                                                                                             
1.1      Form of Underwriting Agreement..............................................        
3(i)**   Second Amended and Restated Certificate of Incorporation....................        
3(ii)**  Bylaws of the Registrant, as amended........................................        
4.1**    Form of Common Stock Certificate............................................        
4.2**    Reference is made to Exhibits 3(i) and 3(ii)................................        
5.1**    Opinion of Pillsbury Madison & Sutro LLP....................................        
10.1**   Cooperative Agreement between the National Science Foundation and Network           
         Solutions, Inc., as amended by Amendments Nos. 1, 2, 3 and 5................        
10.2**   Amendment No. 4 to the Cooperative Agreement dated September 13, 1995.......        
10.3**   Master Services Agreement for System Management Services dated January 21,          
         1997 by and between NationsBanc Services, Inc. and Network Solutions,               
         Inc.........................................................................        
10.4**   1996 Stock Incentive Plan and forms of agreements thereunder................        
10.5**   Corporate Services Agreement between Network Solutions, Inc. and Science            
         Applications International Corporation......................................        
10.6**   Tax Sharing Agreement between Network Solutions, Inc. and Science                   
         Applications International Corporation......................................        
10.7**   Registration Rights Agreement between Network Solutions, Inc. and Science           
         Applications International Corporation......................................        
10.8**   Noncompetition and Corporate Opportunities Agreement between Network                
         Solutions, Inc. and Science Applications International Corporation..........        
10.9**   Letter Agreement dated September 16, 1996 between the Registrant and Gabriel        
         A. Battista, as amended as of September 23, 1996............................        
10.10**  Science Applications International Corporation Employee Stock Ownership Plan        
         and amendments thereto......................................................        
10.11**  Science Applications International Corporation 1995 Stock Option Plan.......        
10.12**  Letter dated September 13, 1995 regarding Amendment No. 4 to the Cooperative        
         Agreement...................................................................        
10.13    Asset Transfer Agreement between Network Solutions, Inc. and Science                
         Applications International Corporation......................................        
11.1**   Statement of computation of earnings per share..............................        
23.1     Consent of Price Waterhouse LLP (see Page II-5).............................        
23.2**   Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1)..........        
24.1**   Power of Attorney...........................................................        
24.2**   Power of Attorney for John E. Glancy........................................        
27.1**   Financial Data Schedule.                                                            

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

** Previously filed.                                                            

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘S-1/A’ Filing		Date		First		Last			Other Filings
		7/31/02		103
		3/31/98		31					10-K,  10-Q
		12/31/97		94					10-K
		12/15/97		102
Filed on:		9/18/97		1		110
		9/15/97		111
		8/21/97		93		104
		8/18/97		12		55
		7/31/97		6		108
		7/17/97		15
		7/1/97		12		55
		6/30/97		5		103
		6/27/97		14		103
		6/26/97		84		111
		6/16/97		35		51
		5/31/97		103
		5/30/97		103
		4/18/97		103
		4/1/97		31
		3/31/97		31
		3/20/97		14		103
		3/17/97		84		111
		1/21/97		108		113
		1/1/97		16		103
		12/31/96		9		112
		10/14/96		107		108
		9/24/96		66
		9/23/96		108		113
		9/18/96		65		100
		9/16/96		108		113
		8/10/96		21		99
		8/9/96		20		99
		6/30/96		5		103
		1/1/96		94
		12/31/95		7		112
		9/14/95		5		92
		9/13/95		108		113
		3/11/95		7		112
		3/10/95		7		112
		1/1/95		7		112
		12/31/94		28		112
		1/1/94		107
		12/31/93		29		88
		12/31/92		29
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