<PAGE>   1

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1999

                                                      REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                    FORM S-1
                            ------------------------
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                               ANDOVER.NET, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                <C>                                <C>
            DELAWARE                             7379                            04-3153168
 (State or other jurisdiction of     (Primary Standard Industrial             (I.R.S. Employer
 incorporation or organization)       Classification Code Number)            Identification No.)
</TABLE>

                                 50 NAGOG PARK
                                ACTON, MA 01720
                                 (978) 635-5300
              (Address, including zip code, and telephone number,
       including area code, of registrant's principal executive offices)

                               BRUCE A. TWICKLER
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                               ANDOVER.NET, INC.
                                 50 NAGOG PARK
                                ACTON, MA 01720
                                 (978) 635-5300
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
                                   COPIES TO:

<TABLE>
<S>                                                      <C>
              DAVID P. KREISLER, ESQUIRE                             WILLIAM J. GRANT, JR., ESQUIRE
              HUTCHINS, WHEELER & DITTMAR                               WILLKIE FARR & GALLAGHER
              A PROFESSIONAL CORPORATION                                   787 SEVENTH AVENUE
                  101 FEDERAL STREET                                       NEW YORK, NY 10019
              BOSTON, MASSACHUSETTS 02110                                    (212) 728-8000
                    (617) 951-6600
</TABLE>

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  As soon as
practicable after the effective date of this Registration Statement.

    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, check the following box and
list the Securities Act registration statement number of 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 number of the earlier effective registration statement for the same
offering. [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the earlier
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,
check the following box. [ ]

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                                                        PROPOSED MAXIMUM AGGREGATE
 TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED          OFFERING PRICE(1)          AMOUNT OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                             <C>
Common Stock, $.01 par value per share...............           $69,000,000                     $19,182.00
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Estimated solely for the purpose of calculating the registration fee
     pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
                            ------------------------
    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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1999
--------------------------------------------------------------------------------

          4,000,000 shares of common stock          $       per share

                                  Andover net
                         The Leading Linux Destination
                                     [LOGO]

<TABLE>
       <S>                                               <C>         <C>           <C>
</TABLE>

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

<TABLE>

       Andover.Net, Inc.                                                           Andover.Net is the leading Linux/Open
       50 Nagog Park                                                               Source destination on the Internet. Our
       Acton, MA 01720                                                             network of web sites provides an
       We have applied for approval for listing of our shares on the Nasdaq        independent, unbiased source for content,
       National Market under the symbol "ANDN."                                    community and commerce for the Linux and,
                                                                                   more generally, the Open Source
                                                                                   communities.
                                                                                   This is our initial public offering and
                                                                                   no public market currently exists for our
                                                                                   shares. We expect that the public
                                                                                   offering price will be between $12.00 and
                                                                                   $15.00 per share. This price may not
                                                                                   reflect the market price of our shares
                                                                                   after this offering.
                                                         PER SHARE    TOTAL
       <S>                                               <C>         <C>           <C>
       Public Offering Price...........................   $          $
       Underwriting Discount...........................   $          $
       Proceeds to Andover.Net.........................   $          $

       We have granted the underwriters the right to purchase up to 600,000
       additional shares within 30 days to cover any over-allotments. The
       underwriters expect to deliver shares of common stock to purchasers
       on             , 1999.
</TABLE>

--------------------------------------------------------------------------------
     THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
     ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
     PAGE 4.
--------------------------------------------------------------------------------

<TABLE>
       <S>                                               <C>         <C>           <C>
       Neither the Securities and Exchange Commission nor any state                OPEN IPO WR HAMBRECHT & CO [LOGO]
       securities commission has approved or disapproved of these securities
       or determined if this prospectus is truthful or complete. Any
       representation to the contrary is a criminal offense.
       The method of distribution being used by the underwriters in this
       offering differs somewhat from that traditionally employed in firm
       commitment underwritten public offerings. In particular, the public
       offering price and allocation of shares will be determined primarily
       by an auction process conducted by the underwriters and other
       securities dealers participating in the offering. A more detailed
       description of this process is included in "Plan of Distribution."
</TABLE>

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

     WR HAMBRECHT & CO [LOGO]
                                  ADVEST, INC.
                                                                  DLJdirect INC.
--------------------------------------------------------------------------------

                  The date of this prospectus is  _____ , 1999

<PAGE>   3

                               [ANDOVER.NET LOGO]

Andover.Net is the leading Linux/Open Source destination on the Internet.
Our network of web sites serves over 2 million unique visitors and 40 million
page views on a monthly basis. We provide an independent, unbiased source
for content, community and commerce for the Linux and, more generally, the Open
Source communities. We provide products, online tools, news and other services
for programmers, software developers, web site designers, technology managers
and corporate buyers.


                          LINUX RESOURCE SITES--VISITS
                                  [PIE CHART]

<TABLE>
<S>                                                         <C>
Andover.Net includes: Slashdot, FreeCode, and Freshmeat..... 51.1%
SSC Includes: SSC, Linux Resources, Linux Gazette and
  Linux Journal.............................................  6.7%
Other.......................................................  6.5%
VA Linux includes: Themes.org and Linux.com.................  3.5%
Linux Today.................................................  4.9%
Linux Documentation Project.................................  4.4%
Linux News..................................................  3.7%
Linux Online................................................ 19.2%
[SLASHDOT LOGO]
[FREECODE LOGO]
[FRESHMEAT.NET LOGO]
</TABLE>

Source: Linux Journal, August 1999.

These numbers were collected on May 13, 1999.
"Visits" are accumulated over the previous six months.
<PAGE>   4
LINUX/OPEN SOURCE SITES


SLASHDOT.ORG
News for Nerds. Stuff that Matters. A leading
voice for the Open Source community.

    [Screen Shot]               http://www.andover.net


FRESHMEAT.NET                              FREECODE
One of the largest downloadable Linux      A comprehensive archive
software application repositories.         of free source code.


    [Screen Shot]                                [Screen Shot]
<PAGE>   5
CROSS-PLATFORM SITES

<TABLE>
<S>                           <C>                             <C>
DAVECENTRAL                   MEDIABUILDER                    ANDOVER NEWS
Over 10,000 downloadable      Complete online multimedia      Searchable computer-industry news
products for both Linux       resource center, including      and editorials.
and Windows.                  online tools.

[Screen Shot]                 [Screen Shot]                   [Screen Shot]
</TABLE>


<TABLE>
<S>                                         <C>
IT MANAGER'S JOURNAL                        INTERNET TRAFFIC REPORT
Editorials and summaries for                Monitors the flow of data around
IT managers.                                the world.

[Screen Shot]                               [Screen Shot]
</TABLE>


WINDOWS SITE

SLAUGHTERHOUSE
Free Windows applications and news.

<PAGE>   6

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



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



                               TABLE OF CONTENTS

                                                              PAGE
                                                              ----
Prospectus Summary..........................................    1
The Offering................................................    2
Summary Financial Data......................................    3
Risk Factors................................................    4
Special Note Regarding Forward Looking Statements...........   14
Use of Proceeds.............................................   15
Dividend Policy.............................................   15
Capitalization..............................................   16
Dilution....................................................   17
Selected Financial Data.....................................   19
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   21
Business....................................................   31
Management..................................................   43
Principal Stockholders......................................   48
Relationships with Andover.Net and Related Transactions.....   50
Description of Capital Stock................................   52
Shares Eligible for Future Sale.............................   55
Plan of Distribution........................................   56
Legal Matters...............................................   59
Experts.....................................................   59
Where You Can Find Additional Information...................   60
Index to Financial Statements...............................  F-1



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



     Andover.Net and the Andover.Net logo are trademarks of Andover.Net, Inc.
All other trademarks, tradenames or copyrights referred to in this prospectus
are the property of their respective owners.

     Information contained on our network does not constitute a part of this
prospectus.
<PAGE>   7

                      [THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>   8
--------------------------------------------------------------------------------
                               PROSPECTUS SUMMARY

     The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes appearing elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully.

<TABLE>
<S>                      <C>
Our Business:            Andover.Net is the leading Linux/Open Source destination on
                         the Internet. Our network of web sites provides an
                         independent, unbiased source for content, community and
                         commerce for the Linux and, more generally, the Open Source
                         communities. We provide products, online tools, news and
                         other services for programmers, software developers, web
                         site designers, technology managers and corporate buyers.
                         Our network generates over 40 million page views with over
                         two million unique visitors on a monthly basis. With our
                         recent acquisitions of Slashdot.org and Freshmeat.net, we
                         believe that traffic on our network represents over 50% of
                         the visits to Linux resource sites on the World Wide Web, or
                         web. This leading position in the Linux market allows us to
                         provide advertisers targeted access to the Linux/Open Source
                         communities. We have over 100 advertisers on our network.
                         Our top five advertisers based on cash revenues for the six
                         months ended August 31, 1999 were IBM, Compaq, Silicon
                         Graphics, Hewlett-Packard and Intel.
Our Network:             We combine our Linux/Open Source web sites with other web
                         sites to provide programmers and developers with a leading
                         online resource regardless of operating system. Our closely
                         integrated network consists of web sites that are deep and
                         rich in content. Our network includes:
</TABLE>

<TABLE>
<S>                      <C>                        <C>                           <C>

                         LINUX/OPEN SOURCE          CROSS-PLATFORM                WINDOWS
                         - Slashdot                 - DaveCentral                 - Slaughter House
                         - Freshmeat                - MediaBuilder
                         - FreeCode                 - Andover News
                                                    - IT Manager's Journal
                                                    - Internet Traffic Report
</TABLE>

<TABLE>
<S>                      <C>
Our Strategy:            Our goal is to maintain and enhance our position as the
                         leading destination for content, community and commerce for
                         the Linux and, more generally, the Open Source movement. The
                         key elements of our strategy are to:
                         -  grow the size and share of our dominant Linux/Open Source
                            position;
                         -  facilitate and guide the transition of Windows developers
                            to Linux/Open Source;
                         -  expand our e-commerce offerings to our targeted, high
                            volume traffic;
                         -  acquire complementary Linux/Open Source web sites;
                         -  expand the number and participation of major advertisers;
                            and
                         -  strengthen the Andover.Net brand.

Linux/Open Source        The Internet has accelerated the growth of the Open Source
Movement:                movement. The Open Source movement is a collaborative
                         approach to the development and distribution of software and
                         has emerged as a viable alternative to traditional
                         proprietary software development. The growth of the Internet
                         has greatly increased the scale and efficiency of Open
                         Source development by enabling large communities of
                         independent developers to collaborate online. The best-known
                         example of Open Source is the Linux operating system, or
                         Linux, created by Linus Torvalds in 1991. Due to the growing
                         number of Linux/Open Source operating systems and related
                         applications, a number of major technology industry leaders,
                         including IBM, Intel and Hewlett-Packard, have recently
                         announced support for Linux-based operating systems.
                         According to International Data Corporation, Linux-based
                         operating systems represented 17% of all new licensed
                         shipments of server operating systems in 1998, which was an
                         increase of 190% from the previous year.
</TABLE>
--------------------------------------------------------------------------------

                                        1
<PAGE>   9
--------------------------------------------------------------------------------

     We were founded in 1992 as Andover Advanced Technologies, Inc., a
Massachusetts corporation. We reincorporated in Delaware and changed our name to
Andover.Net, Inc. in September 1999. Our headquarters are located at 50 Nagog
Park, Acton, Massachusetts, 01720 and our telephone number is (978) 635-5300.
Information about Andover.Net is available at www.andover.net. Information
contained on our network of web sites does not constitute part of this
prospectus.

                                  THE OFFERING

<TABLE>
<S>                                            <C>
Type of Security.............................  Common stock
Common stock offered.........................  4,000,000 shares
Common stock to be outstanding after the       15,000,000 shares
  offering...................................
Use of proceeds..............................  For redemption of redeemable preferred stock,
                                               potential strategic acquisitions and general
                                               corporate purposes, including working
                                               capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.......  ANDN
</TABLE>

     References to "we," "us" or "Andover.Net" shall refer to Andover.Net, Inc.
and all predecessor entities.

     Except as otherwise noted, all information in this prospectus assumes:

     - no exercise of the underwriters' over-allotment option;

     - no exercise of those options to purchase shares of common stock remaining
       outstanding after the completion of this offering;

     - the shares of common stock to be issued upon the closing of this offering
       in connection with the acquisition of Slashdot.org, Freshmeat.net and
       Animation Factory have not been issued;

     - the conversion of all outstanding shares of Series B convertible
       preferred stock into 3,017,138 shares of our common stock immediately
       prior to the closing of this offering;

     - the redemption of all outstanding shares of Series A redeemable preferred
       stock immediately prior to the closing of this offering;

     - the completion of a 5.02 for 1 stock split effective immediately prior to
       the effectiveness of the registration statement of which this prospectus
       forms a part; and

     - an increase in our authorized common stock to 100,000,000 shares and the
       authorization of 1,000,000 shares of undesignated preferred stock
       effective immediately prior to the closing of this offering.
--------------------------------------------------------------------------------

                                        2
<PAGE>   10
--------------------------------------------------------------------------------

                             SUMMARY FINANCIAL DATA

     The following table summarizes the financial data of our business. The pro
forma 1999 statements of operations data gives effect to the conversion of
convertible notes into Series B convertible preferred stock in September 1999,
the automatic conversion of the Series B convertible preferred stock into common
stock and the effects of the acquisition of Slashdot.org and Animation Factory.
See Note 2(j) of the Financial Statements and Notes thereto for discussion of
pro forma basic and diluted net loss per share.

<TABLE>
<CAPTION>
                                                                                  NINE MONTHS ENDED
                                                  YEAR ENDED SEPTEMBER 30,             JUNE 30,
                                                  ------------------------   ----------------------------
                                                                                               PRO FORMA
                                                   1996     1997     1998     1998     1999       1999
                                                  ------   ------   ------   ------   -------   ---------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                               <C>      <C>      <C>      <C>      <C>       <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.......................................   $  316   $  741   $1,290   $  986   $ 1,109    $ 1,617
Gross profit...................................      287      438      963      731       679        914
Loss from operations...........................     (573)    (590)    (445)    (341)   (2,309)    (5,630)
Net loss.......................................     (654)    (664)    (474)    (374)   (2,250)    (7,335)
Net loss attributable to common stockholders...     (654)    (705)    (608)    (463)   (2,510)    (7,595)
Basic and diluted net loss per share...........   $(0.38)  $(0.29)  $(0.12)  $(0.09)  $ (0.36)   $ (1.06)
Basic and diluted weighted average common
  shares outstanding...........................    1,763    2,468    5,110    5,106     6,990      7,169
Pro forma basic and diluted net loss per
  share........................................                     $(0.12)           $ (0.32)   $ (1.06)
Pro forma basic and diluted weighted average
  common shares outstanding....................                      5,110              6,992      7,171
</TABLE>

     The following table summarizes our balance sheet data as of June 30, 1999.
The pro forma column gives effect to the recent issuance and sale of 480,354
shares of Series B convertible preferred stock on September 15, 1999 and the
concurrent automatic conversion of all convertible notes into 120,214 shares of
Series B convertible preferred stock. The pro forma column also gives effect to
the automatic conversion of the Series B convertible preferred stock into
3,017,138 shares of common stock. The effects of the Slashdot.org and Animation
Factory acquisitions are included in the actual June 30, 1999 balance sheet data
below, as such acquisitions were consummated before June 30, 1999. The pro forma
as adjusted column reflects the sale of 4,000,000 shares of common stock offered
by Andover.Net at an assumed initial public offering price of $13.50 per share,
after deducting the estimated underwriting discount and assumed offering
expenses and the automatic redemption of all outstanding shares of Series A
redeemable preferred stock, including accrued dividends, of $4,713,000 which
will occur upon the closing of this offering. See "Use of Proceeds" and
"Capitalization."

<TABLE>
<CAPTION>
                                                                        AS OF JUNE 30, 1999
                                                              ----------------------------------------
                                                                                            PRO FORMA
                                                              ACTUAL       PRO FORMA       AS ADJUSTED
                                                              -------      ---------       -----------
                                                                           (IN THOUSANDS)
<S>                                                           <C>        <C>               <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................  $ 1,610       $11,710          $56,622
Working capital.............................................   (1,146)       11,044           55,956
Total assets................................................    5,170        15,270           60,182
Long-term obligations, less current portion.................      487           487              487
Redeemable convertible preferred stock......................    4,713         4,713               --
Stockholders' equity (deficit)..............................   (3,221)        8,969           58,594
</TABLE>
--------------------------------------------------------------------------------

                                        3
<PAGE>   11

                                  RISK FACTORS

     You should carefully consider the following risks and all other information
contained in this prospectus before you decide to buy our common stock.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business operations. If any of the
following risks actually occur, our business, financial condition or operating
results could suffer. If this occurs, the trading price of our common stock
could decline, and you could lose all or part of the money you paid to buy our
common stock.

                          RISKS RELATED TO ANDOVER.NET

WE HAVE A LIMITED OPERATING HISTORY AS AN INTERNET COMPANY.

     Although we began operating in May 1992, we only commenced our Internet
focus in 1997. Thus, we have a limited operating history in our current market
upon which you can evaluate our business. We are subject to the risks, expenses
and uncertainties frequently encountered by companies in the new and rapidly
evolving markets for Internet products and services. For example:

     -  we might fail to continue to develop and extend our Internet-based
        content offerings and services;

     -  we might not effectively integrate our recent acquisitions;

     -  Internet users, vendors or advertisers may not accept our services;

     -  we might be unable to maintain and increase the levels of traffic on our
        network;

     -  our competitors may develop or may already have developed similar or
        superior content, services or products;

     -  the market might not continue to accept the Internet as an advertising
        medium;

     -  we might be unable to sell Internet advertising successfully;

     -  market prices for Internet advertising may drop as a result of
        competition;

     -  we might not effectively integrate the technology and operations of any
        acquired businesses or technologies with our operations;

     -  the technologies we use in our operations might fail or operate poorly;
        and

     -  we might be unable to identify, attract, retain and motivate qualified
        personnel.

     We might not be successful in addressing these risks or other risks we may
face. If we are unable to address these risks adequately, our business, results
of operations and financial condition may suffer.

WE EXPECT TO INCUR SUBSTANTIAL LOSSES IN THE FUTURE.

     We have incurred operating losses since our inception in 1992, including
our most recent fiscal year ended September 30, 1998 and the nine months ended
June 30, 1999. We expect to incur significant losses in the near term as we
substantially increase our sales and marketing, general and administrative, and
research and development expenses. In addition, we are investing considerable
resources in our expansion strategies. As a result, we cannot be certain when or
if we will achieve sustained profitability. Failure to become and remain
profitable may materially and adversely affect the market price of our common
stock and our ability to raise capital and continue operations.

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.

     Our quarterly operating results have fluctuated, and may continue to
fluctuate significantly in the future because of a variety of factors, many of
which are outside our control. These factors include:

     -  the level of Internet usage;

     -  traffic levels on our network;

     -  the demand for advertising on our network, as well as on the Internet in
        general;
                                        4
<PAGE>   12

     -  changes in rates paid for Internet advertising resulting from
        competition or other factors;

     -  our ability to enter into or renew key agreements with our advertisers
        and vendors;

     -  the acceptance of our e-commerce strategy;

     -  the amount and timing of costs related to our marketing efforts;

     -  costs incurred as we expand operations;

     -  our ability to introduce new content offerings and services
        successfully;

     -  seasonality of our business;

     -  new services introduced by us or our competitors;

     -  technical difficulties or system downtime affecting the Internet
        generally or the operation of our network; and

     -  economic conditions specific to the Internet as well as general economic
        conditions.

     Therefore, operating results for any particular quarter might not be
indicative of future operating results. If our e-commerce strategy does not
generate a significant amount of revenue, then we expect to depend primarily on
advertising revenues for the foreseeable future. As a result, the level of
advertising revenues in each quarter is likely to significantly affect our
quarterly revenues and operating results. Our selling and marketing, general and
administrative, and research and development expenses are based on expectations
of future revenues and are relatively fixed in the short term. These expenses
totaled approximately $1.0 million during the three months ended June 30, 1999.
If our advertising and other revenues are lower than expected, we might not be
able to reduce spending quickly. In addition, we intend to significantly
increase operating expenses to expand our business. Any shortfall in revenues
would have a direct impact on operating results for a particular quarter, and
these fluctuations could affect the market price of our common stock.

ATTEMPTS TO EXPAND BY MEANS OF ACQUISITIONS AND STRATEGIC ALLIANCES MAY NOT BE
SUCCESSFUL.

     We intend to expand our operations or market presence by entering into
business combinations, investments, joint ventures or other strategic alliances
both in the United States and internationally. We may not, however, be able to
enter into such combinations and alliances. Furthermore, any such expansion may
harm our operational efficiency, financial performance and relationships with
employees and third parties. Our ability to expand in this way may be limited
due to the many financial and operational risks accompanying these transactions.
For example:

     -  we may have difficulty assimilating the operations, technology and
        personnel of any acquired companies;

     -  the allocation of resources to consummate these transactions may disrupt
        our business;

     -  we may have problems retaining key technical and managerial personnel
        from acquired companies;

     -  we may experience one-time, in-process research and development charges
        as well as ongoing expenses associated with amortization of goodwill and
        other purchased intangible assets;

     -  our stockholders will be diluted if we issue equity to fund these
        transactions;

     -  acquired businesses may initially be unprofitable resulting in our
        assumption of operating losses and increased expenses;

     -  our reputation may be harmed if the Linux/Open Source communities do not
        approve of these transactions; and

     -  our relationships with existing employees, customers and business
        partners may be weakened or terminated as a result of these
        transactions.

                                        5
<PAGE>   13

     Furthermore, we have acquired and intend to continue to acquire
complementary web sites, companies, technologies, services and products as
appropriate opportunities arise. If we identify an appropriate acquisition
opportunity, we might not be able to negotiate the terms of that acquisition
successfully, obtain financing, or integrate the acquired company's personnel
and operations. We may also have difficulty continuing to acquire web sites and
other Internet media properties at the prices historically paid due to the
escalation of Internet media valuations. If we make acquisitions outside of our
core business, assimilating the acquired technology, services or products into
our operations could be difficult. This may cause a disruption in our ongoing
business, distract management and make it difficult to maintain standards,
controls and procedures. In addition, we might be required to incur debt or
issue equity securities to pay for any future acquisitions. If the market price
for acquisition targets increases substantially, our business, results of
operations and financial condition could suffer.

WE RELY ON THE GROWTH OF THE LINUX/OPEN SOURCE MOVEMENT.

     Our business relies on the growth of Linux operating systems. If users
choose a different operating system, and the use of Linux operating systems
decreases or does not grow, then our business, results of operations and
financial condition will suffer. Moreover, if a competitor subverts further
development or adoption of the Open Source software movement by tying the Open
Source modules into a proprietary operating system or developing proprietary
applications that promote their control over the distribution and influence of
Linux operating systems, then our business would be harmed. If a competitor were
able to convert the essentially open nature of Linux operating systems into a
proprietary system, our business, results of operations and financial condition
would suffer.

NEGATIVE REACTION WITHIN THE OPEN SOURCE COMMUNITY TO OUR BUSINESS STRATEGY
COULD HARM OUR REPUTATION AND BUSINESS.

     Some members of the Open Source community have criticized the
commercialization of the Open Source movement. This type of negative reaction,
if widely shared by our visitors, developers or the rest of the Open Source
community, could harm our reputation and diminish the Andover.Net brand. Our
business, results of operations and financial condition could suffer.

WE HAVE A SIGNIFICANT AMOUNT OF NET INTANGIBLE ASSETS.

     We had approximately $2.9 million of net intangible assets as of June 30,
1999. Of these intangible assets $2.3 million relates to goodwill. If we are
unable to recover the recorded amounts of our intangible assets, our business,
results of operations and financial condition will suffer.

WE RELY HEAVILY ON ADVERTISING REVENUES.

     As we execute our Internet strategy, we expect to continue to derive a
majority of our revenue from advertising on our network for the foreseeable
future. We may not generate these revenues if advertisers do not maintain or
increase their current levels of Internet advertising. As there is no industry
standard for the measurement of the effectiveness of Internet advertising,
advertisers that currently advertise on the Internet may reduce or eliminate
this form of advertising, and advertisers that have traditionally relied upon
other advertising media may be reluctant to begin to advertise on the Internet.

     Moreover, widespread adoption of currently available software programs that
limit or prevent advertisements from being delivered to an Internet user's
computer would negatively affect the commercial viability of Internet
advertising and would further deter advertisers from increasing or maintaining
current levels of Internet advertising. Our ability to execute our Internet
strategy successfully will suffer if the market for Internet advertising fails
to develop or develops more slowly than expected.

     Different pricing models are used to sell advertising on the Internet. It
is difficult to predict which, if any, will emerge as the industry standard. If
we cannot quickly and successfully respond to changes in pricing models for
Internet advertising, or identify and adopt any industry standards that may
emerge, we will not be able to attract a sufficient number of advertising
customers, and our Internet advertising strategy will fail.
                                        6
<PAGE>   14

     We expect that it will be important to our advertisers that we accurately
measure the demographics of the visitors to our network. If we are unable to
provide this demographic data for any reason, or if it becomes costly to do so,
then companies may choose not to advertise on our network or may pay less for
advertising on our network.

A SIGNIFICANT PORTION OF OUR REVENUES COMES FROM A LIMITED NUMBER OF
ADVERTISERS.

     We have derived our revenues to date from a limited number of advertising
customers, and we expect that a limited number of advertisers will continue to
account for a significant portion of our revenues. In particular, one advertiser
accounted for approximately 17% of our cash advertising revenues for the six
month period ended June 30, 1999, and our top ten advertisers accounted for an
aggregate of approximately 65% of our revenues for the six month period ended
June 30, 1999. Moreover, we generally sell advertising through the use of
insertion order agreements that are subject to cancellation with no minimum
notice requirement. Current advertisers may not continue to purchase advertising
from us, or we may not be able to attract additional advertisers. If we lose one
or more of the advertisers that represent a material portion of our revenues, or
if we experience the non-payment or late payment of amounts due by a significant
advertiser, our business, results of operations and financial condition could
suffer.

WE MAY FAIL TO DEVELOP AND PROMOTE OUR NETWORK EFFECTIVELY, WHICH MAY PREVENT US
FROM ATTRACTING NEW VISITORS, ADVERTISERS OR E-COMMERCE PARTNERS TO OUR NETWORK.

     Enhancing our network is critical to our ability to increase our revenue.
In order to attract and retain Internet users, advertisers and e-commerce
partners, we intend to substantially increase our expenditures to further
promote and develop our network. Our success in developing and promoting the
Andover.Net network will also depend on our ability to provide high quality
content, features and functionality. If we fail to promote our network
successfully or if visitors to our network or advertisers do not perceive our
services to be useful, current or of high quality, our business, results of
operations and financial condition will suffer.

WE DEPEND ON AN EFFECTIVE DIRECT SALES FORCE.

     We depend on our direct sales force to sell advertising on our network.
This dependence involves the following risks:

     -  the need to increase the size of our direct sales force;

     -  the need to hire, retain, integrate and motivate additional sales and
        sales support personnel;

     -  lack of experience of our new sales personnel; and

     -  competition from other companies in hiring and retaining sales
        personnel.

     Our business, results of operations and financial condition may suffer if
we do not maintain an effective direct sales force.

WE FACE INTENSE COMPETITION IN OUR INDUSTRY.

     The market for Internet-based content offerings and services is relatively
new, intensely competitive and rapidly changing. Since the advent of commercial
services on the Internet, the number of online services competing for users'
attention and spending has proliferated. We expect that competition will
continue to intensify. We compete with other web sites which are aimed
specifically at Linux/Open Source users as well as other companies that direct
some of their overall web content and services at the Internet professional
community. We also compete for circulation with general interest portal and
destination web sites as well as traditional media.

     In addition, the competition in the sale of advertising on the Internet,
including competition from Internet portals and other high-traffic sites, is
intense. This competition has resulted in a wide range of rates quoted by
different vendors for a variety of advertising services. As a result, we cannot
accurately predict the future levels of Internet advertising revenues that we
will realize. The prices for Internet advertising may also
                                        7
<PAGE>   15

be affected by competition among current and future suppliers of Internet
navigational services or web sites and advertising networks. This, together with
competition with other traditional media for advertising placements, could
result in significant price competition, reduced pricing for Internet
advertising and reductions in our advertising revenues.

     The market for Internet based content offerings focusing on the Linux-based
operating system is new and growing rapidly. This market is based on Open Source
software. If one of our Linux-based competitors were to make essential aspects
of this industry proprietary, it could harm our business.

     An important part of our strategy is to develop and increase the reputation
of our brand names. If we are unable to do so, or if our competitors develop
their brand names more successfully than we do, our future growth, business,
results of operations and financial condition would suffer.

     Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we have. These competitors
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements and to devote greater resources to the development,
promotion and sale of their products and services than we can. We might not be
able to compete successfully against our current or future competitors.

WE MIGHT NOT BE ABLE TO ADEQUATELY MANAGE OUR GROWTH.

     Our recent growth has placed, and will continue to place, a significant
strain on our managerial, operational and financial resources. We must continue
to implement and improve our operational and financial systems and expand, train
and manage our employee base to manage this future growth. We also intend to
establish or acquire additional web sites which will create additional
operational and management complexities. In addition, we expect that our
operational and management systems will face increased strain as a result of the
expansion of our content offerings and services. We might not be able to manage
effectively the expansion of our operations and systems, and our procedures and
controls might not be adequate to support our operations. In addition, our
management might not be able to make and execute decisions rapidly enough to
exploit market opportunities for the expansion of our content offerings and
services. If we are unable to manage our growth effectively, our business,
results of operations and financial condition would suffer.

WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY OFFICERS.

     Our future success depends on the continued services of a number of key
officers. The loss of the technical knowledge and industry expertise of any of
these officers could seriously impede our success. If we lose one or a group of
our key employees, particularly to a competitor, our business, financial
condition and results of operations could suffer. Andover.Net does not currently
have a chief financial officer, although it is in active discussions with
qualified individuals to fill this position and will have a chief financial
officer before the closing of this offering.

WE ARE VULNERABLE TO UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM FAILURES,
WHICH MAY RESULT IN
REDUCED VISITOR TRAFFIC ON OUR NETWORK, DECREASED REVENUE AND HARM TO OUR
REPUTATION.

     Substantially all of our communications hardware and other hardware related
to our web sites is located at one location, although we are considering
duplicating them at other facilities within the next six months. Fire, floods,
hurricanes, tornadoes, earthquakes, power loss, telecommunications failures,
break-ins and similar events could damage these systems. In addition, although
we have implemented network security measures, our servers are vulnerable to
computer viruses, electronic break-ins, human error and other similar disruptive
problems which could adversely affect our systems and web sites. Although we try
to prevent unauthorized access to our systems, we cannot eliminate this risk
entirely. We could lose revenue and suffer damage to our reputation if any of
these occurrences affected our systems. Our insurance policies may not
adequately compensate us for any losses that may occur due to failures or
interruptions in our systems.

                                        8
<PAGE>   16

OUR SYSTEMS MAY FAIL OR EXPERIENCE A SLOWDOWN AND OUR USERS DEPEND ON OTHERS FOR
ACCESS TO OUR NETWORK.

     Our network must accommodate a high volume of traffic and deliver
frequently updated information. Our network has in the past, and may in the
future, experience slower response times or decreased traffic for a variety of
reasons. Slower response times can result from general Internet problems,
routing and equipment problems by third-party Internet access providers,
problems with third-party advertising servers and increased traffic to our
servers. Our network could experience interruptions in service due to the
failure or delay in the transmission or receipt of this information. In
addition, our community of Internet users depends on Internet service providers,
online service providers and other web sites' operators for access to our
network. Those providers have experienced outages in the past, and may
experience outages or delays in the future. Moreover, our Internet
infrastructure might not be able to support continued growth of our network. If
we experience any of these problems, our reputation and brand name could suffer,
users might perceive our network as not functioning properly and our business,
results of operations and financial condition could suffer.

OUR SOFTWARE PRODUCTS, AS WELL AS THOSE OF OUR CUSTOMERS AND SUPPLIERS, COULD
FAIL AS A RESULT OF THE YEAR 2000 PROBLEM.

     Our business will suffer if the computer systems we use, as well as the
computer systems used by our Internet users, advertisers and vendors, do not
correctly process the change in year from "99" to "00" on January 1, 2000. We
are working to avoid such problems and to obtain assurances from our
advertisers, vendors and other service providers that they are taking similar
steps. We believe that our computer systems will successfully handle the year
2000 issue, but there may be parts of our computer systems and aspects of the
year 2000 issue, including the potential cost of addressing the year 2000 issue,
that we have failed to consider. If our efforts and the efforts of our users,
advertisers, vendors and other service providers to address the year 2000 issue
are not successful, our business, results of operations and financial condition
could suffer.

OUR FAILURE TO UPDATE AND MODERNIZE OUR INTERNAL SYSTEMS, PROCEDURES AND
CONTROLS MAY PREVENT THE IMPLEMENTATION OF OUR BUSINESS STRATEGIES IN A RAPIDLY
EVOLVING MARKET AND MAY LIMIT OUR FUTURE GROWTH.

     Our operational and financial systems, procedures and controls, which are
adequate for a small private company, may become outdated as we grow. Our
business could suffer if we fail to improve our transaction processing and
reporting systems and procedures, or to expand and train our expanding workforce
quickly enough to maintain a competitive position in our markets. In addition,
failure to quickly replace obsolete systems, procedures and controls could
impede our management's decision-making abilities. This, in turn, may impair our
ability to pursue business opportunities and may hamper future growth.

THE AVAILABILITY OF BARTER TRANSACTIONS MAY BE LIMITED.

     We engage in barter transactions, which reduce cash expenditures in
marketing and other areas, and leverage our advertising inventory. Barter is the
exchange by us of advertising space on our network for reciprocal advertising
space on other web sites. During the nine months ended June 30, 1999, 40% of our
viewable pages contained bartered advertisements. In the future, our ability to
barter may be limited due to a lack of availability or willingness of other web
sites to enter into barter transactions. This could increase our expenses which
could harm our business.

OUR EFFORTS TO PROTECT OUR TRADEMARKS MAY NOT BE ADEQUATE TO PREVENT THIRD
PARTIES FROM MISAPPROPRIATING OUR INTELLECTUAL PROPERTY RIGHTS.

     We use a number of trademarks which contribute to drawing visitors to our
web sites. We have taken steps to register our most important trademarks in the
United States; however, we are uncertain as to whether a trademark owner in the
United States or another country will have superior rights that will result in
our inability to continue to use one or more of our trademarks. The protective
steps we have taken in the past have been, and may in the future continue to be,
inadequate to deter misappropriation of our trademark rights.

                                        9
<PAGE>   17

Although we do not believe that we have suffered any material harm from
misappropriation to date, we may be unable to detect the unauthorized use of, or
take appropriate steps to enforce, our trademark rights. Effective trademark
protection may not be available in every country in which we offer or intend to
offer our products and services. Failure to protect our trademark rights
adequately could damage or even destroy the Andover.Net brand and impair our
ability to compete effectively. Furthermore, defending or enforcing our
trademark rights could result in the expenditure of significant financial and
managerial resources.

THERE ARE A NUMBER OF RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT COULD
HARM OUR BUSINESS.

     One component of our growth strategy is to further expand into
international markets. We have operations in Europe and Asia. Our international
operations are at an early stage of development and have an extremely limited
operating history. In addition, the markets in which we have undertaken
international expansion have technology and online industries that are less
developed than those in the United States.

     There are risks inherent in doing business in international markets, such
as the following:

     - uncertainty of product acceptance by different cultures;

     - unforeseen changes in regulatory requirements;

     - difficulties in staffing and managing multinational operations;

     - government imposed restrictions on the repatriation of funds;

     - currency fluctuations;

     - difficulties in finding appropriate foreign licensees or joint venture
       partners; and

     - potentially adverse tax consequences.

     These factors could harm our ability to successfully operate
internationally and could harm our business.

                     RISKS RELATED TO OUR INTERNET STRATEGY

OUR FUTURE RESULTS DEPEND ON CONTINUED GROWTH IN THE USE OF THE INTERNET.

     Our market is new and rapidly evolving. Our business could suffer if
Internet usage does not continue to grow. Internet usage may be inhibited for a
number of reasons, including:

     -  inadequate network infrastructure;

     -  security concerns;

     -  inconsistent quality of service;

     -  lack of availability of cost-effective and high-speed service; and

     -  changes in government regulation of the Internet.

     If Internet usage grows, the Internet infrastructure might not be able to
support the demands placed on it by this growth or its performance and
reliability may decline. In addition, future outages and other interruptions
occurring throughout the Internet could lead to decreased use of our network and
would therefore harm our business.

WE ARE VULNERABLE TO CLAIMS THAT OUR PRODUCTS INFRINGE THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS PARTICULARLY BECAUSE OUR PRODUCTS ARE COMPRISED OF MANY DISTINCT
SOFTWARE COMPONENTS DEVELOPED BY THOUSANDS OF INDEPENDENT PARTIES.

     We may be exposed to future litigation based on claims that our content
infringes on the intellectual property rights of others. This risk is
exacerbated by the fact that independent parties over whom we exercise no
supervision or control develop most of the code in our products. Claims of
infringement could require us

                                       10
<PAGE>   18

to obtain licenses from third parties in order to continue offering our
products. In addition, an adverse legal decision affecting our intellectual
property, or the use of significant resources to defend against this type of
claim, could place a significant strain on our financial resources and harm our
reputation.

WE MAY BE SUED AS A RESULT OF INFORMATION PUBLISHED OR POSTED ON OR ACCESSIBLE
FROM OUR NETWORK.

     We may be subjected to claims for defamation, negligence, copyright or
trademark infringement or other claims relating to the information we publish on
our network. These types of claims have been brought, sometimes successfully,
against online services in the past, and can be costly to defend. We may also be
subjected to claims based on content that is accessible from our network through
links to other web sites or through content and materials that visitors to our
network may post. We believe that the scope and amount of our commercial and
general liability insurance is appropriate, given our current financial
position. However, this insurance may not adequately protect us against these
types of claims. We have not been a party to any lawsuit of this type to date.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS AND
RISKS TO DOING BUSINESS ON THE INTERNET.

     There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing and the
characteristics and quality of products and services. For example, although it
was held unconstitutional, the Telecommunications Act of 1996 prohibited certain
types of information and content from being transmitted over the Internet.
Several other nations have taken actions to restrict the free flow of material
deemed to be objectionable on the Internet. In addition, local telephone
carriers have argued before the Federal Communications Commission that Internet
service providers and online service providers should be required to pay fees
for access to local telephone networks in a manner similar to long distance
telephone carriers. If these efforts are successful, costs for Internet access
could increase sharply. Moreover, it may take years to determine the extent to
which existing laws relating to issues such as property ownership, libel and
personal privacy are applicable to the Internet. Any new laws or regulations
relating to the Internet could harm our business.

REGULATION COULD REDUCE THE VALUE OF OUR DOMAIN NAMES.

     We own the Internet domain name "andover.net" as well as numerous other
domain names both in the United States and internationally. Internet regulatory
bodies regulate domain names. The regulation of domain names in the United
States and in foreign countries is subject to change. Regulatory bodies could
establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result, we
might not acquire or maintain the "andover.net" or comparable domain names in
all the countries in which we conduct business, which could harm our business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear and still
evolving. Therefore, we might be unable to prevent third parties from acquiring
domain names that infringe or otherwise decrease the value of our trademarks and
other proprietary rights. If this occurs, our business, results of operations
and financial condition would suffer.

THE INTERNET INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE.

     Rapid technological developments, evolving industry standards and user
demands, and frequent new product introductions and enhancements characterize
the market for Internet products and services. These market characteristics are
exacerbated by the emerging nature of the market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Our future success will depend on our ability to continually
improve our content offerings and services. In addition, the widespread adoption
of developing technologies could require fundamental and costly changes in our
technology and could adversely affect the nature, viability and measurability of
Internet-based advertising, which could harm our business.

                                       11
<PAGE>   19

                         RISKS RELATED TO THIS OFFERING

THERE HAS BEEN NO PUBLIC TRADING MARKET FOR OUR STOCK PRIOR TO THIS OFFERING AND
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE.

     There has not previously been a public market for our common stock. We
cannot predict the extent to which investor interest in Andover.Net will lead to
the development of a trading market or how liquid any trading market might
become. The initial public offering price for the shares of our common stock
might not reflect prices that will prevail in the trading market. The stock
market has experienced extreme price and volume fluctuations, and the market
prices of securities of technology companies, particularly Internet-related
companies, have been highly volatile. Investors might not be able to resell
their shares at or above the initial public offering price. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such a
company. Such litigation could result in substantial costs and a diversion of
our management's attention and resources.

CONCENTRATION OF OWNERSHIP WILL LIMIT YOUR ABILITY TO INFLUENCE CORPORATE
MATTERS.

     Immediately following this offering, our directors, executive officers and
their affiliates will beneficially own approximately 48.0% of our outstanding
common stock. These stockholders could significantly influence the outcome of
actions taken by us that require stockholder approval. For example, these
stockholders could significantly influence the election of our directors, delay
or prevent a transaction in which stockholders might receive a premium over the
prevailing market price for their shares and control changes in management.

PROVISIONS OF OUR CHARTER AND BY-LAWS MAY DELAY OR PREVENT TRANSACTIONS THAT
MANY STOCKHOLDERS MAY FAVOR.

     Provisions of our certificate of incorporation and by-laws may discourage,
delay or prevent a merger or acquisition that stockholders may consider
favorable, including transactions in which you might otherwise receive a premium
for your shares. These provisions include:

     -  authorizing the issuance of "blank check" preferred stock without any
        need for action by stockholders;

     -  providing for a classified board of directors with staggered three-year
        terms;

     -  eliminating the ability of stockholders to call special meetings of
        stockholders;

     -  prohibiting stockholder action other than by unanimous written consent;
        and

     -  establishing advance notice requirements for nominations for election to
        the board of directors or for proposing matters that can be acted on by
        stockholders at stockholder meetings.

     Some provisions of Delaware law may also discourage, delay or prevent
someone from acquiring us or merging with us.

OUR STOCK PRICE MAY BE EXTREMELY VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR
SHARES AT OR ABOVE THE INITIAL OFFERING PRICE.

     Following this offering, the price at which our common stock will trade may
be extremely volatile and may fluctuate significantly. The public market may not
agree with or accept the valuation determined in connection with this offering.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
securities of technology companies, particularly software and Internet
companies. After this offering, therefore, you might not be able to resell your
shares at or above the initial public offering price.

                                       12
<PAGE>   20

A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK COULD BE SOLD INTO THE PUBLIC
MARKET SOON AFTER THIS OFFERING, WHICH COULD DEPRESS OUR STOCK PRICE.

     Once a trading market develops for our common stock, many of our
stockholders will have an opportunity to sell their stock for the first time.
2,946,906 shares will become eligible for sale in the public market at various
dates beginning 90 days after the date of this prospectus. Sales of a
substantial number of shares of common stock in the public market, or the threat
that substantial sales might occur, could cause the market price of our stock to
decrease significantly. These factors could also make it difficult for us to
raise additional capital by selling stock.

YOU WILL INCUR IMMEDIATE DILUTION IN THIS OFFERING.

     The initial public offering price of our common stock is substantially
higher than the net tangible book value per share of the outstanding common
stock immediately after this offering. Therefore, if you purchase our common
stock in this offering, you will incur immediate dilution of $9.78 in the net
tangible book value per share of common stock from the price you pay for such
common stock (based upon an assumed initial public offering price of $13.50 per
share).

                                       13
<PAGE>   21

               SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

     This prospectus contains "forward looking statements." These statements may
include statements regarding:

     -  our business strategy;

     -  plans for hiring additional personnel;

     -  entering into business combinations strategic alliances;

     -  adequacy of anticipated sources of funds, including the proceeds from
        this offering; and

     -  other statements about our plans, objectives, expectations and
        intentions contained in this prospectus that are not historical facts.

     When used in this prospectus, the words "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions are
generally intended to identify forward looking statements. Because these forward
looking statements involve risks and uncertainties, actual results could differ
materially from those express or implied by these forward looking statements for
a number of reasons, including those discussed under "Risk Factors" and
elsewhere in this prospectus. We assume no obligation to update any forward
looking statements.

                                       14
<PAGE>   22

                                USE OF PROCEEDS

     We estimate the net proceeds from the sale of the 4,000,000 shares of
common stock offered by us will be $49,625,000, after deducting the estimated
underwriting discount and offering expenses. We intend to use a portion of the
net proceeds of this offering to redeem our outstanding Series A redeemable
preferred stock in the amount of $4,713,000. We expect to use the remainder of
the net proceeds for potential strategic acquisitions and general corporate
purposes, including working capital and expansion of sales and marketing and
research and development activities. The amounts actually expended for such
working capital purposes may vary significantly and will depend on a number of
factors, including the amount of our future revenues and the other factors
described under "Risk Factors." Accordingly, our management will retain broad
discretion in the allocation of the net proceeds of this offering. Pending these
uses, we intend to invest the proceeds in short-term, investment-grade,
interest-bearing investments.

                                DIVIDEND POLICY

     We have never declared or paid cash dividends on our capital stock. We
currently anticipate that we will retain all available funds for use in our
business and do not anticipate paying any cash dividends in the foreseeable
future. Any determination to pay dividends in the future will be at the
discretion of our board of directors and will depend upon our financial
condition, results of operations and capital requirements.

                                       15
<PAGE>   23

                                 CAPITALIZATION

     The following table sets forth our capitalization as of June 30, 1999. Our
capitalization is presented:

     -  on an actual basis;

     -  on a pro forma basis to give effect to (a) the recent issuance and sale
        of 480,354 shares of Series B convertible preferred stock on September
        15, 1999 and the concurrent automatic conversion of all convertible
        notes into 120,214 shares of Series B convertible preferred stock and
        (b) the automatic conversion of the Series B convertible preferred stock
        into 3,017,138 shares of common stock; and

     -  on a pro forma as adjusted basis to reflect (a) our receipt of the net
        proceeds from the sale of 4,000,000 shares of common stock in this
        offering at an assumed initial public offering price of $13.50 per share
        after deducting the estimated underwriting discount and assumed offering
        expenses and (b) the automatic redemption of all outstanding shares of
        Series A redeemable preferred stock including accrued dividends for
        $4,713,000 upon the closing of this offering.

<TABLE>
<CAPTION>
                                                                      AS OF JUNE 30, 1999
                                                             --------------------------------------
                                                                                        PRO FORMA
                                                              ACTUAL     PRO FORMA     AS ADJUSTED
                                                             --------    ----------    ------------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                          <C>         <C>           <C>
Current portion of long-term debt..........................  $   664      $   664        $   664
Convertible note payable...................................    2,090           --             --
Long-term debt, less current portion.......................      487          487            487
Series A redeemable preferred stock, $.01 par value; 325
     shares authorized; 322 shares issued and outstanding,
     actual and pro forma; 0 shares issued and outstanding,
     pro forma as adjusted.................................    4,713        4,713             --
Series B convertible redeemable preferred stock, $.01 par
     value; 700 shares authorized; 0 shares issued and
     outstanding actual, pro forma and pro forma as
     adjusted..............................................       --           --             --

Stockholders' equity (deficit):

Common Stock, $.01 par value authorized; 100,000 shares
     authorized; 7,951 issued and outstanding, actual;
     10,968 shares issued and outstanding, pro forma;
     14,968 shares issued and outstanding, pro forma as
     adjusted..............................................       79          110            150
Additional paid in capital.................................    2,338       28,755         78,340
Deferred compensation......................................     (863)        (863)          (863)
Accumulated deficit........................................   (4,775)     (19,033)       (19,033)
                                                             -------      -------        -------
          Total stockholders' equity (deficit).............   (3,221)       8,969         58,594
                                                             -------      -------        -------
          Total capitalization.............................  $ 4,733      $14,833        $59,745
                                                             =======      =======        =======
</TABLE>

     Common stock outstanding after this offering excludes 1,000,543 shares
issuable upon exercise of stock options outstanding as of June 30, 1999.

     See "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements and
Notes thereto included in this prospectus.

                                       16
<PAGE>   24

                                    DILUTION

     The pro forma net tangible book value of the common stock as of June 30,
1999 was $6,049,000, or $0.55 per share, after giving effect to:

     - the recent issuance and sale of 480,354 shares of Series B convertible
       preferred stock on September 15, 1999;

     - the concurrent automatic conversion of all convertible notes into 120,214
       shares of Series B convertible preferred stock;

     - the automatic conversion of the Series B convertible preferred stock into
       3,017,138 shares of common stock;

     After giving effect to the sale of the common stock in this offering at an
assumed initial public offering price of $13.50 per share and after deducting
the estimated underwriting discount and expenses of this offering, the adjusted
pro forma net tangible book value at June 30, 1999, would have been $55,672,000,
or $3.72 per share.

     Pro forma net tangible book value per share before this offering has been
determined by dividing our pro forma net tangible book value (total tangible
assets less total liabilities) by the pro forma number of shares of common stock
outstanding at June 30, 1999. This offering will result in an increase in pro
forma net tangible book value per share of $3.17 to existing stockholders and
dilution in pro forma net tangible book value per share of $9.78 to new
investors who purchase common stock in this offering. Dilution is determined by
subtracting pro forma net tangible book value per share from the assumed initial
public offering price of $13.50. The following table illustrates this dilution.

<TABLE>
<S>                                                             <C>      <C>
Assumed initial public offering price per share.............             $13.50
  Pro forma net tangible book value per share at June 30,
     1999...................................................    $0.55
  Increase attributable to sale of common stock in this
     offering (1)...........................................     3.17
                                                                -----
Pro forma net tangible book value per share after this
  offering..................................................               3.72
                                                                         ------
Dilution of net tangible book value per share to persons who
  purchase shares in this offering..........................             $ 9.78
                                                                         ======
</TABLE>

---------------
(1) After deduction of the estimated underwriting discount and expenses totaling
    $4,375,000.

     If the underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $4.06 per
share, the increase in net tangible book value per share to existing
stockholders would be $3.51 per share and the dilution to persons who purchase
common stock in this offering would be $9.44 per share.

     The table below summarizes, on a pro forma basis, as of June 30, 1999, the
following differences between our existing stockholders and new investors
purchasing our common stock in this offering:

     - the number of shares purchased from Andover.Net;

     - the aggregate cash consideration paid; and

     - the average price per share paid.

<TABLE>
<CAPTION>
                                       SHARES PURCHASED        TOTAL CONSIDERATION
                                    ----------------------    ----------------------    AVERAGE PRICE
                                      NUMBER       PERCENT      AMOUNT       PERCENT      PER SHARE
                                    -----------    -------    -----------    -------    -------------
<S>                                 <C>            <C>        <C>            <C>        <C>
Existing stockholders.............   10,968,913       73%     $12,924,000       19%        $ 1.18
New investors.....................    4,000,000       27       54,000,000       81          13.50
                                    -----------      ---      -----------      ---         ------
     Total........................   14,968,913      100%     $66,924,000      100%
                                    ===========      ===      ===========      ===
</TABLE>

                                       17
<PAGE>   25

     This information is based on pro forma shares outstanding as of June 30,
1999 and excludes:

     - 1,000,542 shares of common stock reserved for issuance pursuant to
       outstanding options granted under our 1995 stock option plan and our 1999
       stock option plan;

     - 1,736,228 shares of common stock reserved for issuance pursuant to future
       grants under our 1999 stock option plan; and

     - 587,630 shares of common stock reserved for issuance as consideration for
       recent acquisitions based on an assumed initial public offering price of
       $13.50, 171,193 of which will be issued immediately following this
       offering.

                                       18
<PAGE>   26

                            SELECTED FINANCIAL DATA

     The selected financial data of Andover.Net set forth below as of September
30, 1998 and June 30, 1999 and for each of the years ended September 30, 1997,
1998 and the nine months ended June 30, 1999 are derived from financial
statements of Andover.Net audited by Arthur Andersen LLP, independent public
accountants, which are included elsewhere in this prospectus. The selected
financial data as of September 30, 1996 and 1997, and for the year ended
September 30, 1996 are derived from audited financial statements of Andover.Net
which are not included in this prospectus. The selected financial data as of
September 30, 1994 and 1995, the nine months ended June 30, 1998 and the years
ended September 30, 1994 and 1995 are derived from unaudited financial
statements of Andover.Net which are not included in this prospectus and which
include, in the opinion of Andover.Net, all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of its
financial position and the results of its operations for those periods.
Operating results for the nine months ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 1999. Pro forma statements of operations data gives effect to the
conversion of convertible notes into Series B convertible preferred stock in
September 1999, the automatic conversion of the Series B convertible preferred
stock into common stock and the effects of the acquisitions of Slashdot.org and
Animation Factory. See Note 2(j) of the Financial Statements or Notes thereto
for discussion of the pro forma basis and diluted net loss per share. The pro
forma balance sheet data as of June 30, 1999 reflects the conversion of all
convertible notes into Series B convertible preferred stock, then the automatic
conversion of the Series B convertible preferred stock into common stock. The
effects of the Slashdot.org and Animation Factory acquisitions are included in
the actual June 30, 1999 balance sheet data below, as such acquisitions were
consummated before June 30, 1999. The data should be read in conjunction with
the Financial Statements and the Notes thereto and with Management's Discussion
and Analysis of Financial Condition and Results of Operations appearing
elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                                                 NINE MONTHS ENDED
                                                        YEAR ENDED SEPTEMBER 30,                      JUNE 30,
                                               ------------------------------------------   ----------------------------
                                                                                                               PRO FORMA
                                                1994     1995     1996     1997     1998     1998     1999       1999
                                               ------   ------   ------   ------   ------   ------   -------   ---------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>      <C>      <C>      <C>      <C>      <C>      <C>       <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
  Advertising................................  $   --   $   --   $   --   $  469   $1,290   $  986   $ 1,109    $ 1,402
  Software...................................     889      989      316      272       --       --        --        215
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Total revenues...........................     889      989      316      741    1,290      986     1,109      1,617
Cost of revenues:
  Editorial content and related..............      --       --       --      136      327      255       430        548
  Software...................................     316      376       29      167       --       --        --        155
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Total cost of revenues...................     316      376       29      303      327      255       430        703
                                               ------   ------   ------   ------   ------   ------   -------    -------
Gross profit.................................     573      613      287      438      963      731       679        914
Operating expenses:
  Sales and marketing........................     401      301      339      496      744      582     1,118      1,118
  General and administrative.................     192      311      521      338      360      290       678      4,234
  Research and development...................      --       --       --      194      304      200       472        472
  Amortization of deferred compensation......      --       --       --       --       --       --       720        720
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Total operating expenses.................     593      612      860    1,028    1,408    1,072     2,988      6,544
                                               ------   ------   ------   ------   ------   ------   -------    -------
Loss from operations.........................     (20)       1     (573)    (590)    (445)    (341)   (2,309)    (5,630)
Interest income..............................      --       --        3        1       20       16        59         82
Interest expense.............................      --      (35)     (84)     (75)     (49)     (49)       --     (1,787)
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Net loss.................................  $  (20)  $  (34)  $ (654)  $ (664)  $ (474)  $ (374)  $(2,250)   $(7,335)
                                               ======   ======   ======   ======   ======   ======   =======    =======
Accrued dividends and issuance costs on
  redeemable preferred stock.................      --       --       --       41      134       89       260        260
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Net loss attributable to common
      stockholders...........................  $  (20)  $  (34)  $ (654)  $ (705)  $ (608)  $ (463)  $(2,510)   $(7,595)
                                               ======   ======   ======   ======   ======   ======   =======    =======
Basic and diluted net loss per share.........  $(1.00)  $(1.70)  $(0.38)  $(0.29)  $(0.12)  $(0.09)  $ (0.36)   $ (1.06)
                                               ======   ======   ======   ======   ======   ======   =======    =======
Basic and diluted weighted average common
  shares outstanding.........................      20       20    1,763    2,468    5,110    5,106     6,990      7,169
                                               ======   ======   ======   ======   ======   ======   =======    =======
Pro forma basic and diluted net loss per
  share......................................                                      $(0.12)           $ (0.32)   $ (1.06)
                                                                                   ======            =======    =======
Pro forma basic and diluted weighted average
  common shares outstanding..................                                       5,110              6,992      7,171
                                                                                   ======            =======    =======
</TABLE>

                                       19
<PAGE>   27

<TABLE>
<CAPTION>
                                                                 AS OF SEPTEMBER 30,                  AS OF JUNE 30, 1999
                                                   ------------------------------------------------   -------------------
                                                     1994      1995      1996      1997      1998     ACTUAL    PRO FORMA
                                                   --------   -------   -------   -------   -------   -------   ---------
                                                                               (IN THOUSANDS)
<S>                                                <C>        <C>       <C>       <C>       <C>       <C>       <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................      $  4      $  2     $ 128      $837      $196    $1,610    $11,710
Working capital..................................       (41)      (72)      155       710       230    (1,146)    11,044
Total assets.....................................        96       142       404     1,099       533     5,170     15,270
Long-term obligations, less current portion......        --        --        51        --        --       487        487
Redeemable convertible preferred stock...........        --        --       988     2,228     2,362     4,713      4,713
Stockholders' equity (deficit)...................       (30)      (64)     (870)   (1,503)   (2,109)   (3,221)     8,969
</TABLE>

                                       20
<PAGE>   28

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

     You should read the following discussion and analysis in conjunction with
the financial statements and related notes included elsewhere in this
prospectus. Except for historical information, the discussion in this prospectus
contains certain forward looking statements that involve risks and
uncertainties. The principal factors that could cause or contribute to
differences in our actual results are discussed in the section titled "Risk
Factors."

OVERVIEW

     Andover.Net is a network of web sites that provides an independent,
unbiased source for content, community and commerce for the Linux and, more
generally, the Open Source communities. We provide products, online tools, news
and other services for programmers, software developers, web site designers,
technology managers and corporate buyers.

     We were incorporated in Massachusetts in 1992 as Andover Advanced
Technologies, Inc. In September 1999, Andover Advanced Technologies, Inc. was
merged into its wholly-owned subsidiary, Andover.Net, Inc., a Delaware
corporation, and we changed our fiscal year end from September 30 to December
31.

     Prior to fiscal 1996, we were a software publisher of multimedia and web
authoring tools. We derived revenues from distributing and marketing graphic
arts and multimedia software developed by others, primarily to large
distributors and retailers. In fiscal 1996, we launched our first web site,
DaveCentral. During fiscal 1997, we transitioned from a software publisher to a
web site publisher to participate in the commercial opportunities emerging on
the Internet. Since March 1997, all of our activities have been focused on
expanding our Internet business.

     We currently generate substantially all of our revenue from advertisements
on our network of web sites. Our current advertising products include standard
banner advertising, display advertisements, megabanners and web site and
newsletter sponsorships. We recognize advertising revenue in the period that the
advertising is displayed, provided that we deem the collectibility of the
resulting receivable as probable. We sell advertising through our nationwide
direct media sales force.

     We enter into barter transactions with other web sites in order to increase
traffic to our network of web sites and to strengthen the Andover.Net brand. A
barter transaction is the exchange by us of advertising space on our web sites
for reciprocal advertising space on the web sites of others. We record revenues
only on the portion of our barter transactions which could be paid in cash by
the advertiser if a barter arrangement were not in place. Otherwise, we do not
recognize barter revenue. We record revenue from these barter transactions, and
the corresponding advertising expense, based upon the fair market value of the
advertising space exchanged. Revenues from barter transactions, representing
advertising space given, is recognized as income when advertisements are
delivered on our network. Barter expense, representing advertising space
received, is recognized when our advertisements are run on other companies' web
sites, which is typically in the same period when the related barter revenue is
recognized.

     We have incurred losses since our inception. As of June 30, 1999, we had an
accumulated deficit of $4.8 million and net operating loss carry-forwards in the
amount of $3.1 million. We anticipate incurring additional expenses to increase
our product development and sales and marketing efforts, to pursue additional
strategic acquisitions and to support the growth of the organization. As a
result, we believe that we will incur additional losses in the foreseeable
future.

RECENT DEVELOPMENTS

     Sale of Series B Convertible Preferred Stock.  Andover.Net issued 600,568
shares of Series B convertible preferred stock on September 15, 1999. Of these
shares, 480,354 shares were issued and sold for consideration of $10.1 million
and 120,214 shares were issued to holders of convertible notes in consideration
for the conversion of approximately $2.1 million of principal and interest. The
price per share in the private
                                       21
<PAGE>   29

placement was $21.03. The Series B convertible preferred stock is convertible
into common stock immediately upon issuance at the option of the holder and will
convert into 3,017,138 shares of common stock upon the closing of this offering.
This conversion will result in an effective purchase price of $4.05 per share of
common stock. The difference between the offering price and the deemed effective
purchase price resulted in a beneficial conversion feature of approximately $2.1
million which will be reflected as interest expense in the statement of
operations in the period in which this offering occurs.

     Acquisition of Slashdot.org. In June 1999, we acquired certain assets and
assumed certain liabilities relating to the Slashdot.org web site from
BlockStackers, Inc. for consideration consisting of a $1.5 million cash payment
made at the closing, and contingent payments of $2.0 million of stock valued at
the initial public offering price issuable upon the closing of this offering, up
to $3.5 million in cash and up to $5.0 million in stock valued at the initial
public offering price and payable during the two years following this offering.
The amount of cash and stock consideration that is contingent solely on the
continued employment of the principals of Slashdot.org in the amount of $6.3
million will be recorded as a compensation charge ratably over the period of the
payments. The amount of stock consideration that is contingent on the
achievement of performance milestones and the continued employment of the
principals of Slashdot.org will be recognized upon the achievement of these
milestones. To the extent any stock consideration is issued, we will record a
non-cash compensation charge based on the fair value of the shares issued at
such time.

     Acquisition of Animation Factory.  In June 1999, we acquired certain assets
and assumed certain liabilities of Eclipse Digital Imaging, Inc., including the
graphical and artistic web site known as Animation Factory, for consideration
consisting of a $250,000 cash payment made at the closing, $200,000 of stock
valued at the initial offering price issuable upon the closing of this offering
and payments of up to $1.25 million in cash and contingent payments of up to
$400,000 in stock valued at the initial public offering price. These payments
are payable during the two years following this offering. The amount of the
stock consideration that is contingent solely on the continued employment of the
principals of Animation Factory in the amount of $204,000 will be recorded as a
compensation charge ratably over the period of the payments. The amount of the
stock consideration that is contingent on the achievement of performance
milestones and the continued employment of the principals of Animation Factory
will be recognized upon the achievement of these milestones. To the extent any
stock consideration is issued, we will record a non-cash compensation charge
based on the fair value of the shares issued at such time.

     Acquisition of Freshmeat.net.  In August 1999, we acquired the assets and
assumed the liabilities relating to the Freshmeat.net web site from a business
owned by Patrick Lenz for consideration consisting of a $367,000 cash payment
made at the closing, $111,111 of stock valued at the initial public offering
price issuable upon the closing of this offering and contingent payments of up
to $300,000 in cash and $222,222 in stock valued at the initial public offering
price and payable during the two year period following this offering. The stock
payments are contingent on the continued employment of Mr. Lenz. To the extent
any stock consideration is issued, we will record a non-cash compensation charge
based on the fair value of the shares issued at such time.

AMORTIZATION OF DEFERRED COMPENSATION

     In the nine months ended June 30, 1999, we recorded total deferred stock
compensation of $1.6 million in connection with stock option grants totaling
472,632 options. This amount represents the difference between the exercise
price of stock option grants and the deemed fair value of our common stock at
the time of such grants. Should the actual offering price of this offering
increase, we may record additional deferred compensation expense. We are
amortizing this amount over the vesting periods of the stock options, which will
result in amortization expense of $720,000 for the nine months ended June 30,
1999, $65,000 in the three months ended September 30, 1999, $259,000 in 2000,
$259,000 in 2001, $243,000 in 2002 and $39,000 in 2003. In addition, we
anticipate recording additional deferred compensation of approximately $4.5
million related to the 430,759 options granted in September 1999 which will be
recognized as an expense over the vesting period of these options.

                                       22
<PAGE>   30

     Certain options contain provisions that accelerate the vesting to 100% upon
an initial public offering. Upon the closing of this offering, additional
compensation expense of approximately $800,000 relating to 260,459 options will
be recorded as compensation expense in the quarter in which this offering
occurs. The remaining deferred compensation will be amortized over the remaining
vesting period.

NET OPERATING LOSS CARRYFORWARDS

     As of June 30, 1999, we had net operating loss carryforwards of $3.1
million. The net operating loss carryforwards will expire at various dates
through 2019, if not utilized. The Tax Reform Act of 1986 imposes substantial
restrictions on the utilization of net operating loss carryforwards in the event
of an "ownership change" of a corporation. Our ability to utilize net operating
loss and tax credit carryforwards on an annual basis would be limited as a
result of an "ownership change" as defined by Section 382 of the Internal
Revenue Code. We have completed several financings since inception and believe
that we have incurred ownership changes. We do not believe the ownership changes
to date will have a material impact on our ability to utilize our net operating
loss and tax credit carryforwards.

RESULTS OF OPERATIONS

     The following table sets forth certain statements of operations data as a
percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED
                                           YEAR ENDED SEPTEMBER 30,                  JUNE 30,
                                  ------------------------------------------    ------------------
                                  1994     1995      1996     1997     1998      1998       1999
                                  -----    -----    ------    -----    -----    ------     -------
                                                   (AS A PERCENTAGE OF REVENUES)
<S>                               <C>      <C>      <C>       <C>      <C>      <C>        <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................  100.0%   100.0%    100.0%   100.0%   100.0%   100.0%      100.0%
Cost of revenues................   35.5     38.0       9.2     40.9     25.3     25.9        38.8
                                  -----    -----    ------    -----    -----    -----      ------
Gross profit....................   64.5     62.0      90.8     59.1     74.7     74.1        61.2
Operating expenses:
     Sales and marketing........   45.1     30.4     107.3     66.9     57.7     59.0       100.8
     General and
       administrative...........   21.6     31.4     164.9     45.6     27.9     29.4        61.1
     Research and development...     --       --        --     26.2     23.6     20.3        42.6
     Amortization of deferred
       compensation.............     --       --        --       --       --       --        64.9
                                  -----    -----    ------    -----    -----    -----      ------
          Total operating
            expenses............   66.7     61.8     272.2    138.7    109.2    108.7       269.4
                                  -----    -----    ------    -----    -----    -----      ------
Loss from operations............   (2.2)     0.2    (181.4)   (79.6)   (34.5)   (34.6)     (208.2)
Interest income.................     --       --       0.9      0.1      1.6      1.6         5.3
Interest expense................     --     (3.5)    (26.6)   (10.1)    (3.8)    (5.0)         --
                                  -----    -----    ------    -----    -----    -----      ------
Net loss........................   (2.2)%   (3.3)%  (207.1)%  (89.6)%  (36.7)%  (38.0)%    (202.9)%
                                  =====    =====    ======    =====    =====    =====      ======
</TABLE>

NINE MONTHS ENDED JUNE 30, 1998 AND 1999

     Revenues.  Substantially all of the revenues for the nine months ended June
30, 1998 and 1999 were from advertisements on our network of web sites. Since
our acquisitions of Slashdot.org, Freshmeat.net and Animation Factory occurred
on or after June 28, 1999, revenues for the nine months ended June 30, 1998 and
1999 did not include advertising revenues generated from these sites. Revenues
increased 12.5% from $986,000 in the nine months ended June 30, 1998 to $1.1
million in the nine months ended June 30, 1999. The increase was primarily due
to an increase in banner advertising and sponsorships on our network of web
sites. There were no barter revenues in the nine months ended June 30, 1998. In
the nine months ended June 30, 1999, revenues from barter transactions were
$218,000, or 19.7% of revenues.

                                       23
<PAGE>   31

     Cost of Revenues. Cost of revenues primarily consists of expenses
associated with editorial content, communications infrastructure and web site
hosting. Cost of revenues increased from $255,000, or 25.9% of revenues, in the
nine months ended June 30, 1998 to $430,000, or 38.8% of revenues, in the nine
months ended June 30, 1999. The increase in cost of revenues reflects additional
operations personnel and expenses for freelance contributors for editorial
content, as well as higher costs for hosting our network of web sites. We
anticipate that cost of revenues will continue to increase in absolute dollars
as we continue to enhance our content offerings and services and expand the
number of data centers hosting our web sites.

     Sales and Marketing Expenses. Sales and marketing expenses primarily
consist of advertising and promotional expenditures and payroll, sales
commissions and related expenses for personnel engaged in sales and marketing
activities. Sales and marketing expenses increased from $582,000, or 59.0% of
revenues, in the nine months ended June 30, 1998 to $1.1 million, or 100.8% of
revenues, in the nine months ended June 30, 1999. The increase in expenses
relates to added sales personnel and an increase in advertising and promotional
expenses. In January 1999, we began to transition to a direct sales force.
Previously, we had relied primarily on a limited number of independent,
non-exclusive sales representatives to sell advertising for us. Between January
and June of 1999, we expanded our direct sales personnel from three to ten. In
addition to the increase in sales personnel, we substantially increased our
advertising and promotional expenditures in the nine months ended June 30, 1999.
Included in sales and marketing expenses for the nine months ended June 30, 1999
were non-cash advertising costs of $218,000 from barter transactions. There were
no barter advertising costs in the nine months ended June 30, 1998. We
anticipate our sales and marketing expenses will substantially increase in the
future as we continue to expand our direct sales force and invest in advertising
and promotions to strengthen the Andover.Net brand.

     General and Administrative Expenses.  General and administrative expenses
primarily consist of payroll and related costs of management and administrative
personnel, as well as professional fees and facility costs. General and
administrative expenses increased from $290,000, or 29.4% of revenues, in the
nine months ended June 30, 1998 to $678,000, or 61.1% of revenues, in the nine
months ended June 30, 1999. The increase in expenses largely reflects the hiring
of additional management and administrative personnel, employee recruiting costs
and an increase in facility costs due to our move to larger, leased office space
in May 1999. We anticipate that our general and administrative expenses will
continue to increase in absolute dollars as we plan on hiring additional
personnel and will incur costs associated with being a public company, including
directors' and officers' liability insurance and higher professional service
fees.

     Research and Development Expenses.  Research and development expenses
primarily consist of payroll and related costs for developing our web sites,
including our internal banner advertising and page statistic systems, as well as
developing our online web applications, or e-Tools. Research and development
expenses increased from $200,000, or 20.3% of revenues, in the nine months ended
June 30, 1998 to $472,000, or 42.6% of revenues, in the nine months ended June
30, 1999. The increase in research and development expenses largely reflects
additions to our research and development staff of direct and contract
personnel. We anticipate that these expenses will increase significantly as we
continue to expand our technical staff to handle the integration of future
acquisitions and development of new internal systems and e-Tools.

     Interest Income and Expense.  Interest income increased from $16,000 in the
nine months ended June 30, 1998 to $59,000 in the nine months ended June 30,
1999. Interest expense was $49,000 in the nine months ended June 30, 1998. The
increase in interest income reflects the higher average cash balances resulting
from the private sale of equity securities during the nine months ended June 30,
1999. Interest expense relates to a loan from two stockholders which was repaid
in early fiscal 1998.

     Provision for Income Taxes.  We had no provision for income taxes for the
nine months ended June 30, 1998 and 1999 because we incurred losses during these
periods.

FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND 1998

     Revenues.  Revenues increased 75.4% from $741,000 in the fiscal year ended
September 30, 1997 to $1.3 million in the fiscal year ended September 30, 1998.
In fiscal 1997, we transitioned our business activities from software publishing
to web site publishing. Revenues from software publishing in fiscal 1997
                                       24
<PAGE>   32

were $272,000 and initial advertising revenues on our web sites were $469,000.
In fiscal 1998, substantially all of our revenues of $1.3 million represent
advertising on our network of web sites. The increase in advertising revenues in
fiscal 1998 was a result of increased sales of banner advertising and
sponsorships from our expanding base of customers.

     Cost of Revenues.  Cost of revenues increased from $303,000, or 40.9% of
revenues, in the fiscal year ended September 30, 1997 to $327,000, or 25.3% of
revenues, in the fiscal year ended September 30, 1998. In fiscal 1997, costs of
advertising revenues were $136,000, or 29.0% of advertising revenues, and costs
of software publishing revenues were $167,000, or 61.4% of software publishing
revenues. In fiscal 1998, costs of revenues related entirely to advertising
revenues. The lower costs of advertising revenues, as a percentage of
advertising revenues, in fiscal 1998 was due to lower proportionate fixed costs
on the higher year-to-year revenues.

     Sales and Marketing Expenses.  Sales and marketing expenses increased from
$496,000, or 66.9% of revenues, in the fiscal year ended September 30, 1997 to
$744,000, or 57.7% of revenues, in the fiscal year ended September 30, 1998. The
increase in absolute dollars in sales and marketing expenses relates primarily
to higher variable sales commissions on the year-to-year increases in revenues.
During fiscal 1997 and 1998, we primarily relied on independent, non-exclusive
sales representatives to sell our advertising.

     General and Administrative Expenses.  General and administrative expenses
increased from $338,000, or 45.6% of revenues, in the fiscal year ended
September 30, 1997 to $360,000, or 27.9% of revenues, in the fiscal year ended
September 30, 1998. The increase in general and administrative expenses, in
absolute dollars, relates primarily to administrative support from contract
employees and other non-payroll administrative costs.

     Research and Development Expenses.  Research and development expenses
increased from $194,000, or 26.2% of revenues, in the fiscal year ended
September 30, 1997 to $304,000, or 23.6% of revenues, in the fiscal year ended
September 30, 1998. The increase in research and development expenses, in
absolute dollars, relates primarily to personnel additions to our development
staff.

     Interest Income and Expense.  Interest income increased from $1,000 in the
nine months ended June 30, 1997 to $20,000 in the fiscal year ended September
30, 1998. Interest expense decreased from $75,000 in the fiscal year ended
September 30, 1997 to $49,000 in the fiscal year ended September 30, 1998. The
increase in interest income in fiscal 1998 over fiscal 1997 relates to higher
average cash balances during fiscal 1998. The interest expense over this
two-year period relates to a secured loan we received from two of our
stockholders in fiscal 1993. This loan was repaid in early fiscal 1998.

     Provision for Income Taxes.  We had no provision for income taxes for
fiscal years 1997 or 1998 because we incurred losses during these periods.

                                       25
<PAGE>   33

                        QUARTERLY RESULTS OF OPERATIONS

     The following tables set forth certain unaudited statements of operations
data for each quarter of fiscal 1998 and the first three quarters of fiscal
1999, as well as such data expressed as a percentage of Andover.Net's revenues
for each quarter. This information has been presented on the same basis as the
audited Financial Statements appearing elsewhere in this prospectus and, in the
opinion of management, includes all adjustments, consisting only of normal
recurring adjustments, that Andover.Net considers necessary to present fairly
the unaudited quarterly results. This information should be read in conjunction
with Andover.Net's audited Financial Statements and Notes thereto appearing
elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                               QUARTER ENDED
                                            -----------------------------------------------------------------------------------
                                            DEC. 31,    MARCH 31,    JUNE 30,    SEPT. 30,    DEC. 31,    MARCH 31,    JUNE 30,
                                              1997        1998         1998        1998         1998        1999         1999
                                            --------    ---------    --------    ---------    --------    ---------    --------
                                                                              (IN THOUSANDS)
<S>                                         <C>         <C>          <C>         <C>          <C>         <C>          <C>
Revenues..................................   $ 333        $ 364       $ 289        $ 304       $ 373        $ 253       $ 483
Cost of revenues..........................      53           99         103           72         107          147         176
                                             -----        -----       -----        -----       -----        -----       -----
    Gross profit..........................     280          265         186          232         266          106         307
Operating expenses:
  Sales and marketing.....................     235          189         157          163         213          369         536
  General and administrative..............      90          115          85           70         145          236         297
  Research and development................      50           69          81          104         127          160         185
  Amortization of deferred compensation...      --           --          --           --         577           16         127
                                             -----        -----       -----        -----       -----        -----       -----
    Total operating expenses..............     375          373         323          337       1,062          781       1,145
                                             -----        -----       -----        -----       -----        -----       -----
Loss from operations......................     (95)        (108)       (137)        (105)       (796)        (675)       (838)
Interest income...........................       4            7           5            4          12           28          19
Interest expense..........................     (49)          --          --           --          --           --          --
                                             -----        -----       -----        -----       -----        -----       -----
    Net loss..............................   $(140)       $(101)      $(132)       $(101)      $(784)       $(647)      $(819)
                                             =====        =====       =====        =====       =====        =====       =====
</TABLE>

<TABLE>
<CAPTION>
                                                                               QUARTER ENDED
                                            -----------------------------------------------------------------------------------
                                            DEC. 31,    MARCH 31,    JUNE 30,    SEPT. 30,    DEC. 31,    MARCH 31,    JUNE 30,
                                              1997        1998         1998        1998         1998        1999         1999
                                            --------    ---------    --------    ---------    --------    ---------    --------
                                                                       (AS A PERCENTAGE OF REVENUES)
<S>                                         <C>         <C>          <C>         <C>          <C>         <C>          <C>
Revenues..................................   100.0%       100.0%      100.0%       100.0%       100.0%      100.0%       100.0%
Cost of revenues..........................    15.9         27.2        35.6         23.7         28.7        58.1         36.4
                                             -----        -----       -----        -----       ------      ------       ------
    Gross profit..........................    84.1         72.8        64.4         76.3         71.3        41.9         63.6
Operating expenses:
  Sales and marketing.....................    70.6         51.9        54.3         53.6         57.1       145.8        111.0
  General and administrative..............    27.0         31.6        29.4         23.0         38.9        93.3         61.5
  Research and development................    15.0         19.0        28.0         34.2         34.0        63.2         38.3
  Amortization of deferred compensation...      --           --          --           --        154.7         6.3         26.3
                                             -----        -----       -----        -----       ------      ------       ------
    Total operating expenses..............   112.6        102.5       111.7        110.8        284.7       308.6        237.1
                                             -----        -----       -----        -----       ------      ------       ------
Loss from operations......................   (28.5)       (29.7)      (47.4)       (34.5)      (213.4)     (266.8)      (173.5)
Interest income...........................     1.2          1.9         1.7          1.3          3.2        11.1          3.9
Interest expense..........................   (14.7)          --          --           --           --          --           --
                                             -----        -----       -----        -----       ------      ------       ------
    Net loss..............................   (42.0)%      (27.7)%     (45.7)%      (33.2)%     (210.2)%    (255.7)%     (169.6)%
                                             =====        =====       =====        =====       ======      ======       ======
</TABLE>

     The operating results for any quarter are not necessarily indicative of the
operating results for any future period. See "Risk Factors -- Our quarterly
operating results are subject to significant fluctuations." In particular, due
to our limited operating history as an Internet company and the unpredictability
of our industry, our revenues may fluctuate from quarter to quarter and are
difficult to forecast. Accordingly, a revenue shortfall in a particular quarter
would have a disproportionate adverse effect on our operating results for that
quarter. During the three months ended March 31, 1999, our revenues declined
from the prior quarter as we transitioned from using independent sales
representatives to a direct media sales force. During the second half of fiscal
1998, our quarterly revenues were lower than the first half of fiscal 1998. We
believe this was primarily related to a reduction in advertising spending by
technology companies who were adversely affected by the Asian economic crisis.

                                       26
<PAGE>   34

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have funded operations primarily through the private
sales of common and preferred stock and short-term loans, which are convertible
into equity securities, together with cash flow from operations. As of June 30,
1999, we had $1.6 million in cash and cash equivalents, total current assets of
$2.0 million and a working capital deficit of $1.1 million. In September 1999,
we issued 600,568 shares of Series B convertible preferred stock, including
120,214 shares which were issued upon conversion of approximately $2.1 million
of principal and interest under the convertible notes. We received proceeds of
$10.1 million from the issuance of the 480,354 shares of Series B convertible
preferred stock.

     Net cash used in operating activities was $602,000 in fiscal 1996, $529,000
in fiscal 1997 and $574,000 in fiscal 1998. Net cash used in operating
activities was $497,000 in the nine months ended June 30, 1998 and $1.5 million
in the nine months ended June 30, 1999. The net cash used in operating
activities for all of these periods was primarily a result of our operating
losses before non-cash expenses.

     Cash used for additions to property and equipment was $10,000 in fiscal
1996, $8,000 in fiscal 1997 and $17,000 in fiscal 1998. Cash used for additions
to property and equipment was $12,000 for the nine months ended June 30, 1998
and $168,000 for the nine months ended June 30, 1999. For the nine months ended
June 30, 1999, the additions of $168,000 to property and equipment consisted of
leasehold improvements, furniture and office equipment for our new leased office
space, as well as computer equipment necessary to support personnel additions.

     In June 1999, we paid $1.75 million in cash at closing for our acquisitions
of Slashdot.org ($1.5 million) and Animation Factory ($250,000). Under the terms
of the Slashdot.org acquisition, there are additional contingent cash payments
of up to $1.5 million in January 2000, $1.0 million in June 2000 and $1.0
million in June 2001. The amount of each of these cash payments is dependent on
the continued employment of the two principals of Slashdot.org. In addition, the
acquisition price of Slashdot.org includes the issuance of $2.0 million of stock
valued at the initial public offering price upon the closing of this offering
and contingent payments of up to an additional $5.0 million of stock valued at
the initial public offering price and payable in installments over a two-year
period, following this offering. The payment of this stock consideration is
contingent upon the continued employment of the two principals of Slashdot.org
and the achievement of certain performance milestones over the two-year period.
Under the terms of the Animation Factory acquisition, there are additional cash
payments totaling $1.25 million, payable in fifteen equal monthly installments
beginning October 1999. This amount payable of $1.2 million as of June 30, 1999,
representing future cash payments less interest, is reflected in current
liabilities for $664,000 and in long-term liabilities for $487,000. In addition,
the acquisition price of Animation Factory includes the issuance of $200,000 of
stock valued at the initial public offering price upon the closing of this
offering and contingent payments of up to an additional $400,000 of stock valued
at the initial public offering price and payable in installments over a two-year
period following this offering. The payment of this stock consideration is
contingent upon the continued employment of the two principals of Animation
Factory and the achievement of certain performance milestones over the two-year
period.

     We have intangible assets of $2.9 million, consisting primarily of
goodwill, as of June 30, 1999 relating to the acquisitions of Slashdot.org and
Animation Factory. The purchase price for these acquisitions represents the
up-front cash payment for both acquisitions, as well as the installment cash
payments due under the Animation Factory acquisition. The intangible assets will
be amortized over a three-year period on a straight-line basis. The future
contingent cash payments under the Slashdot.org acquisition, as well as the
future contingent stock payments under both acquisitions, will be charged to
operations over the period the payments are made.

     In August 1999, we paid $367,000 in cash at closing for our acquisition of
Freshmeat.net. Under the terms of the Freshmeat.net acquisition, there are
additional cash payments totaling $300,000, payable in 15 equal monthly
installments beginning September 1999. In addition, the acquisition price
includes the issuance of $111,111 of stock valued at the initial public offering
price upon the closing of this offering and contingent payments of up to an
additional $222,222 of stock valued at the initial public offering price and

                                       27
<PAGE>   35

payable over a two-year period following this offering. The payment of this
stock consideration is contingent upon the continued employment of the principal
of Freshmeat.net.

     In June 1999, we received proceeds of $2.1 million from the issuance of
convertible notes in a private placement to various investors, some of whom are
Andover.Net stockholders. The notes are due December 31, 1999 and bear interest
at the prime rate. In September 1999, the convertible notes were converted into
120,214 shares of Series B convertible preferred stock which will automatically
be converted into shares of common stock upon the closing of this offering.

     During fiscal 1997, we received net proceeds of $1.3 million from sales of
Series B convertible preferred stock, Series A redeemable preferred stock and
common stock. We then changed our capital structure and issued Series C
redeemable preferred stock and common stock in exchange for our outstanding
Series A convertible preferred stock and Series B convertible preferred stock.
Between November 1998 and January 1999, we received net proceeds of $2.8 million
for the issuance of Series C redeemable preferred stock and common stock. In
connection with our merger in September 1999 with a wholly-owned subsidiary to
effect our reincorporation in Delaware, the Series C redeemable preferred stock
was converted into Series A redeemable preferred stock. The holders of the
Series A redeemable preferred stock accrue dividends at an 8.0% annual rate. As
of June 30, 1999, $393,000 of dividends have been accrued and not paid. The
Series A redeemable preferred stock will be redeemed upon the completion of this
offering at the redemption price of $13.50 per share, or a total of $4.4
million, plus accrued dividends.

     We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated cash
requirements for working capital and capital expenditures through at least
December 31, 2000. We may need to raise additional funds sooner if, for example,
we pursue business or technology acquisitions or experience operating losses
that exceed our current expectations. If we raise additional funds through the
issuance of equity, equity related or debt securities, such securities may have
rights, preferences or privileges senior to those of the rights of our common
stock, and our stockholders may experience additional dilution. We cannot be
certain that such additional financing will be available to us on favorable
terms, or at all. If additional financing is not available when required or is
not available on acceptable terms, we may be unable to develop or enhance our
products or services. In addition, we may be unable to take advantage of
business opportunities or to respond to competitive pressures. Any of these
events could harm our business, financial condition or results of operations.

YEAR 2000

     Many existing computer programs use only two digits to identify a year and
cannot reliably distinguish dates beginning on January 1, 2000 from dates prior
to the year 2000. If not corrected, many computer software applications could
fail or create erroneous results by, on or after the year 2000. We use software,
computer technology and other services provided by third parties that may fail
due to the year 2000 phenomenon.

State of Readiness

     We have made a preliminary assessment of the year 2000 readiness of our
information technology systems. This assessment includes but is not limited to
the hardware and software necessary to provide and deliver our services. We are
also performing assessments of our non-information technology systems, which
include many of the building and office equipment systems.

     Our year 2000 readiness plan consists of the following steps:

        - quality assurance testing of our internally developed software;

        - contacting third-party vendors of hardware, software and services that
          we utilize;

        - contacting material non-information technology systems and service
          providers that we utilize;

        - developing and implementing necessary remedial measures; and

        - creating contingency plans in the event of year 2000 failures.

                                       28
<PAGE>   36

     Our year 2000 task force, which is being directed by our Chief Technology
Officer, is currently conducting an inventory of and developing testing
procedures for all software and other systems that might be affected by year
2000 issues. Since third parties developed and currently support many of the
systems we use, a significant portion of this effort will be to ensure that
these third-party systems are year 2000 ready. We plan to contact third-party
vendors to obtain representation of their year 2000 readiness, as well as
conduct specific testing of these systems. We plan to complete our evaluation
and testing of internally developed software and third-party vendors of
hardware, software and services by October 1, 1999 and plan to complete all
necessary remedial measures by November 1, 1999. However, until our evaluation
and testing is completed and such third-party vendors and service providers are
contacted, we will not be able to completely evaluate whether our systems will
need to be revised or replaced and the time and costs involved to do so.

Costs

     To date, we have spent an immaterial amount on year 2000 readiness issues.
We expect to incur an additional $30,000 in the future in connection with
identifying, evaluating and addressing year 2000 readiness issues. Most of our
expenses to date have related to, and are expected to continue to relate to, the
time spent by employees in the evaluation process and developing and
implementing necessary remedial measures. If these expenses are significantly
higher than expected our business, results of operations and financial condition
could suffer.

Risks

     We are not currently aware of any year 2000 readiness problems relating to
our internally developed software or third-party supplied hardware, software and
services that would have a material adverse affect on our business. However, as
we complete our evaluation and testing, we may discover year 2000 readiness
problems. These problems may require us to substantially revise our systems or
revise or replace third-party hardware, software or services, all of which could
be time-consuming and expensive. Our failure to fix or replace our internally
developed software or third-party hardware, software or services on a timely
basis could result in interruptions. These interruptions could harm our
business, results of operations and financial condition.

     We are dependent on a number of third-party vendors to provide network
services and equipment. A significant year 2000-related disruption of the
services or equipment that third-party vendors provide to us could cause our
users, advertisers or sponsors to consider seeking alternate content providers
or cause a significant burden on our technical support, which could adversely
affect our business. In addition, a systematic failure beyond our control, such
as a prolonged Internet, telecommunications or electrical failure, which could
prevent us from delivering services or prevent users from accessing our network,
could harm our business, results of operations and financial condition.

Contingency Plan

     As discussed above, we are currently engaged in an ongoing year 2000
readiness assessment and have not yet developed any contingency plans. The
results of our evaluation and testing, together with the responses we receive
from third-party vendors and service providers, will be considered in
determining the nature and extent of any contingency plans we develop.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     We have no derivative financial instruments or derivative commodity
instruments in our cash and cash equivalents and investments. We invest our cash
and cash equivalents and investments in short-term, interest-bearing, investment
grade securities. We anticipate investing our net proceeds from this offering in
similar investment grade investments pending their use as described in this
prospectus. See "Use of Proceeds." Our transactions are generally conducted, and
our accounts are denominated, in United States dollars. Accordingly, we are not
exposed to significant foreign currency risk.

                                       29
<PAGE>   37

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Pursuant to SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133, SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is
not expected to have a material impact on Andover.Net's financial statements.

     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires computer
software costs associated with internal use software to be charged to operations
as incurred until certain capitalization criteria are met. SOP 98-1 is effective
beginning January 1, 1999. The adoption of this statement did not have a
material impact on Andover.Net's financial position or consolidated results of
operations.

                                       30
<PAGE>   38

                                    BUSINESS

INTRODUCTION

     Andover.Net is the leading Linux/Open Source destination on the Internet.
Our network of web sites provides an independent, unbiased source for content,
community and commerce for the Linux and, more generally, the Open Source
communities. We provide products, online tools, news and other services for
programmers, software developers, web site designers, technology managers and
corporate buyers.

     Our network generates over 40 million page views with over two million
unique visitors on a monthly basis. With our recent acquisitions of Slashdot.org
and Freshmeat.net, we believe that traffic on our network represents over 50% of
the visits to Linux resource sites on the web. This leading position in the
Linux market allows us to provide advertisers targeted access to the Linux/Open
Source communities. We have over 100 advertisers on our network. Our top five
advertisers based on cash revenues for the six months ended August 31, 1999 were
IBM, Compaq, Silicon Graphics, Hewlett-Packard and Intel.

     The Internet has accelerated the growth of the Open Source movement. The
Open Source movement is a collaborative approach to the development and
distribution of software and has emerged as a viable alternative to traditional
proprietary software development. The growth of the Internet has greatly
increased the scale and efficiency of Open Source development by enabling large
communities of independent developers to collaborate online. The best-known
example of Open Source is the Linux operating system created by Linus Torvalds
in 1991. Due to the growing number of Linux/Open Source operating systems and
related applications, a number of major technology industry leaders, including
IBM, Intel and Hewlett-Packard, have recently announced support for Linux-based
operating systems. According to International Data Corporation, or IDC,
Linux-based operating systems represented 17% of all new licensed shipments of
server operating systems in 1998, which was an increase of 190% from the
previous year.

INDUSTRY OVERVIEW

  Growth and impact of the Internet

     The Internet has emerged as a global communications medium, enabling
millions of people to gather information, communicate and conduct business
electronically. IDC estimates that there were approximately 142 million users of
the Internet at the end of 1998 and that number will grow to over 500 million
users by the end of 2003.

     The Internet is an attractive medium for advertisers because it allows
flexibility, interactivity and measurement capabilities and provides users with
immediate access to information about advertisers and their products. For
example, the Internet allows advertisers to change messages frequently in
response to market developments or current events. The Internet also allows
advertisers to gather demographic information about users and to deliver
targeted messages to specific consumer groups. According to Jupiter
Communications, total Internet advertising revenues were $2.1 billion in 1998
and are expected to grow to $11.5 billion in 2003, representing an average
annual compounded growth rate of approximately 41% from 1998 to 2003. The
growing popularity of the Internet also represents a substantial opportunity for
companies to take advantage of the potential for conducting transactions online,
commonly known as e-commerce. IDC estimates that worldwide e-commerce revenue
will increase from approximately $50 billion in 1998 to more than $1 trillion in
2003.

  Growth of the information technology profession

     As the pace and complexity of technological change has increased,
professionals in the information technology, or IT, industry have become more
specialized and grown in number. IT professionals, including programmers and
developers, play a central role in many companies because of their ability to
deploy and integrate new information technologies. Organizations are
increasingly adopting technologies such as client/server architectures, data
warehousing, Internet/intranet applications and object-oriented software
development to execute business strategies and maintain competitiveness. These
and other technologies have

                                       31
<PAGE>   39

continued to fuel the growth in the worldwide market for IT products and
services, which is forecasted by IDC to grow from an estimated $781 billion in
1998 to $1.1 trillion in 2002.

     IT professionals devote considerable time, effort and financial resources
researching new technologies, seeking answers to technical questions and
developing and implementing IT solutions. These professionals need to stay
abreast of rapid technological developments in a marketplace where vendors
continually introduce new products with a variety of standards and short life
cycles. They have historically relied on resources provided by IT publishers,
software vendors, hardware vendors, training service providers and fellow
professionals to follow the latest trends in the industry. We do not believe
that any of these sources provides a comprehensive solution for IT
professionals' need for continuous education, access to new products and a
medium in which professionals can exchange ideas. Due to the rapid rate of
change, technical information, training materials, and software become dated and
obsolete relatively quickly. Therefore, IT professionals, including programmers
and developers, have the following common needs:

     - Content -- News and other resources that keep them informed of changes
       within the industry;

     - Community -- The exchange of ideas and collaboration through a central
       medium by which they can share their experiences as a means of growing
       their personal knowledge as well as growing the industry and technology;
       and

     - Commerce -- An efficient, comprehensive source for products and services
       which meet their purchasing needs.

  Growth of the Linux and Open Source movement

     The Internet has accelerated the growth of the Open Source movement. The
Open Source movement is a collaborative approach to the development and
distribution of software and has emerged as a viable alternative to traditional
proprietary software development. The growth of the Internet has greatly
increased the scale and efficiency of Open Source development by enabling large
communities of independent developers to collaborate online.

     The growth of the Open Source movement is principally based on access to
software source code. Developers write programs in source code. This source code
is then translated into object code, which is read by the computer. Under the
proprietary model of software development, a software developer generally
licenses only the object code, not the source code, to the user. The source code
is always controlled and maintained by the proprietary software developer. By
contrast, under the Open Source development model, the software developer
provides the user access to the source code. This code is often provided for
free or for a minimal cost and is adaptable by the user for a wide variety of
applications.

     Due to the collaborative nature of Open Source software, many new, Open
Source-based operating systems have emerged. The best known Open Source-based
operating system is the Linux operating system, or Linux, which was created by
Linus Torvalds in 1991. Since 1991, many distributions or varieties of Linux
have emerged. Due to the growing number of Linux/Open Source operating systems
and related applications, a number of major technology industry leaders,
including IBM, Intel and Hewlett-Packard, have recently announced support for
Linux-based operating systems. According to IDC, Linux-based operating systems
represented 17% of all new licensed shipments of server operating systems in
1998, which was an increase of 190% from the previous year. Further, the
inexpensive and adaptable nature of Linux/Open Source operating systems has
encouraged the growth of many Open Source applications, including low cost
computer products, known as electronic "appliances." These appliances are
designed to provide basic computer applications such as Internet access, word
processing and email at a cost much less than traditional personal computers. As
a result, manufacturers can create products that are unique, but which maintain
a lower cost because they are not required to license a proprietary operating
system such as Windows for their products.

     A necessary element to the continued success of the Open Source movement is
the continued ability of software developers to communicate, share and develop
software in a collaborative manner. For technology developers, locating and
fostering a community within which one can share information is of critical
importance. Despite a strong continued focus on open software development and
continued support for Open
                                       32
<PAGE>   40

Source products, a number of obstacles to widespread adoption of Open Source
products within the technology industry exist including the lack of:

     - a highly-visible, intelligible transition path to Linux/Open Source;

     - an independent, trusted intermediary to communicate the multiple
       Linux/Open Source products, developments and services to diverse user
       communities;

     - a comprehensive and efficient support infrastructure providing product
       and service guides, technical information, and development resources; and

     - an open marketplace to facilitate the flow of Linux/Open Source products
       and services.

     We believe that a Linux/Open Source leader must broadly promote the
adoption of Linux/Open Source, provide a trusted, responsive, industry-focused
information resource that offers support and collaboration at a consistently
high level, and enable a market for Linux/Open Source products and services.

THE ANDOVER.NET SOLUTION

     Through our network of web sites, we provide a solution designed to meet
the needs of the Linux/Open Source community and its developing markets. As an
extensive provider of cross-platform content, Andover.Net is a natural place to
begin the transition to Linux/Open Source from other operating systems. As the
Internet's leading Linux/Open Source destination, we also furnish an environment
for Linux/Open Source information exchange, downloadable resources and business
transactions.

     Transition path.  We believe the best way for people to discover and
understand Linux/Open Source is for them to visit Slashdot.org, a leading hub
for community, news and information. Its subject matter can be highly technical
but its postings and comments are lucid and irreverent enough for a more general
audience. To make Slashdot.org highly visible to non-Linux developers, we
include links, banners and buttons throughout Andover.Net's cross-platform sites
that contain content useful for both Linux and Windows. We believe that as
sophisticated IT professionals and technology hobbyists move to Linux and other
Open Source-based operating systems, our network will become an important
partner in this transition. In addition, millions of banner advertisements per
month and millions of links promote the possibilities of Linux on Slashdot.org
and our other web sites to developers outside our network.

     Trusted content.  We provide an independent, unbiased source for content,
much of which comes from the candid Linux/Open Source community itself.
Moreover, the comprehensive information we provide covers a broad range of Open
Source topics rather than a single version of Linux or a single hardware
platform. Freshmeat.net comprehensively rates and categorizes the latest in
Linux products regardless of developer or distribution. Further, FreeCode has
hundreds of code modules that can run on, or be easily adapted to run on, any
Linux/Open Source system. Through broad, unbiased coverage in editorials,
community comments and comprehensive software listings, Andover.Net is the
largest independent intermediary for Linux/Open Source.

     Comprehensive support.  Support for Linux/Open Source on our network comes
in many forms. The community itself offers advice and counsel on Slashdot.org.
Further, Freshmeat.net is one of five sites within our network providing
descriptions and free downloadable software resources. Other sites provide
tutorials, reviews, screenshots, links and market information.

     Open marketplace.  We provide the largest Internet media channel through
which Linux/Open Source vendors can promote and advertise their goods and
services and on which purchasers can identify, evaluate and buy the products and
services they need. In addition, we promote application development, provide
free advertising and broadly support promising new business models to encourage
growth in the market.

     The benefits of our solution accrue to both members of the Linux/Open
Source community as well as to vendors who are targeting that community.

     Benefits for our community.  We have established our network as both the
most popular and most visited meeting place for the Linux/Open Source community
as well as one of the largest cross-platform

                                       33
<PAGE>   41

transition networks. We provide editorials, community, commentary, reviews,
products, tools, news, information and services for programmers, software
developers, system engineers, web site designers, web site managers and
corporate technology buyers.

     Benefits for vendors.  We provide vendors with targeted channels to reach
our highly focused technology community. As our network has grown to become a
central site for members of the Linux/Open Source community, it has likewise
evolved as a unique selling opportunity for advertisers. We believe that our
users represent a large and targeted online community of Internet industry and
IT professionals, web developers, programmers and experienced Internet users. As
a result, our vendors can enhance the effectiveness of their advertising by
customizing advertisements and placing them on targeted pages on our network.

OUR STRATEGY

     Our goal is to maintain and enhance our position as the leading destination
for Linux and, more generally, the Open Source movement. Key elements of our
strategy are:

  Grow the size and share of our dominant Linux/Open Source position

     We are the leading Linux/Open Source destination on the Internet. To grow
this dominant position, we intend to increase our traffic by offering more
viewable pages, high quality content and additional services. In particular, we
are committed to augmenting Slashdot.org, Freshmeat.net and FreeCode, our
leading web sites. We also intend to support the overall growth in the Linux and
Open Source communities. An important distinction between Andover.Net and other
major Linux/Open Source companies is that we support Open Source and all
versions of Linux rather than a single version of that operating system. We
intend to support Linux/Open Source communities through free hosting,
contributions of advertising and trade show space, funding of application
development and benchmark testing, supporting new business models and expanding
our Linux/Open Source partnership programs.

  Facilitate and guide the transition of Windows developers to Linux/Open Source

     Unique among all major Linux/Open Source companies, our network includes
high-traffic, cross-platform sites for IT professionals, including programmers,
software developers, web designers, and web site managers, many of whom have not
yet adopted Linux. Our cross-platform web sites offer products, online tools,
news and other services which are usable with virtually all major operating
systems including Linux, Windows and Macintosh. To accelerate the growth of our
Linux/Open Source web sites, we intend to educate visitors on these
cross-platform web sites and inform, guide and encourage developers to adopt and
support Linux.

  Expand our e-commerce offerings to our targeted, high volume traffic

     Our network currently provides content and community to over two million
targeted unique visitors on a monthly basis, and we believe this represents a
significant e-commerce opportunity. We intend to expand our e-commerce offerings
by selling various Linux products such as computer hardware, books or CDs and
services such as installation and support. Moreover, we believe that our
e-commerce offerings will generate increased traffic and encourage longer time
spent on our network.

  Acquire complementary Linux/Open Source web sites

     We have already acquired and integrated leading Linux/Open Source web sites
such as Slashdot.org and Freshmeat.net. We expect to continue to pursue
strategic acquisitions to strengthen our content offerings and services. We may
also acquire complementary web sites to obtain valuable brands, expertise or
access to new users, advertisers and vendors. We believe that by acquiring
complementary web sites, we can efficiently integrate them into our network, and
thereby improve their traffic and revenue results as well as our own.

                                       34
<PAGE>   42

  Expand the number and participation of major advertisers

     We intend to increase the number of major advertisers on our network by
expanding our media sales force and by increasing our sales promotion to
Linux/Open Source vendors. With our recent Linux/Open Source acquisitions, we
believe that traffic on our network represents over 50% of the visits to Linux
resource sites on the web. This leading position in the Linux/Open Source market
allows us to provide advertisers targeted access to the Linux/Open Source
communities. We believe that Linux/Open Source related vendors will
significantly increase their online advertising in this rapidly growing market.
We also intend to broaden the participation of our major advertisers by offering
several innovative advertising products. Many advertisers have indicated to us
that these advertising products are more effective for branding and sales than
standard banner advertisements.

  Strengthen the Andover.Net brand

     We intend to strengthen the Andover.Net brand through a combination of
online and offline advertising, sales promotion, trade shows, direct mail,
public relations, syndicated content and events to promote the use of our
network to the technical community, advertisers and vendors. We currently place
over eight million banner advertisements each month on complementary sites and
expect to significantly increase both online and other media advertising in the
future. We also intend to promote the Andover.Net brand with licensing programs
such as our agreement with Lycos, Inc. for the Angelfire and the Tripod
community web sites. We also have partnerships with more than 15 web sites that
link over four million web pages directly to our network.

THE ANDOVER.NET NETWORK

     Our closely integrated network consists of web sites that are deep and rich
in content and provide programmers and developers with a leading online
resource. We believe that as sophisticated IT professionals and technology
hobbyists move to Linux and other Open Source-based operating systems, our
network, which includes news and tools for the Windows operating system, will
become an important partner in this transition. Our network will introduce Linux
and other similar operating systems to many of our technology oriented customers
who have not yet migrated to these systems.

     The Andover.Net network consists of three categories of web sites:

     - Our Linux/Open Source sites attract sophisticated Linux users and
       developers for their cutting-edge Open Source content;

     - Our cross-platform sites offer visitors a wide range of content including
       news, products and online software applications or e-Tools; and

     - Our Windows site features daily reviews and updates of Windows software
       downloads.

                                       35
<PAGE>   43

     Each of our main web sites and product offerings are summarized below.

LINUX/OPEN SOURCE SITES

<TABLE>
<S>                           <C>
LOGO                          slashdot.org -- Slashdot.org is the largest online community for Open Source
                              developers providing news, commentary, information and reviews for
                              everything from Legos to Linux. Slashdot.org focuses on issues of importance
                              to the Open Source community allowing individuals to post comments and
                              debate news items and technical issues.
LOGO                          freshmeat.net -- Freshmeat.net is one of the largest Linux software
                              application repositories and also contains application news and a community
                              section. One feature of this web site shows the number of hits each
                              application has received which allows us to determine which Linux product is
                              the most popular.
LOGO                          www.freecode.com -- FreeCode is a comprehensive online resource for
                              programming source code which offers a constantly updated and expanded
                              database of free, Internet-related programs. FreeCode contains programs
                              written in Perl, C++, Java and Visual Basic.
</TABLE>

CROSS-PLATFORM SITES

<TABLE>
<S>                           <C>
LOGO                          www.davecentral.com -- DaveCentral has two components, one for Linux and one
                              for Windows. The site archives over 10,000 free software downloads and
                              reviews. Both the Linux and Windows web sites group the software by category
                              which facilitates searches. The site also has a ticker showing recent
                              updates in all sections of the web site as well as keyword search
                              capabilities.
LOGO                          www.andovernews.com -- Andover News provides free, timely and searchable
                              computer-industry news from multiple sources. IT professionals visit Andover
                              News for information and editorials about a broad range of technologies and
                              technology companies.
LOGO                          www.itmanagersjournal.com -- IT Manager's Journal provides IT news and
                              advice for professionals and managers. The site features daily editorial
                              articles on a wide variety of IT topics, survey questions with live results
                              and discussions about a broad range of IT issues.
LOGO                          www.mediabuilder.com -- MediaBuilder is an online multimedia resource center
                              which contains multimedia software; online tools; GIF animations, the most
                              popular file format for animations on the web; the largest collection of
                              free images on the Internet; and a font library with over 1,000 free fonts.
                              With our acquisition of Animation Factory, users can also access and
                              download over 100,000 images. Some of the more popular web tools found
                              within MediaBuilder are summarized below:
LOGO                          -     www.gifworks.com -- GIFWorks is a free on-line software application.
                                    With easy-to-use pull down menus, GIFWorks allows user to resize any
                                    GIF animation.
LOGO                          -     www.htmlworks.com -- HTMLWorks is an online application that enables
                                    users to quickly and easily create, edit and improve their web pages
                                    through their web browser.
</TABLE>

                                       36
<PAGE>   44
<TABLE>
<S>                           <C>
LOGO                          www.techmailings.com -- TechMailings offers the largest collection of
                              technology mailing lists on the Internet with fifteen categories covering
                              everything from cyber-culture to Internet marketing.
LOGO                          www.techsightings.com -- TechSightings searches the Internet for technology
                              sites and presents informative daily reviews of the best high-tech sites for
                              IT professionals. Chosen sites include targeted information on topics such
                              as hardware, software, programming and web building.
LOGO                          www.internettrafficreport.com -- Internet Traffic Report monitors the flow
                              of Internet data around the world. The Internet Traffic Report analyzes the
                              data and displays a value ranging from zero to 100 with higher values
                              indicating faster, more reliable connections.
</TABLE>

WINDOWS SITE

<TABLE>
<S>                           <C>
LOGO                          www.slaughterhouse.com  -- Slaughter House ranks and updates a wide variety
                              of Windows software, including Internet applications, multimedia tools,
                              utilities and games. Slaughter House also offers daily news updates and a
                              "Product of the Day Review."
</TABLE>

     By combining our Linux/Open Source, cross-platform and Windows web sites
into our network, Andover.Net provides IT professionals with a leading online
resource.

VISITORS

     According to an independent survey we commissioned in February 1999 from
the Laredo Group, the typical Andover.Net visitor spends an average of 15.8
hours per week online, excluding time spent corresponding by e-mail, two hours
of which are spent visiting Andover.Net sites. Our visitors, who have an annual
average household income of $61,000, include corporate executives, web
developers and designers, programmers and IT professionals. Over 60% of our
visitors visit our web sites at least once a week.

     Furthermore, 68% of our visitors are personally involved in the purchasing
of computer products for their companies. The study also reveals that 74% of our
visitors have already made online purchases compared to an industry average of
22% in 1998, as estimated by Jupiter Communications. In addition, 77% of our
visitors said they are likely to make online purchases within the next year. We
believe that these buying patterns of our user base make our network well suited
for e-commerce.

     The main reasons cited in the survey for visiting our network were
up-to-date technology news, including the latest developments in Linux and Open
Source systems, buying information and product downloads for evaluation, how-to
information and the ability to search for computer products and services.

MARKETING AND SALES

  Marketing

     We employ a combination of online and offline advertising, sales promotion,
trade shows, direct mail, public relations, syndicated content and events to
promote the use of our network to the technical community, advertisers and
vendors. We currently place over eight million banner advertisements online each
month, usually on complementary programmer and developer sites. We use barter,
content licensing and partnerships to extend our online presence to offline
media including technical trade magazines and Internet marketing guides.

     Our sales promotion includes seminars at major online media agencies and
forums for presenting our Linux/Open Source marketing opportunities to major
product vendors. We focus our trade show marketing on Linux-related shows, such
as LinuxWorld, and online media planning conferences, such as @d:tech. We

                                       37
<PAGE>   45

announce and promote major events and advertising opportunities to media
planners and vendors through direct mail, as well as with advertising campaigns
on the major online web-marketing sites. We also promote our network to over
150,000 subscribers of Andover Update, Autopsy Report and our other online
newsletters and to the over two million unique visitors who visit our network on
a monthly basis.

     Andover.Net has received extensive press coverage in both online and print
publications including the Wall Street Journal, Business Week-on-Line, Time
Digital, Rolling Stone, Red Herring and USA Today. Slashdot.org also produces an
online radio show "Geeks in Space" hosted by The Sync, an online radio
syndicator. The show generally occurs once a week or, as the introduction
relates, "Whenever we feel like it".

     We use online tools, including the Internet Traffic Report, GIFWorks and
HTMLWorks, to attract technology-oriented visitors. We believe that this
encourages long and repeat visits, adding to our "stickiness." The significance
of these e-Tools extends beyond attracting a large core of users to our own
network. We also use them in a variety of licensing and partnership programs to
extend our promotional frequency and reach. For example, GIFWorks has over four
million links from our Graphics Partnership Program where we provide public
relations and promotion to the partners' sites, and they provide links to
GIFWorks. In addition, with a recent agreement with Lycos with respect to their
Angelfire and Tripod sites, we estimate that we will have links to GIFWorks from
over 150 million pages per month and share in the advertising revenue.

  Sales

     The core of Andover.Net's online advertising business is a professional
media sales force that makes sales calls on computer product vendors and media
planners at major agencies. We have built and are expanding our nationwide media
sales force with representatives currently in San Francisco, New York, Los
Angeles and Boston. As of September 15, 1999, our direct sales force had 11
members. Our direct sales force is dedicated to increasing the sales of banner
advertising, sponsorships, email newsletters, display advertisements and
megabanners and recruitment advertising. We sell our advertising services to
high technology companies, consumer goods companies, independent software
developers, advertising agencies, high technology recruitment agencies, and
other marketers interested in reaching our highly focused technology community.
We successfully market banner advertising on our web sites because we provide an
efficient medium for advertisers to reach a worldwide audience of Internet
developers. In addition, because of the unique role our visitors play as Linux
and web site developers, they represent an affluent and highly sought after
target audience for high technology and high-end consumer products.

     We believe that our competitive advantage is our leading Linux/Open Source
position. We estimate that our Linux/Open Source web sites represent 50% to 60%
of the advertisable online pages in the Linux/Open Source category. Linux/Open
Source computer product vendors must advertise to establish their share of this
early stage but rapidly growing market. We believe that our network is the most
effective channel for that communication due to our category-leading quality and
depth of our web sites.

     We have been generating advertising revenue since our DaveCentral web site
went online and accepted advertisements in 1996. In addition to conventional
banner advertisements, Andover.Net has developed several innovative advertising
products, or beyond-the-banner products.

     Our current offering of beyond-the-banner products is shown below:

     -  Display Advertisements -- Appear in the navigation bar on most
        Andover.Net web sites and combine visually appealing animations with
        text. They are approximately two inches wide and six inches long and
        generally contain 100 words of copy and extend down the right hand side
        of our web pages. They can be rotated throughout the network to pages
        and web sites specified by advertisers just as a regular banner
        advertisements.

     -  Megabanners -- Combine a display advertisement with a large top-of-page
        banner resulting in sixteen square inches filled with animations and
        text in the top right hand corner of our web page.

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<PAGE>   46

     -  E-Tools -- Allow advertisers to communicate directly to people in their
        workplace for ten to 15 minutes at a time.

     -  Sponsorships -- Include banners, display advertisements and logo/slogan
        design elements on targeted web sites, e-Tools, home pages and
        newsletters.

     We believe that our advertisers can customize their advertising campaigns
and deliver their message in a highly targeted fashion by choosing specific
placements, or channels, on our network. Because of this ability to target and
deliver a specific audience, we believe that we command higher advertising
rates.

     We believe that we enable advertisers to efficiently and effectively reach
targeted Linux/Open Source programmers, developers, engineers, web site
designers and managers, and other buyers of technical products and services. In
addition, since this demographic group has premium income and purchasing power,
it allows us to offer significant advertising opportunities to premium
non-technology advertisers. Based on the Laredo Group survey, 68% of our
visitors are personally involved in purchasing computer products for their
company. They buy for departments or sections with an average of 150 people. As
a result, based on publicly available banner advertisement rate cards, we
believe that our rates are approximately three to four times higher than the
rates of well-known portals that target a more general audience.

  Andover.Net's Advertisers

     Our customers include high technology and consumer advertisers. Our base of
advertisers has been increasing steadily since March 1999 and we now have over
100 advertisers on our network. Other than IBM, which accounted for
approximately 15.6% of our revenues for the six month period ended August 31,
1999, no single customer accounts for greater than 10% of our revenues. Our five
largest advertisers for the six month period ended August 31, 1999, based upon
percentage of cash revenues, were:

     -  IBM Corporation

     -  Compaq Computer Corporation

     -  Silicon Graphics Inc.

     -  Hewlett-Packard Company

     -  Intel Corporation

SOFTWARE ENGINEERING AND DEVELOPMENT

     We have invested, and intend to continue to invest, significant resources
in product and technology development. We focus and modify our product
development efforts based on the needs of users and changes in the marketplace.
Our software development efforts are focused on four key areas.

     Advertisement and statistics systems. We have created and continually
enhance two software systems necessary for the efficient operation of our web
sites: a banner advertisement system and a page traffic statistics system. Using
an internally developed advertising system has allowed us to create unique
advertising products, such as our megabanner product, and to rapidly adjust to
requests from advertising clients.

     Database generated web sites. All of our web sites are created and managed
through centralized, online databases. This allows data entry operators working
both in-house and off-site to enter new content and update existing content for
our sites using password protected web forms. At regular intervals, ranging from
one to 24 hours, a completely new copy of each web site is automatically
generated from these databases using internally developed programs. These web
pages are automatically uploaded to our web servers, providing our visitors with
continually updated versions of each site. This database driven model of web
site creation provides a higher level of efficiency than traditional publishing
models, where large numbers of people are required to write each web page by
hand. Therefore, we believe that we are able to provide a high level of content
at minimal incremental cost with a much smaller staff.

     Online web applications, or e-Tools. A unique, and highly popular,
component of our network is our e-Tools which are part of our MediaBuilder site
and include GIFWorks and HTMLWorks. These server-based applications are usable
through any web browser, and provide a high level of functionality, without
requiring the user to download or install any additional software. All of our
e-Tools have been developed and are continually enhanced internally. e-Tools are
another way that we achieve a high level of efficiency, because
                                       39
<PAGE>   47

they provide web site content that is continually new and relevant to a visitor,
without requiring any on-going editorial effort.

     Technical integration of acquired web sites. We continue to integrate new
acquisitions into our network. All of our web sites are linked into our network
and share traffic as visitors follow links from one of our web sites to another.
Acquired web sites are modified to utilize our statistics and advertising
systems. Some acquired web sites are completely redesigned if necessary to
increase their quality and performance.

     All of our software systems have been written in the C++ and Perl
programming languages. These languages are commonly used for Internet
applications and are understood and used by a wide number of software engineers.

     As of September 15, 1999, we employed 12 software engineers, three web
design professionals, and two network operations engineers. We intend to
increase our development staff significantly to accommodate the increased
technical demands of acquisitions, new internal systems and additional e-Tools.

SYSTEM TECHNOLOGY AND DATA CENTER ARCHITECTURE

     Maintaining a high level of performance and reliability while accommodating
rapid growth in visitors to our web sites is a major focus of our network
operations engineers. To that end we have developed an expandable and
fault-tolerant data center architecture for delivering content and
advertisements on our web sites.

     Our web sites are maintained on 16 high-speed, industry-standard Pentium
servers that run on the Linux operating system. These servers are equipped with
a Redundant Array of Interdependent Disks, or RAID, for increased reliability.
Web site requests are distributed among the servers by a pair of Alteon load
balancing switches that allow for maximum throughput and fault tolerance. This
architecture allows us to respond quickly to increased traffic on our web sites
by incorporating additional machines without having to shut down or otherwise
interfere with the existing servers. We lease our servers which provides us with
the flexibility needed to increase the number of machines used or update our
machines quickly and inexpensively.

     Our current data center is located on the East coast of the United States.
We intend to add three additional data centers using the same software and
hardware architecture. These will be located on the West coast of the United
States, Europe and Asia. Load balancing routers will be employed to
automatically allocate web site traffic to the closest geographic location,
ensuring our visitors the best possible performance. This multiple data center
architecture will increase the fault tolerance of our network, and insulate us
from localized interruptions of service on the Internet.

     We maintain and continually enhance a quality assurance process to monitor
our servers, processes and network connectivity. This process involves both
internal staff and external contractors who run regular system and security
audits of our servers. We currently run automatic monitoring programs which
immediately notify our network operations engineers by email and pager in the
case of any current or potential interruptions in service. We intend to develop
a distributed network of engineers who will personally monitor our data centers
on a 24-hour basis and be prepared to perform any necessary adjustments to the
servers.

INTELLECTUAL PROPERTY

     Andover.Net seeks to protect its intellectual property through a
combination of license agreements, service mark, copyright, trade secret laws
and other methods of restricting disclosure and transferring title. We obtain
the majority of our content under license agreements with publishers, through
work for hire arrangements with third parties and from internal staff
development. We have no patents or patents pending for our current online
services and do not anticipate that patents will become a significant part of
our intellectual property in the foreseeable future. Where appropriate, we also
enter into confidentiality agreements with our employees, consultants, vendors
and customers. We generally seek to control access to and distribution of our
technology, documentation and other proprietary information. We pursue the
registration of our trademarks in the United States and internationally, and
have submitted trademark
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<PAGE>   48

registration applications for our Andover.net, Slashdot.org and Freshmeat.net
trademarks. Content created or acquired by us is protected by copyright. The
proprietary software that we use to run our business is protected generally by
restricting third party access, entering into confidentiality agreements with
third parties who do have access and relying on copyright law.

COMPETITION

     Competition within the Internet is intense and is expected to increase
significantly in the future. Specifically, the market is rapidly evolving and
barriers to entry are low, enabling newcomers to launch competitive web sites at
relatively low costs.

     We believe that we compete on the basis of brand recognition, quality and
quantity of content, product and resource selection, convenience and
reliability. We believe that we are differentiated from our competitors due to:

     -  our focus on the Linux/Open Source operating systems;

     -  the fact that we are independent of a particular version of the
        Linux/Open Source operating systems; and

     -  our vertical focus of providing content, community and commerce to
        technology professionals.

     We compete for advertisers, merchants, users and strategic partners with:

     -  web sites specifically targeting the Linux/Open Source communities;

     -  web sites specializing in technology information;

     -  Internet portals, search sites and content aggregators; and

     -  traditional media content businesses such as newspapers, magazines,
        radio and television.

     Increased competition could result in advertising price reductions, reduced
margins or loss of market share, any of which could harm our business.
Competition is likely to increase significantly as new companies enter the
market and current competitors expand their services. Many of our current and
potential competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources than we have. These competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements and
to devote greater resources to the development, promotion and sale of their
products and services than we can.

     Additionally, our success is in large part dependant on the success of
Linux which is in competition with other operating systems. In the market for
operating systems, Linux competes with a number of large and well-established
companies that have significantly greater financial resources, larger
development staffs and more extensive marketing and distribution capabilities.
While we do not directly compete with these companies, our future success may
depend on the ability of Linux to effectively compete with these other more
established operating systems.

EMPLOYEES

     As of September 15, 1999, we had a total of 48 employees. Of the total
employees, 27 were in engineering and content development, 17 in sales and
marketing and four in finance and administration. Our future success will depend
in part on our ability to attract, retain and motivate highly qualified
technical and management personnel, for whom competition is intense. From time
to time we also employ independent contractors to support our professional
services, product development, sales, marketing and business development
organizations. Our employees are not represented by any labor union and are not
organized under a collective bargaining agreement, and we have never experienced
work stoppage. We believe our relations with our employees are good.

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<PAGE>   49

FACILITIES

     Our headquarters are currently located in a leased facility in Acton,
Massachusetts, consisting of approximately 11,700 square feet under a five year
lease that will expire on April 30, 2004. The current annual rental expense
under this lease is approximately $205,000. We have an option to extend the term
of this lease for another five years at the end of the initial five year term.
We believe that additional space will be required as our business expands and
will be available on acceptable terms.

LEGAL PROCEEDINGS

     We are not currently a party to any legal proceedings.

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<PAGE>   50

                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     Our directors and executive officers and their respective ages and
positions are as follows:

<TABLE>
<CAPTION>
                   NAME                      AGE                    POSITION
                   ----                      ---                    --------
<S>                                          <C>   <C>
Bruce A. Twickler..........................  53    President, Chief Executive Officer and
                                                   Chairman
Adam B. Green..............................  43    Chief Technology Officer
James E. Patterson.........................  61    Executive Vice President
William M. Dwyer...........................  47    Vice President, Publishing
Derek V. Carroll...........................  43    Vice President, Business Development
Janet F. Holian............................  39    Vice President, Communications
Walter M. Bird, III........................  41    Director
Jonathan M. Goldstein......................  37    Director
James D. Logan.............................  47    Director
Robert Malda...............................  23    Director
Louis Page.................................  33    Director
Thomas R. Shepherd.........................  69    Director
John E. Trombly............................  51    Director
</TABLE>

---------------
     Bruce A. Twickler.  Mr. Twickler founded Andover.Net in 1992, has been a
director, President and Chief Executive Officer since its formation and was
elected Chairman of the Board in September 1999. Prior to founding Andover.Net,
Mr. Twickler was a consultant to Dragon Systems and Avid Technologies. From 1988
to 1991, he was Vice President of Microcom. From 1987 to 1988, Mr. Twickler was
President of Shiva Corporation, and from 1983 to 1986 he was President of Hayden
Software. Prior to that time, Mr. Twickler was Vice President of Marketing of
Pioneer Electronics USA.

     Adam B. Green.  Mr. Green has been Chief Technology Officer of Andover.Net
since July 1996. Prior to July 1996, Mr. Green was Vice President of Internet
Products at Clear Software, Inc. Before joining Clear Software, he was a
consultant and contract trainer for Powersoft and Alpha Software, Inc.

     James E. Patterson.  Mr. Patterson has been an Executive Vice President of
Andover.Net since May 1999. He is responsible for implementing our e-commerce
strategy. From February 1997 to May 1999, he was Andover.Net's Vice President,
Sales and Marketing, and from November 1995 to February 1997, he was our Vice
President, Sales. Prior to that time, Mr. Patterson was Director of the IBM
Business Unit of Wang Global.

     William M. Dwyer.  Mr. Dwyer has been Vice President, Publishing of
Andover.Net since May 1999. He is responsible for sales and marketing. Prior to
joining Andover.Net, Mr. Dwyer provided publishing and media sales consulting
services to companies such as Pennwell Publishing and Skinner James Publishing
and launched Back Office Magazine through IT/World, Inc. which he founded in
1994. Prior to founding IT/World, Inc., Mr. Dwyer was Vice President of Sales
for BYTE Magazine at McGraw-Hill, Inc. Previously, Mr. Dwyer held a variety of
positions at Ziff-Davis over a 10 year period including Director of the
Ziff-Davis Magazine Network.

     Derek V. Carroll.  Mr. Carroll has been Vice President, Business
Development of Andover.Net since February 1999. Prior to joining Andover.Net,
Mr. Carroll was Vice-President of Sales and Marketing of Silent Systems, Inc.
from 1995 to 1999. Prior to that time, Mr. Carroll was Director of Business
Development of MicroTouch Systems, Inc.

     Janet F. Holian.  Ms. Holian has been Vice President, Communications of
Andover.Net since August 1999. Ms. Holian joined Andover.Net in February 1999 as
Director of Marketing. Before joining Andover.Net, Ms. Holian spent two years as
Vice President of Marketing of PersonalAudio, Inc. Prior to that time, Ms.
Holian was Director of Marketing of MicroTouch Systems, Inc.

                                       43
<PAGE>   51

     Walter M. Bird, III.  Mr. Bird has been a director of Andover.Net since
July 1997. Since 1996, Mr. Bird has been Vice President of Claflin Capital
Management, Inc., a venture capital investment management firm. Prior to that
time, Mr. Bird was a Vice President of BankBoston, N.A.

     Jonathan M. Goldstein.  Mr. Goldstein has been a director of Andover.Net
since September 1999. Since 1986, he has been associated with TA Associates,
Inc., a venture capital firm, serving as a Vice President from 1990 to 1996 and
as a Principal since January 1994.

     James D. Logan.  Mr. Logan has been a director of Andover.Net since January
1999. Mr. Logan is the President and Chief Executive Officer of Gotuit Media,
Inc. which he founded in 1999. From 1996 to 1998, Mr. Logan was President and
Chief Executive Officer of PersonalAudio, Inc. which he founded. Prior to that
time, Mr. Logan was President, Chief Executive Officer and Chairman of the Board
of Directors of MicroTouch Systems Inc. He remains Chairman of the Board of
Directors of MicroTouch Systems Inc.

     Robert Malda.  Mr. Malda has been a director of Andover.Net since July 1999
in connection with our acquisition of Slashdot.org from BlockStackers, Inc. He
is currently the editor of the Slashdot.org web site. Mr. Malda is President of
BlockStackers which he founded in 1996. Mr. Malda served as a web site developer
for The Image Group from 1996 to 1998. Prior to working at The Image Group, Mr.
Malda spent two years as a personal computer technician at the Donnelly
Corporation.

     Louis Page, CFA.  Mr. Page has been a director of Andover.Net since October
1995. Mr. Page is the President and founder of Window to Wall Street, Inc., a
company that serves as the general partner of a number of venture capital
investment firms.

     Thomas R. Shepherd.  Mr. Shepherd has been a director of Andover.Net since
July 1999. Mr. Shepherd is a co-founder and the Chairman of The Shepherd Group,
LLC, a private equity investment firm. Additionally, Mr. Shepherd is a Special
Partner, and former Managing Director, of the Thomas H. Lee Company, a private
equity investment firm. Prior to joining the Thomas H. Lee Company in 1986, Mr.
Shepherd was President of the GTE Lighting Products Group of GTE Sylvania from
1983 to 1986, and was President of North American Philips Commercial Electronics
Corporation from 1981 to 1983. Mr. Shepherd is also a director of Rayovac
Corporation and The Vermont Teddy Bear Co., Inc.

     John E. Trombly.  Mr. Trombly has been a director of Andover.Net since
October 1995. Mr. Trombly is an Executive Vice President of Royalty Capital
Management, Inc., a venture capital management firm, and a General Partner of
Royalty Capital Fund L.P. I, a venture capital investment fund. Prior to
co-founding Royal Capital Fund, Mr. Trombly was President of Foxboro/Octek from
1978 to 1988.

BOARD COMMITTEES

     Following the completion of this offering, the compensation committee of
the board of directors of Andover.Net will be comprised of Walter H. Bird, III,
James D. Logan and Jonathan Goldstein. The audit committee of the board of
directors of Andover.Net will be comprised of Louis Page, Thomas R. Shepherd and
Jonathan Goldstein.

ELECTION AND COMPENSATION OF DIRECTORS

     Our certificate of incorporation provides for a classified board of
directors divided into three classes. Class I will expire at the annual meeting
of stockholders to be held in 2000, Class II will expire at the annual meeting
of stockholders to be held in 2001 and Class III will expire at the annual
meeting of stockholders to be held in 2002. At each annual meeting of
stockholders, beginning with the 2000 annual meeting, the successors to
directors whose terms will then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election and
until their successors have been duly elected and qualified, or until their
earlier resignation or removal, if any. To the extent there is an increase or
reduction in the number of directors, increase or decrease in directorships
resulting therefrom will be distributed among the classes so that, as nearly as
possible, each class will consist of an equal number of directors.

                                       44
<PAGE>   52

     Our current directors receive no compensation for serving as directors. We
have granted in the past, and intend to grant in the future, non-qualified stock
options to our non-employee directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     None of our executive officers serves as a member of the board of directors
or compensation committee of any other company that has one or more executive
officers serving as a member of our board of directors or compensation
committee.

EXECUTIVE COMPENSATION

     The following table sets forth the compensation earned by our Chief
Executive Officer and each of our two other most highly compensated executive
officers (collectively, the "Named Executive Officers") during the year ended
September 30, 1998:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                              ANNUAL COMPENSATION                   LONG-TERM COMPENSATION AWARDS
                                   -----------------------------------------   ----------------------------------------
                                                                 OTHER
                                                                 ANNUAL        SECURITIES UNDERLYING      ALL OTHER
   NAME AND PRINCIPAL POSITION     SALARY ($)   BONUS ($)   COMPENSATION ($)     OPTIONS/SARS (#)      COMPENSATION ($)
   ---------------------------     ----------   ---------   ----------------   ---------------------   ----------------
<S>                                <C>          <C>         <C>                <C>                     <C>
Bruce Twickler...................    108,000        --              --                    --                   --
  President, Chief Executive
    Officer and Chairman
Adam Green.......................    105,000        --              --                40,190                   --
  Chief Technology Officer
James Patterson..................     91,000        --              --                40,190                   --
  Executive Vice President
</TABLE>

     The following table sets forth certain information regarding the option
grants made during the year ended September 30, 1998 to each of the Company's
named executive officers in the Summary Compensation Table above. The Company
issued no stock appreciation rights ("SARs") in year ended September 30, 1998.

                     OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                                   POTENTIAL REALIZABLE
                                                                                                     VALUE AT ASSUMED
                                                                                                     ANNUAL RATES OF
                                                                                                          STOCK
                                                                                                    PRICE APPRECIATION
                                                   INDIVIDUAL GRANTS                                FOR OPTION TERM(1)
                       -------------------------------------------------------------------------   --------------------
                        NUMBER OF
                       SECURITIES    PERCENT OF TOTAL                    MARKET
                       UNDERLYING    OPTIONS GRANTED    EXERCISE OR     VALUE ON
                         OPTIONS     TO EMPLOYEES IN    BASE PRICE    DATE OF GRANT   EXPIRATION
        NAME           GRANTED(#)     FISCAL YEAR(%)     ($/SHARE)      ($/SHARE)        DATE       5%($)       10%($)
        ----           -----------   ----------------   -----------   -------------   ----------    -----       ------
<S>                    <C>           <C>                <C>           <C>             <C>          <C>         <C>
Bruce Twickler.......        --             --               --             --              --         --           --
Adam Green...........    40,190            8.5             0.50           1.50         3/15/08     78,104      136,270
James Patterson......    40,190            8.5             0.50           1.50         3/15/08     78,104      136,270
</TABLE>

---------------
(1) In accordance with the rules of the SEC, shown are the gains or "option
    spreads" that would exist for the respective options granted. These gains
    are based on the assumed rates of annual compound stock price appreciation
    of 5% and 10% from the date the option was granted over the full option
    term. These assumed annual compound rates of stock price appreciation are
    mandated by the rules of the SEC and do not represent the Company's estimate
    or projection of future common stock prices.

                                       45
<PAGE>   53

     Year End Option Table.  The following table sets forth information
regarding exercise of options and the number and value of options held at
September 30, 1998, by each of the Company's named executive officers in the
Summary Compensation Table above:

               AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
                           YEAR-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
                                                             NUMBER OF SECURITIES
                                                            UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED IN-THE-MONEY
                                                                  OPTIONS AT                           OPTIONS AT
                                                                FISCAL YEAR END                   FISCAL YEAR END (1)
                       SHARES ACQUIRED      VALUE      ---------------------------------   ----------------------------------
        NAME           ON EXERCISE(#)    REALIZED($)   EXERCISABLE(#)   UNEXERCISABLE(#)   EXERCISABLE($)    UNEXERCISABLE($)
        ----           ---------------   -----------   --------------   ----------------   --------------    ----------------
<S>                    <C>               <C>           <C>              <C>                <C>               <C>
Bruce Twickler.......           --              --             --                --                  --                 --
Adam Green...........            0               0        124,746           154,953           1,680,967          2,088,010
James Patterson......            0               0         46,150            73,721             621,877            993,399
</TABLE>

---------------
(1) Value is based on the difference between the option exercise price and the
    initial public offering price of the common stock multiplied by the number
    of shares of common stock underlying the option. No market existed for the
    common stock prior to this offering. Assumed offering price of $13.50 per
    share; exercise price is $0.025 per share.

BENEFIT PLANS

  1995 Stock Option Plan.

     The 1995 Stock Option Plan, or the 1995 plan, provides for the granting of
incentive stock options and non-qualified options defined in Section 422 of the
Internal Revenue Code to Andover.Net's employees, consultants and directors. The
1995 plan may be administered by the board of directors or by a committee. The
board has the authority to take the following actions:

          (a) interpret and apply the 1995 plan; and

          (b) determine the eligibility of an individual to participate in the
     1995 plan.

     No incentive stock options may be granted to an employee who, at the time
of the grant, owns more than 10% of the voting power or greater than 10% of each
class of Andover.Net's outstanding stock, unless the purchase price of the stock
is not less than 110% of the stock's fair market value on the date of the grant
and the option, by its terms, shall not be exercisable more than five years from
the date it is granted.

     Vested options may be exercised in full at one time or in part from time to
time. The payment of the exercise price may be made by delivery of one of the
following: (a) cash or a check; (b) at the discretion of the board, shares of
Andover.Net's common stock owned by the optionholder having a fair market value
equal in amount to the exercise price of the options being exercised; (c) at the
discretion of the board, by delivery of the optionholder's personal recourse
note; or (d) at the discretion of the board, any combination of (a), (b) and
(c).

     The term of any option granted under the 1995 plan is limited to either
five or 10 years, depending on the nature of the option holder. Upon the
termination of an optionholder's employment with Andover.Net, his or her options
will terminate between 60 and 180 days after that optionholder leaves the employ
of Andover.Net.

     As of September 15, 1999, 1,000,542 options were outstanding under the 1995
plan. No additional shares will be granted under the plan. Options granted vest
over a term established by the board of directors or committee at the date of
grant. The outstanding options have exercise prices ranging from $0.025 to $1.06
per share.

                                       46
<PAGE>   54

   1999 Stock Option Plan.

     The 1999 Stock Option Plan, or 1999 plan, provides for the granting of
incentive stock options and non-qualified options defined in Section 422 of the
Internal Revenue Code to Andover.Net's employees, directors, advisors or
consultants. The 1999 plan may be administered by Andover.Net's board of
directors or by a committee. The board has the authority to take the following
actions:

          (a) interpret and apply the 1999 plan;

          (b) determine the eligibility of an individual to participate in the
     1999 plan;

          (c) approve the assignment of options immediately prior to the
     registration of Andover.Net's stock pursuant to the Securities Exchange Act
     of 1934, as amended, if such assignment would increase the number of common
     stockholders; and

          (d) determine and allocate the cancellation or exchange of outstanding
     options in the case of a recapitalization, acquisition, merger or change in
     control.

     No incentive stock options may be granted to an employee who, at the time
of the grant, owns more than 10% of the voting power or greater than 10% of each
class of Andover.Net's outstanding stock, unless the purchase price of the stock
is not less than 110% of the stock's fair market value on the date of the grant
and the option, by its terms, shall not be exercisable more than five years from
the date it is granted.

     Vested options may be exercised in full at one time or in part from time to
time in amounts of 50 shares or more. The payment of the exercise price may be
made as determined by the board, and set forth in the option agreement, by
delivery of one of the following: (a) cash or a check; (b) shares of
Andover.Net's common stock owned by the optionholder having a fair market value
equal in amount to the exercise price of the options being exercised; (c) any
combination of (a) and (b); provided, however, that payment of the exercise
price by delivery of shares of common stock owned by such option holder may be
made if the payment does not result in a charge to earnings for financial
accounting purposes as determined by the board; or (d) a properly executed
exercise notice to Andover.Net, together with a copy of irrevocable instruments
to a broker to deliver promptly to Andover.Net the amount of sale or loan
proceeds to pay the exercise price. Andover.Net may delay the issuance of shares
covered by the exercise of an option until the shares for which the option has
been exercised have been registered or qualified under the applicable federal or
state securities laws, or counsel for Andover.Net has opined that the shares are
exempt from the registration requirements of applicable federal or state
securities laws.

     The term of any option granted under the 1999 plan is limited to either
five or 10 years, depending on the nature of the option holder. Upon the
termination of an optionholder's employment with Andover.Net, his or her options
will terminate between 60 days and 12 months after that optionholder leaves the
employ of Andover.Net.

     As of September 15, 1999, 667,443 options were outstanding under the 1999
plan. Options granted vest over a term established by the board of directors at
the date of grant. The outstanding options have an exercise price ranging from
$0.12 to $1.06 per share.

LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS

     As permitted by the Delaware General Corporation Law, we have included in
our certificate of incorporation a provision to eliminate the personal liability
of its directors for monetary damages for breach or alleged breach of their
fiduciary duties as directors, subject to certain exceptions. In addition, our
bylaws provide that we are required to indemnify our officers and directors
under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and we are required to advance
expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. At present, we are
not aware of any pending or threatened litigation or proceeding involving our
directors, officers, employees or agents in which indemnification would be
required or permitted. We believe that our certificate of incorporation
provisions and indemnification agreements are necessary to attract and retain
qualified persons as directors and officers.
                                       47
<PAGE>   55

                             PRINCIPAL STOCKHOLDERS

     The following table sets forth information regarding the beneficial
ownership of our common stock as of September 15, 1999, and as adjusted to
reflect the sale of the common stock offered hereby by:

     -  each person who is known by us to own beneficially more than 5% of the
        outstanding shares of our capital stock;
     -  each of our directors;
     -  the named executive officers; and
     -  all directors and executive officers as a group.

     Percentage of ownership is calculated as required by the Securities and
Exchange Commission, or SEC. Except as indicated in the footnotes to this table,
the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them. The
table below includes the number of shares underlying options which are
exercisable within 60 days from September 15, 1999. For purposes of calculating
each person's or group's percentage ownership, stock options exercisable within
60 days after September 15, 1999 are included for that person or group, but not
the stock options of any other person or group. Unless otherwise indicated, the
address of each of the beneficial owners identified is 50 Nagog Park, Acton,
Massachusetts 01720.

<TABLE>
<CAPTION>
                                                                                      PERCENTAGE OF
                                                                                    SHARES OUTSTANDING
                                                                                  ----------------------
                                                              NUMBER OF SHARES    BEFORE THE   AFTER THE
           NAME AND ADDRESS OF BENEFICIAL OWNER              BENEFICIALLY OWNED    OFFERING    OFFERING
           ------------------------------------              ------------------   ----------   ---------
<S>                                                          <C>                  <C>          <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Bruce A. Twickler(1).......................................       1,911,005          16.1%       12.7%
Adam B. Green(2)...........................................         304,674           2.7         2.0
James E. Patterson(3)......................................          80,022             *           *
William M. Dwyer(4)........................................          80,320             *           *
Derek V. Carroll(5)........................................         100,400             *           *
Janet F. Holian(6).........................................          30,120             *           *
Walter M. Bird III(7)......................................         792,692           7.2         5.3
Jonathan M. Goldstein(8)...................................       2,381,345          21.7        15.9
James D. Logan(9)..........................................         203,493           1.7         1.3
Robert Malda(10)...........................................              --            --          --
Louis Page(11).............................................       1,327,180          12.1         8.9
Thomas R. Shepherd(12).....................................         199,606           1.7         1.3
John E. Trombly(13)........................................         517,452           4.6         3.4
All Directors and Executive Officers as a Group
  (13 persons, including the above)........................       7,928,309          72.1        52.9
5% STOCKHOLDERS
Massachusetts Technology Development Corp..................         684,142           6.2         4.6
  148 State Street
  Boston, MA 02109
James S. Mulhullond, Jr....................................         926,330           8.4         6.1
  One East 66th Street
  New York, NY 10021
TA/Advent VIII L.P. .......................................       1,592,874          14.5        10.6
  High Street Tower
  125 High Street
  Boston, MA 02110
TA/Atlantic and Pacific IV, L.P. ..........................         726,352           6.6         4.8
  High Street Tower
  125 High Street
  Boston, MA 02110
Window to Wall Street, Inc.................................         561,481           5.1         3.7
  39 Cedar Hill Road
  Dover, MA 02030
Window to Wall Street Limited Partnership..................         569,197           5.1         3.8
  39 Cedar Hill Road
  Dover, MA 02030
</TABLE>

                                       48
<PAGE>   56

---------------
  *  Less than one percent

 (1) Shares listed as held by Bruce A. Twickler include 617,184 shares which are
     currently held by Barbara Twickler, his wife, as to which Mr. Twickler
     maintains full voting power. Mr. Twickler disclaims beneficial ownership of
     these shares. Shares listed as held by Mr. Twickler also include options to
     purchase 147,760 shares Mr. Twickler has the right to acquire within 60
     days of September 15, 1999.

 (2) Shares listed as held by Adam B. Green include options to purchase 304,674
     shares Mr. Green has the right to acquire within 60 days of September 15,
     1999.

 (3) Shares listed as held by James E. Patterson include options to purchase
     49,818 shares Mr. Patterson has the right to acquire within 60 days of
     September 15, 1999.

 (4) Shares listed as held by William M. Dwyer include options to purchase
     80,320 shares Mr. Dwyer has the right to acquire within 60 days of
     September 15, 1999.

 (5) Shares listed as held by Derek V. Carroll include options to purchase
     100,400 shares Mr. Carroll has the right to acquire within 60 days of
     September 15, 1999.

 (6) Shares listed as held by Janet F. Holian include options to purchase 30,120
     shares Ms. Holian has the right to acquire within 60 days of September 15,
     1999.

 (7) Shares listed as held by Walter M. Bird III include 461,010 shares held by
     Claflin Capital VI, L.P. and 331,682 Claflin Capital VII, L.P. of which Mr.
     Bird is the general partner. Mr. Bird disclaims beneficial ownership of
     these shares.

 (8) Shares listed as held by Jonathan M. Goldstein include an aggregate of
     1,592,874 shares held by TA/Advent VIII L.P., 726,352 shares held by
     TA/Atlantic and Pacific IV, L.P., 30,263 shares held by TA Executives Fund
     LLC, and 31,856 shares held by TA Investors LLC. Mr. Goldstein has
     beneficial ownership of 6,636 of such shares. Mr. Goldstein disclaims
     beneficial ownership of the remaining shares.

 (9) Shares listed as held by James D. Logan include 188,172 shares held by the
     James D. and Kerry M. Logan Family Trust U/A/D 12/31/98 of which his mother
     Bernice C. Logan is a trustee. Mr. Logan disclaims beneficial ownership of
     these shares. Shares listed as held by Mr. Logan also include 15,333
     options for shares Mr. Logan has the right to acquire within 60 days of
     September 15, 1999.

(10) Mr. Malda, a substantial stockholder of BlockStackers, will beneficially
     own a certain number of shares of common stock upon the closing of this
     offering based upon the initial public offering price. See "Relationships
     with Andover.Net and Related Transactions -- Other Transactions with
     Management -- Slashdot.org Purchase Agreement."

(11) Shares listed as held by Louis Page include 561,481 shares held by Window
     to Wall Street, Inc. of which Mr. Page is the president, 569,197 shares
     held by Window to Wall Street Limited Partnership of which Window to Wall
     Street Inc. is the general partner and 196,501 shares held by Window to
     Wall Street II Limited Partnership of which Window to Wall Street, Inc. is
     the general partner. Mr. Page disclaims beneficial ownership of these
     shares.

(12) Shares listed as held by Thomas R. Shepherd include an aggregate of 10,188
     shares held by The Shepherd Group, LLC of which Mr. Shepherd is the
     Chairman and 80,883 shares held by The Shepherd Venture Fund I, L.P. of
     which The Shepherd Group, LLC is the general partner. Mr. Shepherd
     disclaims beneficial ownership of these shares.

(13) Shares listed as held by John E. Trombly include 334,927 shares held by
     Royalty Capital Fund L.P. I, of which Royalty Capital Management, Inc. is
     the general partner. Mr. Trombly is the Executive Vice President of Royalty
     Capital Management, Inc. Mr. Trombly disclaims beneficial ownership of
     these shares.

                                       49
<PAGE>   57

            RELATIONSHIPS WITH ANDOVER.NET AND RELATED TRANSACTIONS

SALE OF SERIES B PREFERRED STOCK

     Andover.Net issued and sold 600,568 shares of Series B convertible
preferred stock on September 15, 1999. 480,354 shares were sold and issued to
affiliates of TA Associates, Inc. and others and 120,214 shares, in the
aggregate, were issued to holders of convertible promissory notes in exchange
for the cancellation of their notes. The total aggregate proceeds to Andover.Net
in the private placement was approximately $10,100,000. The Series B convertible
preferred stock is immediately convertible into common stock at the option of
the holder and will convert into 3,017,138 shares of common stock upon the
closing of this offering.

EMPLOYMENT AGREEMENTS

  Robert Malda

     In connection with its acquisition of Slashdot.org, Andover.Net entered
into an employment agreement with Robert Malda, a director of Andover.Net, on
June 28, 1999, for a term of three years. The agreement provides that Mr. Malda
is entitled to a base salary of $90,000 per year. In addition, Mr. Malda is
entitled to customary employee benefits. Mr. Malda's employment agreement may be
terminated by Andover.Net at any time for "cause," which is defined as (a) the
conviction of or plea of no contest to any felony, (b) continued, uncured
insubordination, (c) breach of the non-competition provisions of the employment
agreement or (d) commission of any fraud, embezzlement or similar acts of
dishonesty against Andover.Net. This agreement may also be terminated by
Andover.Net without cause or by Mr. Malda for "good reason," which is defined as
(a) the assignment of any duties inconsistent with those set forth in the
employment agreement, (b) any material reduction in Mr. Malda's salary or
benefits, (c) breach of the employment agreement by Andover.Net or (d) the
requirement by Andover.Net that Mr. Malda perform his duties from any specific
location for a prolonged period of time. If Mr. Malda is terminated without
cause or terminates for "good reason" then Mr. Malda is entitled to continue to
receive his existing base salary and benefits for a period of 12 months and is
entitled to receive the payments set forth in the Slashdot.org purchase
agreement without reduction. See "Other Transactions with Management -
Slashdot.org Purchase Agreement."

     Under the terms of the employment agreement, Mr. Malda has agreed that
during the term of the agreement he will not participate in the management of
any entity which is in competition with Andover.Net. In the event that
Andover.Net terminates Mr. Malda without cause or if Mr. Malda terminates for
good reason, this non-competition period will terminate concurrently with the
termination of employment.

OTHER TRANSACTIONS WITH MANAGEMENT

  Compensation and Benefits.

     Our executive officers receive compensation, bonuses and other benefits
under various employee benefit plan arrangements maintained by us and its
subsidiaries. The executive officers participated in such benefit plans under
the same terms generally made available to our similarly situated employees with
similar responsibilities and levels of compensation.

     Our executive officers are eligible for performance bonuses under our
Executive Officer Incentive Plan. Under this plan, each officer is eligible for
a bonus of up to $9,000 per quarter. The amount of each bonus is based on a
consideration of our quarterly revenues and quarterly traffic as well as the
achievement of specific corporate objectives.

  Slashdot.org Purchase Agreement

     Under the terms of the Asset Purchase Agreement between BlockStackers, Inc.
and Andover.Net, dated as of June 18, 1999, Andover.Net purchased those assets
of BlockStackers relating to the Slashdot.org web site. Andover.Net is obligated
to issue shares of its common stock to BlockStackers over a period of two

                                       50
<PAGE>   58

years following this offering. For the purposes of these issuances, the number
of shares of common stock to be issued is determined using an assumed initial
public offering price of $13.50 per share.

     - 148,148 shares issuable upon the closing of this offering;

     - 74,074 shares issuable seven months after the closing of this offering;

     - 49,383 shares issuable 12 months after the closing of this offering;

     - 98,763 shares issuable 12 months after the closing of this offering
       provided that the milestones in the agreement have been met;

     - 49,383 shares issuable 24 months after the closing of this offering; and

     - 98,765 shares issuable 24 months after the closing of this offering
       provided that the milestones in the agreement have been met.

     Pursuant to this purchase agreement, BlockStackers also agreed not to
compete with Andover.Net or to solicit its personnel, customers or suppliers.
Specifically, BlockStackers may not compete with Andover.Net, its subsidiaries
or affiliates by engaging in any business that involves a real-time or
contemporaneous news web site until June 28, 2004. Prior to June 28, 2001,
BlockStackers may not solicit personnel, customers or suppliers from
Andover.Net, its subsidiaries or affiliates. Mr. Malda, a director of
Andover.Net, is a substantial stockholder of BlockStackers.

  Freshmeat.net Purchase Agreement

     Under the terms of the Asset Purchase Agreement between Patrick Lenz (the
owner of Freshmeat.net) and Andover.Net, dated August 6, 1999, Andover.Net
purchased those assets relating to the Freshmeat.net web site. Andover.Net is
obligated to issue shares of its common stock to Mr. Lenz over a period of two
years following this offering. For purposes of these issuances, the number of
shares of common stock to be issued is determined using an assumed initial
public offering price of $13.50 per share.

     - 8,230 shares issuable upon the closing of this offering;

     - 8,230 shares issuable 12 months after the closing of this offering; and

     - 8,230 shares issuable 24 months after the closing of this offering.

     Mr. Lenz is presently an independent contractor of Andover.Net.

  Animation Factory Purchase Agreement

     Under the terms of the Asset Purchase Agreement between Eclipse Digital
Imaging, Inc. and Andover.Net, dated as of June 18, 1999, Andover.Net purchased
certain assets of Eclipse Digital Imaging including certain graphical and
artistic web sites known as Animation Factory. Andover.Net is obligated to issue
shares of its common stock to Eclipse Digital Imaging over a period of two years
following this offering. For the purposes of these issuances, the number of
shares of common stock to be issued is determined using an assumed initial
public offering price of $13.50 per share.

     - 14,815 shares issuable upon the closing of this offering;

     - 14,815 shares issuable 12 months after the closing of this offering; and

     - 14,815 shares issuable 24 months after the closing of this offering.

     James Maloney and Art Holden, employees of Andover.Net, are substantial
stockholders of Eclipse Digital Imaging.

                                       51
<PAGE>   59

                          DESCRIPTION OF CAPITAL STOCK

     Upon completion of the offering, our authorized capital stock will consist
of 100,000,000 shares of common stock, $.01 par value per share, of which
15,000,000 shares will be outstanding, and 1,000,000 shares of preferred stock,
$.01 par value per share, none of which will be outstanding. The following
description of our capital stock and certain provisions of our restated
certificate of incorporation, or the certificate of incorporation, and bylaws is
a summary and is qualified in its entirety by the provisions of the certificate
of Incorporation and bylaws, copies of which have been filed as exhibits to this
registration Statement of which this prospectus is a part.

COMMON STOCK

     Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of the stockholders, including the election of
directors. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election if they choose to do so. The certificate of incorporation
does not provide for cumulative voting for the election of directors. Holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the board of directors out of funds legally
available therefor, and shall be entitled to receive, pro rata, all assets of
Andover.Net available for distribution to such holders upon liquidation. Holders
of common stock have no preemptive, subscription or redemption rights.

PREFERRED STOCK

     We are authorized to issue "blank check" preferred stock, which may be
issued from time to time in one or more series upon authorization by our board
of directors. The board of directors, without further approval of the
stockholders, is authorized to fix the dividend rights and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences and
any other rights, preferences, privileges and restrictions applicable to each
series of the preferred stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of the
holders of common stock and, under certain circumstances, make it more difficult
for a third party to gain control of Andover.Net, discourage bids for our common
stock at a premium or otherwise adversely affect the market price of our common
stock. We currently have no plans to issue any preferred stock.

CERTAIN CERTIFICATE OF INCORPORATION, BYLAW AND STATUTORY ANTI-TAKEOVER
PROVISIONS AFFECTING STOCKHOLDERS

     Classified Board.  Our board of directors is divided into three classes,
each of which, after a transitional period, will serve for three years, with one
class being elected each year. Removal of a member of the board of directors
with or without cause requires a majority vote of the board of directors or of
the stockholders. A majority of the remaining directors then in office, though
less than a quorum, and the stockholders, are empowered to fill any vacancy on
the board of directors. A majority vote of the stockholders is required to
alter, amend or repeal the foregoing provisions.

     Section 203 of Delaware Law.  We are subject to the "business combination"
statute of the Delaware General Corporation Law. In general, this statute
prohibits a publicly held Delaware corporation from engaging in various
"business combination" transactions with any "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless (a) the transaction is approved by
the board of directors prior to the date the interested stockholder obtained
such status, (b) upon consummation of the transaction which resulted in the
shareholder 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 by (x) persons who are directors and
also officers and (y) 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 (c) on or

                                       52
<PAGE>   60

subsequent to such date the "business combination" is approved by the board of
directors and authorized at an annual or special meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the "interested stockholder." A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
a stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's voting stock. By virtue of our decision not to elect out of the
statute's provisions, the statute applies to us. None of our current
stockholders is an "interested stockholder" because their acquisition of shares
was approved by our board of directors. The statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.

     Directors Liability.  The certificate of incorporation provides that no
director shall be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director notwithstanding any provision
of law imposing such liability, provided that, to the extent provided by
applicable law, the certificate of incorporation shall not eliminate the
liability of a director for (a) any breach of the director's duty of loyalty to
us or our stockholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) acts or omissions in
respect of certain unlawful dividend payments or stock redemptions or
repurchases or (d) any transaction from which such director derives improper
personal benefit. The effect of this provision is to eliminate the rights of
Andover.Net and our stockholders (through stockholders' derivative suits against
Andover.Net) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (a) through (d) above. The limitations summarized above, however, do not
affect the ability of Andover.Net or our stockholders to seek non-monetary based
remedies, such as an injunction or rescission, against a director for breach of
his fiduciary duty nor would such limitations limit liability under the Federal
securities laws. Our bylaws provide that we shall, to the extent permitted by
Delaware law, as amended from time to time, indemnify and advance expenses to
the currently acting and former directors, officers, employees and agents of
Andover.Net or of another corporation, partnership, joint venture, trust or
other enterprise if serving at our request arising in connection with their
acting in such capacities.

     Certain provisions described above may also have the effect of delaying
stockholder actions with respect to certain business combinations and the
election of new members to our board of directors. As such, the provisions could
have the effect of discouraging open market purchases of our common stock
because they may be considered disadvantageous by a stockholder who desires to
participate in a business combination with us or elect a new director to our
board.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

     Following this offering, the holders of approximately 9,497,449 shares of
common stock will have certain rights to register those shares under the
Securities Act of 1933, as amended, the Securities Act, pursuant to a third
amended and restated registration rights agreement. Subject to certain
limitations in the agreement, the holders of at least 50% of:

     - the shares issued upon conversion of the Series B convertible preferred
       stock; or

     - the shares of common stock held by former holders of Series A redeemable
       preferred stock

may require, on a total of three occasions, Andover.Net to use its best efforts
to register all such shares for resale to the public. These holders are
entitled, if Andover.Net registers any of its common stock for its own account
or for the account of other security holders, to include their shares of common
stock in such registration. These holders may also require Andover.Net to
register all or a portion of their shares of common stock in a registration
statement on Form S-3 when Andover.Net is eligible to use that form, provided
that the proposed aggregate price to the public of any offering is at least
$1,000,000. Andover.Net will bear all fees, costs and expenses of these
registrations, other than underwriting discounts and commissions.

                                       53
<PAGE>   61

     All of the registration rights described above are subject to conditions
and limitations, among them the right of the underwriters in any underwritten
offering to limit the number of shares of common stock to be included in a
registration. Registrations of any shares of common stock held by holders with
registration rights would result in these shares being freely tradable without
restriction under the Securities Act upon the effective date of the
registration. Under the agreement, Andover.Net has also agreed to indemnify the
holders of registration rights.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock is BankBoston, N.A.

                                       54
<PAGE>   62

                        SHARES ELIGIBLE FOR FUTURE SALE

     Upon completion of this offering, Andover.Net will have outstanding
15,000,000 shares of common stock. Of these shares, the 4,000,000 shares offered
hereby (4,600,000 shares if the Underwriters' over-allotment option is exercised
in full) will be freely tradable without restriction or further registration
under the Securities Act, unless purchased by "affiliates" of Andover.Net as
that term is defined in Rule 144 described below. The remaining 11,000,000
shares of common stock outstanding upon closing of the offering are "restricted
securities" as that term is defined in Rule 144. Of the remaining 11,000,000
shares, approximately 5,004,838 shares are subject to 180 day lock-up agreements
(described below).

     Beginning 90 days after commencement of this offering, approximately
2,946,906 shares will become eligible for sale pursuant to Rule 144 or Rule 701
under the Securities Act ("Rule 701"). Upon expiration of the lock-up
agreements, an aggregate of 7,057,506 shares will become immediately eligible
for sale subject to the timing, volume, and manner of sale restrictions of Rule
144. Commencing                     , 2001, all outstanding shares not owned by
affiliates of Andover.Net (currently 2,946,906 shares) will be eligible for sale
pursuant to Rule 144(k). In addition, 913,178 additional shares of common stock
subject to outstanding vested stock options could also be sold as of January 1,
2000, subject in some cases to compliance with certain volume limitations as
described below.

     In general, under Rule 144, as amended, a person (or persons whose shares
are aggregated) who has beneficially owned shares for at least one year
(including the holding period of any prior owner except an affiliate from whom
such shares were purchased) is entitled to sell in "brokers' transactions" or to
market makers, within any three-month period commencing 90 days after the date
of this Prospectus, a number of shares that does not exceed the greater of (i)
one percent of the number of shares of common stock then outstanding
(approximately 150,000 shares immediately after the completion of this offering)
or (ii) generally, the average weekly trading volume in our common stock during
the four calendar weeks preceding the required filing of a Form 144 with respect
to such sale. Sales under Rule 144 are generally subject to the availability of
current public information about Andover.Net. Under Rule 144(k), a person who is
not deemed to have been an affiliate of Andover.Net at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any prior owner
other than an affiliate from whom such shares were purchased), is entitled to
sell such shares without having to comply with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Under Rule 701,
persons who purchase shares upon exercise of options granted prior to the
effective date of this offering are entitled to sell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.

     Each of our directors, executive officers and holders of 5% or more of our
outstanding capital stock has agreed to certain restrictions on their ability to
sell, offer, contract or grant any option to sell, pledge, transfer or otherwise
dispose of shares of our common stock for a period of 180 days after the date of
this prospectus, without the prior written consent of WR Hambrecht + Co. Each of
the holders of less than 5% of our outstanding capital stock has agreed to
identical restrictions covering a period of 90 days from the date of this
prospectus.

     The holders of an aggregate of 9,497,449 shares of common stock or their
transferees are entitled to rights with respect to the registration of these
shares under the Securities Act. See "Description of Capital Stock-Registration
Rights of Certain Holders."

     Prior to this offering, there has not been any public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect the prevailing market prices and impair
Andover.Net's ability to raise capital through the sale of equity securities.

                                       55
<PAGE>   63

                              PLAN OF DISTRIBUTION

     In accordance with the terms of an underwriting agreement, WR Hambrecht +
Co., LLC, Advest, Inc. and DLJdirect Inc., as underwriters, will purchase from
Andover.Net the following respective number of shares of common stock at the
public offering price less the underwriting discounts and commissions described
on the cover page of this prospectus.

<TABLE>
<CAPTION>
                                                              NUMBER OF
                        UNDERWRITER                            SHARES
                        -----------                           ---------
<S>                                                           <C>
WR Hambrecht + Co., LLC.....................................
Advest, Inc. ...............................................
DLJdirect Inc...............................................
                                                              ---------
          Total.............................................  4,000,000
                                                              =========
</TABLE>

     The underwriting agreement provides that the obligations of the
underwriters are subject to conditions, including the absence of any material
adverse change in Andover.Net's business, and the receipt of certificates,
opinions and letters from Andover.Net and its counsel and independent
accountants. Subject to those conditions, the underwriters are committed to
purchase all shares of common stock offered if any of the shares are purchased.

     The underwriters propose to offer the shares of common stock directly to
the public at the offering price set forth on the cover page of this prospectus,
as this price is determined by the process described below, and to certain
dealers at this price less a concession not in excess of $     per share. Any
dealers or agents that participate in the distribution of the common stock may
be deemed to be underwriters within the meaning of the Securities Act, and any
discounts, commissions or concessions received by them and any provided by the
sale of the shares by them might be deemed to be underwriting discounts and
commissions under the Securities Act. After the completion of the initial public
offering of the shares, the public offering price and other selling terms may be
changed by the underwriters.

     The public offering price described on the cover page of this prospectus
will be based on the results of an auction process, rather than solely through
negotiations between Andover.Net and the underwriters. The plan of distribution
of the offered shares differs somewhat from traditional underwritten public
offerings of equity securities.

     The auction process will proceed as follows:

     - Prior to the effectiveness of the registration statement relating to this
       offering, the underwriters and participating dealers will solicit
       conditional offers to purchase from prospective investors through the
       Internet as well as by traditional means. The conditional offers to
       purchase will specify the number of shares the potential investor
       proposes to purchase and the price the investor is willing to pay for the
       shares. At least two business days prior to the expected effectiveness of
       the registration statement, WR Hambrecht + Co will send an e-mail (the
       confirmation e-mail) to or contact by telephone, voice mail or facsimile
       investors who have submitted conditional offers, advising them that the
       registration statement for the offering may be declared effective
       shortly, that investors should carefully consider the conditional offer
       that they have transmitted previously, and requesting that the investors
       affirmatively confirm their previously transmitted conditional offer to
       purchase. An affirmative confirmation from an investor remains valid for
       a period of seven business days from the transmission of the confirmation
       e-mail. If WR Hambrecht + Co anticipates that the registration statement
       will not be effective within this seven business day period, WR Hambrecht
       + Co will send out another confirmation e-mail approximately two business
       days prior to the revised time that WR Hambrecht + Co expects the
       registration statement to be effective. All conditional offers to
       purchase that are not confirmed prior to the time specified by the
       underwriters or, if the time is not specified, the pricing of the
       offering, will be deemed withdrawn.

     - After effectiveness, the underwriters will contact by e-mail, telephone,
       voice mail or facsimile all bidders who have affirmatively confirmed
       their conditional offers, to notify them that the registration

                                       56
<PAGE>   64

       statement is effective and that WR Hambrecht + Co can accept his or her
       conditional offer to purchase by notice to the bidder sent after the
       auction has closed and the offering has been priced. If the auction is
       closed and the offering is priced on the same day that the registration
       statement becomes effective, notice of effectiveness will be included in
       the notice of acceptance. The bidder has the right to withdraw his or her
       conditional offer at any time prior to the time at which WR Hambrecht +
       Co sends the notice of acceptance by one of the means specified above.
       New conditional offers to purchase may be placed at any time prior to the
       close of the auction. After the auction is closed and a clearing price is
       set as described below, WR Hambrecht + Co will accept the conditional
       offers to purchase from those bidders with conditional offers to purchase
       at or above the clearing price.

     The public offering price will ultimately be determined by negotiation
between the underwriters and Andover.Net following the close of the auction. The
principal factor in establishing the public offering price will be the price per
share, or clearing price, resulting from the auction that equals the highest
price set forth in valid conditional offers at which all of the shares may be
sold to potential investors. The public offering price may be lower (but will
not be higher) than the clearing price based on negotiations between the
underwriters and Andover.Net. However, the clearing price will always determine
the allocation of shares. Thus, if the public offering price is below the
clearing price, all conditional offers which are below the clearing price will
be rejected even if they are higher than the public offering price. If
sufficient conditional offers are not received or Andover.Net does not consider
the clearing price to be adequate or the underwriters and Andover.Net are not
able to reach agreement on the offering price, Andover.Net and the underwriters
will either postpone or cancel the offering or file a post-effective amendment
and conduct a new auction.

     - A simplified example of how the public offering price will be determined
       via the auction process is as follows: Company X offers to sell 100
       shares in its public offering through this auction process. WR Hambrecht
       + Co, on behalf of Company X, receives five conditional offers to
       purchase, all of which are kept confidential until the auction process
       ends. The first conditional offer to purchase is to pay $10 per share for
       10 shares, the second is for $9 per share for 30 shares, the third for $8
       per share for 60 shares, the fourth for $8 per share for 40 shares and
       the last for $7 per share for 80 shares. Assuming that all of these
       conditional offers to purchase are confirmed and not withdrawn or
       modified prior to acceptance by WR Hambrecht + Co, and that no additional
       conditional offers to purchase are received, the clearing price used to
       determine the public offering price would be $8 a share because $8 equals
       the highest price at which all 100 shares may be sold to potential
       investors who have submitted valid bids. The two potential investors with
       the highest conditional offers to purchase would receive all the shares
       they requested, totaling 40 shares. The next two potential investors
       would receive the remaining 60 shares in proportion to the amounts they
       asked for, or 36 and 24 shares each. The potential investor with the
       lowest conditional offer to purchase would receive no shares in this
       example.

     - Valid conditional offers to purchase are those that meet the
       requirements, including eligibility, account status and size, established
       by the underwriters or participating dealers. In addition to minimum
       account balances, a prospective investor submitting a conditional offer
       to purchase through a WR Hambrecht + Co brokerage account may be required
       to have an account balance equal to or in excess of an amount specified
       by WR Hambrecht + Co. Although funds may be required to be in an account
       as a condition to the conditional offer to purchase being considered
       valid, the funds will not be transferred to the underwriters until the
       closing of the offering. Conditions for valid conditional offers to
       purchase, including eligibility standards and account funding
       requirements of other underwriters or participating dealers may vary.

     - The auction will close on a date estimated and publicly disclosed in
       advance by the underwriters on the web site of WR Hambrecht + Co. The
       offered shares will be purchased from Andover.Net by the underwriters and
       sold through the underwriters and participating dealers to investors who
       have submitted offers to purchase at or in excess of the clearing price,
       and these investors will be notified by e-mail, telephone, voice mail,
       facsimile or mail as soon as practicable following the close of the
       auction that their conditional offers to purchase have been accepted. The
       number of shares sold to an investor submitting a conditional offer to
       purchase precisely at the clearing price may be subject to a
                                       57
<PAGE>   65

       pro rata reduction. Each participating dealer has agreed with the
       underwriters to sell shares they purchase from the underwriters in this
       manner, unless otherwise consented to by the underwriters. The
       underwriters reserve the right to reject bids that they deem
       manipulative, disruptive or necessary or beneficial to facilitate the
       orderly completion of the offering, and reserve the right, in exceptional
       circumstances, to alter this method of allocation as they deem necessary
       to effect a fair and orderly distribution of the shares. For example,
       large orders may be reduced to insure a public distribution and
       conditional offers to purchase may be rejected by the underwriters or
       participating dealers based on eligibility or creditworthiness criteria.

     Price and volume volatility in the market for Andover.Net's common stock
may result from the somewhat unique nature of the proposed plan of distribution.
Price and volume volatility in the market for Andover.Net's common stock after
the completion of this offering may adversely affect the market price of
Andover.Net's common stock.

     Andover.Net has granted to the underwriters an option, exercisable no later
than 30 days after the date of this prospectus, to purchase up to an aggregate
of 600,000 additional shares of common stock at the offering price, less the
underwriting discount, set forth on the cover page of this prospectus. To the
extent that the underwriters exercise this option, the underwriters will have a
firm commitment to purchase the additional shares, and Andover.Net will be
obligated to sell the additional shares to the underwriters. The underwriters
may exercise the option only to cover over-allotments made in connection with
the sale of shares offered. The underwriting agreement provides that Andover.Net
will indemnify the underwriters against specified liabilities, including
liabilities under the Securities Act, or contribute to payments that the
underwriters may be required to make.

     Andover.Net has agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of common stock, or any options or warrants to purchase
common stock other than the shares of common stock or options to acquire common
stock issued under Andover.Net's stock option plan(s), for a period of 90 days
after the date of this prospectus, except with the prior written consent of WR
Hambrecht + Co. Each of our directors, executive officers and holders of 5% or
more of our outstanding capital stock has agreed to certain restrictions on
their ability to sell, offer, contract or grant any option to sell, pledge,
transfer or otherwise dispose of shares of our common stock for a period of 180
days after the date of this prospectus, without the prior written consent of WR
Hambrecht + Co. Each of the holders of less than 5% of our outstanding capital
stock has agreed to identical restrictions covering a period of 90 days from the
date of this prospectus.

     Prior to the offering, there has been no public market for Andover.Net's
common stock. The initial public offering price for the common stock will be
determined by the process described above and does not necessarily bear any
direct relationship to Andover.Net's assets, current earnings or book value or
to any other established criteria of value, although these factors were
considered in establishing the initial public offering price range. Other
factors considered in determining the initial public offering price range
include:

     -  market conditions;

     -  the industry in which Andover.Net operates;

     -  an assessment of Andover.Net's management;

     -  Andover.Net's operating results;

     -  Andover.Net's capital structure;

     -  the business potential of Andover.Net;

     -  the demand for similar securities of comparable companies; and

     -  other factors deemed relevant.

     In connection with the offering, persons participating in the offering may
purchase and sell shares of common stock on the open market. These transactions
may include short sales, stabilizing transactions in accordance with Rule 104 of
Regulation M under the Securities Exchange Act of 1934, as amended, the Exchange
Act, and purchases to cover positions created by short sales. Short sales
involve the sale by the underwriters of a greater number of shares than they are
required to purchase in the offering which creates a

                                       58
<PAGE>   66

syndicate short position. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a decline in the
market price of the common stock. The underwriters also may impose a penalty
bid. This occurs when a particular underwriter repays to the underwriters a
portion of the underwriting discount received by it because the representative
has repurchased shares sold by or for the account of such underwriter in
stabilizing or short covering transactions. These activities by the underwriters
may stabilize, maintain or otherwise affect the market price of the common
stock. As a result, the price of the common stock may be higher than the price
that otherwise might exist in the open market. If these activities are
commenced, they may be discontinued by the underwriters at any time. These
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

     Persons participating in this offering may also engage in passive market
making transactions in the common stock on the Nasdaq National Market. Passive
market making consists of displaying bids on the Nasdaq National Market limited
by the prices of independent market makers and affecting purchases limited by
such prices and in response to order flow. Rule 103 of Regulation M promulgated
by the SEC limits the amount of net purchases that each passive market maker may
make and the displayed size of each bid.

     Passive market making may stabilize the market price of the common stock at
a level above that which might otherwise prevail in the open market and, if
commenced, may be discontinued at any time.

     WR Hambrecht + Co currently intends to act as a market maker for the common
stock following this offering. However, WR Hambrecht + Co is not obligated to do
so and may discontinue any market making at any time.

     WR Hambrecht + Co is an investment banking firm formed as a limited
liability company in February 1998. In addition to this offering, WR Hambrecht +
Co has engaged in the business of public and private equity investing and
financial advisory services since its inception. The manager of WR Hambrecht +
Co, William R. Hambrecht, has 40 years of experience in the securities industry.

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for Andover.Net by Hutchins, Wheeler & Dittmar, A Professional Corporation,
Boston, Massachusetts. Certain members of Hutchins, Wheeler & Dittmar may be
deemed to have a beneficial interest in an aggregate of 5,747 shares of common
stock. David P. Kreisler, a member of Hutchins, Wheeler and Dittmar, is also the
Secretary of Andover.Net. Certain legal matters in connection with the offering
will be passed upon for the underwriters by Willkie Farr & Gallagher, New York,
New York.

                                    EXPERTS

     The financial statements of (a) Andover.Net, Inc. as of September 30, 1998
and June 30, 1999, and for each of the two years in the period ending September
30, 1998 and for the nine month period ending June 30, 1999, (b) the financial
statements of BlockStackers, Inc. as of December 31, 1998 and for the period
from Inception (August 24, 1998) through December 31, 1998 and (c) the financial
statements of Eclipse Digital Imaging, Inc. as of December 31, 1998 and for the
year then ended, included in the registration statement of which this prospectus
forms a part have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

                                       59
<PAGE>   67

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission, or SEC, for the common stock we are offering by this
prospectus. This prospectus 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 us and our common stock, we make reference to the
registration statement and to the exhibits and schedules filed therewith.
Statements contained in this prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference. A copy of the registration statement may be
inspected by anyone without charge at the SEC's principal office in Washington,
D.C., and copies of all or any part of the registration statement may be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of certain fees prescribed by the SEC.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. The SEC maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of the web site
is http://www.sec.gov. Upon completion of the offering, we will be subject to
the information reporting requirements of the Securities Exchange Act of 1934,
as amended and, in accordance therewith, will file reports, proxy statements and
other information with the SEC.

     We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent public accountants and quarterly
reports for the first three fiscal quarters of each fiscal year containing
unaudited interim financial information.

                                       60
<PAGE>   68

                               ANDOVER.NET, INC.

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
ANDOVER.NET, INC.
Report of Independent Public Accountants....................   F-2
Balance Sheets as of September 30, 1998 and June 30, 1999...   F-3
Statements of Operations for the Years Ended September 30,
  1997 and 1998 and for the Nine Months Ended June 30, 1998
  (Unaudited) and 1999......................................   F-4
Statements of Stockholders' Equity (Deficit) for the Years
  Ended September 30, 1997 and 1998 and the Nine Months
  Ended June 30, 1999.......................................   F-5
Statements of Cash Flows for the Years Ended September 30,
  1997 and 1998 and for the Nine Months Ended June 30, 1998
  (Unaudited) and 1999......................................   F-6
Notes to Financial Statements...............................   F-7

ANDOVER.NET, INC. PRO FORMA UNAUDITED FINANCIAL INFORMATION
Introduction to Pro Forma Financial Information.............  F-21
Pro Forma Combined Statement of Operations for the Year
  Ended September 30, 1998..................................  F-22
Pro Forma Combined Statement of Operations for the Nine
  Months Ended June 30, 1999................................  F-23

BLOCKSTACKERS, INC.
Report of Independent Public Accountants....................  F-24
Balance Sheet as of December 31, 1998.......................  F-25
Statement of Operations for the Period from Inception
  (August 24, 1998) through December 31, 1998...............  F-26
Statements of Stockholders' Deficit from Inception (August
  24, 1998) through December 31, 1998.......................  F-27
Statements of Cash Flows for the Period from Inception
  (August 24, 1998) through December 31, 1998...............  F-28
Notes to Financial Statements...............................  F-29

ECLIPSE DIGITAL IMAGING, INC.
Report of Independent Public Accountants....................  F-32
Balance Sheet as of December 31, 1998.......................  F-33
Statement of Operations for the Years Ended December 31,
  1998......................................................  F-34
Statement of Partners' Capital for the Year Ended December
  31, 1998..................................................  F-35
Statement of Cash Flows for the Year Ended December 31,
  1998......................................................  F-36
Notes to Financial Statements...............................  F-37
</TABLE>

                                       F-1
<PAGE>   69

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Andover.Net, Inc.:

We have audited the accompanying balance sheets of Andover.Net, Inc. (a Delaware
corporation) as of September 30, 1998 and June 30, 1999 and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended September 30, 1997 and 1998 and for the nine months ended June 30,
1999. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Andover.Net, Inc. as of
September 30, 1998 and June 30, 1999 and the results of its operations and cash
flows for the years ended September 30, 1997 and 1998 and for the nine months
ended June 30, 1999, in conformity with generally accepted accounting
principles.

Boston, Massachusetts
September 16, 1999

                                       F-2
<PAGE>   70

                               ANDOVER.NET, INC.

                                 BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                JUNE 30, 1999
                                                           SEPTEMBER 30,    ----------------------
                                                               1998         ACTUAL      PRO FORMA
                                                           -------------    -------    -----------
                                                                                       (NOTE 2(C))
                                                                                       (UNAUDITED)
<S>                                                        <C>              <C>        <C>
                                              ASSETS
Current assets:
  Cash and cash equivalents..............................     $   196       $ 1,610      $11,710
  Accounts receivable, net of allowance of $13 and $35 as
     of September 30, 1998 and June 30, 1999,
     respectively........................................         308           398          398
  Other current assets...................................           6            37           37
                                                              -------       -------      -------
          Total current assets...........................         510         2,045       12,145
Property and equipment, net..............................          23           168          168
Other assets:
  Intangible assets......................................          --         2,922        2,922
  Other..................................................          --            35           35
                                                              -------       -------      -------
                                                                   --         2,957        2,957
                                                              -------       -------      -------
                                                              $   533       $ 5,170      $15,270
                                                              =======       =======      =======

            LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable.......................................     $   121       $   134      $   134
  Accrued expenses.......................................         159           303          303
  Long-term debt -- current portion......................          --           664          664
  Convertible notes payable to stockholders..............          --         2,090           --
                                                              -------       -------      -------
          Total current liabilities......................         280         3,191        1,101
Long-term debt...........................................          --           487          487
Commitments and contingencies (Note 8)
Series A redeemable preferred stock, at redemption value
  (Note 9)...............................................       2,362         4,713        4,713
Series B redeemable convertible preferred stock (Note
  12(c)).................................................          --            --           --
Stockholders' equity (deficit):
  Common stock, $0.01 par value -- authorized -- 100,000
     shares; issued and outstanding -- 5,119 shares at
     September 30, 1998, 7,951 shares at June 30, 1999
     and 10,968 pro forma at June 30, 1999...............          51            79          110
  Additional paid in capital.............................         105         2,338       28,755
  Deferred compensation..................................          --          (863)        (863)
  Accumulated deficit....................................      (2,265)       (4,775)     (19,033)
                                                              -------       -------      -------
          Total stockholders' equity (deficit)...........      (2,109)       (3,221)       8,969
                                                              -------       -------      -------
                                                              $   533       $ 5,170      $15,270
                                                              =======       =======      =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-3
<PAGE>   71

                               ANDOVER.NET, INC.

                            STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                NINE MONTHS ENDED
                                               YEARS ENDED SEPTEMBER 30,             JUNE 30,
                                               --------------------------    ------------------------
                                                  1997           1998           1998          1999
                                               -----------    -----------    -----------    ---------
                                                                             (UNAUDITED)
<S>                                            <C>            <C>            <C>            <C>
Net revenue:
  Advertising................................   $     469      $   1,290      $     986     $     891
  Barter advertising.........................          --             --             --           218
  Software...................................         272             --             --            --
                                                ---------      ---------      ---------     ---------
          Total revenue......................         741          1,290            986         1,109
                                                ---------      ---------      ---------     ---------
Cost of revenue:
  Editorial content and related..............         136            327            255           430
  Software...................................         167             --             --            --
                                                ---------      ---------      ---------     ---------
          Total cost of revenue..............         303            327            255           430
                                                ---------      ---------      ---------     ---------
Gross profit.................................         438            963            731           679
Operating expenses:
  Sales and marketing........................         496            744            582         1,118
  General and administrative.................         338            360            290           678
  Research and development...................         194            304            200           472
  Amortization of deferred compensation......          --             --             --           720
                                                ---------      ---------      ---------     ---------
          Total operating expenses...........       1,028          1,408          1,072         2,988
                                                ---------      ---------      ---------     ---------
          Loss from operations...............        (590)          (445)          (341)       (2,309)
Interest income..............................           1             20             16            59
Interest expense.............................         (75)           (49)           (49)           --
                                                ---------      ---------      ---------     ---------
          Net loss...........................   $    (664)     $    (474)     $    (374)    $  (2,250)
                                                =========      =========      =========     =========
Accrued dividends on redeemable preferred
  stock......................................          41            134             89           260
                                                ---------      ---------      ---------     ---------
          Net loss attributable to common
            stockholders.....................   $    (705)     $    (608)     $    (463)    $  (2,510)
                                                =========      =========      =========     =========
Basic and diluted net loss per share
  applicable to common stockholders (Note
  2(j))......................................   $   (0.29)     $   (0.12)     $   (0.09)    $   (0.36)
                                                =========      =========      =========     =========
Basic and diluted weighted average shares
  outstanding................................       2,468          5,110          5,106         6,990
                                                =========      =========      =========     =========
Pro forma net loss per share (Note 2(j)).....                  $   (0.12)                   $   (0.36)
                                                               =========                    =========
Pro forma basic and diluted weighted average
  shares outstanding.........................                      5,110                        6,992
                                                               =========                    =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-4
<PAGE>   72

                               ANDOVER.NET, INC.

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                  COMMON STOCK
                                                  NO PAR VALUE
                                               ------------------                  ADDITIONAL                      TOTAL
                                               NUMBER OF              DEFERRED      PAID-IN     ACCUMULATED    STOCKHOLDERS'
                                                SHARES     AMOUNT   COMPENSATION    CAPITAL       DEFICIT     EQUITY (DEFICIT)
                                               ---------   ------   ------------   ----------   -----------   ----------------
<S>                                            <C>         <C>      <C>            <C>          <C>           <C>
Balance, September 30, 1996..................    1,763      $ 18      $    --       $    --      $   (813)        $  (795)
  Recapitalization of preferred stock........    1,709        17           --            --          (139)           (122)
  Issuance of common stock...................    1,206        12           --            78            --              90
  Issuance costs related to Series A
    redeemable preferred stock...............       --        --           --            --           (41)            (41)
  Conversion of convertible promissory notes
    to Series A redeemable preferred stock
    and common stock.........................      402         4           --            26            --              30
  Exercise of stock options..................       15        --           --            --            --              --
  Net loss...................................       --        --           --            --          (664)           (664)
                                                ------      ----      -------       -------      --------         -------
Balance, September 30, 1997..................    5,095        51           --           104        (1,657)         (1,502)
  Accrued dividends on Series A redeemable
    preferred stock..........................       --        --           --            --          (134)           (134)
  Exercise of stock options..................       24        --           --            --            --              --
  Net loss...................................       --        --           --            --          (474)           (474)
                                                ------      ----      -------       -------      --------         -------
Balance, September 30, 1998..................    5,119        51           --           104        (2,265)         (2,110)
  Accrued dividends on Series A redeemable
    preferred stock..........................       --        --           --            --          (226)           (226)
  Issuance of common stock...................    2,636        26           --           651            --             677
  Issuance costs related to Series A
    redeemable preferred stock...............       --        --           --            --           (34)            (34)
  Exercise of stock options..................      196         2           --            --            --               2
  Deferred compensation related to stock
    options..................................       --        --       (1,583)        1,583            --              --
  Amortization of deferred compensation......       --        --          720            --            --             720
  Net loss...................................       --        --           --            --        (2,250)         (2,250)
                                                ------      ----      -------       -------      --------         -------
Balance, June 30, 1999.......................    7,951      $ 79      $  (863)      $ 2,338      $ (4,775)        $(3,221)
                                                ======      ====      =======       =======      ========         =======
Conversion of Series B redeemable convertible
  preferred stock to common stock
  (Unaudited)................................    3,017        31           --        26,417       (14,258)         12,190
                                                ------      ----      -------       -------      --------         -------
Pro forma balance, June 30, 1999 (Unaudited)
  (Note) 2(c)................................   10,968      $110      $  (863)      $28,755      $(19,033)        $ 8,969
                                                ======      ====      =======       =======      ========         =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-5
<PAGE>   73

                               ANDOVER.NET, INC.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         YEARS ENDED           NINE-MONTHS
                                                        SEPTEMBER 30,         ENDED JUNE 30,
                                                       ---------------    ----------------------
                                                        1997     1998        1998         1999
                                                       ------    -----    -----------    -------
                                                                          (UNAUDITED)
<S>                                                    <C>       <C>      <C>            <C>
Cash flows from operating activities:
  Net loss...........................................  $ (664)   $(474)      $(374)      $(2,250)
  Adjustments to reconcile net loss to net cash used
     in operating activities --
     Depreciation and amortization...................       6        9           6            23
     Amortization of deferred compensation...........      --       --          --           720
     Changes in operating assets and liabilities --
       Accounts receivable...........................     (91)    (136)       (175)          (90)
       Other current assets..........................     107       69          72           (32)
       Accounts payable..............................      45     (120)        (88)           12
       Accrued expenses..............................      68       78          62           124
                                                       ------    -----       -----       -------
          Net cash used in operating activities......    (529)    (574)       (497)       (1,493)
                                                       ------    -----       -----       -------
Cash flows from investing activities:
  Cash paid for acquisitions.........................      --       --          --        (1,750)
  Purchases of property and equipment................      (8)     (17)        (12)         (168)
  Increase in other assets...........................      --       --          --           (35)
                                                       ------    -----       -----       -------
          Net cash used in investing activities......      (8)     (17)        (12)       (1,953)
                                                       ------    -----       -----       -------
Cash flows from financing activities:
  Proceeds from the issuance of AAT Series B
     convertible preferred stock.....................      10       --          --            --
  Proceeds from the issuance of Series A redeemable
     preferred stock, net of issuance costs..........     769       --          --         2,091
  Proceeds from issuance of common stock.............      90       --          --           677
  Proceeds from exercise of ATT Series B warrants....     103       --          --            --
  Payments on related party notes payable to
     stockholders....................................     (26)     (50)         --            --
  Proceeds from convertible notes payable to
     stockholders....................................      --       --          --         2,090
  Proceeds from convertible notes payable to
     stockholders and issuance of Series A redeemable
     preferred stock and common stock................     300       --          --            --
  Exercise of stock options..........................      --       --           1             2
                                                       ------    -----       -----       -------
          Net cash provided by (used in) financing
            activities...............................   1,246      (50)          1         4,860
                                                       ------    -----       -----       -------
Net increase (decrease) in cash and cash
  equivalents........................................     709     (641)       (508)        1,414
Cash and cash equivalents, beginning of period.......     128      837         837           196
                                                       ------    -----       -----       -------
Cash and cash equivalents, end of period.............  $  837    $ 196       $ 329       $ 1,610
                                                       ======    =====       =====       =======
Supplemental disclosure of cash flow information:
  Cash paid for interest.............................  $   48    $  27       $  --       $    --
                                                       ======    =====       =====       =======
Supplemental disclosure of noncash financing
  transactions:
  Conversion of notes payable to Series A redeemable
     preferred stock and common stock................  $  100    $  --       $  --       $    --
                                                       ======    =====       =====       =======
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-6
<PAGE>   74

                               ANDOVER.NET, INC.

                         NOTES TO FINANCIAL STATEMENTS
                (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)

(1) OPERATIONS

     Andover.Net, Inc. (Andover.Net) (formerly Andover Advanced Technologies,
Inc.) is a commercial internet web site designer and developer. Andover.Net has
developed a network of web sites providing news, information, products and
services to technology-oriented users. Andover.Net sells advertising to
companies whose products and services target these users. Prior to September 30,
1996, Andover.Net was a software publisher of multimedia and Internet tools. In
fiscal 1997, Andover.Net made the transition from a software publisher to web
site publisher, focusing all development and sales efforts on Web publishing
after March 31, 1997. The Company was originally incorporated in Massachusetts
in 1992. In September 1999, Andover Advanced Technologies, Inc. (AAT) was merged
into its wholly owned subsidiary, Andover.Net and changed its fiscal year-end to
December 31.

     Andover.Net is subject to the risks associated with emerging,
technology-oriented companies with a limited operating history, including a
developing business model, limited history of commerce on the Internet, initial
and continued market acceptance of Andover.Net's web sites, competition, the
ability to successfully market its current web sites, and the continued ability
to manage and fund Andover.Net's future operations.

     Since its inception, Andover.Net has incurred a significant accumulated
deficit and is devoting substantially all of its efforts toward marketing its
web sites and products. Andover.Net's ability to continue operating as a going
concern is dependent upon its ability to raise additional capital and to achieve
budgeted operating results. See Note 12 (c), which describes Andover.Net's
financing in September 1999.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying financial statements reflect the application of certain
significant accounting policies as described in this note and elsewhere in the
notes to financial statements.

  (a) Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of net revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

  (b) Interim Financial Statements

     The accompanying statements of operations and cash flows for the nine
months ended June 30, 1998 are unaudited, but, in the opinion of management,
include all adjustments, consisting or normal recurring adjustments, necessary
for a fair presentation of results for these interim periods. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted, although Andover.Net believes that the disclosures included are
adequate to make the information presented not misleading. The results of
operations for the nine months ended June 30, 1999 are not necessarily
indicative of the results to be expected for the entire fiscal year or any other
interim period.

  (c) Unaudited Pro Forma Presentation

     The unaudited pro forma balance sheet as of June 30, 1999 and the pro forma
net loss per share for the nine months ended June 30, 1999 gives effect to the
recent issuance and sale of 480,354 shares of Series B redeemable convertible
preferred stock on September 15, 1999 and the concurrent automatic conversion of
all convertible notes payable into 120,214 shares of Series B redeemable
convertible preferred stock equaling an
                                       F-7
<PAGE>   75
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

aggregate of 600,568 shares of Series B redeemable convertible preferred stock
and the automatic conversion of the Series B convertible preferred stock into
3,014,851 shares of common stock upon the closing of the initial public
offering. The effects of the Slashdot.org and Eclipse Digital Imaging
acquisitions are included in the actual June 30, 1999 balance sheet data below,
as such acquisitions were consummated before June 30, 1999.

  (d) Revenue Recognition

     Advertising revenues are derived from the sale of advertising space on the
Company's various online services. Advertising revenues are recognized over the
period in which the advertisements are displayed, provided that no significant
Company obligations remain and collection of the receivable is reasonably
assured. Company obligations typically include guarantees of a minimum number of
"impressions" (times that an advertisement is viewed by users of the Company's
online services over a specified period of time). To the extent that minimum
guaranteed impressions are not met, the Company defers recognition of the
corresponding revenues until the guaranteed impressions are achieved.

     Revenues from barter transactions are recorded at the lower of the
estimated fair value of the advertisements, goods or services received or the
estimated fair value of the advertisements given. Andover.Net records barter
revenues only on the portion of the barter transactions which could be paid for
in cash if a barter arrangement was not in place. Otherwise, barter revenue is
not recognized. Revenues from barter transactions, representing advertising
space given, is recognized as income when advertisements are delivered on
Andover.Net's web site. Barter expense, representing advertising space received,
is recognized when our advertisements are run on other companies' web sites,
which is typically in the same period when the related barter revenue is
recognized. Andover.Net did not recognize any barter revenue for the years ended
September 30, 1997 and 1998 and recognized $218,000 of barter revenue for the
nine months ended June 30, 1999.

     Andover.Net derived revenue from web related software products during 1997
for use on desktop computers. Revenue from the licensing of software products
was recognized when the products were shipped, as there were no significant post
delivery obligations. Andover.Net provided for estimated returns and warranty
costs at the time of sale. Andover.Net did not offer maintenance and support on
its products. There were no significant software sales after fiscal 1997.

  (e) Sales and Marketing Expenses

     Sales and marketing expenses consist primarily of costs, including salaries
and sales commissions, of all personnel involved in the sales process and
related expenses. Sales and marketing expenses also include costs of advertising
and trade shows including barter advertising of $218,000 in 1999. All costs of
advertising are expensed as incurred. Advertising expense totaled approximately
$241,000, $546,000 and $421,000 for the years ended September 30, 1997, 1998 and
the nine months ended June 30, 1999, respectively.

  (f) Research and Development

     Research and Development expenses include all research and development
related direct costs, primarily salaries for Andover.Net research and
development personnel and outside contractors related to the development of new
web sites, improved design of existing web sites and related infrastructure.

  (g) Cash and Cash Equivalents

     Cash equivalents are stated at cost, which approximates fair market value.
Andover.Net considers highly liquid investments with original maturities of
ninety days or less to be cash equivalents and includes money market accounts
and commercial paper that are readily convertible to cash.

                                       F-8
<PAGE>   76
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (h) Property and Equipment

     Andover.Net provides for depreciation using the straight-line method, by
charges to operations in amounts estimated to allocate the cost of property and
equipment over their estimated useful lives.

<TABLE>
<CAPTION>
                                                           ESTIMATED
                 ASSET CLASSIFICATION                     USEFUL LIFE
                 --------------------                    -------------
<S>                                                      <C>
Computer equipment.....................................     3 years
Furniture and fixtures.................................     7 years
Office equipment.......................................     5 years
Leasehold improvements.................................  Life of lease
</TABLE>

     Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                        SEPTEMBER 30,    JUNE 30,
                                                            1998           1999
                                                        -------------    --------
                                                             (IN THOUSANDS)
<S>                                                     <C>              <C>
Computer equipment....................................      $ 43           $119
Furniture and fixtures................................        13             36
Office equipment......................................        --             24
Leasehold improvements................................        --             44
                                                            ----           ----
                                                              56            223
Less -- Accumulated depreciation......................       (33)           (55)
                                                            ----           ----
                                                            $ 23           $168
                                                            ====           ====
</TABLE>

  (i) Concentration of Credit Risk

     Andover.Net has no significant off-balance sheet concentration of credit
risks such as foreign exchange contracts, options contracts or other foreign
hedging arrangements. Financial instruments that potentially expose Andover.Net
to concentrations of credit risk consist primarily of cash equivalents, accounts
receivable, accounts payable, notes payable and redeemable preferred stock.
Concentrated credit risk with respect to accounts receivable is limited to
certain customers to whom Andover.Net makes substantial sales. Andover.Net
performs periodic evaluations of its customers and generally does not require
collateral.

     The following table summarizes the number of customers that individually
comprise greater than 10% of total accounts receivable and total net revenue for
the periods presented:

<TABLE>
<CAPTION>
                                                             YEARS ENDED
                                                            SEPTEMBER 30,      NINE MONTHS
                                                            --------------        ENDED
                                                            1997     1998     JUNE 30, 1999
                                                            -----    -----    -------------
<S>                                                         <C>      <C>      <C>
Revenue --
  Customer A..............................................    *       26%          14%
  Customer B..............................................    *       20%           *
  Customer C..............................................   21%      10%           *
  Customer D..............................................    *        *            *
  Customer E..............................................    *        *           20%
</TABLE>

                                       F-9
<PAGE>   77
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30,
                                                            --------------
                                                            1997     1998     JUNE 30, 1999
                                                            -----    -----    -------------
<S>                                                         <C>      <C>      <C>
Accounts Receivable --
  Customer A..............................................   17%      21%          18%
  Customer B..............................................    *        *           12%
  Customer C..............................................    *       35%           *
  Customer D..............................................   42%       *            *
  Customer E..............................................    *        *            *
</TABLE>

------------------------------
* Less than 10%

  (j) Net Loss Per Share

     Basic and diluted net loss per common share is computed using the weighted
average number of shares of common stock outstanding during the period.
Potentially dilutive shares outstanding have been excluded because their effect
would be antidilutive.

     Pro forma net loss per share is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the conversion
of the convertible notes payable (Note 6) into Series B redeemable convertible
preferred stock and the automatic conversion of the Series B redeemable
convertible preferred stock into shares of Andover.Net's common stock, effective
upon the closing of Andover.Net's proposed initial public offering as if such
conversion occurred on the date of the original issuance.

     The weighted average common shares outstanding, the pro forma weighted
average number of common shares outstanding and the shares under option plans
and convertible notes payable which were antidilutive for all periods presented
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                               NINE MONTHS
                                                               YEAR ENDED         ENDED
                                                              SEPTEMBER 30,     JUNE 30,
                                                                  1998            1999
                                                              -------------    -----------
<S>                                                           <C>              <C>
Net loss attributable to common stockholders used in basic
  and diluted net loss per share calculation................     $ (608)         $(2,510)
                                                                 ======          =======
Weighted average common shares used in basic and diluted EPS
  calculation...............................................      5,110            6,990
Weighted average convertible notes payable assumed to
  convert to common shares..................................         --                2
                                                                 ------          -------
Weighted average common shares used in pro forma basic and
  diluted EPS calculations..................................      5,110            6,992
                                                                 ======          =======
Shares under option plans and convertible notes payable
  excluded in computation of diluted earnings per share due
  to antidilutive effects...................................        723            1,001
                                                                 ======          =======
</TABLE>

  (k) Stock-Based Compensation for Employees

     Andover.Net has adopted Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 defines a
fair-value-based method of accounting for employee stock options and other
stock-based compensation. The compensation expense related to employee stock
based compensation arising from this method of accounting can be included in the
statements of operations or, alternatively, the pro forma net loss and loss per
share effect of the fair-value-based accounting can be disclosed in the
financial statement footnotes. Andover.Net has elected the disclosure-only
alternative (see Note 11).

                                      F-10
<PAGE>   78
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (l) Comprehensive Income

     In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. Under SFAS No. 130, companies are
required to report comprehensive income as a measure of overall performance.
Comprehensive income includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. For the
years ended September 30, 1997 and 1998 and for the nine-month periods ended
June 30, 1998 and 1999, Andover.Net's comprehensive loss is the same as its
reported net loss.

  (m) Segment and Geographic Information

     SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. Andover.Net's chief decision-maker, as defined
under SFAS No. 131, is the Chief Executive Officer. At June 30, 1999,
Andover.Net views its operations and its business as principally one segment,
Internet publishing. For all periods presented, Andover.Net did not have
international sales greater than 10% of total net revenues.

  (n) Fair Value of Financial Instruments

     Financial instruments consist principally of cash equivalents, accounts
receivable, accounts payable, notes payable and preferred stock. The estimated
fair value of these instruments approximates their carrying value.

  (o) Impairment of Long-Lived Assets

     Andover.Net applies SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. SFAS No. 121
requires Andover.Net to continually evaluate whether events or circumstances
have occurred that indicate that the estimated remaining useful life of
long-lived assets and certain identifiable intangibles and goodwill may warrant
revision or that the carrying value of these assets may be impaired. To compute
whether assets have been impaired, the estimated gross cash flows for the
estimated remaining useful life of the assets are compared to the carrying
value. To the extent that the gross cash flows are less than the carrying value,
the assets are written down to the estimated fair value of the asset.
Andover.Net does not believe that its long-lived assets have been impaired.

  (p) New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Pursuant to SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133, SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is
not expected to have a material impact on Andover.Net's financial statements.

     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires computer
software costs associated with internal use software to be charged to operations

                                      F-11
<PAGE>   79
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

as incurred until certain capitalization criteria are met. SOP 98-1 is effective
beginning January 1, 1999. The adoption of this statement did not have a
material impact on Andover.Net's financial position or consolidated results of
operations.

(3) ACQUISITIONS

  (a) Slashdot.org

     On June 28, 1999, Andover.Net entered in an asset purchase agreement (the
Purchase) to acquire the web site www.slashdot.org, the assets required to run
the web site, and all trademarks from BlockStackers, Inc. (BlockStackers or
Seller). The web site and related assets essentially made up the entire business
of BlockStackers. The web site provides a forum among programmers to discuss
current issues regarding the Linux operating system.

     Andover.Net paid $1,500,000 in cash on June 28, 1999 for the assets
described above. The purchase agreement also contains additional cash payments
and common stock consideration contingent upon certain future events. Maximum
future cash payments are $3,500,000 payable over the next two years contingent
on two key employees continued employment. Maximum future stock consideration of
$7,000,000 is payable over two years, contingent upon the closing of an initial
public offering by Andover.Net in the next two years as defined in the purchase.
The number of shares paid will be calculated based on the price per share
offered in the public offering and are contingent upon the continued employment
of two key employees and other performance milestones relating to the web site.

     In the event that an initial public stock offering does not occur within 18
months of the closing of the acquisition, the Seller has the one time option, to
accept cash consideration instead of the stock consideration as follows:
$1,500,000 five days following the election of cash payment, $1,500,000
twenty-four months after the acquisition closing and $1,500,000 thirty months
after the acquisition closing. This cash election is subject to the same
employment requirement and milestones of the stock election. This option expires
21 months from the closing of the acquisition.

     The acquisition has been accounted for under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16 (APB
16) "Business Combinations" and Emerging Issues Task Force Issue 95-08, (EITF
95-08) Accounting for Contingent Consideration Paid to the Shareholders of an
Acquired Enterprise in a Purchase Business Combination. The purchase price of
$1,500,000 was allocated to the acquired assets based on the fair value of
assets acquired as determined by a valuation performed by an independent
appraiser. Of the purchase price, $242,000 was allocated to the covenant not to
compete, $23,000 was allocated to trademarks and $1,235,000 was allocated to
goodwill. The goodwill can primarily be attributed to the value of the work
force acquired. Trademarks and goodwill will be amortized over two years which
is their estimated useful life. The covenant not to compete will be amortized
over five years, which is the life of the agreement. There was no amortization
expense recorded in the statement of operations for the nine months ended June
30, 1999. The future cash and stock payments which are contingent solely on
future employment in the amount of $6.3 million will be recognized as
compensation expense ratably over the term of the payments as they are directly
linked to the continued employment of the two key employees. The remaining
contingent payments, which are based on performance milestones, will be
recognized as expense once those milestones are reached. To the extent that
there is any appreciation in the market value, the compensation charges could be
materially higher than as disclosed.

  (b) Animation Factory

     Concurrently on June 28, 1999, Andover.Net acquired certain assets and
assumed certain liabilities related to the web site Animation Factory from
Eclipse Digital Imaging, Inc. (Eclipse). Eclipse develops, markets and sells
computer animation via its web site.

                                      F-12
<PAGE>   80
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The purchase price is $1,500,000 in cash for the net assets acquired, of
which $250,000 was paid on the closing of the acquisition and $1,250,000 will be
paid in 15 equal monthly installments beginning in October 1999. The future
payments have been discounted to their present value using an imputed interest
rate of prime (8% at June 28, 1999) plus 1% for a present value of 1,151,000.
The discount will be amortized as interest expense over the term of the
payments. The purchase agreement also contains stock consideration of $600,000
payable over two years contingent upon continued employment of the two
principals of Eclipse, Andover.Net completing an initial public offering and
other milestones relating to the creation of new animation images. Any stock
consideration given, when the contingencies are resolved, will be accounted for
as compensation expense over the period earned as they are directly related to
the continued employment and performance of these two key employees. The number
of shares paid will be calculated based on the price per share offered in the
initial public offering.

     In the event that an initial public stock offering does not occur within 18
months of the closing of the acquisition, the seller has the one time option to
accept cash consideration instead of the stock consideration as follows:
$200,000 five days following the election of cash payment, $200,000 twenty-four
months after the acquisition closing and $200,000 thirty-six months after the
acquisition closing. This option expires 19 months from the closing of the
acquisition.

     The acquisition has been accounted for under APB 16 and EITF 95-08 and the
purchase price of $1,421,000 was allocated to the acquired assets based on the
fair value of the assets acquired as determined by a valuation performed by an
independent appraiser. Of the purchase price, $177,000 was allocated to the
covenant not to compete, $213,000 was allocated to the animation library,
$14,000 was allocated to trademarks and $1,017,000 was allocated to goodwill
which is the estimated useful life. The animation library, the trademarks and
the goodwill will be amortized over two years. The covenant not to compete will
be amortized over five years, which is the life of the agreement. There was no
amortization expense for the nine months ended June 30, 1999. The future cash
and stock payments which are contingent solely on future employment in the
amount of $200,000 will be recognized as compensation expense ratably over the
term of the payments as they are directly linked to the continued employment of
the two key employees. The remaining contingent payments, which are based on
performance milestones, will be recognized as expense once those milestones are
reached. To the extent that there is any appreciation in the market value, the
compensation charges could be materially higher than as disclosed.

     The unaudited pro forma results below assume the two acquisitions occurred
on October 1 of each period and therefore have been considered with
Andover.Net's historical results.

<TABLE>
<CAPTION>
                                                          NINE
                                                         MONTHS
                                                         ENDED       YEAR ENDED
                                                        JUNE 30,    SEPTEMBER 30,
                                                          1999          1998
                                                        --------    -------------
                                                          (IN THOUSANDS, EXCEPT
                                                             PER SHARE DATA)
<S>                                                     <C>         <C>
Revenues..............................................  $ 1,617        $ 1,539
Operating loss........................................   (5,630)        (4,892)
Net loss applicable to common shareholders............   (7,595)        (6,315)
Net loss per share applicable to common
  shareholders -- basic and diluted...................    (1.06)         (1.19)
</TABLE>

                                      F-13
<PAGE>   81
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) ACCOUNTS RECEIVABLE

     Accounts receivable, which result primarily from advertising sales, are
presented net of an allowance for doubtful accounts. The activity in
Andover.Net's allowance for doubtful accounts for the years ended September 30,
1997 and 1998 and for the nine months ended June 30, 1999 is presented in the
following table:

<TABLE>
<CAPTION>
                                       BALANCE AT                                    BALANCE AT
                                      BEGINNING OF    CHARGED TO                       END OF
                                         PERIOD        EXPENSE      DEDUCTIONS(A)      PERIOD
                                      ------------    ----------    -------------    ----------
                                                           (IN THOUSANDS)
<S>                                   <C>             <C>           <C>              <C>
Year ended September 30, 1997.......      $ --           $ --           $ --            $ --
Year ended September 30, 1998.......        --             13             --              13
Nine months ended June 30, 1999.....        13             28              6              35
</TABLE>

------------------------------
(a) Represents amounts written off as uncollectable accounts receivable

(5) ACCRUED EXPENSES

     Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                        SEPTEMBER 30,    JUNE 30,
                                                            1998           1999
                                                        -------------    --------
<S>                                                     <C>              <C>
Accrued vendor commissions............................      $ 80           $ 63
Other.................................................        79            240
                                                            ----           ----
                                                            $159           $303
                                                            ====           ====
</TABLE>

(6) CONVERTIBLE NOTES PAYABLE TO STOCKHOLDERS

     On June 30, 1999, Andover.Net received proceeds of $2,090,000 from the
issuance of convertible notes payable in a private placement to various
investors, some of whom are Andover.Net stockholders and certain outsiders (the
Notes). The Notes bear interest at the prime rate (8% at June 30, 1999) per
annum and are due on December 31, 1999. Upon the closing of the financing by
Andover.Net in September 1999 these Notes converted into 120,214 shares of
Series B Convertible Preferred Stock issued under the new capital structure of
Andover.Net (See Note 12b). Upon the closing of an initial public offering, this
Series B Convertible Preferred Stock automatically converts into 603,474 shares
of common stock.

     The original terms of the Notes provided for a formula based conversion
price. Pursuant to the conversion terms, whereby the Noteholders were guaranteed
beneficial conversion features depending on the amount of time the Notes were
held before conversion, Andover.Net recorded an original discount of $2,124,000,
which represents the difference between the offering price and the effective
purchase price. This discount will be amortized to interest expense over 76
days, which is the period from issuance of the Notes to the period in which the
offering occurs. Since the Notes were issued on June 30, 1999, there is no
amortization in any period presented. (See Note 12(c))

(7) INCOME TAXES

     Andover.Net accounts for income taxes using the liability method which
requires the recognition of the amount of current and deferred income taxes at
the date of the financial statements as a result of all differences in the tax
basis and financial statement carrying amounts of assets and liabilities, as
measured by enacted tax laws.

                                      F-14
<PAGE>   82
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     No provision for federal or state income taxes has been recorded, as
Andover.Net has incurred net operating losses for all periods presented. As of
June 30, 1999, Andover.Net had net operating loss carryforwards for federal and
state income tax purposes of approximately $3,109,000 available to reduce future
federal and state income taxes, if any. These carryforwards expire at various
dates through 2019 and are subject to review and possible adjustment by the
Internal Revenue Service. Due to the uncertainty surrounding the realization of
the net deferred tax asset, Andover.Net has provided a full valuation allowance
against this amount.

     U.S. tax rules impose annual limitations on the use of net operating losses
following substantial changes in ownership. Andover.Net has completed several
financings since its inception and has incurred an ownership change as defined
by the U.S. tax rules. Andover.Net believes that this change in ownership will
not have a material impact on its ability to utilize its net operating loss
carryforwards.

     The approximate income tax effect of each type of temporary difference and
carryforward is as follows (in thousands):

<TABLE>
<CAPTION>
                                                  SEPTEMBER 30,    SEPTEMBER 30,    JUNE 30,
                                                      1997             1998           1999
                                                  -------------    -------------    --------
<S>                                               <C>              <C>              <C>
Net operating loss carryforwards................      $ 530            $ 674        $ 1,252
Non deductible expenses and reserves............         20               37             89
Valuation allowance.............................       (550)            (711)        (1,341)
                                                      -----            -----        -------
          Net deferred tax asset................      $  --            $  --        $    --
                                                      =====            =====        =======
</TABLE>

(8) COMMITMENTS AND CONTINGENCIES

  (a) Operating Leases

     Andover.Net leases its office facility and equipment under operating leases
that expire at various dates through April 30, 2004.

     Future minimum lease payments at June 30, 1999 are as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
<S>                                                           <C>
1999........................................................  $   53
2000........................................................     212
2001........................................................     205
2002........................................................     215
2003........................................................     229
Thereafter..................................................     134
                                                              ------
                                                              $1,048
                                                              ======
</TABLE>

     Rent expense included in the accompanying statements of operations was
approximately $33,000 and $20,000 for the years ended September 30, 1997 and
1998, respectively. Rent expense for the nine months ended June 30, 1998 and
June 30, 1999 was $24,000 and $62,000, respectively.

  (b) Litigation

     Currently, Andover.Net is not a party to any litigation.

                                      F-15
<PAGE>   83
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(9) REDEEMABLE PREFERRED STOCK

     Redeemable preferred stock consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,    JUNE 30,
                                                                  1998           1999
                                                              -------------    --------
<S>                                                           <C>              <C>
Series A redeemable preferred stock (Series A) -- $13.50
  redemption value plus accrued dividends; authorized -- 900
  shares, issued and outstanding -- 322 and 165 shares at
  September 30, 1998 and June 30, 1999, respectively (at
  redemption value).........................................     $2,228         $4,353
Accrued dividends on Series A (see Dividends)...............        134            360
                                                                 ------         ------
                                                                 $2,362         $4,713
                                                                 ======         ======
</TABLE>

     In connection with the recapitalization of Andover.Net in September 1999,
all the Series C redeemable preferred stock of AAT was converted to Series A
redeemable preferred stock of Andover.Net. This new Series A redeemable
preferred stock has all of the same rights, privileges and preferences of the
AAT Series C redeemable preferred stock. The following reflects that conversion
on a retroactive basis.

     During fiscal 1997, Andover.Net amended its bylaws to change its capital
structure and to authorize Series A redeemable preferred stock. Each stockholder
of AAT Series A convertible preferred stock and AAT Series B convertible
preferred stock received one share of Series A redeemable preferred stock and
one share of common stock in a recapitalization. The Series A redeemable
preferred stock has been stated at the redemption value of $13.50 plus accrued
dividends. An adjustment to accumulated deficit of approximately $122,000 is
reflected in the accompanying statements of stockholders' equity (deficit) to
account for the issuance of the Series A redeemable preferred stock at
redemption value.

     In fiscal 1997, Andover.Net sold an additional 80,001 shares of Series A
redeemable preferred stock at a price of $13.50 per share, less stock issuance
costs of approximately $41,000, for aggregate net proceeds of approximately
$1,039,000. During fiscal 1999, Andover.Net sold 157,438 shares of Series A
redeemable preferred stock, and 2,634,436 shares of common stock at a price of
$0.26 per share, less stock issuance costs of $33,000, for aggregate net
proceeds of approximately $2,770,000.

     The Series A redeemable preferred stock (Preferred Stock) holders have the
following rights, preferences and privileges:

     Voting Rights

     The Preferred Stock does not entitle the holder to any voting rights on any
action taken by the stockholders of Andover.Net.

     Dividends

     Beginning January 1, 1998, the holders of Preferred Stock are entitled to
receive cumulative dividends, which will accrue and will be due and payable at
an annual rate, or portion thereof for partial periods, in an amount equal to
the greater of (i) the applicable percentage, as defined, of Andover.Net's
pre-tax earnings or (ii) 8.0% of the original purchase price paid for the number
of shares of Preferred Stock outstanding on the last day of the applicable year.
Dividends are not payable until approved by the Board of Directors and do not
accrue interest. As of June 30, 1999, approximately $360,000 of dividends have
been accrued.

     Liquidation Preference

     In certain events, including liquidation, dissolution or winding up of
Andover.Net, the holders of Preferred Stock are entitled to $13.50 per share
plus all accumulated and unpaid dividends due before any distribution may be
made to common stockholders. If the assets of Andover.Net shall be insufficient
to permit
                                      F-16
<PAGE>   84
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

payment in full to the holders of preferred stock, then the entire assets of
Andover.Net that are available for distribution shall be distributed ratably.

     Redemption

     At any time on or after June 2003, at the election of the holders of 70% of
the shares of Preferred Stock, Andover.Net may be required to redeem the
Preferred Stock at a redemption price in an amount equal to the liquidation
payment for the Preferred Stock and shall be paid in cash.

     Andover.Net is required to redeem all shares of the Preferred Stock
outstanding upon the closing of an initial public offering in which the
valuation of Andover.Net is at least $20 million or a qualified acquisition, as
defined.

     The following table summarizes the activity for the AAT Series A, AAT
Series B and Andover.Net Series A Preferred Stock (in thousands, except for
share data):

<TABLE>
<CAPTION>
                                                  AAT                      AAT                  ANDOVER.NET
                                          SERIES A CONVERTIBLE     SERIES B CONVERTIBLE     SERIES A REDEEMABLE
                                            PREFERRED STOCK          PREFERRED STOCK          PREFERRED STOCK
                                         ----------------------   ----------------------   ----------------------     TOTAL
                                         NUMBER OF   REDEMPTION   NUMBER OF   REDEMPTION   NUMBER OF   REDEMPTION   REDEMPTION
                                          SHARES       VALUE       SHARES       VALUE       SHARES       VALUE        VALUE
                                         ---------   ----------   ---------   ----------   ---------   ----------   ----------
<S>                                      <C>         <C>          <C>         <C>          <C>         <C>          <C>
Balance, September 30, 1996............    50,000      $ 500        27,500      $ 413            --      $   --       $  913
  Exercise of AAT Series B warrants....        --         --         6,875        103            --          --          103
  Issuance AAT Series B convertible
    preferred stock....................        --         --           666         10            --          --           10
  Recapitalization of preferred
    stock..............................   (50,000)      (500)      (35,041)      (526)       85,041       1,148          122
  Issuance of Series A Redeemable
    preferred stock....................        --         --            --         --        60,001         810          810
  Conversion of convertible promissory
    notes and issuance of Series A
    Redeemable preferred stock and
    common stock.......................        --         --            --         --        20,000         270          270
                                          -------      -----       -------      -----      --------      ------       ------
Balance, September 30, 1997............        --         --            --         --       165,042       2,228        2,228
  Accrued dividends on Series A
    Redeemable preferred stock.........        --         --            --         --            --         134          134
                                          -------      -----       -------      -----      --------      ------       ------
Balance, September 30, 1998............        --         --            --         --       165,042       2,362        2,362
  Accrued dividends on Series A
    Redeemable preferred stock.........        --         --            --         --            --         226          226
  Issuance of Series A Redeemable
    preferred stock....................        --         --            --         --       157,438       2,125        2,125
                                          -------      -----       -------      -----      --------      ------       ------
Balance, June 30, 1999.................        --      $  --            --      $  --       322,480      $4,713       $4,713
                                          =======      =====       =======      =====      ========      ======       ======
</TABLE>

(10) STOCKHOLDERS' EQUITY

  (a) Common Stock

     In November 1998, the board of directors authorized an additional 3,697,523
shares of Andover.Net's no par value common stock for an aggregate authorization
of 10,987,069 shares. The board of directors also authorized an additional
184,000 shares of preferred stock for an aggregate authorization of 409,000
shares.

     Also in November 1998, the board of directors approved an increase in the
number of authorized options under the Andover.Net 1995 Stock Option Plan to
1,507,142 options.

     In September 1999, the board of directors approved a 4-for-1 stock split of
Andover.Net's $0.01 par value common stock. Also, in September, the board of
directors and anticipate a Andover.Net 5.02 for 1 stock split of Andover.Net's
$0.01 par value common stock upon the effectiveness of this offering. All
references to the number of shares in the accompanying financial statements have
been adjusted to reflect both stock splits on a retroactive basis.

                                      F-17
<PAGE>   85
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (b) Stock Warrants

     During the fiscal year 1996, Andover.Net issued warrants to the
stockholders of the previously issued Series B convertible preferred stock. A
total of 6,875 warrants were issued to purchase Series B Convertible preferred
stock at an exercise price of $15.00 share. The value of the warrants when
issued was determined to be immaterial. The warrants were exercised during
fiscal 1997 for total proceeds of approximately $103,000.

  (c) Convertible Notes Payable to Stockholders

     In May 1997, Andover.Net issued convertible promissory notes to certain
stockholders (the Notes) in the sum of $100,000. The notes were mandatorily
convertible upon the additional financing of $200,000 (the conversion financing)
which was completed during fiscal 1997. The notes were converted into shares
identical to the shares sold in the conversion financing. The investors received
a total of 401,905 common shares and 20,000 Series C Preferred shares in
exchange for the notes and an additional $200,000 in cash.

(11) STOCK OPTION PLAN

     On October 12, 1995, Andover.Net's board of directors (the Board) approved
the adoption of the 1995 Stock Option Plan (the Plan), as amended, which
provides for a maximum of 1,507,142 shares of common stock to be issued as
incentive stock option (ISOs) and nonqualified options. The options under the
Plan may be granted to directors, officers, employees, consultants and related
corporations. ISOs may be granted at no less then fair market value (FMV) on the
date of grant, as determined by the Board (no less than 110% of FMV on the date
of grant for 10% or greater stockholders). Options under the Plan expire between
5 to 10 years from the date of grant. Vesting is determined by the Board and can
be fully exercisable on the date of grant or in installments, as approved.

     Stock option activity for the years ended September 30, 1998 and 1997 and
the nine months ended June 30, 1999 is as follows (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                                                WEIGHTED
                                                                                AVERAGE
                                                                                EXERCISE
                                                                EXERCISE         PRICE
                                                NUMBER OF       PRICE PER         PER
                                                 SHARES           SHARE          SHARE
                                                ---------    ---------------    --------
<S>                                             <C>          <C>                <C>
Outstanding, September 30, 1996...............      196      $        $0.005     $0.005
  Granted.....................................      482                0.025      0.025
  Exercised...................................      (15)               0.025      0.025
  Canceled....................................      (25)               0.025      0.025
                                                  -----      ---------------     ------
Outstanding, September 30, 1997                     638       0.005 -  0.025      0.019
  Granted.....................................      165                0.025      0.025
  Exercised...................................      (24)               0.025      0.025
  Canceled....................................      (56)               0.025      0.025
                                                  -----      ---------------     ------
Outstanding, September 30, 1998                     723       0.005 -  0.025      0.019
  Granted.....................................      474       0.025 -  1.063      0.124
  Exercised...................................     (196)               0.005      0.005
  Canceled....................................       --                   --         --
                                                  -----      ---------------     ------
Outstanding, June 30, 1999....................    1,001      $0.025 - $1.063     $0.083
                                                  =====      ===============     ======
Exercisable, June 30, 1999....................      513      $0.025 - $1.063     $0.026
                                                  =====      ===============     ======
</TABLE>

     At June 30, 1999, 352,310 options to purchase shares of common stock were
available for future grants under the Plan.

                                      F-18
<PAGE>   86
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     SFAS No. 123, Accounting for Stock-Based Compensation, requires the
measurement of the fair value of stock options to be included in the statements
of operations or disclosed in the notes to the financial statements. Andover.Net
has determined that it will continue to account for stock-based compensation for
employees under the Accounting Principles Board Opinion No. 25 and elect the
disclosure-only alternative under SFAS No. 123. Fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions:

<TABLE>
<CAPTION>
                                         YEARS ENDED SEPTEMBER 30,     NINE MONTHS ENDED JUNE 30,
                                         --------------------------    --------------------------
                                            1997           1998           1998           1999
                                         -----------    -----------    -----------    -----------
<S>                                      <C>            <C>            <C>            <C>
Risk free interest rate................  6.18%-6.53%     5.62%-6.11%    5.62%-6.11%    4.45%-5.15%
Expected dividend yield................          --             --             --             --
Expected lives (years).................        5.00           5.00           5.00           5.00
Expected volatility....................         70%            70%            70%            70%
Weighted average fair value per share
  of options granted...................       $1.48          $2.91          $2.91          $3.26
Weighted average remaining contractual
  life of options outstanding
  (years)..............................        6.12           8.25           6.60           8.72
</TABLE>

     In connection with certain stock option grants during the nine months ended
June 30, 1999, Andover.Net recorded deferred compensation of $1.6 million in
connection with stock option grants totaling 472,632 which represents the
aggregate difference between the exercise price and the fair market value of the
common stock as determined for accounting purposes. The deferred compensation
will be recognized as an expense over the vesting period of the underlying stock
options. Andover.Net recorded compensation expense of $720,000 for the nine
months ended June 30, 1999 related to these options. In addition, the Company
anticipates recording additional deferred compensation of approximately $4.5
million related to the options granted in September 1999 totaling 430,759
options which will be recognized as an expense over the vesting period of these
options.

     Certain options contain provisions that accelerate the vesting to 100% upon
an initial public offering. Upon this event, additional compensation expense of
approximately $800,000 relating to 260,459 options will be recorded as
compensation expense. The remaining deferred compensation will be amortized over
the remaining vesting period.

     Had compensation expense for the options been determined consistent with
SFAS No. 123, Andover.Net's net loss and net loss per share would have been
affected as follows (in thousands):

<TABLE>
<CAPTION>
                                                            YEARS ENDED       NINE MONTHS ENDED
                                                           SEPTEMBER 30,          JUNE 30,
                                                          ----------------    -----------------
                                                           1997      1998      1998      1999
                                                          ------    ------    ------    -------
<S>                                                       <C>       <C>       <C>       <C>
Net loss applicable to common shareholders --
  As reported...........................................  $ (705)   $ (608)   $ (463)   $(2,510)
  Pro forma.............................................  $ (884)   $ (902)   $ (684)   $(3,549)
Basic and diluted net loss per share applicable to
  common shareholders --
  As reported...........................................  $(0.29)   $(0.12)   $(0.09)   $ (0.36)
  Pro forma.............................................  $(0.36)   $(0.18)   $(0.13)   $ (0.51)
</TABLE>

(12) OTHER EVENTS

  (a) Recapitalization

     In September 1999, Andover Advanced Technologies, Inc. was merged into its
wholly owned subsidiary, Andover.Net. In connection with this recapitalization,
the Board authorized 100 million shares of Andover.Net's $0.01 par value common
stock and 2 million shares of Preferred Stock, of which 900,000

                                      F-19
<PAGE>   87
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

shares were designated as Series A redeemable preferred stock, 700,000 shares
were designated as Series B redeemable convertible preferred stock and 400,000
shares remained undesignated.

  (b) Acquisition

     In August 1999, Andover.Net purchased certain assets related to the web
site Freshmeat. Andover.Net paid $367,000 of cash at the closing and has
guaranteed future payments aggregating $300,000 payable monthly through November
2000. Future stock consideration of $333,000 is contingent upon meeting certain
milestones as defined in the asset purchase agreement. No pro forma information
has been presented as the acquisition is not material to Andover.Net.

  (c) Sale of Series B redeemable convertible preferred stock

     On September 15, 1999, Andover.Net issued 600,568 shares of Series B
redeemable convertible preferred stock at $21.03 per share to private investors
for total consideration of $12,224,000. This includes $10,100,000 of originally
issued shares and the conversion of $2,124,000 of principal and accrued interest
from the June 1999 convertible notes into 120,214 shares of Series B redeemable
convertible preferred stock of which 19,195 shares were issued pursuant to a
beneficial conversion feature (See Note 6).

     The Series B redeemable convertible preferred stock is voting. Dividends
accrue annually and are cumulative at a rate of 8% of the original purchase
price of $21.03 per share, on a per share basis. Dividends must be paid before
any other dividends can be declared or paid on any common stock. The Series B
redeemable convertible preferred stock is convertible at any time by the
holders, at the then applicable conversion rate as adjusted from time to time.
The Series B redeemable convertible preferred stock is redeemable at the option
of the holder beginning in September 2003 if Andover.Net has not made a
qualified initial public offering of its common stock, as defined. Upon
liquidation, holders of Series B redeemable convertible preferred stock are
entitled to receive, out of funds then generally available, 21.03 per share,
plus all accrued and unpaid dividends.

     Upon the closing of this offering, all outstanding shares of Series B
redeemable convertible preferred stock will automatically convert into 3,014,851
shares of common stock, resulting in an effective purchase price of $4.05 per
common share. The difference between the offering price and the deemed effective
purchase price resulted in a beneficial conversion feature of $2,124,000, which
will be reflected as interest expense in the statement of operations in the
period in which this offering occurs.

  (d) 1999 Stock Option Plan

     In August 1999, Andover.Net approved the adoption of the 1999 Stock Option
Plan (the Plan), which provides for a maximum of 1,736,228 shares of common
stock to be issued as incentive stock option (ISOs) and nonqualified options.
The options under the Plan may be granted to directors, officers, employees,
consultants and related corporations. ISOs may be granted at no less than fair
market value (FMV) on the date of grant, as determined by the Board (no less
than 110% of FMV on the date of grant for 10% or greater stockholders). Options
under the Plan expire no more than 10 years from the date of grant. Vesting is
determined by the Board and can be fully exercisable on the date of grant or in
installments as approved.

                                      F-20
<PAGE>   88

                INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION

The following unaudited Pro Forma Combined Statements of Operations for the year
ended September 30, 1998, and the nine months ended June 30, 1999 give effect to
the acquisitions by Andover.Net, Inc. of certain assets of BlockStackers, Inc.
and Eclipse Digital Imaging, Inc. as if each had occurred at the beginning of
the earliest period presented. The unaudited Pro Forma Combined Statement of
Operations does not include the effects of the Andover.Net, Inc. acquisition of
the assets related to Freshmeat as of August 6, 1999 as Andover.Net, Inc. has
determined that its effects are immaterial. The unaudited Pro Forma Combined
Statement of Operations gives effect to the issuance of the convertible notes
payable and their subsequent conversion into Series B Redeemable Convertible
Preferred Stock as these notes were used to finance the acquisitions. These
statements do not take into effect the issuance of the Series B Redeemable
Convertible Preferred Stock in September 1999.

The unaudited Pro Forma Combined Statements of Operations have been prepared
using the purchase method of accounting for the Acquisitions whereby the total
cost of each acquisition is allocated to the tangible and intangible assets
acquired and liabilities assumed based upon their respective fair values at the
effective dates of such acquisitions. Such allocations have been made based upon
currently available information and management's estimates. Final allocations
will be determined upon completion of the analysis of the assets acquired and
liabilities assumed.

The unaudited Pro Forma Combined Statement of Operations for the year ended
September 30, 1998 is based on the audited financial statements for the year
ended September 30, 1998 of the Company and the unaudited operating results of
Eclipse Digital Imaging, Inc. for the year ended September 30, 1998 and the
unaudited operating results of BlockStackers, Inc. for the period form inception
(August 24, 1998) to September 30, 1998. The unaudited Pro Forma Combined
Statement of Operations for the nine months ended June 30, 1999 is based on the
audited financial statements for the nine months ended June 30, 1999 of
Andover.Net, Inc. and the unaudited operating results for the nine months ended
June 30, 1999 of Eclipse Digital Imaging, Inc. and BlockStackers, Inc. The
unaudited financial statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management are necessary for a
presentation of results for the respective periods in accordance with the basis
of presentation described in Note 2 of the Notes to Andover.Net, Inc.'s
Financial Statements and similar statements found in the other entities'
financial statements.

The unaudited Pro Forma Combined Statements of Operations do not purport to
represent what the results of operations or financial position of Andover.Net,
Inc. would actually have been if any of the transactions had occurred on such
dates or to project the results of operations or financial positions of
Andover.Net, Inc. for any future date or period. The unaudited Pro Forma
Combined Statements of Operations set forth below should be read in conjunction
with the respective Financial Statements and Notes thereto of the Andover.Net,
Inc. included elsewhere in this Prospectus, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

                                      F-21
<PAGE>   89

                               ANDOVER.NET, INC.

                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
                     FOR THE YEAR ENDED SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
                                                               HISTORICAL
                                            ------------------------------------------------                     PRO FORMA
                                                                             ECLIPSE DIGITAL                  COMBINED FOR THE
                                            ANDOVER.NET   BLOCKSTACKERS(A)     IMAGING(A)       ADJUSTMENTS     ACQUISITIONS
                                            -----------   ----------------   ---------------    -----------   ----------------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                         <C>           <C>                <C>                <C>           <C>
Revenues:
  Advertising.............................   $   1,290          $ --              $ --            $    --        $   1,290
  Product.................................          --            --               249                 --              249
                                             ---------          ----              ----            -------        ---------
         Total revenues...................       1,290            --               249                 --            1,539
Cost of revenues:
  Advertising.............................         327            --                --                 --              327
  Product.................................          --            --                64                 --               64
                                             ---------          ----              ----            -------        ---------
         Total cost of revenues...........         327            --                64                 --              391
                                             ---------          ----              ----            -------        ---------
Gross profit..............................         963            --               185                 --            1,148
                                             ---------          ----              ----            -------        ---------
Operating expenses........................       1,408             1                54              1,325(b)            --
                                                                                                    3,252(c)         6,040
                                             ---------          ----              ----            -------        ---------
Operating income..........................        (445)           (1)              131             (4,577)          (4,892)
Interest income (expense).................         (29)           --                --               (178)(e)
                                                                                                   (1,083)(f)       (1,290)
Other (expense) income....................          --            (1)                2                 --                1
                                             ---------          ----              ----            -------        ---------
Income (loss) before taxes................        (474)           (2)              133             (5,838)          (6,181)
Income tax benefit (expense)..............          --            --                --                 --               --
                                             ---------          ----              ----            -------        ---------
Net income (loss).........................   $    (474)         $ (2)             $133            $(5,838)       $  (6,181)
                                             =========          ====              ====            =======        =========
Accretion on preferred stock..............         134            --                --                 --              134
Net income (loss) applicable to common
  shareholders............................   $    (608)         $ (2)             $133            $(5,838)       $  (6,315)
                                             =========          ====              ====            =======        =========
Basic and diluted net loss per share
  applicable to common stockholders.......   $   (0.12)                                                          $   (1.19)
                                             =========                                                           =========
Basic and diluted weighted average shares
  outstanding.............................       5,110                                                194(d)         5,304
                                             =========                                            =======        =========
Other operating data:
  Depreciation and amortization...........   $       9          $ --              $ 14            $    --        $      23
                                             =========          ====              ====            =======        =========
</TABLE>

------------------------------
(a)  Includes the results of operations of the acquired businesses from the
     beginning of the period reporting through the respective dates of
     acquisition by Andover.Net (both entities on June 28, 1999)

(b)  Reflects the amortization of goodwill and intangible assets associated with
     the acquisition of BlockStackers and Eclipse Digital Imaging

(c)  Reflects additional compensation payments required with the purchase
     agreements. These payments, which are solely contingent upon the continued
     employment of two key employees, are payable over two years and are
     comprised of $3.5 million of cash and $3.0 million in stock compensation.
     Andover.Net is recognizing this compensation expense ratably over the two
     year period. The remaining contingent payments of $4.6 million in stock
     compensation are not reflected as they are contingent upon performance
     milestones. At this time, it is uncertain if or when these milestones will
     be met.

(d)  Reflects weighted shares to be issued as compensation associated with the
     acquisitions of BlockStackers and Eclipse Digital Imaging at an assumed
     offering price of $13.50. These shares are to be issued within the first
     year after the offering

(e)  Reflects interest expense on debt used to finance the acquisitions
     calculated using an assumed interest rate of 8.5% per annum on the
     convertible notes payable

(f)  Reflects the additional charge recorded as interest expense for the
     beneficial conversion effect of the convertible notes payable. The charge
     was computed assuming the issuance of the convertible notes payable at the
     beginning of the period presented and the conversion at the actual date in
     September 1999.

                                      F-22
<PAGE>   90

                               ANDOVER.NET, INC.

                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
                    FOR THE NINE MONTHS ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
                                                              HISTORICAL
                                           ------------------------------------------------                     PRO FORMA
                                                                            ECLIPSE DIGITAL                  COMBINED FOR THE
                                           ANDOVER.NET   BLOCKSTACKERS(A)     IMAGING(A)       ADJUSTMENTS     ACQUISITIONS
                                           -----------   ----------------   ---------------    -----------   ----------------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>           <C>                <C>                <C>           <C>
Revenues:
  Advertising............................    $ 1,109           $293              $ --            $    --         $ 1,402
  Product................................         --             --               215                 --             215
                                             -------           ----              ----            -------         -------
         Total revenues..................      1,109            293               215                 --           1,617
Cost of Revenues:
  Editorial content and related..........        430            118                --                 --             548
  Product................................         --             --               155                 --             155
                                             -------           ----              ----            -------         -------
         Total cost of revenues..........        430            118               155                 --             703
                                             -------           ----              ----            -------         -------
Gross Profit.............................        679            175                60                 --             914
                                             -------           ----              ----            -------         -------
Operating Expenses.......................      2,988             55                68                994(b)
                                                                                                   2,439(c)        6,544
                                             -------           ----              ----            -------         -------
Operating Income (Loss)..................     (2,309)           120                (8)            (3,433)         (5,630)
Interest Income (Expense)................         59             --                --               (129)(e)
                                                                                                  (1,658)(f)      (1,728)
Other (Expense) Income...................         --             --                23                 --              23
                                             -------           ----              ----            -------         -------
Income (Loss) before Taxes...............     (2,250)           120                15             (5,220)         (7,335)
Income Tax Benefit
  (Expense)..............................         --             --                --                 --              --
                                             -------           ----              ----            -------         -------
Net Income (Loss)........................    $(2,250)          $120              $ 15            $(5,220)        $(7,335)
                                             =======           ====              ====            =======         =======
Accretion on Preferred Stock.............        260             --                --                 --             260
Net Income (Loss) Applicable to Common
  Shareholders...........................    $(2,510)          $120              $ 15            $(5,220)        $(7,595)
                                             =======           ====              ====            =======         =======
Basic and Diluted Net Loss per Share
  Applicable to Common Stockholders......    $ (0.36)                                                              (1.06)
                                             -------                                                             -------
Basic and Diluted Weighted Average Shares
  Outstanding............................      6,990                                                 179(d)        7,169
                                             =======                                             =======         =======
Other Operating Data:
  Depreciation and amortization..........    $     6           $ --              $ 14            $    --         $    20
                                             =======           ====              ====            =======         =======
</TABLE>

------------------------------
(a)  Includes the results of operations of the acquired businesses from the
     beginning of the period reporting through the respective dates of
     acquisition by Andover.Net (both entities on June 28, 1999)

(b)  Reflects the amortization of goodwill and intangible assets associated with
     the acquisition of BlockStackers and Eclipse Digital Imaging

(c)  Reflects additional compensation payments required with the purchase
     agreements. These payments, which are solely contingent upon the continued
     employment of two key employees, are payable over two years and are
     comprised of $3.5 million of cash and $3.0 million in stock compensation.
     Andover.Net is recognizing this compensation expense ratably over the two
     year period. The remaining contingent payments of $4.6 million in stock
     compensation are not reflected as they are contingent upon performance
     milestones. At this time, it is uncertain if or when these milestones will
     be met.

(d)  Reflects weighted shares to be issued as compensation associated with the
     acquisitions of BlockStackers and Eclipse Digital Imaging at an assumed
     offering price of $13.50. These shares are to be issued within the first
     nine months after the offering

(e)  Reflects interest expense on debt used to finance the acquisitions
     calculated using an assumed interest rate of 8.5% per annum on the
     convertible notes payable

(f)  Reflects the additional charge recorded as interest expense for the
     beneficial conversion effect of the convertible notes payable. The charge
     was computed assuming the issuance of the convertible notes payable at the
     beginning of the period presented and the conversion at the actual date in
     September 1999.

                                      F-23
<PAGE>   91

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To BlockStackers, Inc.:

We have audited the accompanying balance sheet of BlockStackers, Inc. (a
Michigan corporation) as of December 31, 1998, and the related statements of
operations, stockholders' deficit and cash flows for the period from inception
(August 24, 1998) to December 31, 1998. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BlockStackers, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (August 24, 1998) to December 31, 1998, in conformity with
generally accepted accounting principles.

Boston, Massachusetts
September 16, 1999

                                      F-24
<PAGE>   92

                              BLOCKSTACKERS, INC.
                                 BALANCE SHEET
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                                              DECEMBER 31,
                                                                  1998
                                                              ------------
                                  ASSETS
Current assets:
  Cash......................................................      $  3
  Other current assets......................................         1
                                                                  ----
          Total current assets..............................         4
                                                                  ----
          Total assets......................................      $  4
                                                                  ====
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable..........................................      $  5
  Accrued expenses..........................................         4
                                                                  ----
          Total current liabilities.........................         9
Stockholders' deficit:
  Common stock, no par value --
     Authorized -- 60,000 shares
     Issued -- 2,500 shares
     Outstanding -- 2,000 shares............................         5
  Accumulated deficit.......................................       (10)
                                                                  ----
          Total stockholders' deficit.......................        (5)
                                                                  ----
          Total liabilities and stockholders' deficit.......      $  4
                                                                  ====

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

                                      F-25
<PAGE>   93

                              BLOCKSTACKERS, INC.

                            STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              PERIOD FROM INCEPTION
                                                                (AUGUST 24, 1998)
                                                                     THROUGH
                                                                DECEMBER 31, 1998
                                                              ---------------------
<S>                                                           <C>
Net revenues................................................          $ 18
Cost of revenues............................................            17
                                                                      ----
          Gross profit......................................             1
Operating expenses:
  Selling expenses..........................................             6
  General and administrative expenses.......................             5
                                                                      ----
          Total operating expenses..........................            11
                                                                      ====
          Net loss..........................................          $(10)
                                                                      ====
</TABLE>

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

                                      F-26
<PAGE>   94

                              BLOCKSTACKERS, INC.

                       STATEMENT OF STOCKHOLDERS' DEFICIT
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                       COMMON STOCK
                                                     -----------------
                                                                  NO                       TOTAL
                                                     NUMBER OF    PAR    ACCUMULATED   STOCKHOLDERS'
                                                      SHARES     VALUE     DEFICIT        DEFICIT
                                                     ---------   -----   -----------   -------------
<S>                                                  <C>         <C>     <C>           <C>
August 24, 1998 (Inception)........................       --      $--       $ --           $ --
  Contributed capital..............................    2,500        5         --              5
  Repurchase and retirement of common stock........     (500)      --         --             --
  Net loss.........................................       --       --        (10)           (10)
                                                       -----      ---       ----           ----
Balance, December 31, 1998.........................    2,000      $ 5       $(10)          $ (5)
                                                       =====      ===       ====           ====
</TABLE>

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

                                      F-27
<PAGE>   95

                              BLOCKSTACKERS, INC.

                            STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              PERIOD FROM INCEPTION
                                                                (AUGUST 24, 1998)
                                                                     THROUGH
                                                                DECEMBER 31, 1998
                                                              ---------------------
<S>                                                           <C>
Cash flows from operating activities:
  Net loss..................................................          $(10)
  Adjustments to reconcile net loss to net cash provided by
     operating activities --
     Donated services.......................................             4
     Changes in operating assets and liabilities --
       Other current assets.................................            (1)
       Accounts payable.....................................             5
       Accrued expense......................................             4
                                                                      ----
          Net cash provided by operating activities.........             2
                                                                      ----
Cash flows from investing activities........................            --
                                                                      ----
Cash flows from financing activities:
  Contributed capital.......................................             1
                                                                      ----
          Net cash provided by financing activities.........             1
                                                                      ----
Net increase in cash........................................             3
Cash, beginning of period...................................            --
                                                                      ----
Cash, end of period.........................................          $  3
                                                                      ====
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                      F-28
<PAGE>   96

                              BLOCKSTACKERS, INC.

                         NOTES TO FINANCIAL STATEMENTS

(1) OPERATIONS

     BlockStackers, Inc. (BlockStackers) was incorporated in Michigan on August
24, 1998 as an S Corporation. BlockStackers creates and hosts a web site,
Slashdot.org that acts as a forum for Linux software users to discuss
developments and events. Revenues are generated through advertising banners
placed on BlockStackers' web site and through consulting work.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying financial statements reflect the application of certain
significant accounting policies described in this note and elsewhere in the
notes to financial statements.

  (a) Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  (b) Revenue Recognition

     Revenues are recognized ratably in the period in which the advertisement is
displayed providing BlockStackers has no significant remaining obligations.

  (c) Concentrations of Credit Risk

     BlockStackers has no significant off-balance sheet concentration of credit
risks such as foreign exchange contracts, options contracts or other foreign
hedging arrangements. Financial instruments that substantially expose
BlockStackers to concentrations of credit risk consist primarily of cash.
BlockStackers maintains its cash balances with a financial institution.
BlockStackers operates in one industry segment and derives substantially all of
its revenues from U.S. customers.

     The following table summarizes the number of customers that individually
comprise greater than 10% of total revenues for the period presented:

<TABLE>
<S>                                                           <C>
Revenue --
  Customer A................................................   33%
  Customer B................................................   23%
</TABLE>

  (d)  Comprehensive Income (Loss)

     In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income. Under SFAS No. 130, companies are required to report
comprehensive income as a measure of overall performance. Comprehensive income
includes all changes in equity during a period, except those resulting from
investments by owners and distributions to owners. For the period ended December
31, 1998, BlockStackers' comprehensive loss is the same as its reported net
loss.

  (e) Fair Value of Financial Instruments

     Financial instruments consist principally of cash and accounts payable. The
estimated fair value of these instruments approximates their carrying value.

                                      F-29
<PAGE>   97
                              BLOCKSTACKERS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (f) New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Pursuant to SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133, SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is
not expected to have a material impact on BlockStackers' financial statements.

     In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires
computer software costs associated with internal use software to be charged to
operations as incurred until certain capitalization criteria are met. SOP 98-1
is effective for financial statements for fiscal years beginning after December
15, 1998. The adoption of this statement did not have a material impact on
BlockStackers' financial statements.

     In April 1998, AICPA issued Statement of Position 98-5, Reporting on the
Costs of Start-up Activities (SOP 98-5). SOP 98-5 provides guidance on the
financial reporting of start-up activities and organization costs to be expensed
as incurred. SOP 98-5 did not have a material impact on BlockStackers' financial
statements.

(3) INCOME TAXES

     BlockStackers has elected to be taxed as an S corporation for federal
income tax purposes, which results in taxable income of BlockStackers being
reported on the individual tax returns of its stockholders for federal income
taxes.

(4) STOCKHOLDERS' DEFICIT

  (a) Common Stock

     At December 31, 1998, BlockStackers has authorized 60,000 shares of common
stock at no par value.

  (b) Retired Common Stock

     In December 1998, BlockStackers acquired and retired 500 shares of its
common stock at a purchase price of $.10 per share.

  (c) Donated Services

     During 1998, certain shareholders provided services valued at approximately
$4,000 for no charge. This amount was recorded as a contribution to capital in
the accompanying statement of stockholders' deficit.

(5) RELATED PARTY TRANSACTIONS

     During 1998, BlockStackers operated its business from one of the
shareholders' homes. Therefore, BlockStackers did not incur rent and utilities
expenses.

                                      F-30
<PAGE>   98
                              BLOCKSTACKERS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) SUBSEQUENT EVENT

  (a) Operating Lease

     On May 1, 1999, BlockStackers entered into an operating lease for its
headquarters. The approximate future minimum lease payments due under the
operating lease agreement are as follows (in thousands):

<TABLE>
<CAPTION>
                  YEAR ENDING DECEMBER 31,
                  ------------------------
<S>                                                           <C>
1999........................................................  $ 7
2000........................................................    4
                                                              ---
                                                              $11
                                                              ===
</TABLE>

  (b) Sale of Assets

     On June 28, 1999, BlockStackers sold substantially all of its business
assets, including the Web site www.slashdot.org and all related trademarks,
software code and hardware required to run the Web site for $1,500,000. The
purchase agreement contains additional cash payments of $3,500,000 and stock
consideration of $7,000,000 contingent upon certain events, as defined.

                                      F-31
<PAGE>   99

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Eclipse Digital Imaging, Inc.:

We have audited the accompanying balance sheet of Eclipse Digital Imaging, Inc.
(a South Dakota corporation) as of December 31, 1998, and the related statements
of operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of Eclipse Digital Imaging, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eclipse Digital Imaging, Inc.
as of December 31, 1998, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.

Boston, Massachusetts
September 16, 1999

                                      F-32
<PAGE>   100

                         ECLIPSE DIGITAL IMAGING, INC.

                                 BALANCE SHEET
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                                  1998
                                                              ------------
<S>                                                           <C>
                                  ASSETS
Current assets:
  Cash......................................................      $ 10
  Accounts receivable.......................................        27
                                                                  ----
          Total current assets..............................        37
Property and equipment, at cost:
  Office equipment..........................................         3
  Computer equipment........................................        51
                                                                  ----
                                                                    54
  Less -- accumulated depreciation..........................       (20)
                                                                  ----
                                                                    34
                                                                  ----
          Total assets......................................      $ 71
                                                                  ====

                    LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
  Accounts payable..........................................      $  6
  Line of credit............................................         5
  Accrued expenses..........................................         1
                                                                  ----
          Total current liabilities.........................        12
Partners' capital...........................................        59
                                                                  ----
          Total liabilities and partners' capital...........      $ 71
                                                                  ====
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                      F-33
<PAGE>   101

                         ECLIPSE DIGITAL IMAGING, INC.

                            STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                                  1998
                                                              ------------
<S>                                                           <C>
Net revenue.................................................      $291
Cost of revenue.............................................       100
                                                                  ----
          Gross profit......................................       191
Operating expenses:
  Sales and marketing expenses..............................        14
  General and administrative expenses.......................        36
                                                                  ----
          Income from operations............................       141
Other income................................................        10
                                                                  ----
          Net income........................................      $151
                                                                  ====
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                      F-34
<PAGE>   102

                         ECLIPSE DIGITAL IMAGING, INC.

                         STATEMENT OF PARTNERS' CAPITAL
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              -----------------
<S>                                                           <C>
BALANCE, DECEMBER 31, 1997 (UNAUDITED)......................        $  52
  Contributed capital.......................................            8
  Member distribution.......................................         (152)
  Net income................................................          151
                                                                    -----
BALANCE, DECEMBER 31, 1998..................................        $  59
                                                                    =====
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                      F-35
<PAGE>   103

                         ECLIPSE DIGITAL IMAGING, INC.

                            STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              -----------------
<S>                                                           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................        $ 151
  Adjustments to reconcile net income to net cash provided
     by operating activities --
     Depreciation and amortization..........................           14
     Changes in operating assets and liabilities --
       Accounts receivable..................................          (15)
       Accounts payable.....................................            3
       Accrued expenses.....................................            1
                                                                    -----
          Net cash provided by operating activities.........          154
CASH FLOWS USED IN INVESTING ACTIVITIES:
  Purchase of equipment.....................................          (13)
                                                                    -----
CASH FLOWS FROM FINANCING ACTIVITIES:
  Distributions.............................................         (152)
  Borrowings under line of credit...........................            5
                                                                    -----
          Net cash used in financing activities.............         (147)
                                                                    -----
NET DECREASE IN CASH........................................           (6)
CASH, BEGINNING OF YEAR.....................................           16
                                                                    -----
CASH, END OF YEAR...........................................        $  10
                                                                    =====
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING TRANSACTIONS:
  Contributed capital.......................................        $   8
                                                                    =====
</TABLE>

   The accompanying notes are an integral part of these financial statements
                                      F-36
<PAGE>   104

                         ECLIPSE DIGITAL IMAGING, INC.

                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

(1) OPERATIONS

     Eclipse Digital Imaging, Inc. (Eclipse Digital Imaging) was incorporated on
November 25, 1998. From September 1996 through December 1998, Eclipse Digital
Imaging operated was organized as four individual sole proprietors, who were
operating the business. On January 1, 1999, 400 shares of stock were granted to
stockholders at $100 per share in exchange for assets of Eclipse Digital
Imaging, Inc. As such, the period presented reflects the entity as a
partnership. Eclipse Digital Imaging develops and sells animated graphics
software through its Web site.

     Eclipse Digital Imaging, Inc. is subject to risks common to rapidly growing
technology-based companies, including a limited operating history, dependence on
key personnel, and the need for successful development and marketing of
services.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying financial statements reflect the application of certain
significant accounting policies, described in this note and elsewhere in the
notes to financial statements.

  (a) Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  (b) Revenue Recognition

     Revenue from the sale of software animation products, for which no
technical support is provided, are generally recognized upon shipment of the
products, net of estimated returns.

  (c) Property and Equipment

     Eclipse Digital Imaging, Inc. provides for depreciation using the
straight-line method, by charges to operations in amounts estimated to allocate
the cost of property and equipment over their estimated useful lives.

<TABLE>
<CAPTION>
                                                     ESTIMATED
               ASSET CLASSIFICATION                 USEFUL LIFE
               --------------------                 -----------
<S>                                                 <C>
Computer equipment/software.......................   3 years
Office equipment..................................   5 years
</TABLE>

  (d) Concentrations of Credit Risk

     Eclipse Digital Imaging, Inc. has no significant off-balance sheet
concentration of credit risks such as foreign exchange contracts, options
contracts, or other foreign hedging arrangements. Financial instruments that
potentially expose Eclipse Digital Imaging, Inc. to concentrations of credit
risk consist primarily of cash and accounts receivable. Eclipse Digital Imaging,
Inc. maintains the majority of its cash balances with financial institutions.
Concentrated credit risk with respect to accounts receivable is limited to
certain customers to whom Eclipse Digital Imaging, Inc. makes substantial sales.
To reduce risk, Eclipse Digital Imaging, Inc. routinely assesses the financial
strength of its customers and, as a consequence, believes that its

                                      F-37
<PAGE>   105
                         ECLIPSE DIGITAL IMAGING, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

accounts receivable credit risk exposure is limited. Eclipse Digital Imaging,
Inc. operates in one industry segment and derives substantially all of its
revenues from U.S. customers.

     During the year ended December 31, 1998, one customer accounted for
approximately 52% of net sales. This customer's accounts receivable balance
represented approximately 98% of accounts receivable as of December 31, 1998.

  (e) Fair Value of Financial Instruments

     Financial instruments consist principally of cash, accounts receivable and
accounts payable. The estimated fair value of these instruments approximates
their carrying value.

  (f) New Accounting Standards

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Pursuant to SFAS No. 137, Deferral of the Effective Date, SFAS No. 133,
Accounting For Derivative Instruments and Hedging Activities, this statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
SFAS No. 133 is not expected to have a material impact on Eclipse Digital
Imaging's financial statements.

     In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires
computer software costs associated with internal use software to be charged to
operations as incurred until certain capitalization criteria are met. SOP 98-1
is effective for financial statements for fiscal years beginning after December
15, 1998. The adoption of this statement did not have a material impact on
Eclipse Digital Imaging's financial statements.

     In April 1998, AICPA issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities (SOP 98-5). SOP 98-5 provides guidance on the
financial reporting of start-up activities and organization costs to be expensed
as incurred. SOP 98-5 did not have a material impact on Eclipse Digital
Imaging's financial statements.

(3) INCOME TAXES

     Eclipse Digital Imaging is treated as a partnership for Federal and State
income tax purposes, whereby the individual members are taxed on their
proportionate share of Eclipse Digital Imaging, Inc.'s income. As a result,
Eclipse Digital Imaging, Inc. does not provide for Federal or State income
taxes.

(4) COMMITMENTS

  (a) Operating Leases

     Eclipse Digital Imaging leased certain office space from a related party.
Included in the accompanying statements of operations for the year ended
December 31, 1998 is rent expense of approximately $5,460.

     The approximate future minimum annual rent due under the operating lease
agreement as of December 31, 1998 is $4,000 for the year ending December 31,
1999.

                                      F-38
<PAGE>   106
                         ECLIPSE DIGITAL IMAGING, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (b) Litigation

     In the ordinary course of business, Eclipse Digital Imaging is party to
various types of litigation. Eclipse Digital Imaging believes it has meritorious
defenses to all claims and, in its opinion, all litigation currently pending or
threatening will not have a material adverse effect on Eclipse Digital Imaging's
financial position or results of operations.

(5) LINE OF CREDIT

     On October 2, 1998, Eclipse Digital Imaging entered into a $20,000 line of
credit with the bank secured by substantially all of its business assets. The
line bears interest at 9.5%. At December 31, 1998, approximately $5,000 was
outstanding under the line. The line of credit expires on October 2, 1999. There
are no financial, negative or affirmative covenants.

(6) SUBSEQUENT EVENT

     On June 28, 1999, Eclipse Digital Imaging sold substantially all the assets
and assumed certain liabilities for $1,500,000. The purchase agreement contains
additional stock consideration of $1,000,000 contingent upon certain events, as
defined.

                                      F-39
<PAGE>   107
[ANDOVER.NET LOGO]

Over 2 million unique visitors and
40 million page views on a
monthly basis.

[LINUX LOGO]

[SLASHDOT LOGO]

[FRESHMEAT.NET LOGO]

[FREECODE LOGO]

[CROSS PLATFORM SITES LOGO]

[DAVE CENTRAL LOGO]

[MEDIA BUILDER LOGO]

[ANDOVER NEWS LOGO]

[IT MANAGER'S JOURNAL LOGO]

[INTERNET TRAFFIC REPORT LOGO]

[WINDOWS SITE LOGO]

[SLAUGHTERHOUSE LOGO]
<PAGE>   108

                        4,000,000 shares of common stock

                       OPEN IPO WR HAMBRECHT & CO [LOGO]

WR HAMBRECHT & CO [LOGO]
                                  ADVEST, INC.

                                  ANDOVER NET                     DLJdirect INC.
                         THE LEADING LINUX DESTINATION
                                     [LOGO]

     Until             , 1999, which is 25 days after the date of this
prospectus, all dealers that buy, sell, or trade Andover.Net's common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>   109

                PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The estimated expenses (other than the underwriting discount) payable in
connection with the sale of the common stock offered hereby are as follows, all
of which will be paid by the Company:

<TABLE>
<CAPTION>
                                                                AMOUNT
                                                              ----------
<S>                                                           <C>
SEC Registration fee........................................  $   19,182
NASD filing fee.............................................       7,400
Nasdaq National Market fee..................................       5,000
Printing expenses...........................................     100,000
Legal fees and expenses.....................................     300,000
Accounting Fees and expenses................................     200,000
Transfer agent and registrar fees and expenses..............      25,000
Miscellaneous...............................................  $  343,418
                                                              ----------
Total.......................................................  $1,000,000
                                                              ==========
</TABLE>

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the General Corporation Law of the State of Delaware
provides as follows:

     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact the he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent or another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suite or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and a manner he
reasonably believed to in or not opposed to the best interest of the corporation
and except that no indemnification shall be made in respect to any claim, issue
or matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

     In addition, pursuant to our certificate of incorporation and bylaws, we
shall indemnify our directors and officers against expenses (including judgments
or amounts paid in settlement) incurred in any action, civil

                                      II-1
<PAGE>   110

or criminal, to which any such person is a party by reason of any alleged act or
failure to act in his capacity as such, except as to a matter as to which such
director or officer shall have been finally adjudged not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
corporation.

     The underwriting agreement between Andover.Net and the underwriters of this
offering provides that the underwriters are obligated, under certain
circumstances, to indemnify our directors, officers and controlling persons
against certain liabilities, including liabilities under the Securities Act.
Reference is made to the form of Underwriting Agreement filed at Exhibit 1.1
hereto.

     We maintain directors and officers liability insurance for the benefit of
our directors and certain of our officers.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     During the three year period ending September 15, 1999, Andover.Net has
issued the following securities, none of which has been registered under the
Securities Act:

     1. In June and July 1997, we issued and sold an aggregate of 46,667 shares
        of Series C preferred stock for $630,000 and 934,987 shares of common
        stock for $70,000, or $0.07 per share, for an aggregate purchase price
        of approximately $700,000 to a total of three accredited investors.

     2. On September 24, 1997, we issued and sold an aggregate of 33,334 shares
        of Series C preferred stock for $450,000 and 667,856 shares of common
        stock for $50,000, or $0.07 per share, for an aggregate purchase price
        of approximately $500,000 to a total of 14 accredited investors.

     3. On November 13, 1998, we issued and sold an aggregate of 157,438 shares
        of Series C preferred stock for $2.1 million and 2,628,569 shares of
        common stock for $677,000, or $0.26 per share, for an aggregate purchase
        price of approximately $2.8 million to a total of 24 accredited
        investors.

     4. On June 30, 1999, we issued and sold an aggregate of $2,090,000 in
        convertible notes to a total of 17 accredited investors.

     5. On September 15, 1999, we issued and sold an aggregate of 480,354 shares
        of Series B convertible preferred stock for an aggregate purchase price
        of approximately $10.1 million, or $21.0261753 per share, to 6
        accredited investors. In addition, we issued 120,214 shares of Series B
        convertible preferred stock upon conversion of the principal and accrued
        interest of the convertible notes referred to in item 4 above.

     6. From October 1, 1998 to June 30, 1999, we issued to our employees,
        officers, directors and consultants options to purchase an aggregate of
        471,294 shares of our common stock, at exercise prices ranging from
        $0.03 per share to $1.07 per share.

     The sales of securities set forth in paragraphs one to five above were
deemed to be exempt from the registration requirements of the Securities Act in
reliance on Section 4(2) thereof, or Regulation D promulgated thereunder, as
transactions by an issuer not involving a public offering. The sale of
securities set forth in paragraph 6 above was deemed to be exempt from the
registration requirements of the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act as transactions by an
issuer pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The granting of stock options
described in paragraph 6 above did not require registration under the Securities
Act, or an exemption therefrom, insofar as such grants did not involve a "sale"
of securities as such term is used in Section 2(3) of the Securities Act.

     During fiscal 1996, the Company issued warrants to the holders of the
previously issued Series B convertible preferred stock. A total of 6,875
warrants were issued to purchase Series B convertible preferred stock at an
exercise price of $15.00 per share. The warrants were exercised during fiscal
1997 for total proceeds of approximately $103,000.

     In May 1997, the Company issued convertible promissory notes in the sum of
$100,000 to investors. The notes were mandatorily convertible upon the
additional financing of $200,000 which was completed in June
                                      II-2
<PAGE>   111

1997. The investors received a total of 20,000 shares of common stock and 20,000
shares of Series C preferred stock in exchange for the notes and an additional
$200,000.

ITEM 16.  EXHIBITS

<TABLE>
<CAPTION>
 NO.                     DESCRIPTION OF DOCUMENTS
 ---                     ------------------------
<C>    <S>
  1.1  Form of Underwriting Agreement
  3.1  Form of Amended and Restated Certificate of Incorporation of
       the Registrant
  3.2  Form of Amended and Restated Bylaws of the Registrant
  5.1  Opinion of Hutchins, Wheeler & Dittmar, A Professional
       Corporation*
 10.1  Third Amended and Restated Registration Rights Agreement,
       dated as of September 15, 1999 among the Registrant and
       certain of its stockholders.
 10.2  Asset Purchase Agreement, between the Registrant and
       BlockStackers, Inc., dated as of June 18, 1999.
 10.3  Asset Purchase Agreement, between the Registrant and Eclipse
       Digital Imaging, Inc., dated as of June 18, 1999.
 10.4  Asset Purchase Agreement, between the Registrant and Patrick
       Lenz (d/b/a Freshmeat), dated as of August 6, 1999.
 10.5  Lease dated March 23,1999 between the Registrant and Nagog
       Park Investors, L.L.C.
 10.6  Form of Advertising Insertion Order
 10.7  Employment Agreement between the Registrant and Robert
       Malda, dated as of June 28, 1999.
 10.8  1995 Stock Option Plan, as amended
 10.9  1999 Stock Option Plan
 23.1  Consent of Arthur Andersen LLP
 23.2  Consent of Hutchins, Wheeler & Dittmar, A Professional
       Corporation (included in Exhibit 5.1)*
 24.1  Power of Attorney (included on page II-4)
 27.1  Financial Data Schedule
</TABLE>

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

* To be filed by amendment

     All other schedules for which provisions are made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.

ITEM 17.  UNDERTAKINGS

     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing of this offering specified in the underwriting agreement
certificates in such denomination and registered in such names as required by
the underwriters to permit proper delivery to each purchaser.

     The undersigned registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement 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.

                                      II-3
<PAGE>   112

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                      II-4
<PAGE>   113

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Acton, Massachusetts, on September
16, 1999.

                                          ANDOVER.NET, INC.

                                          By:      /s/ BRUCE A. TWICKLER
                                            ------------------------------------
                                                Bruce A. Twickler, President

     We, the undersigned officers and directors of Andover.Net, Inc., hereby
severally constitute and appoint Bruce A. Twickler, to sign for us and in our
names in the capacities indicated below, the Registration Statement on Form S-1
filed herewith and any and all pre-effective and post-effective amendments to
said Registration Statement, and, in connection with any registration of
additional securities pursuant to Rule 462(b) under the Securities Act of 1933,
to sign any abbreviated registration statement and any and all amendments
thereto, and to file the same, with all exhibits thereto and other documents in
connection therewith, in each case, with the Securities and Exchange Commission,
and generally to do all such things in our names and on our behalf in our
capacities with the provisions of the Securities Act of 1933, as amended, and
all requirements of the Securities and Exchange Commission.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
                     SIGNATURE                                   TITLE                      DATE
                     ---------                                   -----                      ----
<C>                                                  <S>                             <C>

               /s/ BRUCE A. TWICKLER                 President and Chief Executive   September 16, 1999
---------------------------------------------------    Officer and Chairman of the
                 Bruce A. Twickler                     Board (Principal Executive
                                                       Officer and Principal
                                                       Financial Officer)

              /s/ WALTER H. BIRD, III                Director                        September 16, 1999
---------------------------------------------------
                Walter H. Bird, III

                /s/ JAMES D. LOGAN                   Director                        September 16, 1999
---------------------------------------------------
                  James D. Logan

                  /s/ LOUIS PAGE                     Director                        September 16, 1999
---------------------------------------------------
                    Louis Page

                /s/ JOHN E. TROMBLY                  Director                        September 16, 1999
---------------------------------------------------
                  John E. Trombly

              /s/ THOMAS R. SHEPHERD                 Director                        September 16, 1999
---------------------------------------------------
                Thomas R. Shepherd

                 /s/ ROBERT MALDA                    Director                        September 16, 1999
---------------------------------------------------
                   Robert Malda

             /s/ JONATHAN M. GOLDSTEIN               Director                        September 16, 1999
---------------------------------------------------
               Jonathan M. Goldstein
</TABLE>

                                      II-5
<PAGE>   114

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 NO.                     DESCRIPTION OF DOCUMENTS
 ---                     ------------------------
<S>    <C>
 1.1   Form of Underwriting Agreement
 3.1   Form of Amended and Restated Certificate of Incorporation of
       the Registrant
 3.2   Form of Amended and Restated Bylaws of the Registrant
 5.1   Form of Opinion of Hutchins, Wheeler & Dittmar, A
       Professional Corporation*
10.1   Third Amended and Restated Registration Rights Agreement,
       dated as of September 15, 1997 among the Registrant and
       certain of its stockholders.
10.2   Asset Purchase Agreement, between the Registrant and
       BlockStackers, Inc., dated as of June 18, 1999.
10.3   Asset Purchase Agreement, between the Registrant and Eclipse
       Digital Imaging, Inc., dated as of June 18, 1999.
10.4   Asset Purchase Agreement, between the Registrant and Patrick
       Lenz (d/b/a Freshmeat), dated as of August 6, 1999.
10.5   Lease dated March 23, 1999, between the Registrant and Nagog
       Park Investors, L.L.C.
10.6   Form of Advertising Insertion Order
10.7   Employment Agreement between the Registrant and Robert
       Malda, dated as of June 28, 1999.
10.8   1995 Stock Option Plan, as amended
10.9   1999 Stock Option Plan
23.1   Consent of Arthur Andersen LLP
23.2   Consent of Hutchins, Wheeler & Dittmar, A Professional
       Corporation (included in Exhibit 5.1)*
24.1   Power of Attorney (included on page II-4)
27.1   Financial Data Schedule
</TABLE>

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

* To be filed by amendment
[{"type": "S-1", "sequence": "1", "description": "ANDOVER.NET, INC.", "secsgml_size_bytes": 409279}]
{"company-data": {"conformed-name": "ANDOVER NET INC", "cik": "0001093580", "assigned-sic": "", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-87257", "film-number": "99712829"}, "business-address": {"street1": "532 GREAT ROAD", "city": "ACTON", "state": "MA", "zip": "01720", "phone": "9786355300"}, "mail-address": {"street1": "532 GREAT ROAD", "city": "ACTON", "state": "MA", "zip": "01720"}}
1

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1999

                                                      REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                    FORM S-1
                            ------------------------
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933

                               ANDOVER.NET, INC.
             (Exact name of registrant as specified in its charter)
DELAWARE                             7379                            04-3153168
 (State or other jurisdiction of     (Primary Standard Industrial             (I.R.S. Employer
 incorporation or organization)       Classification Code Number)            Identification No.)
50 NAGOG PARK
                                ACTON, MA 01720
                                 (978) 635-5300
              (Address, including zip code, and telephone number,
       including area code, of registrant's principal executive offices)

                               BRUCE A. TWICKLER
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                               ANDOVER.NET, INC.
                                 50 NAGOG PARK
                                ACTON, MA 01720
                                 (978) 635-5300
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
                                   COPIES TO:
DAVID P. KREISLER, ESQUIRE                             WILLIAM J. GRANT, JR., ESQUIRE
              HUTCHINS, WHEELER & DITTMAR                               WILLKIE FARR & GALLAGHER
              A PROFESSIONAL CORPORATION                                   787 SEVENTH AVENUE
                  101 FEDERAL STREET                                       NEW YORK, NY 10019
              BOSTON, MASSACHUSETTS 02110                                    (212) 728-8000
                    (617) 951-6600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  As soon as
practicable after the effective date of this Registration Statement.

    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, check the following box and
list the Securities Act registration statement number of 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 number of the earlier effective registration statement for the same
offering. [ ]

    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the earlier
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,
check the following box. [ ]

                        CALCULATION OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
                                                        PROPOSED MAXIMUM AGGREGATE
 TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED          OFFERING PRICE(1)          AMOUNT OF REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per share...............           $69,000,000                     $19,182.00
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
(1)  Estimated solely for the purpose of calculating the registration fee
     pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
                            ------------------------
    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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

                SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 1999
--------------------------------------------------------------------------------

          4,000,000 shares of common stock          $       per share

                                  Andover net
                         The Leading Linux Destination
                                     [LOGO]
--------------------------------------------------------------------------------

       Andover.Net, Inc.                                                           Andover.Net is the leading Linux/Open
       50 Nagog Park                                                               Source destination on the Internet. Our
       Acton, MA 01720                                                             network of web sites provides an
       We have applied for approval for listing of our shares on the Nasdaq        independent, unbiased source for content,
       National Market under the symbol "ANDN."                                    community and commerce for the Linux and,
                                                                                   more generally, the Open Source
                                                                                   communities.
                                                                                   This is our initial public offering and
                                                                                   no public market currently exists for our
                                                                                   shares. We expect that the public
                                                                                   offering price will be between $12.00 and
                                                                                   $15.00 per share. This price may not
                                                                                   reflect the market price of our shares
                                                                                   after this offering.
                                                         PER SHARE    TOTAL
Public Offering Price...........................   $          $
       Underwriting Discount...........................   $          $
       Proceeds to Andover.Net.........................   $          $

       We have granted the underwriters the right to purchase up to 600,000
       additional shares within 30 days to cover any over-allotments. The
       underwriters expect to deliver shares of common stock to purchasers
       on             , 1999.
--------------------------------------------------------------------------------
     THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
     ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
     PAGE 4.
--------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state                OPEN IPO WR HAMBRECHT & CO [LOGO]
       securities commission has approved or disapproved of these securities
       or determined if this prospectus is truthful or complete. Any
       representation to the contrary is a criminal offense.
       The method of distribution being used by the underwriters in this
       offering differs somewhat from that traditionally employed in firm
       commitment underwritten public offerings. In particular, the public
       offering price and allocation of shares will be determined primarily
       by an auction process conducted by the underwriters and other
       securities dealers participating in the offering. A more detailed
       description of this process is included in "Plan of Distribution."
--------------------------------------------------------------------------------

     WR HAMBRECHT & CO [LOGO]
                                  ADVEST, INC.
                                                                  DLJdirect INC.
--------------------------------------------------------------------------------

                  The date of this prospectus is  _____ , 1999
3

                               [ANDOVER.NET LOGO]

Andover.Net is the leading Linux/Open Source destination on the Internet.
Our network of web sites serves over 2 million unique visitors and 40 million
page views on a monthly basis. We provide an independent, unbiased source
for content, community and commerce for the Linux and, more generally, the Open
Source communities. We provide products, online tools, news and other services
for programmers, software developers, web site designers, technology managers
and corporate buyers.

                          LINUX RESOURCE SITES--VISITS
                                  [PIE CHART]
Andover.Net includes: Slashdot, FreeCode, and Freshmeat..... 51.1%
SSC Includes: SSC, Linux Resources, Linux Gazette and
  Linux Journal.............................................  6.7%
Other.......................................................  6.5%
VA Linux includes: Themes.org and Linux.com.................  3.5%
Linux Today.................................................  4.9%
Linux Documentation Project.................................  4.4%
Linux News..................................................  3.7%
Linux Online................................................ 19.2%
[SLASHDOT LOGO]
[FREECODE LOGO]
[FRESHMEAT.NET LOGO]
Source: Linux Journal, August 1999.

These numbers were collected on May 13, 1999.
"Visits" are accumulated over the previous six months.
4
LINUX/OPEN SOURCE SITES

SLASHDOT.ORG
News for Nerds. Stuff that Matters. A leading
voice for the Open Source community.

    [Screen Shot]               http://www.andover.net

FRESHMEAT.NET                              FREECODE
One of the largest downloadable Linux      A comprehensive archive
software application repositories.         of free source code.

    [Screen Shot]                                [Screen Shot]
5
CROSS-PLATFORM SITES
DAVECENTRAL                   MEDIABUILDER                    ANDOVER NEWS
Over 10,000 downloadable      Complete online multimedia      Searchable computer-industry news
products for both Linux       resource center, including      and editorials.
and Windows.                  online tools.

[Screen Shot]                 [Screen Shot]                   [Screen Shot]
IT MANAGER'S JOURNAL                        INTERNET TRAFFIC REPORT
Editorials and summaries for                Monitors the flow of data around
IT managers.                                the world.

[Screen Shot]                               [Screen Shot]
WINDOWS SITE

SLAUGHTERHOUSE
Free Windows applications and news.
6

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

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

                               TABLE OF CONTENTS

                                                              PAGE
                                                              ----
Prospectus Summary..........................................    1
The Offering................................................    2
Summary Financial Data......................................    3
Risk Factors................................................    4
Special Note Regarding Forward Looking Statements...........   14
Use of Proceeds.............................................   15
Dividend Policy.............................................   15
Capitalization..............................................   16
Dilution....................................................   17
Selected Financial Data.....................................   19
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   21
Business....................................................   31
Management..................................................   43
Principal Stockholders......................................   48
Relationships with Andover.Net and Related Transactions.....   50
Description of Capital Stock................................   52
Shares Eligible for Future Sale.............................   55
Plan of Distribution........................................   56
Legal Matters...............................................   59
Experts.....................................................   59
Where You Can Find Additional Information...................   60
Index to Financial Statements...............................  F-1

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

     Andover.Net and the Andover.Net logo are trademarks of Andover.Net, Inc.
All other trademarks, tradenames or copyrights referred to in this prospectus
are the property of their respective owners.

     Information contained on our network does not constitute a part of this
prospectus.
7

                      [THIS PAGE INTENTIONALLY LEFT BLANK]
8
--------------------------------------------------------------------------------
                               PROSPECTUS SUMMARY

     The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes appearing elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully.
Our Business:            Andover.Net is the leading Linux/Open Source destination on
                         the Internet. Our network of web sites provides an
                         independent, unbiased source for content, community and
                         commerce for the Linux and, more generally, the Open Source
                         communities. We provide products, online tools, news and
                         other services for programmers, software developers, web
                         site designers, technology managers and corporate buyers.
                         Our network generates over 40 million page views with over
                         two million unique visitors on a monthly basis. With our
                         recent acquisitions of Slashdot.org and Freshmeat.net, we
                         believe that traffic on our network represents over 50% of
                         the visits to Linux resource sites on the World Wide Web, or
                         web. This leading position in the Linux market allows us to
                         provide advertisers targeted access to the Linux/Open Source
                         communities. We have over 100 advertisers on our network.
                         Our top five advertisers based on cash revenues for the six
                         months ended August 31, 1999 were IBM, Compaq, Silicon
                         Graphics, Hewlett-Packard and Intel.
Our Network:             We combine our Linux/Open Source web sites with other web
                         sites to provide programmers and developers with a leading
                         online resource regardless of operating system. Our closely
                         integrated network consists of web sites that are deep and
                         rich in content. Our network includes:
LINUX/OPEN SOURCE          CROSS-PLATFORM                WINDOWS
                         - Slashdot                 - DaveCentral                 - Slaughter House
                         - Freshmeat                - MediaBuilder
                         - FreeCode                 - Andover News
                                                    - IT Manager's Journal
                                                    - Internet Traffic Report
Our Strategy:            Our goal is to maintain and enhance our position as the
                         leading destination for content, community and commerce for
                         the Linux and, more generally, the Open Source movement. The
                         key elements of our strategy are to:
                         -  grow the size and share of our dominant Linux/Open Source
                            position;
                         -  facilitate and guide the transition of Windows developers
                            to Linux/Open Source;
                         -  expand our e-commerce offerings to our targeted, high
                            volume traffic;
                         -  acquire complementary Linux/Open Source web sites;
                         -  expand the number and participation of major advertisers;
                            and
                         -  strengthen the Andover.Net brand.

Linux/Open Source        The Internet has accelerated the growth of the Open Source
Movement:                movement. The Open Source movement is a collaborative
                         approach to the development and distribution of software and
                         has emerged as a viable alternative to traditional
                         proprietary software development. The growth of the Internet
                         has greatly increased the scale and efficiency of Open
                         Source development by enabling large communities of
                         independent developers to collaborate online. The best-known
                         example of Open Source is the Linux operating system, or
                         Linux, created by Linus Torvalds in 1991. Due to the growing
                         number of Linux/Open Source operating systems and related
                         applications, a number of major technology industry leaders,
                         including IBM, Intel and Hewlett-Packard, have recently
                         announced support for Linux-based operating systems.
                         According to International Data Corporation, Linux-based
                         operating systems represented 17% of all new licensed
                         shipments of server operating systems in 1998, which was an
                         increase of 190% from the previous year.
--------------------------------------------------------------------------------

                                        1
9
--------------------------------------------------------------------------------

     We were founded in 1992 as Andover Advanced Technologies, Inc., a
Massachusetts corporation. We reincorporated in Delaware and changed our name to
Andover.Net, Inc. in September 1999. Our headquarters are located at 50 Nagog
Park, Acton, Massachusetts, 01720 and our telephone number is (978) 635-5300.
Information about Andover.Net is available at www.andover.net. Information
contained on our network of web sites does not constitute part of this
prospectus.

                                  THE OFFERING
Type of Security.............................  Common stock
Common stock offered.........................  4,000,000 shares
Common stock to be outstanding after the       15,000,000 shares
  offering...................................
Use of proceeds..............................  For redemption of redeemable preferred stock,
                                               potential strategic acquisitions and general
                                               corporate purposes, including working
                                               capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.......  ANDN
References to "we," "us" or "Andover.Net" shall refer to Andover.Net, Inc.
and all predecessor entities.

     Except as otherwise noted, all information in this prospectus assumes:

     - no exercise of the underwriters' over-allotment option;

     - no exercise of those options to purchase shares of common stock remaining
       outstanding after the completion of this offering;

     - the shares of common stock to be issued upon the closing of this offering
       in connection with the acquisition of Slashdot.org, Freshmeat.net and
       Animation Factory have not been issued;

     - the conversion of all outstanding shares of Series B convertible
       preferred stock into 3,017,138 shares of our common stock immediately
       prior to the closing of this offering;

     - the redemption of all outstanding shares of Series A redeemable preferred
       stock immediately prior to the closing of this offering;

     - the completion of a 5.02 for 1 stock split effective immediately prior to
       the effectiveness of the registration statement of which this prospectus
       forms a part; and

     - an increase in our authorized common stock to 100,000,000 shares and the
       authorization of 1,000,000 shares of undesignated preferred stock
       effective immediately prior to the closing of this offering.
--------------------------------------------------------------------------------

                                        2
10
--------------------------------------------------------------------------------

                             SUMMARY FINANCIAL DATA

     The following table summarizes the financial data of our business. The pro
forma 1999 statements of operations data gives effect to the conversion of
convertible notes into Series B convertible preferred stock in September 1999,
the automatic conversion of the Series B convertible preferred stock into common
stock and the effects of the acquisition of Slashdot.org and Animation Factory.
See Note 2(j) of the Financial Statements and Notes thereto for discussion of
pro forma basic and diluted net loss per share.
NINE MONTHS ENDED
                                                  YEAR ENDED SEPTEMBER 30,             JUNE 30,
                                                  ------------------------   ----------------------------
                                                                                               PRO FORMA
                                                   1996     1997     1998     1998     1999       1999
                                                  ------   ------   ------   ------   -------   ---------
                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Revenues.......................................   $  316   $  741   $1,290   $  986   $ 1,109    $ 1,617
Gross profit...................................      287      438      963      731       679        914
Loss from operations...........................     (573)    (590)    (445)    (341)   (2,309)    (5,630)
Net loss.......................................     (654)    (664)    (474)    (374)   (2,250)    (7,335)
Net loss attributable to common stockholders...     (654)    (705)    (608)    (463)   (2,510)    (7,595)
Basic and diluted net loss per share...........   $(0.38)  $(0.29)  $(0.12)  $(0.09)  $ (0.36)   $ (1.06)
Basic and diluted weighted average common
  shares outstanding...........................    1,763    2,468    5,110    5,106     6,990      7,169
Pro forma basic and diluted net loss per
  share........................................                     $(0.12)           $ (0.32)   $ (1.06)
Pro forma basic and diluted weighted average
  common shares outstanding....................                      5,110              6,992      7,171
The following table summarizes our balance sheet data as of June 30, 1999.
The pro forma column gives effect to the recent issuance and sale of 480,354
shares of Series B convertible preferred stock on September 15, 1999 and the
concurrent automatic conversion of all convertible notes into 120,214 shares of
Series B convertible preferred stock. The pro forma column also gives effect to
the automatic conversion of the Series B convertible preferred stock into
3,017,138 shares of common stock. The effects of the Slashdot.org and Animation
Factory acquisitions are included in the actual June 30, 1999 balance sheet data
below, as such acquisitions were consummated before June 30, 1999. The pro forma
as adjusted column reflects the sale of 4,000,000 shares of common stock offered
by Andover.Net at an assumed initial public offering price of $13.50 per share,
after deducting the estimated underwriting discount and assumed offering
expenses and the automatic redemption of all outstanding shares of Series A
redeemable preferred stock, including accrued dividends, of $4,713,000 which
will occur upon the closing of this offering. See "Use of Proceeds" and
"Capitalization."
AS OF JUNE 30, 1999
                                                              ----------------------------------------
                                                                                            PRO FORMA
                                                              ACTUAL       PRO FORMA       AS ADJUSTED
                                                              -------      ---------       -----------
                                                                           (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents...................................  $ 1,610       $11,710          $56,622
Working capital.............................................   (1,146)       11,044           55,956
Total assets................................................    5,170        15,270           60,182
Long-term obligations, less current portion.................      487           487              487
Redeemable convertible preferred stock......................    4,713         4,713               --
Stockholders' equity (deficit)..............................   (3,221)        8,969           58,594
--------------------------------------------------------------------------------

                                        3
11

                                  RISK FACTORS

     You should carefully consider the following risks and all other information
contained in this prospectus before you decide to buy our common stock.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business operations. If any of the
following risks actually occur, our business, financial condition or operating
results could suffer. If this occurs, the trading price of our common stock
could decline, and you could lose all or part of the money you paid to buy our
common stock.

                          RISKS RELATED TO ANDOVER.NET

WE HAVE A LIMITED OPERATING HISTORY AS AN INTERNET COMPANY.

     Although we began operating in May 1992, we only commenced our Internet
focus in 1997. Thus, we have a limited operating history in our current market
upon which you can evaluate our business. We are subject to the risks, expenses
and uncertainties frequently encountered by companies in the new and rapidly
evolving markets for Internet products and services. For example:

     -  we might fail to continue to develop and extend our Internet-based
        content offerings and services;

     -  we might not effectively integrate our recent acquisitions;

     -  Internet users, vendors or advertisers may not accept our services;

     -  we might be unable to maintain and increase the levels of traffic on our
        network;

     -  our competitors may develop or may already have developed similar or
        superior content, services or products;

     -  the market might not continue to accept the Internet as an advertising
        medium;

     -  we might be unable to sell Internet advertising successfully;

     -  market prices for Internet advertising may drop as a result of
        competition;

     -  we might not effectively integrate the technology and operations of any
        acquired businesses or technologies with our operations;

     -  the technologies we use in our operations might fail or operate poorly;
        and

     -  we might be unable to identify, attract, retain and motivate qualified
        personnel.

     We might not be successful in addressing these risks or other risks we may
face. If we are unable to address these risks adequately, our business, results
of operations and financial condition may suffer.

WE EXPECT TO INCUR SUBSTANTIAL LOSSES IN THE FUTURE.

     We have incurred operating losses since our inception in 1992, including
our most recent fiscal year ended September 30, 1998 and the nine months ended
June 30, 1999. We expect to incur significant losses in the near term as we
substantially increase our sales and marketing, general and administrative, and
research and development expenses. In addition, we are investing considerable
resources in our expansion strategies. As a result, we cannot be certain when or
if we will achieve sustained profitability. Failure to become and remain
profitable may materially and adversely affect the market price of our common
stock and our ability to raise capital and continue operations.

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.

     Our quarterly operating results have fluctuated, and may continue to
fluctuate significantly in the future because of a variety of factors, many of
which are outside our control. These factors include:

     -  the level of Internet usage;

     -  traffic levels on our network;

     -  the demand for advertising on our network, as well as on the Internet in
        general;
                                        4
12

     -  changes in rates paid for Internet advertising resulting from
        competition or other factors;

     -  our ability to enter into or renew key agreements with our advertisers
        and vendors;

     -  the acceptance of our e-commerce strategy;

     -  the amount and timing of costs related to our marketing efforts;

     -  costs incurred as we expand operations;

     -  our ability to introduce new content offerings and services
        successfully;

     -  seasonality of our business;

     -  new services introduced by us or our competitors;

     -  technical difficulties or system downtime affecting the Internet
        generally or the operation of our network; and

     -  economic conditions specific to the Internet as well as general economic
        conditions.

     Therefore, operating results for any particular quarter might not be
indicative of future operating results. If our e-commerce strategy does not
generate a significant amount of revenue, then we expect to depend primarily on
advertising revenues for the foreseeable future. As a result, the level of
advertising revenues in each quarter is likely to significantly affect our
quarterly revenues and operating results. Our selling and marketing, general and
administrative, and research and development expenses are based on expectations
of future revenues and are relatively fixed in the short term. These expenses
totaled approximately $1.0 million during the three months ended June 30, 1999.
If our advertising and other revenues are lower than expected, we might not be
able to reduce spending quickly. In addition, we intend to significantly
increase operating expenses to expand our business. Any shortfall in revenues
would have a direct impact on operating results for a particular quarter, and
these fluctuations could affect the market price of our common stock.

ATTEMPTS TO EXPAND BY MEANS OF ACQUISITIONS AND STRATEGIC ALLIANCES MAY NOT BE
SUCCESSFUL.

     We intend to expand our operations or market presence by entering into
business combinations, investments, joint ventures or other strategic alliances
both in the United States and internationally. We may not, however, be able to
enter into such combinations and alliances. Furthermore, any such expansion may
harm our operational efficiency, financial performance and relationships with
employees and third parties. Our ability to expand in this way may be limited
due to the many financial and operational risks accompanying these transactions.
For example:

     -  we may have difficulty assimilating the operations, technology and
        personnel of any acquired companies;

     -  the allocation of resources to consummate these transactions may disrupt
        our business;

     -  we may have problems retaining key technical and managerial personnel
        from acquired companies;

     -  we may experience one-time, in-process research and development charges
        as well as ongoing expenses associated with amortization of goodwill and
        other purchased intangible assets;

     -  our stockholders will be diluted if we issue equity to fund these
        transactions;

     -  acquired businesses may initially be unprofitable resulting in our
        assumption of operating losses and increased expenses;

     -  our reputation may be harmed if the Linux/Open Source communities do not
        approve of these transactions; and

     -  our relationships with existing employees, customers and business
        partners may be weakened or terminated as a result of these
        transactions.

                                        5
13

     Furthermore, we have acquired and intend to continue to acquire
complementary web sites, companies, technologies, services and products as
appropriate opportunities arise. If we identify an appropriate acquisition
opportunity, we might not be able to negotiate the terms of that acquisition
successfully, obtain financing, or integrate the acquired company's personnel
and operations. We may also have difficulty continuing to acquire web sites and
other Internet media properties at the prices historically paid due to the
escalation of Internet media valuations. If we make acquisitions outside of our
core business, assimilating the acquired technology, services or products into
our operations could be difficult. This may cause a disruption in our ongoing
business, distract management and make it difficult to maintain standards,
controls and procedures. In addition, we might be required to incur debt or
issue equity securities to pay for any future acquisitions. If the market price
for acquisition targets increases substantially, our business, results of
operations and financial condition could suffer.

WE RELY ON THE GROWTH OF THE LINUX/OPEN SOURCE MOVEMENT.

     Our business relies on the growth of Linux operating systems. If users
choose a different operating system, and the use of Linux operating systems
decreases or does not grow, then our business, results of operations and
financial condition will suffer. Moreover, if a competitor subverts further
development or adoption of the Open Source software movement by tying the Open
Source modules into a proprietary operating system or developing proprietary
applications that promote their control over the distribution and influence of
Linux operating systems, then our business would be harmed. If a competitor were
able to convert the essentially open nature of Linux operating systems into a
proprietary system, our business, results of operations and financial condition
would suffer.

NEGATIVE REACTION WITHIN THE OPEN SOURCE COMMUNITY TO OUR BUSINESS STRATEGY
COULD HARM OUR REPUTATION AND BUSINESS.

     Some members of the Open Source community have criticized the
commercialization of the Open Source movement. This type of negative reaction,
if widely shared by our visitors, developers or the rest of the Open Source
community, could harm our reputation and diminish the Andover.Net brand. Our
business, results of operations and financial condition could suffer.

WE HAVE A SIGNIFICANT AMOUNT OF NET INTANGIBLE ASSETS.

     We had approximately $2.9 million of net intangible assets as of June 30,
1999. Of these intangible assets $2.3 million relates to goodwill. If we are
unable to recover the recorded amounts of our intangible assets, our business,
results of operations and financial condition will suffer.

WE RELY HEAVILY ON ADVERTISING REVENUES.

     As we execute our Internet strategy, we expect to continue to derive a
majority of our revenue from advertising on our network for the foreseeable
future. We may not generate these revenues if advertisers do not maintain or
increase their current levels of Internet advertising. As there is no industry
standard for the measurement of the effectiveness of Internet advertising,
advertisers that currently advertise on the Internet may reduce or eliminate
this form of advertising, and advertisers that have traditionally relied upon
other advertising media may be reluctant to begin to advertise on the Internet.

     Moreover, widespread adoption of currently available software programs that
limit or prevent advertisements from being delivered to an Internet user's
computer would negatively affect the commercial viability of Internet
advertising and would further deter advertisers from increasing or maintaining
current levels of Internet advertising. Our ability to execute our Internet
strategy successfully will suffer if the market for Internet advertising fails
to develop or develops more slowly than expected.

     Different pricing models are used to sell advertising on the Internet. It
is difficult to predict which, if any, will emerge as the industry standard. If
we cannot quickly and successfully respond to changes in pricing models for
Internet advertising, or identify and adopt any industry standards that may
emerge, we will not be able to attract a sufficient number of advertising
customers, and our Internet advertising strategy will fail.
                                        6
14

     We expect that it will be important to our advertisers that we accurately
measure the demographics of the visitors to our network. If we are unable to
provide this demographic data for any reason, or if it becomes costly to do so,
then companies may choose not to advertise on our network or may pay less for
advertising on our network.

A SIGNIFICANT PORTION OF OUR REVENUES COMES FROM A LIMITED NUMBER OF
ADVERTISERS.

     We have derived our revenues to date from a limited number of advertising
customers, and we expect that a limited number of advertisers will continue to
account for a significant portion of our revenues. In particular, one advertiser
accounted for approximately 17% of our cash advertising revenues for the six
month period ended June 30, 1999, and our top ten advertisers accounted for an
aggregate of approximately 65% of our revenues for the six month period ended
June 30, 1999. Moreover, we generally sell advertising through the use of
insertion order agreements that are subject to cancellation with no minimum
notice requirement. Current advertisers may not continue to purchase advertising
from us, or we may not be able to attract additional advertisers. If we lose one
or more of the advertisers that represent a material portion of our revenues, or
if we experience the non-payment or late payment of amounts due by a significant
advertiser, our business, results of operations and financial condition could
suffer.

WE MAY FAIL TO DEVELOP AND PROMOTE OUR NETWORK EFFECTIVELY, WHICH MAY PREVENT US
FROM ATTRACTING NEW VISITORS, ADVERTISERS OR E-COMMERCE PARTNERS TO OUR NETWORK.

     Enhancing our network is critical to our ability to increase our revenue.
In order to attract and retain Internet users, advertisers and e-commerce
partners, we intend to substantially increase our expenditures to further
promote and develop our network. Our success in developing and promoting the
Andover.Net network will also depend on our ability to provide high quality
content, features and functionality. If we fail to promote our network
successfully or if visitors to our network or advertisers do not perceive our
services to be useful, current or of high quality, our business, results of
operations and financial condition will suffer.

WE DEPEND ON AN EFFECTIVE DIRECT SALES FORCE.

     We depend on our direct sales force to sell advertising on our network.
This dependence involves the following risks:

     -  the need to increase the size of our direct sales force;

     -  the need to hire, retain, integrate and motivate additional sales and
        sales support personnel;

     -  lack of experience of our new sales personnel; and

     -  competition from other companies in hiring and retaining sales
        personnel.

     Our business, results of operations and financial condition may suffer if
we do not maintain an effective direct sales force.

WE FACE INTENSE COMPETITION IN OUR INDUSTRY.

     The market for Internet-based content offerings and services is relatively
new, intensely competitive and rapidly changing. Since the advent of commercial
services on the Internet, the number of online services competing for users'
attention and spending has proliferated. We expect that competition will
continue to intensify. We compete with other web sites which are aimed
specifically at Linux/Open Source users as well as other companies that direct
some of their overall web content and services at the Internet professional
community. We also compete for circulation with general interest portal and
destination web sites as well as traditional media.

     In addition, the competition in the sale of advertising on the Internet,
including competition from Internet portals and other high-traffic sites, is
intense. This competition has resulted in a wide range of rates quoted by
different vendors for a variety of advertising services. As a result, we cannot
accurately predict the future levels of Internet advertising revenues that we
will realize. The prices for Internet advertising may also
                                        7
15

be affected by competition among current and future suppliers of Internet
navigational services or web sites and advertising networks. This, together with
competition with other traditional media for advertising placements, could
result in significant price competition, reduced pricing for Internet
advertising and reductions in our advertising revenues.

     The market for Internet based content offerings focusing on the Linux-based
operating system is new and growing rapidly. This market is based on Open Source
software. If one of our Linux-based competitors were to make essential aspects
of this industry proprietary, it could harm our business.

     An important part of our strategy is to develop and increase the reputation
of our brand names. If we are unable to do so, or if our competitors develop
their brand names more successfully than we do, our future growth, business,
results of operations and financial condition would suffer.

     Many of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we have. These competitors
may be able to respond more quickly to new or emerging technologies and changes
in customer requirements and to devote greater resources to the development,
promotion and sale of their products and services than we can. We might not be
able to compete successfully against our current or future competitors.

WE MIGHT NOT BE ABLE TO ADEQUATELY MANAGE OUR GROWTH.

     Our recent growth has placed, and will continue to place, a significant
strain on our managerial, operational and financial resources. We must continue
to implement and improve our operational and financial systems and expand, train
and manage our employee base to manage this future growth. We also intend to
establish or acquire additional web sites which will create additional
operational and management complexities. In addition, we expect that our
operational and management systems will face increased strain as a result of the
expansion of our content offerings and services. We might not be able to manage
effectively the expansion of our operations and systems, and our procedures and
controls might not be adequate to support our operations. In addition, our
management might not be able to make and execute decisions rapidly enough to
exploit market opportunities for the expansion of our content offerings and
services. If we are unable to manage our growth effectively, our business,
results of operations and financial condition would suffer.

WE DEPEND ON THE CONTINUED SERVICE OF OUR KEY OFFICERS.

     Our future success depends on the continued services of a number of key
officers. The loss of the technical knowledge and industry expertise of any of
these officers could seriously impede our success. If we lose one or a group of
our key employees, particularly to a competitor, our business, financial
condition and results of operations could suffer. Andover.Net does not currently
have a chief financial officer, although it is in active discussions with
qualified individuals to fill this position and will have a chief financial
officer before the closing of this offering.

WE ARE VULNERABLE TO UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM FAILURES,
WHICH MAY RESULT IN
REDUCED VISITOR TRAFFIC ON OUR NETWORK, DECREASED REVENUE AND HARM TO OUR
REPUTATION.

     Substantially all of our communications hardware and other hardware related
to our web sites is located at one location, although we are considering
duplicating them at other facilities within the next six months. Fire, floods,
hurricanes, tornadoes, earthquakes, power loss, telecommunications failures,
break-ins and similar events could damage these systems. In addition, although
we have implemented network security measures, our servers are vulnerable to
computer viruses, electronic break-ins, human error and other similar disruptive
problems which could adversely affect our systems and web sites. Although we try
to prevent unauthorized access to our systems, we cannot eliminate this risk
entirely. We could lose revenue and suffer damage to our reputation if any of
these occurrences affected our systems. Our insurance policies may not
adequately compensate us for any losses that may occur due to failures or
interruptions in our systems.

                                        8
16

OUR SYSTEMS MAY FAIL OR EXPERIENCE A SLOWDOWN AND OUR USERS DEPEND ON OTHERS FOR
ACCESS TO OUR NETWORK.

     Our network must accommodate a high volume of traffic and deliver
frequently updated information. Our network has in the past, and may in the
future, experience slower response times or decreased traffic for a variety of
reasons. Slower response times can result from general Internet problems,
routing and equipment problems by third-party Internet access providers,
problems with third-party advertising servers and increased traffic to our
servers. Our network could experience interruptions in service due to the
failure or delay in the transmission or receipt of this information. In
addition, our community of Internet users depends on Internet service providers,
online service providers and other web sites' operators for access to our
network. Those providers have experienced outages in the past, and may
experience outages or delays in the future. Moreover, our Internet
infrastructure might not be able to support continued growth of our network. If
we experience any of these problems, our reputation and brand name could suffer,
users might perceive our network as not functioning properly and our business,
results of operations and financial condition could suffer.

OUR SOFTWARE PRODUCTS, AS WELL AS THOSE OF OUR CUSTOMERS AND SUPPLIERS, COULD
FAIL AS A RESULT OF THE YEAR 2000 PROBLEM.

     Our business will suffer if the computer systems we use, as well as the
computer systems used by our Internet users, advertisers and vendors, do not
correctly process the change in year from "99" to "00" on January 1, 2000. We
are working to avoid such problems and to obtain assurances from our
advertisers, vendors and other service providers that they are taking similar
steps. We believe that our computer systems will successfully handle the year
2000 issue, but there may be parts of our computer systems and aspects of the
year 2000 issue, including the potential cost of addressing the year 2000 issue,
that we have failed to consider. If our efforts and the efforts of our users,
advertisers, vendors and other service providers to address the year 2000 issue
are not successful, our business, results of operations and financial condition
could suffer.

OUR FAILURE TO UPDATE AND MODERNIZE OUR INTERNAL SYSTEMS, PROCEDURES AND
CONTROLS MAY PREVENT THE IMPLEMENTATION OF OUR BUSINESS STRATEGIES IN A RAPIDLY
EVOLVING MARKET AND MAY LIMIT OUR FUTURE GROWTH.

     Our operational and financial systems, procedures and controls, which are
adequate for a small private company, may become outdated as we grow. Our
business could suffer if we fail to improve our transaction processing and
reporting systems and procedures, or to expand and train our expanding workforce
quickly enough to maintain a competitive position in our markets. In addition,
failure to quickly replace obsolete systems, procedures and controls could
impede our management's decision-making abilities. This, in turn, may impair our
ability to pursue business opportunities and may hamper future growth.

THE AVAILABILITY OF BARTER TRANSACTIONS MAY BE LIMITED.

     We engage in barter transactions, which reduce cash expenditures in
marketing and other areas, and leverage our advertising inventory. Barter is the
exchange by us of advertising space on our network for reciprocal advertising
space on other web sites. During the nine months ended June 30, 1999, 40% of our
viewable pages contained bartered advertisements. In the future, our ability to
barter may be limited due to a lack of availability or willingness of other web
sites to enter into barter transactions. This could increase our expenses which
could harm our business.

OUR EFFORTS TO PROTECT OUR TRADEMARKS MAY NOT BE ADEQUATE TO PREVENT THIRD
PARTIES FROM MISAPPROPRIATING OUR INTELLECTUAL PROPERTY RIGHTS.

     We use a number of trademarks which contribute to drawing visitors to our
web sites. We have taken steps to register our most important trademarks in the
United States; however, we are uncertain as to whether a trademark owner in the
United States or another country will have superior rights that will result in
our inability to continue to use one or more of our trademarks. The protective
steps we have taken in the past have been, and may in the future continue to be,
inadequate to deter misappropriation of our trademark rights.

                                        9
17

Although we do not believe that we have suffered any material harm from
misappropriation to date, we may be unable to detect the unauthorized use of, or
take appropriate steps to enforce, our trademark rights. Effective trademark
protection may not be available in every country in which we offer or intend to
offer our products and services. Failure to protect our trademark rights
adequately could damage or even destroy the Andover.Net brand and impair our
ability to compete effectively. Furthermore, defending or enforcing our
trademark rights could result in the expenditure of significant financial and
managerial resources.

THERE ARE A NUMBER OF RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT COULD
HARM OUR BUSINESS.

     One component of our growth strategy is to further expand into
international markets. We have operations in Europe and Asia. Our international
operations are at an early stage of development and have an extremely limited
operating history. In addition, the markets in which we have undertaken
international expansion have technology and online industries that are less
developed than those in the United States.

     There are risks inherent in doing business in international markets, such
as the following:

     - uncertainty of product acceptance by different cultures;

     - unforeseen changes in regulatory requirements;

     - difficulties in staffing and managing multinational operations;

     - government imposed restrictions on the repatriation of funds;

     - currency fluctuations;

     - difficulties in finding appropriate foreign licensees or joint venture
       partners; and

     - potentially adverse tax consequences.

     These factors could harm our ability to successfully operate
internationally and could harm our business.

                     RISKS RELATED TO OUR INTERNET STRATEGY

OUR FUTURE RESULTS DEPEND ON CONTINUED GROWTH IN THE USE OF THE INTERNET.

     Our market is new and rapidly evolving. Our business could suffer if
Internet usage does not continue to grow. Internet usage may be inhibited for a
number of reasons, including:

     -  inadequate network infrastructure;

     -  security concerns;

     -  inconsistent quality of service;

     -  lack of availability of cost-effective and high-speed service; and

     -  changes in government regulation of the Internet.

     If Internet usage grows, the Internet infrastructure might not be able to
support the demands placed on it by this growth or its performance and
reliability may decline. In addition, future outages and other interruptions
occurring throughout the Internet could lead to decreased use of our network and
would therefore harm our business.

WE ARE VULNERABLE TO CLAIMS THAT OUR PRODUCTS INFRINGE THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS PARTICULARLY BECAUSE OUR PRODUCTS ARE COMPRISED OF MANY DISTINCT
SOFTWARE COMPONENTS DEVELOPED BY THOUSANDS OF INDEPENDENT PARTIES.

     We may be exposed to future litigation based on claims that our content
infringes on the intellectual property rights of others. This risk is
exacerbated by the fact that independent parties over whom we exercise no
supervision or control develop most of the code in our products. Claims of
infringement could require us

                                       10
18

to obtain licenses from third parties in order to continue offering our
products. In addition, an adverse legal decision affecting our intellectual
property, or the use of significant resources to defend against this type of
claim, could place a significant strain on our financial resources and harm our
reputation.

WE MAY BE SUED AS A RESULT OF INFORMATION PUBLISHED OR POSTED ON OR ACCESSIBLE
FROM OUR NETWORK.

     We may be subjected to claims for defamation, negligence, copyright or
trademark infringement or other claims relating to the information we publish on
our network. These types of claims have been brought, sometimes successfully,
against online services in the past, and can be costly to defend. We may also be
subjected to claims based on content that is accessible from our network through
links to other web sites or through content and materials that visitors to our
network may post. We believe that the scope and amount of our commercial and
general liability insurance is appropriate, given our current financial
position. However, this insurance may not adequately protect us against these
types of claims. We have not been a party to any lawsuit of this type to date.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS AND
RISKS TO DOING BUSINESS ON THE INTERNET.

     There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing and the
characteristics and quality of products and services. For example, although it
was held unconstitutional, the Telecommunications Act of 1996 prohibited certain
types of information and content from being transmitted over the Internet.
Several other nations have taken actions to restrict the free flow of material
deemed to be objectionable on the Internet. In addition, local telephone
carriers have argued before the Federal Communications Commission that Internet
service providers and online service providers should be required to pay fees
for access to local telephone networks in a manner similar to long distance
telephone carriers. If these efforts are successful, costs for Internet access
could increase sharply. Moreover, it may take years to determine the extent to
which existing laws relating to issues such as property ownership, libel and
personal privacy are applicable to the Internet. Any new laws or regulations
relating to the Internet could harm our business.

REGULATION COULD REDUCE THE VALUE OF OUR DOMAIN NAMES.

     We own the Internet domain name "andover.net" as well as numerous other
domain names both in the United States and internationally. Internet regulatory
bodies regulate domain names. The regulation of domain names in the United
States and in foreign countries is subject to change. Regulatory bodies could
establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result, we
might not acquire or maintain the "andover.net" or comparable domain names in
all the countries in which we conduct business, which could harm our business.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear and still
evolving. Therefore, we might be unable to prevent third parties from acquiring
domain names that infringe or otherwise decrease the value of our trademarks and
other proprietary rights. If this occurs, our business, results of operations
and financial condition would suffer.

THE INTERNET INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE.

     Rapid technological developments, evolving industry standards and user
demands, and frequent new product introductions and enhancements characterize
the market for Internet products and services. These market characteristics are
exacerbated by the emerging nature of the market and the fact that many
companies are expected to introduce new Internet products and services in the
near future. Our future success will depend on our ability to continually
improve our content offerings and services. In addition, the widespread adoption
of developing technologies could require fundamental and costly changes in our
technology and could adversely affect the nature, viability and measurability of
Internet-based advertising, which could harm our business.

                                       11
19

                         RISKS RELATED TO THIS OFFERING

THERE HAS BEEN NO PUBLIC TRADING MARKET FOR OUR STOCK PRIOR TO THIS OFFERING AND
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE.

     There has not previously been a public market for our common stock. We
cannot predict the extent to which investor interest in Andover.Net will lead to
the development of a trading market or how liquid any trading market might
become. The initial public offering price for the shares of our common stock
might not reflect prices that will prevail in the trading market. The stock
market has experienced extreme price and volume fluctuations, and the market
prices of securities of technology companies, particularly Internet-related
companies, have been highly volatile. Investors might not be able to resell
their shares at or above the initial public offering price. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such a
company. Such litigation could result in substantial costs and a diversion of
our management's attention and resources.

CONCENTRATION OF OWNERSHIP WILL LIMIT YOUR ABILITY TO INFLUENCE CORPORATE
MATTERS.

     Immediately following this offering, our directors, executive officers and
their affiliates will beneficially own approximately 48.0% of our outstanding
common stock. These stockholders could significantly influence the outcome of
actions taken by us that require stockholder approval. For example, these
stockholders could significantly influence the election of our directors, delay
or prevent a transaction in which stockholders might receive a premium over the
prevailing market price for their shares and control changes in management.

PROVISIONS OF OUR CHARTER AND BY-LAWS MAY DELAY OR PREVENT TRANSACTIONS THAT
MANY STOCKHOLDERS MAY FAVOR.

     Provisions of our certificate of incorporation and by-laws may discourage,
delay or prevent a merger or acquisition that stockholders may consider
favorable, including transactions in which you might otherwise receive a premium
for your shares. These provisions include:

     -  authorizing the issuance of "blank check" preferred stock without any
        need for action by stockholders;

     -  providing for a classified board of directors with staggered three-year
        terms;

     -  eliminating the ability of stockholders to call special meetings of
        stockholders;

     -  prohibiting stockholder action other than by unanimous written consent;
        and

     -  establishing advance notice requirements for nominations for election to
        the board of directors or for proposing matters that can be acted on by
        stockholders at stockholder meetings.

     Some provisions of Delaware law may also discourage, delay or prevent
someone from acquiring us or merging with us.

OUR STOCK PRICE MAY BE EXTREMELY VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR
SHARES AT OR ABOVE THE INITIAL OFFERING PRICE.

     Following this offering, the price at which our common stock will trade may
be extremely volatile and may fluctuate significantly. The public market may not
agree with or accept the valuation determined in connection with this offering.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
securities of technology companies, particularly software and Internet
companies. After this offering, therefore, you might not be able to resell your
shares at or above the initial public offering price.

                                       12
20

A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK COULD BE SOLD INTO THE PUBLIC
MARKET SOON AFTER THIS OFFERING, WHICH COULD DEPRESS OUR STOCK PRICE.

     Once a trading market develops for our common stock, many of our
stockholders will have an opportunity to sell their stock for the first time.
2,946,906 shares will become eligible for sale in the public market at various
dates beginning 90 days after the date of this prospectus. Sales of a
substantial number of shares of common stock in the public market, or the threat
that substantial sales might occur, could cause the market price of our stock to
decrease significantly. These factors could also make it difficult for us to
raise additional capital by selling stock.

YOU WILL INCUR IMMEDIATE DILUTION IN THIS OFFERING.

     The initial public offering price of our common stock is substantially
higher than the net tangible book value per share of the outstanding common
stock immediately after this offering. Therefore, if you purchase our common
stock in this offering, you will incur immediate dilution of $9.78 in the net
tangible book value per share of common stock from the price you pay for such
common stock (based upon an assumed initial public offering price of $13.50 per
share).

                                       13
21

               SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

     This prospectus contains "forward looking statements." These statements may
include statements regarding:

     -  our business strategy;

     -  plans for hiring additional personnel;

     -  entering into business combinations strategic alliances;

     -  adequacy of anticipated sources of funds, including the proceeds from
        this offering; and

     -  other statements about our plans, objectives, expectations and
        intentions contained in this prospectus that are not historical facts.

     When used in this prospectus, the words "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions are
generally intended to identify forward looking statements. Because these forward
looking statements involve risks and uncertainties, actual results could differ
materially from those express or implied by these forward looking statements for
a number of reasons, including those discussed under "Risk Factors" and
elsewhere in this prospectus. We assume no obligation to update any forward
looking statements.

                                       14
22

                                USE OF PROCEEDS

     We estimate the net proceeds from the sale of the 4,000,000 shares of
common stock offered by us will be $49,625,000, after deducting the estimated
underwriting discount and offering expenses. We intend to use a portion of the
net proceeds of this offering to redeem our outstanding Series A redeemable
preferred stock in the amount of $4,713,000. We expect to use the remainder of
the net proceeds for potential strategic acquisitions and general corporate
purposes, including working capital and expansion of sales and marketing and
research and development activities. The amounts actually expended for such
working capital purposes may vary significantly and will depend on a number of
factors, including the amount of our future revenues and the other factors
described under "Risk Factors." Accordingly, our management will retain broad
discretion in the allocation of the net proceeds of this offering. Pending these
uses, we intend to invest the proceeds in short-term, investment-grade,
interest-bearing investments.

                                DIVIDEND POLICY

     We have never declared or paid cash dividends on our capital stock. We
currently anticipate that we will retain all available funds for use in our
business and do not anticipate paying any cash dividends in the foreseeable
future. Any determination to pay dividends in the future will be at the
discretion of our board of directors and will depend upon our financial
condition, results of operations and capital requirements.

                                       15
23

                                 CAPITALIZATION

     The following table sets forth our capitalization as of June 30, 1999. Our
capitalization is presented:

     -  on an actual basis;

     -  on a pro forma basis to give effect to (a) the recent issuance and sale
        of 480,354 shares of Series B convertible preferred stock on September
        15, 1999 and the concurrent automatic conversion of all convertible
        notes into 120,214 shares of Series B convertible preferred stock and
        (b) the automatic conversion of the Series B convertible preferred stock
        into 3,017,138 shares of common stock; and

     -  on a pro forma as adjusted basis to reflect (a) our receipt of the net
        proceeds from the sale of 4,000,000 shares of common stock in this
        offering at an assumed initial public offering price of $13.50 per share
        after deducting the estimated underwriting discount and assumed offering
        expenses and (b) the automatic redemption of all outstanding shares of
        Series A redeemable preferred stock including accrued dividends for
        $4,713,000 upon the closing of this offering.
AS OF JUNE 30, 1999
                                                             --------------------------------------
                                                                                        PRO FORMA
                                                              ACTUAL     PRO FORMA     AS ADJUSTED
                                                             --------    ----------    ------------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)
Current portion of long-term debt..........................  $   664      $   664        $   664
Convertible note payable...................................    2,090           --             --
Long-term debt, less current portion.......................      487          487            487
Series A redeemable preferred stock, $.01 par value; 325
     shares authorized; 322 shares issued and outstanding,
     actual and pro forma; 0 shares issued and outstanding,
     pro forma as adjusted.................................    4,713        4,713             --
Series B convertible redeemable preferred stock, $.01 par
     value; 700 shares authorized; 0 shares issued and
     outstanding actual, pro forma and pro forma as
     adjusted..............................................       --           --             --

Stockholders' equity (deficit):

Common Stock, $.01 par value authorized; 100,000 shares
     authorized; 7,951 issued and outstanding, actual;
     10,968 shares issued and outstanding, pro forma;
     14,968 shares issued and outstanding, pro forma as
     adjusted..............................................       79          110            150
Additional paid in capital.................................    2,338       28,755         78,340
Deferred compensation......................................     (863)        (863)          (863)
Accumulated deficit........................................   (4,775)     (19,033)       (19,033)
                                                             -------      -------        -------
          Total stockholders' equity (deficit).............   (3,221)       8,969         58,594
                                                             -------      -------        -------
          Total capitalization.............................  $ 4,733      $14,833        $59,745
                                                             =======      =======        =======
Common stock outstanding after this offering excludes 1,000,543 shares
issuable upon exercise of stock options outstanding as of June 30, 1999.

     See "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements and
Notes thereto included in this prospectus.

                                       16
24

                                    DILUTION

     The pro forma net tangible book value of the common stock as of June 30,
1999 was $6,049,000, or $0.55 per share, after giving effect to:

     - the recent issuance and sale of 480,354 shares of Series B convertible
       preferred stock on September 15, 1999;

     - the concurrent automatic conversion of all convertible notes into 120,214
       shares of Series B convertible preferred stock;

     - the automatic conversion of the Series B convertible preferred stock into
       3,017,138 shares of common stock;

     After giving effect to the sale of the common stock in this offering at an
assumed initial public offering price of $13.50 per share and after deducting
the estimated underwriting discount and expenses of this offering, the adjusted
pro forma net tangible book value at June 30, 1999, would have been $55,672,000,
or $3.72 per share.

     Pro forma net tangible book value per share before this offering has been
determined by dividing our pro forma net tangible book value (total tangible
assets less total liabilities) by the pro forma number of shares of common stock
outstanding at June 30, 1999. This offering will result in an increase in pro
forma net tangible book value per share of $3.17 to existing stockholders and
dilution in pro forma net tangible book value per share of $9.78 to new
investors who purchase common stock in this offering. Dilution is determined by
subtracting pro forma net tangible book value per share from the assumed initial
public offering price of $13.50. The following table illustrates this dilution.
Assumed initial public offering price per share.............             $13.50
  Pro forma net tangible book value per share at June 30,
     1999...................................................    $0.55
  Increase attributable to sale of common stock in this
     offering (1)...........................................     3.17
                                                                -----
Pro forma net tangible book value per share after this
  offering..................................................               3.72
                                                                         ------
Dilution of net tangible book value per share to persons who
  purchase shares in this offering..........................             $ 9.78
                                                                         ======
---------------
(1) After deduction of the estimated underwriting discount and expenses totaling
    $4,375,000.

     If the underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $4.06 per
share, the increase in net tangible book value per share to existing
stockholders would be $3.51 per share and the dilution to persons who purchase
common stock in this offering would be $9.44 per share.

     The table below summarizes, on a pro forma basis, as of June 30, 1999, the
following differences between our existing stockholders and new investors
purchasing our common stock in this offering:

     - the number of shares purchased from Andover.Net;

     - the aggregate cash consideration paid; and

     - the average price per share paid.
SHARES PURCHASED        TOTAL CONSIDERATION
                                    ----------------------    ----------------------    AVERAGE PRICE
                                      NUMBER       PERCENT      AMOUNT       PERCENT      PER SHARE
                                    -----------    -------    -----------    -------    -------------
Existing stockholders.............   10,968,913       73%     $12,924,000       19%        $ 1.18
New investors.....................    4,000,000       27       54,000,000       81          13.50
                                    -----------      ---      -----------      ---         ------
     Total........................   14,968,913      100%     $66,924,000      100%
                                    ===========      ===      ===========      ===
17
25

     This information is based on pro forma shares outstanding as of June 30,
1999 and excludes:

     - 1,000,542 shares of common stock reserved for issuance pursuant to
       outstanding options granted under our 1995 stock option plan and our 1999
       stock option plan;

     - 1,736,228 shares of common stock reserved for issuance pursuant to future
       grants under our 1999 stock option plan; and

     - 587,630 shares of common stock reserved for issuance as consideration for
       recent acquisitions based on an assumed initial public offering price of
       $13.50, 171,193 of which will be issued immediately following this
       offering.

                                       18
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                            SELECTED FINANCIAL DATA

     The selected financial data of Andover.Net set forth below as of September
30, 1998 and June 30, 1999 and for each of the years ended September 30, 1997,
1998 and the nine months ended June 30, 1999 are derived from financial
statements of Andover.Net audited by Arthur Andersen LLP, independent public
accountants, which are included elsewhere in this prospectus. The selected
financial data as of September 30, 1996 and 1997, and for the year ended
September 30, 1996 are derived from audited financial statements of Andover.Net
which are not included in this prospectus. The selected financial data as of
September 30, 1994 and 1995, the nine months ended June 30, 1998 and the years
ended September 30, 1994 and 1995 are derived from unaudited financial
statements of Andover.Net which are not included in this prospectus and which
include, in the opinion of Andover.Net, all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of its
financial position and the results of its operations for those periods.
Operating results for the nine months ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year ending
September 30, 1999. Pro forma statements of operations data gives effect to the
conversion of convertible notes into Series B convertible preferred stock in
September 1999, the automatic conversion of the Series B convertible preferred
stock into common stock and the effects of the acquisitions of Slashdot.org and
Animation Factory. See Note 2(j) of the Financial Statements or Notes thereto
for discussion of the pro forma basis and diluted net loss per share. The pro
forma balance sheet data as of June 30, 1999 reflects the conversion of all
convertible notes into Series B convertible preferred stock, then the automatic
conversion of the Series B convertible preferred stock into common stock. The
effects of the Slashdot.org and Animation Factory acquisitions are included in
the actual June 30, 1999 balance sheet data below, as such acquisitions were
consummated before June 30, 1999. The data should be read in conjunction with
the Financial Statements and the Notes thereto and with Management's Discussion
and Analysis of Financial Condition and Results of Operations appearing
elsewhere in this prospectus.
NINE MONTHS ENDED
                                                        YEAR ENDED SEPTEMBER 30,                      JUNE 30,
                                               ------------------------------------------   ----------------------------
                                                                                                               PRO FORMA
                                                1994     1995     1996     1997     1998     1998     1999       1999
                                               ------   ------   ------   ------   ------   ------   -------   ---------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Revenues:
  Advertising................................  $   --   $   --   $   --   $  469   $1,290   $  986   $ 1,109    $ 1,402
  Software...................................     889      989      316      272       --       --        --        215
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Total revenues...........................     889      989      316      741    1,290      986     1,109      1,617
Cost of revenues:
  Editorial content and related..............      --       --       --      136      327      255       430        548
  Software...................................     316      376       29      167       --       --        --        155
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Total cost of revenues...................     316      376       29      303      327      255       430        703
                                               ------   ------   ------   ------   ------   ------   -------    -------
Gross profit.................................     573      613      287      438      963      731       679        914
Operating expenses:
  Sales and marketing........................     401      301      339      496      744      582     1,118      1,118
  General and administrative.................     192      311      521      338      360      290       678      4,234
  Research and development...................      --       --       --      194      304      200       472        472
  Amortization of deferred compensation......      --       --       --       --       --       --       720        720
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Total operating expenses.................     593      612      860    1,028    1,408    1,072     2,988      6,544
                                               ------   ------   ------   ------   ------   ------   -------    -------
Loss from operations.........................     (20)       1     (573)    (590)    (445)    (341)   (2,309)    (5,630)
Interest income..............................      --       --        3        1       20       16        59         82
Interest expense.............................      --      (35)     (84)     (75)     (49)     (49)       --     (1,787)
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Net loss.................................  $  (20)  $  (34)  $ (654)  $ (664)  $ (474)  $ (374)  $(2,250)   $(7,335)
                                               ======   ======   ======   ======   ======   ======   =======    =======
Accrued dividends and issuance costs on
  redeemable preferred stock.................      --       --       --       41      134       89       260        260
                                               ------   ------   ------   ------   ------   ------   -------    -------
    Net loss attributable to common
      stockholders...........................  $  (20)  $  (34)  $ (654)  $ (705)  $ (608)  $ (463)  $(2,510)   $(7,595)
                                               ======   ======   ======   ======   ======   ======   =======    =======
Basic and diluted net loss per share.........  $(1.00)  $(1.70)  $(0.38)  $(0.29)  $(0.12)  $(0.09)  $ (0.36)   $ (1.06)
                                               ======   ======   ======   ======   ======   ======   =======    =======
Basic and diluted weighted average common
  shares outstanding.........................      20       20    1,763    2,468    5,110    5,106     6,990      7,169
                                               ======   ======   ======   ======   ======   ======   =======    =======
Pro forma basic and diluted net loss per
  share......................................                                      $(0.12)           $ (0.32)   $ (1.06)
                                                                                   ======            =======    =======
Pro forma basic and diluted weighted average
  common shares outstanding..................                                       5,110              6,992      7,171
                                                                                   ======            =======    =======
19
27
AS OF SEPTEMBER 30,                  AS OF JUNE 30, 1999
                                                   ------------------------------------------------   -------------------
                                                     1994      1995      1996      1997      1998     ACTUAL    PRO FORMA
                                                   --------   -------   -------   -------   -------   -------   ---------
                                                                               (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents........................      $  4      $  2     $ 128      $837      $196    $1,610    $11,710
Working capital..................................       (41)      (72)      155       710       230    (1,146)    11,044
Total assets.....................................        96       142       404     1,099       533     5,170     15,270
Long-term obligations, less current portion......        --        --        51        --        --       487        487
Redeemable convertible preferred stock...........        --        --       988     2,228     2,362     4,713      4,713
Stockholders' equity (deficit)...................       (30)      (64)     (870)   (1,503)   (2,109)   (3,221)     8,969
20
28

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

     You should read the following discussion and analysis in conjunction with
the financial statements and related notes included elsewhere in this
prospectus. Except for historical information, the discussion in this prospectus
contains certain forward looking statements that involve risks and
uncertainties. The principal factors that could cause or contribute to
differences in our actual results are discussed in the section titled "Risk
Factors."

OVERVIEW

     Andover.Net is a network of web sites that provides an independent,
unbiased source for content, community and commerce for the Linux and, more
generally, the Open Source communities. We provide products, online tools, news
and other services for programmers, software developers, web site designers,
technology managers and corporate buyers.

     We were incorporated in Massachusetts in 1992 as Andover Advanced
Technologies, Inc. In September 1999, Andover Advanced Technologies, Inc. was
merged into its wholly-owned subsidiary, Andover.Net, Inc., a Delaware
corporation, and we changed our fiscal year end from September 30 to December
31.

     Prior to fiscal 1996, we were a software publisher of multimedia and web
authoring tools. We derived revenues from distributing and marketing graphic
arts and multimedia software developed by others, primarily to large
distributors and retailers. In fiscal 1996, we launched our first web site,
DaveCentral. During fiscal 1997, we transitioned from a software publisher to a
web site publisher to participate in the commercial opportunities emerging on
the Internet. Since March 1997, all of our activities have been focused on
expanding our Internet business.

     We currently generate substantially all of our revenue from advertisements
on our network of web sites. Our current advertising products include standard
banner advertising, display advertisements, megabanners and web site and
newsletter sponsorships. We recognize advertising revenue in the period that the
advertising is displayed, provided that we deem the collectibility of the
resulting receivable as probable. We sell advertising through our nationwide
direct media sales force.

     We enter into barter transactions with other web sites in order to increase
traffic to our network of web sites and to strengthen the Andover.Net brand. A
barter transaction is the exchange by us of advertising space on our web sites
for reciprocal advertising space on the web sites of others. We record revenues
only on the portion of our barter transactions which could be paid in cash by
the advertiser if a barter arrangement were not in place. Otherwise, we do not
recognize barter revenue. We record revenue from these barter transactions, and
the corresponding advertising expense, based upon the fair market value of the
advertising space exchanged. Revenues from barter transactions, representing
advertising space given, is recognized as income when advertisements are
delivered on our network. Barter expense, representing advertising space
received, is recognized when our advertisements are run on other companies' web
sites, which is typically in the same period when the related barter revenue is
recognized.

     We have incurred losses since our inception. As of June 30, 1999, we had an
accumulated deficit of $4.8 million and net operating loss carry-forwards in the
amount of $3.1 million. We anticipate incurring additional expenses to increase
our product development and sales and marketing efforts, to pursue additional
strategic acquisitions and to support the growth of the organization. As a
result, we believe that we will incur additional losses in the foreseeable
future.

RECENT DEVELOPMENTS

     Sale of Series B Convertible Preferred Stock.  Andover.Net issued 600,568
shares of Series B convertible preferred stock on September 15, 1999. Of these
shares, 480,354 shares were issued and sold for consideration of $10.1 million
and 120,214 shares were issued to holders of convertible notes in consideration
for the conversion of approximately $2.1 million of principal and interest. The
price per share in the private
                                       21
29

placement was $21.03. The Series B convertible preferred stock is convertible
into common stock immediately upon issuance at the option of the holder and will
convert into 3,017,138 shares of common stock upon the closing of this offering.
This conversion will result in an effective purchase price of $4.05 per share of
common stock. The difference between the offering price and the deemed effective
purchase price resulted in a beneficial conversion feature of approximately $2.1
million which will be reflected as interest expense in the statement of
operations in the period in which this offering occurs.

     Acquisition of Slashdot.org. In June 1999, we acquired certain assets and
assumed certain liabilities relating to the Slashdot.org web site from
BlockStackers, Inc. for consideration consisting of a $1.5 million cash payment
made at the closing, and contingent payments of $2.0 million of stock valued at
the initial public offering price issuable upon the closing of this offering, up
to $3.5 million in cash and up to $5.0 million in stock valued at the initial
public offering price and payable during the two years following this offering.
The amount of cash and stock consideration that is contingent solely on the
continued employment of the principals of Slashdot.org in the amount of $6.3
million will be recorded as a compensation charge ratably over the period of the
payments. The amount of stock consideration that is contingent on the
achievement of performance milestones and the continued employment of the
principals of Slashdot.org will be recognized upon the achievement of these
milestones. To the extent any stock consideration is issued, we will record a
non-cash compensation charge based on the fair value of the shares issued at
such time.

     Acquisition of Animation Factory.  In June 1999, we acquired certain assets
and assumed certain liabilities of Eclipse Digital Imaging, Inc., including the
graphical and artistic web site known as Animation Factory, for consideration
consisting of a $250,000 cash payment made at the closing, $200,000 of stock
valued at the initial offering price issuable upon the closing of this offering
and payments of up to $1.25 million in cash and contingent payments of up to
$400,000 in stock valued at the initial public offering price. These payments
are payable during the two years following this offering. The amount of the
stock consideration that is contingent solely on the continued employment of the
principals of Animation Factory in the amount of $204,000 will be recorded as a
compensation charge ratably over the period of the payments. The amount of the
stock consideration that is contingent on the achievement of performance
milestones and the continued employment of the principals of Animation Factory
will be recognized upon the achievement of these milestones. To the extent any
stock consideration is issued, we will record a non-cash compensation charge
based on the fair value of the shares issued at such time.

     Acquisition of Freshmeat.net.  In August 1999, we acquired the assets and
assumed the liabilities relating to the Freshmeat.net web site from a business
owned by Patrick Lenz for consideration consisting of a $367,000 cash payment
made at the closing, $111,111 of stock valued at the initial public offering
price issuable upon the closing of this offering and contingent payments of up
to $300,000 in cash and $222,222 in stock valued at the initial public offering
price and payable during the two year period following this offering. The stock
payments are contingent on the continued employment of Mr. Lenz. To the extent
any stock consideration is issued, we will record a non-cash compensation charge
based on the fair value of the shares issued at such time.

AMORTIZATION OF DEFERRED COMPENSATION

     In the nine months ended June 30, 1999, we recorded total deferred stock
compensation of $1.6 million in connection with stock option grants totaling
472,632 options. This amount represents the difference between the exercise
price of stock option grants and the deemed fair value of our common stock at
the time of such grants. Should the actual offering price of this offering
increase, we may record additional deferred compensation expense. We are
amortizing this amount over the vesting periods of the stock options, which will
result in amortization expense of $720,000 for the nine months ended June 30,
1999, $65,000 in the three months ended September 30, 1999, $259,000 in 2000,
$259,000 in 2001, $243,000 in 2002 and $39,000 in 2003. In addition, we
anticipate recording additional deferred compensation of approximately $4.5
million related to the 430,759 options granted in September 1999 which will be
recognized as an expense over the vesting period of these options.

                                       22
30

     Certain options contain provisions that accelerate the vesting to 100% upon
an initial public offering. Upon the closing of this offering, additional
compensation expense of approximately $800,000 relating to 260,459 options will
be recorded as compensation expense in the quarter in which this offering
occurs. The remaining deferred compensation will be amortized over the remaining
vesting period.

NET OPERATING LOSS CARRYFORWARDS

     As of June 30, 1999, we had net operating loss carryforwards of $3.1
million. The net operating loss carryforwards will expire at various dates
through 2019, if not utilized. The Tax Reform Act of 1986 imposes substantial
restrictions on the utilization of net operating loss carryforwards in the event
of an "ownership change" of a corporation. Our ability to utilize net operating
loss and tax credit carryforwards on an annual basis would be limited as a
result of an "ownership change" as defined by Section 382 of the Internal
Revenue Code. We have completed several financings since inception and believe
that we have incurred ownership changes. We do not believe the ownership changes
to date will have a material impact on our ability to utilize our net operating
loss and tax credit carryforwards.

RESULTS OF OPERATIONS

     The following table sets forth certain statements of operations data as a
percentage of revenues for the periods indicated:
NINE MONTHS ENDED
                                           YEAR ENDED SEPTEMBER 30,                  JUNE 30,
                                  ------------------------------------------    ------------------
                                  1994     1995      1996     1997     1998      1998       1999
                                  -----    -----    ------    -----    -----    ------     -------
                                                   (AS A PERCENTAGE OF REVENUES)
STATEMENTS OF OPERATIONS DATA:
Revenues........................  100.0%   100.0%    100.0%   100.0%   100.0%   100.0%      100.0%
Cost of revenues................   35.5     38.0       9.2     40.9     25.3     25.9        38.8
                                  -----    -----    ------    -----    -----    -----      ------
Gross profit....................   64.5     62.0      90.8     59.1     74.7     74.1        61.2
Operating expenses:
     Sales and marketing........   45.1     30.4     107.3     66.9     57.7     59.0       100.8
     General and
       administrative...........   21.6     31.4     164.9     45.6     27.9     29.4        61.1
     Research and development...     --       --        --     26.2     23.6     20.3        42.6
     Amortization of deferred
       compensation.............     --       --        --       --       --       --        64.9
                                  -----    -----    ------    -----    -----    -----      ------
          Total operating
            expenses............   66.7     61.8     272.2    138.7    109.2    108.7       269.4
                                  -----    -----    ------    -----    -----    -----      ------
Loss from operations............   (2.2)     0.2    (181.4)   (79.6)   (34.5)   (34.6)     (208.2)
Interest income.................     --       --       0.9      0.1      1.6      1.6         5.3
Interest expense................     --     (3.5)    (26.6)   (10.1)    (3.8)    (5.0)         --
                                  -----    -----    ------    -----    -----    -----      ------
Net loss........................   (2.2)%   (3.3)%  (207.1)%  (89.6)%  (36.7)%  (38.0)%    (202.9)%
                                  =====    =====    ======    =====    =====    =====      ======
NINE MONTHS ENDED JUNE 30, 1998 AND 1999

     Revenues.  Substantially all of the revenues for the nine months ended June
30, 1998 and 1999 were from advertisements on our network of web sites. Since
our acquisitions of Slashdot.org, Freshmeat.net and Animation Factory occurred
on or after June 28, 1999, revenues for the nine months ended June 30, 1998 and
1999 did not include advertising revenues generated from these sites. Revenues
increased 12.5% from $986,000 in the nine months ended June 30, 1998 to $1.1
million in the nine months ended June 30, 1999. The increase was primarily due
to an increase in banner advertising and sponsorships on our network of web
sites. There were no barter revenues in the nine months ended June 30, 1998. In
the nine months ended June 30, 1999, revenues from barter transactions were
$218,000, or 19.7% of revenues.

                                       23
31

     Cost of Revenues. Cost of revenues primarily consists of expenses
associated with editorial content, communications infrastructure and web site
hosting. Cost of revenues increased from $255,000, or 25.9% of revenues, in the
nine months ended June 30, 1998 to $430,000, or 38.8% of revenues, in the nine
months ended June 30, 1999. The increase in cost of revenues reflects additional
operations personnel and expenses for freelance contributors for editorial
content, as well as higher costs for hosting our network of web sites. We
anticipate that cost of revenues will continue to increase in absolute dollars
as we continue to enhance our content offerings and services and expand the
number of data centers hosting our web sites.

     Sales and Marketing Expenses. Sales and marketing expenses primarily
consist of advertising and promotional expenditures and payroll, sales
commissions and related expenses for personnel engaged in sales and marketing
activities. Sales and marketing expenses increased from $582,000, or 59.0% of
revenues, in the nine months ended June 30, 1998 to $1.1 million, or 100.8% of
revenues, in the nine months ended June 30, 1999. The increase in expenses
relates to added sales personnel and an increase in advertising and promotional
expenses. In January 1999, we began to transition to a direct sales force.
Previously, we had relied primarily on a limited number of independent,
non-exclusive sales representatives to sell advertising for us. Between January
and June of 1999, we expanded our direct sales personnel from three to ten. In
addition to the increase in sales personnel, we substantially increased our
advertising and promotional expenditures in the nine months ended June 30, 1999.
Included in sales and marketing expenses for the nine months ended June 30, 1999
were non-cash advertising costs of $218,000 from barter transactions. There were
no barter advertising costs in the nine months ended June 30, 1998. We
anticipate our sales and marketing expenses will substantially increase in the
future as we continue to expand our direct sales force and invest in advertising
and promotions to strengthen the Andover.Net brand.

     General and Administrative Expenses.  General and administrative expenses
primarily consist of payroll and related costs of management and administrative
personnel, as well as professional fees and facility costs. General and
administrative expenses increased from $290,000, or 29.4% of revenues, in the
nine months ended June 30, 1998 to $678,000, or 61.1% of revenues, in the nine
months ended June 30, 1999. The increase in expenses largely reflects the hiring
of additional management and administrative personnel, employee recruiting costs
and an increase in facility costs due to our move to larger, leased office space
in May 1999. We anticipate that our general and administrative expenses will
continue to increase in absolute dollars as we plan on hiring additional
personnel and will incur costs associated with being a public company, including
directors' and officers' liability insurance and higher professional service
fees.

     Research and Development Expenses.  Research and development expenses
primarily consist of payroll and related costs for developing our web sites,
including our internal banner advertising and page statistic systems, as well as
developing our online web applications, or e-Tools. Research and development
expenses increased from $200,000, or 20.3% of revenues, in the nine months ended
June 30, 1998 to $472,000, or 42.6% of revenues, in the nine months ended June
30, 1999. The increase in research and development expenses largely reflects
additions to our research and development staff of direct and contract
personnel. We anticipate that these expenses will increase significantly as we
continue to expand our technical staff to handle the integration of future
acquisitions and development of new internal systems and e-Tools.

     Interest Income and Expense.  Interest income increased from $16,000 in the
nine months ended June 30, 1998 to $59,000 in the nine months ended June 30,
1999. Interest expense was $49,000 in the nine months ended June 30, 1998. The
increase in interest income reflects the higher average cash balances resulting
from the private sale of equity securities during the nine months ended June 30,
1999. Interest expense relates to a loan from two stockholders which was repaid
in early fiscal 1998.

     Provision for Income Taxes.  We had no provision for income taxes for the
nine months ended June 30, 1998 and 1999 because we incurred losses during these
periods.

FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND 1998

     Revenues.  Revenues increased 75.4% from $741,000 in the fiscal year ended
September 30, 1997 to $1.3 million in the fiscal year ended September 30, 1998.
In fiscal 1997, we transitioned our business activities from software publishing
to web site publishing. Revenues from software publishing in fiscal 1997
                                       24
32

were $272,000 and initial advertising revenues on our web sites were $469,000.
In fiscal 1998, substantially all of our revenues of $1.3 million represent
advertising on our network of web sites. The increase in advertising revenues in
fiscal 1998 was a result of increased sales of banner advertising and
sponsorships from our expanding base of customers.

     Cost of Revenues.  Cost of revenues increased from $303,000, or 40.9% of
revenues, in the fiscal year ended September 30, 1997 to $327,000, or 25.3% of
revenues, in the fiscal year ended September 30, 1998. In fiscal 1997, costs of
advertising revenues were $136,000, or 29.0% of advertising revenues, and costs
of software publishing revenues were $167,000, or 61.4% of software publishing
revenues. In fiscal 1998, costs of revenues related entirely to advertising
revenues. The lower costs of advertising revenues, as a percentage of
advertising revenues, in fiscal 1998 was due to lower proportionate fixed costs
on the higher year-to-year revenues.

     Sales and Marketing Expenses.  Sales and marketing expenses increased from
$496,000, or 66.9% of revenues, in the fiscal year ended September 30, 1997 to
$744,000, or 57.7% of revenues, in the fiscal year ended September 30, 1998. The
increase in absolute dollars in sales and marketing expenses relates primarily
to higher variable sales commissions on the year-to-year increases in revenues.
During fiscal 1997 and 1998, we primarily relied on independent, non-exclusive
sales representatives to sell our advertising.

     General and Administrative Expenses.  General and administrative expenses
increased from $338,000, or 45.6% of revenues, in the fiscal year ended
September 30, 1997 to $360,000, or 27.9% of revenues, in the fiscal year ended
September 30, 1998. The increase in general and administrative expenses, in
absolute dollars, relates primarily to administrative support from contract
employees and other non-payroll administrative costs.

     Research and Development Expenses.  Research and development expenses
increased from $194,000, or 26.2% of revenues, in the fiscal year ended
September 30, 1997 to $304,000, or 23.6% of revenues, in the fiscal year ended
September 30, 1998. The increase in research and development expenses, in
absolute dollars, relates primarily to personnel additions to our development
staff.

     Interest Income and Expense.  Interest income increased from $1,000 in the
nine months ended June 30, 1997 to $20,000 in the fiscal year ended September
30, 1998. Interest expense decreased from $75,000 in the fiscal year ended
September 30, 1997 to $49,000 in the fiscal year ended September 30, 1998. The
increase in interest income in fiscal 1998 over fiscal 1997 relates to higher
average cash balances during fiscal 1998. The interest expense over this
two-year period relates to a secured loan we received from two of our
stockholders in fiscal 1993. This loan was repaid in early fiscal 1998.

     Provision for Income Taxes.  We had no provision for income taxes for
fiscal years 1997 or 1998 because we incurred losses during these periods.

                                       25
33

                        QUARTERLY RESULTS OF OPERATIONS

     The following tables set forth certain unaudited statements of operations
data for each quarter of fiscal 1998 and the first three quarters of fiscal
1999, as well as such data expressed as a percentage of Andover.Net's revenues
for each quarter. This information has been presented on the same basis as the
audited Financial Statements appearing elsewhere in this prospectus and, in the
opinion of management, includes all adjustments, consisting only of normal
recurring adjustments, that Andover.Net considers necessary to present fairly
the unaudited quarterly results. This information should be read in conjunction
with Andover.Net's audited Financial Statements and Notes thereto appearing
elsewhere in this prospectus.
QUARTER ENDED
                                            -----------------------------------------------------------------------------------
                                            DEC. 31,    MARCH 31,    JUNE 30,    SEPT. 30,    DEC. 31,    MARCH 31,    JUNE 30,
                                              1997        1998         1998        1998         1998        1999         1999
                                            --------    ---------    --------    ---------    --------    ---------    --------
                                                                              (IN THOUSANDS)
Revenues..................................   $ 333        $ 364       $ 289        $ 304       $ 373        $ 253       $ 483
Cost of revenues..........................      53           99         103           72         107          147         176
                                             -----        -----       -----        -----       -----        -----       -----
    Gross profit..........................     280          265         186          232         266          106         307
Operating expenses:
  Sales and marketing.....................     235          189         157          163         213          369         536
  General and administrative..............      90          115          85           70         145          236         297
  Research and development................      50           69          81          104         127          160         185
  Amortization of deferred compensation...      --           --          --           --         577           16         127
                                             -----        -----       -----        -----       -----        -----       -----
    Total operating expenses..............     375          373         323          337       1,062          781       1,145
                                             -----        -----       -----        -----       -----        -----       -----
Loss from operations......................     (95)        (108)       (137)        (105)       (796)        (675)       (838)
Interest income...........................       4            7           5            4          12           28          19
Interest expense..........................     (49)          --          --           --          --           --          --
                                             -----        -----       -----        -----       -----        -----       -----
    Net loss..............................   $(140)       $(101)      $(132)       $(101)      $(784)       $(647)      $(819)
                                             =====        =====       =====        =====       =====        =====       =====
QUARTER ENDED
                                            -----------------------------------------------------------------------------------
                                            DEC. 31,    MARCH 31,    JUNE 30,    SEPT. 30,    DEC. 31,    MARCH 31,    JUNE 30,
                                              1997        1998         1998        1998         1998        1999         1999
                                            --------    ---------    --------    ---------    --------    ---------    --------
                                                                       (AS A PERCENTAGE OF REVENUES)
Revenues..................................   100.0%       100.0%      100.0%       100.0%       100.0%      100.0%       100.0%
Cost of revenues..........................    15.9         27.2        35.6         23.7         28.7        58.1         36.4
                                             -----        -----       -----        -----       ------      ------       ------
    Gross profit..........................    84.1         72.8        64.4         76.3         71.3        41.9         63.6
Operating expenses:
  Sales and marketing.....................    70.6         51.9        54.3         53.6         57.1       145.8        111.0
  General and administrative..............    27.0         31.6        29.4         23.0         38.9        93.3         61.5
  Research and development................    15.0         19.0        28.0         34.2         34.0        63.2         38.3
  Amortization of deferred compensation...      --           --          --           --        154.7         6.3         26.3
                                             -----        -----       -----        -----       ------      ------       ------
    Total operating expenses..............   112.6        102.5       111.7        110.8        284.7       308.6        237.1
                                             -----        -----       -----        -----       ------      ------       ------
Loss from operations......................   (28.5)       (29.7)      (47.4)       (34.5)      (213.4)     (266.8)      (173.5)
Interest income...........................     1.2          1.9         1.7          1.3          3.2        11.1          3.9
Interest expense..........................   (14.7)          --          --           --           --          --           --
                                             -----        -----       -----        -----       ------      ------       ------
    Net loss..............................   (42.0)%      (27.7)%     (45.7)%      (33.2)%     (210.2)%    (255.7)%     (169.6)%
                                             =====        =====       =====        =====       ======      ======       ======
The operating results for any quarter are not necessarily indicative of the
operating results for any future period. See "Risk Factors -- Our quarterly
operating results are subject to significant fluctuations." In particular, due
to our limited operating history as an Internet company and the unpredictability
of our industry, our revenues may fluctuate from quarter to quarter and are
difficult to forecast. Accordingly, a revenue shortfall in a particular quarter
would have a disproportionate adverse effect on our operating results for that
quarter. During the three months ended March 31, 1999, our revenues declined
from the prior quarter as we transitioned from using independent sales
representatives to a direct media sales force. During the second half of fiscal
1998, our quarterly revenues were lower than the first half of fiscal 1998. We
believe this was primarily related to a reduction in advertising spending by
technology companies who were adversely affected by the Asian economic crisis.

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LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have funded operations primarily through the private
sales of common and preferred stock and short-term loans, which are convertible
into equity securities, together with cash flow from operations. As of June 30,
1999, we had $1.6 million in cash and cash equivalents, total current assets of
$2.0 million and a working capital deficit of $1.1 million. In September 1999,
we issued 600,568 shares of Series B convertible preferred stock, including
120,214 shares which were issued upon conversion of approximately $2.1 million
of principal and interest under the convertible notes. We received proceeds of
$10.1 million from the issuance of the 480,354 shares of Series B convertible
preferred stock.

     Net cash used in operating activities was $602,000 in fiscal 1996, $529,000
in fiscal 1997 and $574,000 in fiscal 1998. Net cash used in operating
activities was $497,000 in the nine months ended June 30, 1998 and $1.5 million
in the nine months ended June 30, 1999. The net cash used in operating
activities for all of these periods was primarily a result of our operating
losses before non-cash expenses.

     Cash used for additions to property and equipment was $10,000 in fiscal
1996, $8,000 in fiscal 1997 and $17,000 in fiscal 1998. Cash used for additions
to property and equipment was $12,000 for the nine months ended June 30, 1998
and $168,000 for the nine months ended June 30, 1999. For the nine months ended
June 30, 1999, the additions of $168,000 to property and equipment consisted of
leasehold improvements, furniture and office equipment for our new leased office
space, as well as computer equipment necessary to support personnel additions.

     In June 1999, we paid $1.75 million in cash at closing for our acquisitions
of Slashdot.org ($1.5 million) and Animation Factory ($250,000). Under the terms
of the Slashdot.org acquisition, there are additional contingent cash payments
of up to $1.5 million in January 2000, $1.0 million in June 2000 and $1.0
million in June 2001. The amount of each of these cash payments is dependent on
the continued employment of the two principals of Slashdot.org. In addition, the
acquisition price of Slashdot.org includes the issuance of $2.0 million of stock
valued at the initial public offering price upon the closing of this offering
and contingent payments of up to an additional $5.0 million of stock valued at
the initial public offering price and payable in installments over a two-year
period, following this offering. The payment of this stock consideration is
contingent upon the continued employment of the two principals of Slashdot.org
and the achievement of certain performance milestones over the two-year period.
Under the terms of the Animation Factory acquisition, there are additional cash
payments totaling $1.25 million, payable in fifteen equal monthly installments
beginning October 1999. This amount payable of $1.2 million as of June 30, 1999,
representing future cash payments less interest, is reflected in current
liabilities for $664,000 and in long-term liabilities for $487,000. In addition,
the acquisition price of Animation Factory includes the issuance of $200,000 of
stock valued at the initial public offering price upon the closing of this
offering and contingent payments of up to an additional $400,000 of stock valued
at the initial public offering price and payable in installments over a two-year
period following this offering. The payment of this stock consideration is
contingent upon the continued employment of the two principals of Animation
Factory and the achievement of certain performance milestones over the two-year
period.

     We have intangible assets of $2.9 million, consisting primarily of
goodwill, as of June 30, 1999 relating to the acquisitions of Slashdot.org and
Animation Factory. The purchase price for these acquisitions represents the
up-front cash payment for both acquisitions, as well as the installment cash
payments due under the Animation Factory acquisition. The intangible assets will
be amortized over a three-year period on a straight-line basis. The future
contingent cash payments under the Slashdot.org acquisition, as well as the
future contingent stock payments under both acquisitions, will be charged to
operations over the period the payments are made.

     In August 1999, we paid $367,000 in cash at closing for our acquisition of
Freshmeat.net. Under the terms of the Freshmeat.net acquisition, there are
additional cash payments totaling $300,000, payable in 15 equal monthly
installments beginning September 1999. In addition, the acquisition price
includes the issuance of $111,111 of stock valued at the initial public offering
price upon the closing of this offering and contingent payments of up to an
additional $222,222 of stock valued at the initial public offering price and

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35

payable over a two-year period following this offering. The payment of this
stock consideration is contingent upon the continued employment of the principal
of Freshmeat.net.

     In June 1999, we received proceeds of $2.1 million from the issuance of
convertible notes in a private placement to various investors, some of whom are
Andover.Net stockholders. The notes are due December 31, 1999 and bear interest
at the prime rate. In September 1999, the convertible notes were converted into
120,214 shares of Series B convertible preferred stock which will automatically
be converted into shares of common stock upon the closing of this offering.

     During fiscal 1997, we received net proceeds of $1.3 million from sales of
Series B convertible preferred stock, Series A redeemable preferred stock and
common stock. We then changed our capital structure and issued Series C
redeemable preferred stock and common stock in exchange for our outstanding
Series A convertible preferred stock and Series B convertible preferred stock.
Between November 1998 and January 1999, we received net proceeds of $2.8 million
for the issuance of Series C redeemable preferred stock and common stock. In
connection with our merger in September 1999 with a wholly-owned subsidiary to
effect our reincorporation in Delaware, the Series C redeemable preferred stock
was converted into Series A redeemable preferred stock. The holders of the
Series A redeemable preferred stock accrue dividends at an 8.0% annual rate. As
of June 30, 1999, $393,000 of dividends have been accrued and not paid. The
Series A redeemable preferred stock will be redeemed upon the completion of this
offering at the redemption price of $13.50 per share, or a total of $4.4
million, plus accrued dividends.

     We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated cash
requirements for working capital and capital expenditures through at least
December 31, 2000. We may need to raise additional funds sooner if, for example,
we pursue business or technology acquisitions or experience operating losses
that exceed our current expectations. If we raise additional funds through the
issuance of equity, equity related or debt securities, such securities may have
rights, preferences or privileges senior to those of the rights of our common
stock, and our stockholders may experience additional dilution. We cannot be
certain that such additional financing will be available to us on favorable
terms, or at all. If additional financing is not available when required or is
not available on acceptable terms, we may be unable to develop or enhance our
products or services. In addition, we may be unable to take advantage of
business opportunities or to respond to competitive pressures. Any of these
events could harm our business, financial condition or results of operations.

YEAR 2000

     Many existing computer programs use only two digits to identify a year and
cannot reliably distinguish dates beginning on January 1, 2000 from dates prior
to the year 2000. If not corrected, many computer software applications could
fail or create erroneous results by, on or after the year 2000. We use software,
computer technology and other services provided by third parties that may fail
due to the year 2000 phenomenon.

State of Readiness

     We have made a preliminary assessment of the year 2000 readiness of our
information technology systems. This assessment includes but is not limited to
the hardware and software necessary to provide and deliver our services. We are
also performing assessments of our non-information technology systems, which
include many of the building and office equipment systems.

     Our year 2000 readiness plan consists of the following steps:

        - quality assurance testing of our internally developed software;

        - contacting third-party vendors of hardware, software and services that
          we utilize;

        - contacting material non-information technology systems and service
          providers that we utilize;

        - developing and implementing necessary remedial measures; and

        - creating contingency plans in the event of year 2000 failures.

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36

     Our year 2000 task force, which is being directed by our Chief Technology
Officer, is currently conducting an inventory of and developing testing
procedures for all software and other systems that might be affected by year
2000 issues. Since third parties developed and currently support many of the
systems we use, a significant portion of this effort will be to ensure that
these third-party systems are year 2000 ready. We plan to contact third-party
vendors to obtain representation of their year 2000 readiness, as well as
conduct specific testing of these systems. We plan to complete our evaluation
and testing of internally developed software and third-party vendors of
hardware, software and services by October 1, 1999 and plan to complete all
necessary remedial measures by November 1, 1999. However, until our evaluation
and testing is completed and such third-party vendors and service providers are
contacted, we will not be able to completely evaluate whether our systems will
need to be revised or replaced and the time and costs involved to do so.

Costs

     To date, we have spent an immaterial amount on year 2000 readiness issues.
We expect to incur an additional $30,000 in the future in connection with
identifying, evaluating and addressing year 2000 readiness issues. Most of our
expenses to date have related to, and are expected to continue to relate to, the
time spent by employees in the evaluation process and developing and
implementing necessary remedial measures. If these expenses are significantly
higher than expected our business, results of operations and financial condition
could suffer.

Risks

     We are not currently aware of any year 2000 readiness problems relating to
our internally developed software or third-party supplied hardware, software and
services that would have a material adverse affect on our business. However, as
we complete our evaluation and testing, we may discover year 2000 readiness
problems. These problems may require us to substantially revise our systems or
revise or replace third-party hardware, software or services, all of which could
be time-consuming and expensive. Our failure to fix or replace our internally
developed software or third-party hardware, software or services on a timely
basis could result in interruptions. These interruptions could harm our
business, results of operations and financial condition.

     We are dependent on a number of third-party vendors to provide network
services and equipment. A significant year 2000-related disruption of the
services or equipment that third-party vendors provide to us could cause our
users, advertisers or sponsors to consider seeking alternate content providers
or cause a significant burden on our technical support, which could adversely
affect our business. In addition, a systematic failure beyond our control, such
as a prolonged Internet, telecommunications or electrical failure, which could
prevent us from delivering services or prevent users from accessing our network,
could harm our business, results of operations and financial condition.

Contingency Plan

     As discussed above, we are currently engaged in an ongoing year 2000
readiness assessment and have not yet developed any contingency plans. The
results of our evaluation and testing, together with the responses we receive
from third-party vendors and service providers, will be considered in
determining the nature and extent of any contingency plans we develop.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     We have no derivative financial instruments or derivative commodity
instruments in our cash and cash equivalents and investments. We invest our cash
and cash equivalents and investments in short-term, interest-bearing, investment
grade securities. We anticipate investing our net proceeds from this offering in
similar investment grade investments pending their use as described in this
prospectus. See "Use of Proceeds." Our transactions are generally conducted, and
our accounts are denominated, in United States dollars. Accordingly, we are not
exposed to significant foreign currency risk.

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37

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Pursuant to SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133, SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is
not expected to have a material impact on Andover.Net's financial statements.

     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires computer
software costs associated with internal use software to be charged to operations
as incurred until certain capitalization criteria are met. SOP 98-1 is effective
beginning January 1, 1999. The adoption of this statement did not have a
material impact on Andover.Net's financial position or consolidated results of
operations.

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                                    BUSINESS

INTRODUCTION

     Andover.Net is the leading Linux/Open Source destination on the Internet.
Our network of web sites provides an independent, unbiased source for content,
community and commerce for the Linux and, more generally, the Open Source
communities. We provide products, online tools, news and other services for
programmers, software developers, web site designers, technology managers and
corporate buyers.

     Our network generates over 40 million page views with over two million
unique visitors on a monthly basis. With our recent acquisitions of Slashdot.org
and Freshmeat.net, we believe that traffic on our network represents over 50% of
the visits to Linux resource sites on the web. This leading position in the
Linux market allows us to provide advertisers targeted access to the Linux/Open
Source communities. We have over 100 advertisers on our network. Our top five
advertisers based on cash revenues for the six months ended August 31, 1999 were
IBM, Compaq, Silicon Graphics, Hewlett-Packard and Intel.

     The Internet has accelerated the growth of the Open Source movement. The
Open Source movement is a collaborative approach to the development and
distribution of software and has emerged as a viable alternative to traditional
proprietary software development. The growth of the Internet has greatly
increased the scale and efficiency of Open Source development by enabling large
communities of independent developers to collaborate online. The best-known
example of Open Source is the Linux operating system created by Linus Torvalds
in 1991. Due to the growing number of Linux/Open Source operating systems and
related applications, a number of major technology industry leaders, including
IBM, Intel and Hewlett-Packard, have recently announced support for Linux-based
operating systems. According to International Data Corporation, or IDC,
Linux-based operating systems represented 17% of all new licensed shipments of
server operating systems in 1998, which was an increase of 190% from the
previous year.

INDUSTRY OVERVIEW

  Growth and impact of the Internet

     The Internet has emerged as a global communications medium, enabling
millions of people to gather information, communicate and conduct business
electronically. IDC estimates that there were approximately 142 million users of
the Internet at the end of 1998 and that number will grow to over 500 million
users by the end of 2003.

     The Internet is an attractive medium for advertisers because it allows
flexibility, interactivity and measurement capabilities and provides users with
immediate access to information about advertisers and their products. For
example, the Internet allows advertisers to change messages frequently in
response to market developments or current events. The Internet also allows
advertisers to gather demographic information about users and to deliver
targeted messages to specific consumer groups. According to Jupiter
Communications, total Internet advertising revenues were $2.1 billion in 1998
and are expected to grow to $11.5 billion in 2003, representing an average
annual compounded growth rate of approximately 41% from 1998 to 2003. The
growing popularity of the Internet also represents a substantial opportunity for
companies to take advantage of the potential for conducting transactions online,
commonly known as e-commerce. IDC estimates that worldwide e-commerce revenue
will increase from approximately $50 billion in 1998 to more than $1 trillion in
2003.

  Growth of the information technology profession

     As the pace and complexity of technological change has increased,
professionals in the information technology, or IT, industry have become more
specialized and grown in number. IT professionals, including programmers and
developers, play a central role in many companies because of their ability to
deploy and integrate new information technologies. Organizations are
increasingly adopting technologies such as client/server architectures, data
warehousing, Internet/intranet applications and object-oriented software
development to execute business strategies and maintain competitiveness. These
and other technologies have

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39

continued to fuel the growth in the worldwide market for IT products and
services, which is forecasted by IDC to grow from an estimated $781 billion in
1998 to $1.1 trillion in 2002.

     IT professionals devote considerable time, effort and financial resources
researching new technologies, seeking answers to technical questions and
developing and implementing IT solutions. These professionals need to stay
abreast of rapid technological developments in a marketplace where vendors
continually introduce new products with a variety of standards and short life
cycles. They have historically relied on resources provided by IT publishers,
software vendors, hardware vendors, training service providers and fellow
professionals to follow the latest trends in the industry. We do not believe
that any of these sources provides a comprehensive solution for IT
professionals' need for continuous education, access to new products and a
medium in which professionals can exchange ideas. Due to the rapid rate of
change, technical information, training materials, and software become dated and
obsolete relatively quickly. Therefore, IT professionals, including programmers
and developers, have the following common needs:

     - Content -- News and other resources that keep them informed of changes
       within the industry;

     - Community -- The exchange of ideas and collaboration through a central
       medium by which they can share their experiences as a means of growing
       their personal knowledge as well as growing the industry and technology;
       and

     - Commerce -- An efficient, comprehensive source for products and services
       which meet their purchasing needs.

  Growth of the Linux and Open Source movement

     The Internet has accelerated the growth of the Open Source movement. The
Open Source movement is a collaborative approach to the development and
distribution of software and has emerged as a viable alternative to traditional
proprietary software development. The growth of the Internet has greatly
increased the scale and efficiency of Open Source development by enabling large
communities of independent developers to collaborate online.

     The growth of the Open Source movement is principally based on access to
software source code. Developers write programs in source code. This source code
is then translated into object code, which is read by the computer. Under the
proprietary model of software development, a software developer generally
licenses only the object code, not the source code, to the user. The source code
is always controlled and maintained by the proprietary software developer. By
contrast, under the Open Source development model, the software developer
provides the user access to the source code. This code is often provided for
free or for a minimal cost and is adaptable by the user for a wide variety of
applications.

     Due to the collaborative nature of Open Source software, many new, Open
Source-based operating systems have emerged. The best known Open Source-based
operating system is the Linux operating system, or Linux, which was created by
Linus Torvalds in 1991. Since 1991, many distributions or varieties of Linux
have emerged. Due to the growing number of Linux/Open Source operating systems
and related applications, a number of major technology industry leaders,
including IBM, Intel and Hewlett-Packard, have recently announced support for
Linux-based operating systems. According to IDC, Linux-based operating systems
represented 17% of all new licensed shipments of server operating systems in
1998, which was an increase of 190% from the previous year. Further, the
inexpensive and adaptable nature of Linux/Open Source operating systems has
encouraged the growth of many Open Source applications, including low cost
computer products, known as electronic "appliances." These appliances are
designed to provide basic computer applications such as Internet access, word
processing and email at a cost much less than traditional personal computers. As
a result, manufacturers can create products that are unique, but which maintain
a lower cost because they are not required to license a proprietary operating
system such as Windows for their products.

     A necessary element to the continued success of the Open Source movement is
the continued ability of software developers to communicate, share and develop
software in a collaborative manner. For technology developers, locating and
fostering a community within which one can share information is of critical
importance. Despite a strong continued focus on open software development and
continued support for Open
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Source products, a number of obstacles to widespread adoption of Open Source
products within the technology industry exist including the lack of:

     - a highly-visible, intelligible transition path to Linux/Open Source;

     - an independent, trusted intermediary to communicate the multiple
       Linux/Open Source products, developments and services to diverse user
       communities;

     - a comprehensive and efficient support infrastructure providing product
       and service guides, technical information, and development resources; and

     - an open marketplace to facilitate the flow of Linux/Open Source products
       and services.

     We believe that a Linux/Open Source leader must broadly promote the
adoption of Linux/Open Source, provide a trusted, responsive, industry-focused
information resource that offers support and collaboration at a consistently
high level, and enable a market for Linux/Open Source products and services.

THE ANDOVER.NET SOLUTION

     Through our network of web sites, we provide a solution designed to meet
the needs of the Linux/Open Source community and its developing markets. As an
extensive provider of cross-platform content, Andover.Net is a natural place to
begin the transition to Linux/Open Source from other operating systems. As the
Internet's leading Linux/Open Source destination, we also furnish an environment
for Linux/Open Source information exchange, downloadable resources and business
transactions.

     Transition path.  We believe the best way for people to discover and
understand Linux/Open Source is for them to visit Slashdot.org, a leading hub
for community, news and information. Its subject matter can be highly technical
but its postings and comments are lucid and irreverent enough for a more general
audience. To make Slashdot.org highly visible to non-Linux developers, we
include links, banners and buttons throughout Andover.Net's cross-platform sites
that contain content useful for both Linux and Windows. We believe that as
sophisticated IT professionals and technology hobbyists move to Linux and other
Open Source-based operating systems, our network will become an important
partner in this transition. In addition, millions of banner advertisements per
month and millions of links promote the possibilities of Linux on Slashdot.org
and our other web sites to developers outside our network.

     Trusted content.  We provide an independent, unbiased source for content,
much of which comes from the candid Linux/Open Source community itself.
Moreover, the comprehensive information we provide covers a broad range of Open
Source topics rather than a single version of Linux or a single hardware
platform. Freshmeat.net comprehensively rates and categorizes the latest in
Linux products regardless of developer or distribution. Further, FreeCode has
hundreds of code modules that can run on, or be easily adapted to run on, any
Linux/Open Source system. Through broad, unbiased coverage in editorials,
community comments and comprehensive software listings, Andover.Net is the
largest independent intermediary for Linux/Open Source.

     Comprehensive support.  Support for Linux/Open Source on our network comes
in many forms. The community itself offers advice and counsel on Slashdot.org.
Further, Freshmeat.net is one of five sites within our network providing
descriptions and free downloadable software resources. Other sites provide
tutorials, reviews, screenshots, links and market information.

     Open marketplace.  We provide the largest Internet media channel through
which Linux/Open Source vendors can promote and advertise their goods and
services and on which purchasers can identify, evaluate and buy the products and
services they need. In addition, we promote application development, provide
free advertising and broadly support promising new business models to encourage
growth in the market.

     The benefits of our solution accrue to both members of the Linux/Open
Source community as well as to vendors who are targeting that community.

     Benefits for our community.  We have established our network as both the
most popular and most visited meeting place for the Linux/Open Source community
as well as one of the largest cross-platform

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transition networks. We provide editorials, community, commentary, reviews,
products, tools, news, information and services for programmers, software
developers, system engineers, web site designers, web site managers and
corporate technology buyers.

     Benefits for vendors.  We provide vendors with targeted channels to reach
our highly focused technology community. As our network has grown to become a
central site for members of the Linux/Open Source community, it has likewise
evolved as a unique selling opportunity for advertisers. We believe that our
users represent a large and targeted online community of Internet industry and
IT professionals, web developers, programmers and experienced Internet users. As
a result, our vendors can enhance the effectiveness of their advertising by
customizing advertisements and placing them on targeted pages on our network.

OUR STRATEGY

     Our goal is to maintain and enhance our position as the leading destination
for Linux and, more generally, the Open Source movement. Key elements of our
strategy are:

  Grow the size and share of our dominant Linux/Open Source position

     We are the leading Linux/Open Source destination on the Internet. To grow
this dominant position, we intend to increase our traffic by offering more
viewable pages, high quality content and additional services. In particular, we
are committed to augmenting Slashdot.org, Freshmeat.net and FreeCode, our
leading web sites. We also intend to support the overall growth in the Linux and
Open Source communities. An important distinction between Andover.Net and other
major Linux/Open Source companies is that we support Open Source and all
versions of Linux rather than a single version of that operating system. We
intend to support Linux/Open Source communities through free hosting,
contributions of advertising and trade show space, funding of application
development and benchmark testing, supporting new business models and expanding
our Linux/Open Source partnership programs.

  Facilitate and guide the transition of Windows developers to Linux/Open Source

     Unique among all major Linux/Open Source companies, our network includes
high-traffic, cross-platform sites for IT professionals, including programmers,
software developers, web designers, and web site managers, many of whom have not
yet adopted Linux. Our cross-platform web sites offer products, online tools,
news and other services which are usable with virtually all major operating
systems including Linux, Windows and Macintosh. To accelerate the growth of our
Linux/Open Source web sites, we intend to educate visitors on these
cross-platform web sites and inform, guide and encourage developers to adopt and
support Linux.

  Expand our e-commerce offerings to our targeted, high volume traffic

     Our network currently provides content and community to over two million
targeted unique visitors on a monthly basis, and we believe this represents a
significant e-commerce opportunity. We intend to expand our e-commerce offerings
by selling various Linux products such as computer hardware, books or CDs and
services such as installation and support. Moreover, we believe that our
e-commerce offerings will generate increased traffic and encourage longer time
spent on our network.

  Acquire complementary Linux/Open Source web sites

     We have already acquired and integrated leading Linux/Open Source web sites
such as Slashdot.org and Freshmeat.net. We expect to continue to pursue
strategic acquisitions to strengthen our content offerings and services. We may
also acquire complementary web sites to obtain valuable brands, expertise or
access to new users, advertisers and vendors. We believe that by acquiring
complementary web sites, we can efficiently integrate them into our network, and
thereby improve their traffic and revenue results as well as our own.

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  Expand the number and participation of major advertisers

     We intend to increase the number of major advertisers on our network by
expanding our media sales force and by increasing our sales promotion to
Linux/Open Source vendors. With our recent Linux/Open Source acquisitions, we
believe that traffic on our network represents over 50% of the visits to Linux
resource sites on the web. This leading position in the Linux/Open Source market
allows us to provide advertisers targeted access to the Linux/Open Source
communities. We believe that Linux/Open Source related vendors will
significantly increase their online advertising in this rapidly growing market.
We also intend to broaden the participation of our major advertisers by offering
several innovative advertising products. Many advertisers have indicated to us
that these advertising products are more effective for branding and sales than
standard banner advertisements.

  Strengthen the Andover.Net brand

     We intend to strengthen the Andover.Net brand through a combination of
online and offline advertising, sales promotion, trade shows, direct mail,
public relations, syndicated content and events to promote the use of our
network to the technical community, advertisers and vendors. We currently place
over eight million banner advertisements each month on complementary sites and
expect to significantly increase both online and other media advertising in the
future. We also intend to promote the Andover.Net brand with licensing programs
such as our agreement with Lycos, Inc. for the Angelfire and the Tripod
community web sites. We also have partnerships with more than 15 web sites that
link over four million web pages directly to our network.

THE ANDOVER.NET NETWORK

     Our closely integrated network consists of web sites that are deep and rich
in content and provide programmers and developers with a leading online
resource. We believe that as sophisticated IT professionals and technology
hobbyists move to Linux and other Open Source-based operating systems, our
network, which includes news and tools for the Windows operating system, will
become an important partner in this transition. Our network will introduce Linux
and other similar operating systems to many of our technology oriented customers
who have not yet migrated to these systems.

     The Andover.Net network consists of three categories of web sites:

     - Our Linux/Open Source sites attract sophisticated Linux users and
       developers for their cutting-edge Open Source content;

     - Our cross-platform sites offer visitors a wide range of content including
       news, products and online software applications or e-Tools; and

     - Our Windows site features daily reviews and updates of Windows software
       downloads.

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     Each of our main web sites and product offerings are summarized below.

LINUX/OPEN SOURCE SITES
LOGO                          slashdot.org -- Slashdot.org is the largest online community for Open Source
                              developers providing news, commentary, information and reviews for
                              everything from Legos to Linux. Slashdot.org focuses on issues of importance
                              to the Open Source community allowing individuals to post comments and
                              debate news items and technical issues.
LOGO                          freshmeat.net -- Freshmeat.net is one of the largest Linux software
                              application repositories and also contains application news and a community
                              section. One feature of this web site shows the number of hits each
                              application has received which allows us to determine which Linux product is
                              the most popular.
LOGO                          www.freecode.com -- FreeCode is a comprehensive online resource for
                              programming source code which offers a constantly updated and expanded
                              database of free, Internet-related programs. FreeCode contains programs
                              written in Perl, C++, Java and Visual Basic.
CROSS-PLATFORM SITES
LOGO                          www.davecentral.com -- DaveCentral has two components, one for Linux and one
                              for Windows. The site archives over 10,000 free software downloads and
                              reviews. Both the Linux and Windows web sites group the software by category
                              which facilitates searches. The site also has a ticker showing recent
                              updates in all sections of the web site as well as keyword search
                              capabilities.
LOGO                          www.andovernews.com -- Andover News provides free, timely and searchable
                              computer-industry news from multiple sources. IT professionals visit Andover
                              News for information and editorials about a broad range of technologies and
                              technology companies.
LOGO                          www.itmanagersjournal.com -- IT Manager's Journal provides IT news and
                              advice for professionals and managers. The site features daily editorial
                              articles on a wide variety of IT topics, survey questions with live results
                              and discussions about a broad range of IT issues.
LOGO                          www.mediabuilder.com -- MediaBuilder is an online multimedia resource center
                              which contains multimedia software; online tools; GIF animations, the most
                              popular file format for animations on the web; the largest collection of
                              free images on the Internet; and a font library with over 1,000 free fonts.
                              With our acquisition of Animation Factory, users can also access and
                              download over 100,000 images. Some of the more popular web tools found
                              within MediaBuilder are summarized below:
LOGO                          -     www.gifworks.com -- GIFWorks is a free on-line software application.
                                    With easy-to-use pull down menus, GIFWorks allows user to resize any
                                    GIF animation.
LOGO                          -     www.htmlworks.com -- HTMLWorks is an online application that enables
                                    users to quickly and easily create, edit and improve their web pages
                                    through their web browser.
36
44
LOGO                          www.techmailings.com -- TechMailings offers the largest collection of
                              technology mailing lists on the Internet with fifteen categories covering
                              everything from cyber-culture to Internet marketing.
LOGO                          www.techsightings.com -- TechSightings searches the Internet for technology
                              sites and presents informative daily reviews of the best high-tech sites for
                              IT professionals. Chosen sites include targeted information on topics such
                              as hardware, software, programming and web building.
LOGO                          www.internettrafficreport.com -- Internet Traffic Report monitors the flow
                              of Internet data around the world. The Internet Traffic Report analyzes the
                              data and displays a value ranging from zero to 100 with higher values
                              indicating faster, more reliable connections.
WINDOWS SITE
LOGO                          www.slaughterhouse.com  -- Slaughter House ranks and updates a wide variety
                              of Windows software, including Internet applications, multimedia tools,
                              utilities and games. Slaughter House also offers daily news updates and a
                              "Product of the Day Review."
By combining our Linux/Open Source, cross-platform and Windows web sites
into our network, Andover.Net provides IT professionals with a leading online
resource.

VISITORS

     According to an independent survey we commissioned in February 1999 from
the Laredo Group, the typical Andover.Net visitor spends an average of 15.8
hours per week online, excluding time spent corresponding by e-mail, two hours
of which are spent visiting Andover.Net sites. Our visitors, who have an annual
average household income of $61,000, include corporate executives, web
developers and designers, programmers and IT professionals. Over 60% of our
visitors visit our web sites at least once a week.

     Furthermore, 68% of our visitors are personally involved in the purchasing
of computer products for their companies. The study also reveals that 74% of our
visitors have already made online purchases compared to an industry average of
22% in 1998, as estimated by Jupiter Communications. In addition, 77% of our
visitors said they are likely to make online purchases within the next year. We
believe that these buying patterns of our user base make our network well suited
for e-commerce.

     The main reasons cited in the survey for visiting our network were
up-to-date technology news, including the latest developments in Linux and Open
Source systems, buying information and product downloads for evaluation, how-to
information and the ability to search for computer products and services.

MARKETING AND SALES

  Marketing

     We employ a combination of online and offline advertising, sales promotion,
trade shows, direct mail, public relations, syndicated content and events to
promote the use of our network to the technical community, advertisers and
vendors. We currently place over eight million banner advertisements online each
month, usually on complementary programmer and developer sites. We use barter,
content licensing and partnerships to extend our online presence to offline
media including technical trade magazines and Internet marketing guides.

     Our sales promotion includes seminars at major online media agencies and
forums for presenting our Linux/Open Source marketing opportunities to major
product vendors. We focus our trade show marketing on Linux-related shows, such
as LinuxWorld, and online media planning conferences, such as @d:tech. We

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announce and promote major events and advertising opportunities to media
planners and vendors through direct mail, as well as with advertising campaigns
on the major online web-marketing sites. We also promote our network to over
150,000 subscribers of Andover Update, Autopsy Report and our other online
newsletters and to the over two million unique visitors who visit our network on
a monthly basis.

     Andover.Net has received extensive press coverage in both online and print
publications including the Wall Street Journal, Business Week-on-Line, Time
Digital, Rolling Stone, Red Herring and USA Today. Slashdot.org also produces an
online radio show "Geeks in Space" hosted by The Sync, an online radio
syndicator. The show generally occurs once a week or, as the introduction
relates, "Whenever we feel like it".

     We use online tools, including the Internet Traffic Report, GIFWorks and
HTMLWorks, to attract technology-oriented visitors. We believe that this
encourages long and repeat visits, adding to our "stickiness." The significance
of these e-Tools extends beyond attracting a large core of users to our own
network. We also use them in a variety of licensing and partnership programs to
extend our promotional frequency and reach. For example, GIFWorks has over four
million links from our Graphics Partnership Program where we provide public
relations and promotion to the partners' sites, and they provide links to
GIFWorks. In addition, with a recent agreement with Lycos with respect to their
Angelfire and Tripod sites, we estimate that we will have links to GIFWorks from
over 150 million pages per month and share in the advertising revenue.

  Sales

     The core of Andover.Net's online advertising business is a professional
media sales force that makes sales calls on computer product vendors and media
planners at major agencies. We have built and are expanding our nationwide media
sales force with representatives currently in San Francisco, New York, Los
Angeles and Boston. As of September 15, 1999, our direct sales force had 11
members. Our direct sales force is dedicated to increasing the sales of banner
advertising, sponsorships, email newsletters, display advertisements and
megabanners and recruitment advertising. We sell our advertising services to
high technology companies, consumer goods companies, independent software
developers, advertising agencies, high technology recruitment agencies, and
other marketers interested in reaching our highly focused technology community.
We successfully market banner advertising on our web sites because we provide an
efficient medium for advertisers to reach a worldwide audience of Internet
developers. In addition, because of the unique role our visitors play as Linux
and web site developers, they represent an affluent and highly sought after
target audience for high technology and high-end consumer products.

     We believe that our competitive advantage is our leading Linux/Open Source
position. We estimate that our Linux/Open Source web sites represent 50% to 60%
of the advertisable online pages in the Linux/Open Source category. Linux/Open
Source computer product vendors must advertise to establish their share of this
early stage but rapidly growing market. We believe that our network is the most
effective channel for that communication due to our category-leading quality and
depth of our web sites.

     We have been generating advertising revenue since our DaveCentral web site
went online and accepted advertisements in 1996. In addition to conventional
banner advertisements, Andover.Net has developed several innovative advertising
products, or beyond-the-banner products.

     Our current offering of beyond-the-banner products is shown below:

     -  Display Advertisements -- Appear in the navigation bar on most
        Andover.Net web sites and combine visually appealing animations with
        text. They are approximately two inches wide and six inches long and
        generally contain 100 words of copy and extend down the right hand side
        of our web pages. They can be rotated throughout the network to pages
        and web sites specified by advertisers just as a regular banner
        advertisements.

     -  Megabanners -- Combine a display advertisement with a large top-of-page
        banner resulting in sixteen square inches filled with animations and
        text in the top right hand corner of our web page.

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46

     -  E-Tools -- Allow advertisers to communicate directly to people in their
        workplace for ten to 15 minutes at a time.

     -  Sponsorships -- Include banners, display advertisements and logo/slogan
        design elements on targeted web sites, e-Tools, home pages and
        newsletters.

     We believe that our advertisers can customize their advertising campaigns
and deliver their message in a highly targeted fashion by choosing specific
placements, or channels, on our network. Because of this ability to target and
deliver a specific audience, we believe that we command higher advertising
rates.

     We believe that we enable advertisers to efficiently and effectively reach
targeted Linux/Open Source programmers, developers, engineers, web site
designers and managers, and other buyers of technical products and services. In
addition, since this demographic group has premium income and purchasing power,
it allows us to offer significant advertising opportunities to premium
non-technology advertisers. Based on the Laredo Group survey, 68% of our
visitors are personally involved in purchasing computer products for their
company. They buy for departments or sections with an average of 150 people. As
a result, based on publicly available banner advertisement rate cards, we
believe that our rates are approximately three to four times higher than the
rates of well-known portals that target a more general audience.

  Andover.Net's Advertisers

     Our customers include high technology and consumer advertisers. Our base of
advertisers has been increasing steadily since March 1999 and we now have over
100 advertisers on our network. Other than IBM, which accounted for
approximately 15.6% of our revenues for the six month period ended August 31,
1999, no single customer accounts for greater than 10% of our revenues. Our five
largest advertisers for the six month period ended August 31, 1999, based upon
percentage of cash revenues, were:

     -  IBM Corporation

     -  Compaq Computer Corporation

     -  Silicon Graphics Inc.

     -  Hewlett-Packard Company

     -  Intel Corporation

SOFTWARE ENGINEERING AND DEVELOPMENT

     We have invested, and intend to continue to invest, significant resources
in product and technology development. We focus and modify our product
development efforts based on the needs of users and changes in the marketplace.
Our software development efforts are focused on four key areas.

     Advertisement and statistics systems. We have created and continually
enhance two software systems necessary for the efficient operation of our web
sites: a banner advertisement system and a page traffic statistics system. Using
an internally developed advertising system has allowed us to create unique
advertising products, such as our megabanner product, and to rapidly adjust to
requests from advertising clients.

     Database generated web sites. All of our web sites are created and managed
through centralized, online databases. This allows data entry operators working
both in-house and off-site to enter new content and update existing content for
our sites using password protected web forms. At regular intervals, ranging from
one to 24 hours, a completely new copy of each web site is automatically
generated from these databases using internally developed programs. These web
pages are automatically uploaded to our web servers, providing our visitors with
continually updated versions of each site. This database driven model of web
site creation provides a higher level of efficiency than traditional publishing
models, where large numbers of people are required to write each web page by
hand. Therefore, we believe that we are able to provide a high level of content
at minimal incremental cost with a much smaller staff.

     Online web applications, or e-Tools. A unique, and highly popular,
component of our network is our e-Tools which are part of our MediaBuilder site
and include GIFWorks and HTMLWorks. These server-based applications are usable
through any web browser, and provide a high level of functionality, without
requiring the user to download or install any additional software. All of our
e-Tools have been developed and are continually enhanced internally. e-Tools are
another way that we achieve a high level of efficiency, because
                                       39
47

they provide web site content that is continually new and relevant to a visitor,
without requiring any on-going editorial effort.

     Technical integration of acquired web sites. We continue to integrate new
acquisitions into our network. All of our web sites are linked into our network
and share traffic as visitors follow links from one of our web sites to another.
Acquired web sites are modified to utilize our statistics and advertising
systems. Some acquired web sites are completely redesigned if necessary to
increase their quality and performance.

     All of our software systems have been written in the C++ and Perl
programming languages. These languages are commonly used for Internet
applications and are understood and used by a wide number of software engineers.

     As of September 15, 1999, we employed 12 software engineers, three web
design professionals, and two network operations engineers. We intend to
increase our development staff significantly to accommodate the increased
technical demands of acquisitions, new internal systems and additional e-Tools.

SYSTEM TECHNOLOGY AND DATA CENTER ARCHITECTURE

     Maintaining a high level of performance and reliability while accommodating
rapid growth in visitors to our web sites is a major focus of our network
operations engineers. To that end we have developed an expandable and
fault-tolerant data center architecture for delivering content and
advertisements on our web sites.

     Our web sites are maintained on 16 high-speed, industry-standard Pentium
servers that run on the Linux operating system. These servers are equipped with
a Redundant Array of Interdependent Disks, or RAID, for increased reliability.
Web site requests are distributed among the servers by a pair of Alteon load
balancing switches that allow for maximum throughput and fault tolerance. This
architecture allows us to respond quickly to increased traffic on our web sites
by incorporating additional machines without having to shut down or otherwise
interfere with the existing servers. We lease our servers which provides us with
the flexibility needed to increase the number of machines used or update our
machines quickly and inexpensively.

     Our current data center is located on the East coast of the United States.
We intend to add three additional data centers using the same software and
hardware architecture. These will be located on the West coast of the United
States, Europe and Asia. Load balancing routers will be employed to
automatically allocate web site traffic to the closest geographic location,
ensuring our visitors the best possible performance. This multiple data center
architecture will increase the fault tolerance of our network, and insulate us
from localized interruptions of service on the Internet.

     We maintain and continually enhance a quality assurance process to monitor
our servers, processes and network connectivity. This process involves both
internal staff and external contractors who run regular system and security
audits of our servers. We currently run automatic monitoring programs which
immediately notify our network operations engineers by email and pager in the
case of any current or potential interruptions in service. We intend to develop
a distributed network of engineers who will personally monitor our data centers
on a 24-hour basis and be prepared to perform any necessary adjustments to the
servers.

INTELLECTUAL PROPERTY

     Andover.Net seeks to protect its intellectual property through a
combination of license agreements, service mark, copyright, trade secret laws
and other methods of restricting disclosure and transferring title. We obtain
the majority of our content under license agreements with publishers, through
work for hire arrangements with third parties and from internal staff
development. We have no patents or patents pending for our current online
services and do not anticipate that patents will become a significant part of
our intellectual property in the foreseeable future. Where appropriate, we also
enter into confidentiality agreements with our employees, consultants, vendors
and customers. We generally seek to control access to and distribution of our
technology, documentation and other proprietary information. We pursue the
registration of our trademarks in the United States and internationally, and
have submitted trademark
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48

registration applications for our Andover.net, Slashdot.org and Freshmeat.net
trademarks. Content created or acquired by us is protected by copyright. The
proprietary software that we use to run our business is protected generally by
restricting third party access, entering into confidentiality agreements with
third parties who do have access and relying on copyright law.

COMPETITION

     Competition within the Internet is intense and is expected to increase
significantly in the future. Specifically, the market is rapidly evolving and
barriers to entry are low, enabling newcomers to launch competitive web sites at
relatively low costs.

     We believe that we compete on the basis of brand recognition, quality and
quantity of content, product and resource selection, convenience and
reliability. We believe that we are differentiated from our competitors due to:

     -  our focus on the Linux/Open Source operating systems;

     -  the fact that we are independent of a particular version of the
        Linux/Open Source operating systems; and

     -  our vertical focus of providing content, community and commerce to
        technology professionals.

     We compete for advertisers, merchants, users and strategic partners with:

     -  web sites specifically targeting the Linux/Open Source communities;

     -  web sites specializing in technology information;

     -  Internet portals, search sites and content aggregators; and

     -  traditional media content businesses such as newspapers, magazines,
        radio and television.

     Increased competition could result in advertising price reductions, reduced
margins or loss of market share, any of which could harm our business.
Competition is likely to increase significantly as new companies enter the
market and current competitors expand their services. Many of our current and
potential competitors have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources than we have. These competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements and
to devote greater resources to the development, promotion and sale of their
products and services than we can.

     Additionally, our success is in large part dependant on the success of
Linux which is in competition with other operating systems. In the market for
operating systems, Linux competes with a number of large and well-established
companies that have significantly greater financial resources, larger
development staffs and more extensive marketing and distribution capabilities.
While we do not directly compete with these companies, our future success may
depend on the ability of Linux to effectively compete with these other more
established operating systems.

EMPLOYEES

     As of September 15, 1999, we had a total of 48 employees. Of the total
employees, 27 were in engineering and content development, 17 in sales and
marketing and four in finance and administration. Our future success will depend
in part on our ability to attract, retain and motivate highly qualified
technical and management personnel, for whom competition is intense. From time
to time we also employ independent contractors to support our professional
services, product development, sales, marketing and business development
organizations. Our employees are not represented by any labor union and are not
organized under a collective bargaining agreement, and we have never experienced
work stoppage. We believe our relations with our employees are good.

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49

FACILITIES

     Our headquarters are currently located in a leased facility in Acton,
Massachusetts, consisting of approximately 11,700 square feet under a five year
lease that will expire on April 30, 2004. The current annual rental expense
under this lease is approximately $205,000. We have an option to extend the term
of this lease for another five years at the end of the initial five year term.
We believe that additional space will be required as our business expands and
will be available on acceptable terms.

LEGAL PROCEEDINGS

     We are not currently a party to any legal proceedings.

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50

                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     Our directors and executive officers and their respective ages and
positions are as follows:
NAME                      AGE                    POSITION
                   ----                      ---                    --------
Bruce A. Twickler..........................  53    President, Chief Executive Officer and
                                                   Chairman
Adam B. Green..............................  43    Chief Technology Officer
James E. Patterson.........................  61    Executive Vice President
William M. Dwyer...........................  47    Vice President, Publishing
Derek V. Carroll...........................  43    Vice President, Business Development
Janet F. Holian............................  39    Vice President, Communications
Walter M. Bird, III........................  41    Director
Jonathan M. Goldstein......................  37    Director
James D. Logan.............................  47    Director
Robert Malda...............................  23    Director
Louis Page.................................  33    Director
Thomas R. Shepherd.........................  69    Director
John E. Trombly............................  51    Director
---------------
     Bruce A. Twickler.  Mr. Twickler founded Andover.Net in 1992, has been a
director, President and Chief Executive Officer since its formation and was
elected Chairman of the Board in September 1999. Prior to founding Andover.Net,
Mr. Twickler was a consultant to Dragon Systems and Avid Technologies. From 1988
to 1991, he was Vice President of Microcom. From 1987 to 1988, Mr. Twickler was
President of Shiva Corporation, and from 1983 to 1986 he was President of Hayden
Software. Prior to that time, Mr. Twickler was Vice President of Marketing of
Pioneer Electronics USA.

     Adam B. Green.  Mr. Green has been Chief Technology Officer of Andover.Net
since July 1996. Prior to July 1996, Mr. Green was Vice President of Internet
Products at Clear Software, Inc. Before joining Clear Software, he was a
consultant and contract trainer for Powersoft and Alpha Software, Inc.

     James E. Patterson.  Mr. Patterson has been an Executive Vice President of
Andover.Net since May 1999. He is responsible for implementing our e-commerce
strategy. From February 1997 to May 1999, he was Andover.Net's Vice President,
Sales and Marketing, and from November 1995 to February 1997, he was our Vice
President, Sales. Prior to that time, Mr. Patterson was Director of the IBM
Business Unit of Wang Global.

     William M. Dwyer.  Mr. Dwyer has been Vice President, Publishing of
Andover.Net since May 1999. He is responsible for sales and marketing. Prior to
joining Andover.Net, Mr. Dwyer provided publishing and media sales consulting
services to companies such as Pennwell Publishing and Skinner James Publishing
and launched Back Office Magazine through IT/World, Inc. which he founded in
1994. Prior to founding IT/World, Inc., Mr. Dwyer was Vice President of Sales
for BYTE Magazine at McGraw-Hill, Inc. Previously, Mr. Dwyer held a variety of
positions at Ziff-Davis over a 10 year period including Director of the
Ziff-Davis Magazine Network.

     Derek V. Carroll.  Mr. Carroll has been Vice President, Business
Development of Andover.Net since February 1999. Prior to joining Andover.Net,
Mr. Carroll was Vice-President of Sales and Marketing of Silent Systems, Inc.
from 1995 to 1999. Prior to that time, Mr. Carroll was Director of Business
Development of MicroTouch Systems, Inc.

     Janet F. Holian.  Ms. Holian has been Vice President, Communications of
Andover.Net since August 1999. Ms. Holian joined Andover.Net in February 1999 as
Director of Marketing. Before joining Andover.Net, Ms. Holian spent two years as
Vice President of Marketing of PersonalAudio, Inc. Prior to that time, Ms.
Holian was Director of Marketing of MicroTouch Systems, Inc.

                                       43
51

     Walter M. Bird, III.  Mr. Bird has been a director of Andover.Net since
July 1997. Since 1996, Mr. Bird has been Vice President of Claflin Capital
Management, Inc., a venture capital investment management firm. Prior to that
time, Mr. Bird was a Vice President of BankBoston, N.A.

     Jonathan M. Goldstein.  Mr. Goldstein has been a director of Andover.Net
since September 1999. Since 1986, he has been associated with TA Associates,
Inc., a venture capital firm, serving as a Vice President from 1990 to 1996 and
as a Principal since January 1994.

     James D. Logan.  Mr. Logan has been a director of Andover.Net since January
1999. Mr. Logan is the President and Chief Executive Officer of Gotuit Media,
Inc. which he founded in 1999. From 1996 to 1998, Mr. Logan was President and
Chief Executive Officer of PersonalAudio, Inc. which he founded. Prior to that
time, Mr. Logan was President, Chief Executive Officer and Chairman of the Board
of Directors of MicroTouch Systems Inc. He remains Chairman of the Board of
Directors of MicroTouch Systems Inc.

     Robert Malda.  Mr. Malda has been a director of Andover.Net since July 1999
in connection with our acquisition of Slashdot.org from BlockStackers, Inc. He
is currently the editor of the Slashdot.org web site. Mr. Malda is President of
BlockStackers which he founded in 1996. Mr. Malda served as a web site developer
for The Image Group from 1996 to 1998. Prior to working at The Image Group, Mr.
Malda spent two years as a personal computer technician at the Donnelly
Corporation.

     Louis Page, CFA.  Mr. Page has been a director of Andover.Net since October
1995. Mr. Page is the President and founder of Window to Wall Street, Inc., a
company that serves as the general partner of a number of venture capital
investment firms.

     Thomas R. Shepherd.  Mr. Shepherd has been a director of Andover.Net since
July 1999. Mr. Shepherd is a co-founder and the Chairman of The Shepherd Group,
LLC, a private equity investment firm. Additionally, Mr. Shepherd is a Special
Partner, and former Managing Director, of the Thomas H. Lee Company, a private
equity investment firm. Prior to joining the Thomas H. Lee Company in 1986, Mr.
Shepherd was President of the GTE Lighting Products Group of GTE Sylvania from
1983 to 1986, and was President of North American Philips Commercial Electronics
Corporation from 1981 to 1983. Mr. Shepherd is also a director of Rayovac
Corporation and The Vermont Teddy Bear Co., Inc.

     John E. Trombly.  Mr. Trombly has been a director of Andover.Net since
October 1995. Mr. Trombly is an Executive Vice President of Royalty Capital
Management, Inc., a venture capital management firm, and a General Partner of
Royalty Capital Fund L.P. I, a venture capital investment fund. Prior to
co-founding Royal Capital Fund, Mr. Trombly was President of Foxboro/Octek from
1978 to 1988.

BOARD COMMITTEES

     Following the completion of this offering, the compensation committee of
the board of directors of Andover.Net will be comprised of Walter H. Bird, III,
James D. Logan and Jonathan Goldstein. The audit committee of the board of
directors of Andover.Net will be comprised of Louis Page, Thomas R. Shepherd and
Jonathan Goldstein.

ELECTION AND COMPENSATION OF DIRECTORS

     Our certificate of incorporation provides for a classified board of
directors divided into three classes. Class I will expire at the annual meeting
of stockholders to be held in 2000, Class II will expire at the annual meeting
of stockholders to be held in 2001 and Class III will expire at the annual
meeting of stockholders to be held in 2002. At each annual meeting of
stockholders, beginning with the 2000 annual meeting, the successors to
directors whose terms will then expire will be elected to serve from the time of
election and qualification until the third annual meeting following election and
until their successors have been duly elected and qualified, or until their
earlier resignation or removal, if any. To the extent there is an increase or
reduction in the number of directors, increase or decrease in directorships
resulting therefrom will be distributed among the classes so that, as nearly as
possible, each class will consist of an equal number of directors.

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     Our current directors receive no compensation for serving as directors. We
have granted in the past, and intend to grant in the future, non-qualified stock
options to our non-employee directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     None of our executive officers serves as a member of the board of directors
or compensation committee of any other company that has one or more executive
officers serving as a member of our board of directors or compensation
committee.

EXECUTIVE COMPENSATION

     The following table sets forth the compensation earned by our Chief
Executive Officer and each of our two other most highly compensated executive
officers (collectively, the "Named Executive Officers") during the year ended
September 30, 1998:

                           SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION                   LONG-TERM COMPENSATION AWARDS
                                   -----------------------------------------   ----------------------------------------
                                                                 OTHER
                                                                 ANNUAL        SECURITIES UNDERLYING      ALL OTHER
   NAME AND PRINCIPAL POSITION     SALARY ($)   BONUS ($)   COMPENSATION ($)     OPTIONS/SARS (#)      COMPENSATION ($)
   ---------------------------     ----------   ---------   ----------------   ---------------------   ----------------
Bruce Twickler...................    108,000        --              --                    --                   --
  President, Chief Executive
    Officer and Chairman
Adam Green.......................    105,000        --              --                40,190                   --
  Chief Technology Officer
James Patterson..................     91,000        --              --                40,190                   --
  Executive Vice President
The following table sets forth certain information regarding the option
grants made during the year ended September 30, 1998 to each of the Company's
named executive officers in the Summary Compensation Table above. The Company
issued no stock appreciation rights ("SARs") in year ended September 30, 1998.

                     OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
                                                                                                     VALUE AT ASSUMED
                                                                                                     ANNUAL RATES OF
                                                                                                          STOCK
                                                                                                    PRICE APPRECIATION
                                                   INDIVIDUAL GRANTS                                FOR OPTION TERM(1)
                       -------------------------------------------------------------------------   --------------------
                        NUMBER OF
                       SECURITIES    PERCENT OF TOTAL                    MARKET
                       UNDERLYING    OPTIONS GRANTED    EXERCISE OR     VALUE ON
                         OPTIONS     TO EMPLOYEES IN    BASE PRICE    DATE OF GRANT   EXPIRATION
        NAME           GRANTED(#)     FISCAL YEAR(%)     ($/SHARE)      ($/SHARE)        DATE       5%($)       10%($)
        ----           -----------   ----------------   -----------   -------------   ----------    -----       ------
Bruce Twickler.......        --             --               --             --              --         --           --
Adam Green...........    40,190            8.5             0.50           1.50         3/15/08     78,104      136,270
James Patterson......    40,190            8.5             0.50           1.50         3/15/08     78,104      136,270
---------------
(1) In accordance with the rules of the SEC, shown are the gains or "option
    spreads" that would exist for the respective options granted. These gains
    are based on the assumed rates of annual compound stock price appreciation
    of 5% and 10% from the date the option was granted over the full option
    term. These assumed annual compound rates of stock price appreciation are
    mandated by the rules of the SEC and do not represent the Company's estimate
    or projection of future common stock prices.

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53

     Year End Option Table.  The following table sets forth information
regarding exercise of options and the number and value of options held at
September 30, 1998, by each of the Company's named executive officers in the
Summary Compensation Table above:

               AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
                           YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES
                                                            UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED IN-THE-MONEY
                                                                  OPTIONS AT                           OPTIONS AT
                                                                FISCAL YEAR END                   FISCAL YEAR END (1)
                       SHARES ACQUIRED      VALUE      ---------------------------------   ----------------------------------
        NAME           ON EXERCISE(#)    REALIZED($)   EXERCISABLE(#)   UNEXERCISABLE(#)   EXERCISABLE($)    UNEXERCISABLE($)
        ----           ---------------   -----------   --------------   ----------------   --------------    ----------------
Bruce Twickler.......           --              --             --                --                  --                 --
Adam Green...........            0               0        124,746           154,953           1,680,967          2,088,010
James Patterson......            0               0         46,150            73,721             621,877            993,399
---------------
(1) Value is based on the difference between the option exercise price and the
    initial public offering price of the common stock multiplied by the number
    of shares of common stock underlying the option. No market existed for the
    common stock prior to this offering. Assumed offering price of $13.50 per
    share; exercise price is $0.025 per share.

BENEFIT PLANS

  1995 Stock Option Plan.

     The 1995 Stock Option Plan, or the 1995 plan, provides for the granting of
incentive stock options and non-qualified options defined in Section 422 of the
Internal Revenue Code to Andover.Net's employees, consultants and directors. The
1995 plan may be administered by the board of directors or by a committee. The
board has the authority to take the following actions:

          (a) interpret and apply the 1995 plan; and

          (b) determine the eligibility of an individual to participate in the
     1995 plan.

     No incentive stock options may be granted to an employee who, at the time
of the grant, owns more than 10% of the voting power or greater than 10% of each
class of Andover.Net's outstanding stock, unless the purchase price of the stock
is not less than 110% of the stock's fair market value on the date of the grant
and the option, by its terms, shall not be exercisable more than five years from
the date it is granted.

     Vested options may be exercised in full at one time or in part from time to
time. The payment of the exercise price may be made by delivery of one of the
following: (a) cash or a check; (b) at the discretion of the board, shares of
Andover.Net's common stock owned by the optionholder having a fair market value
equal in amount to the exercise price of the options being exercised; (c) at the
discretion of the board, by delivery of the optionholder's personal recourse
note; or (d) at the discretion of the board, any combination of (a), (b) and
(c).

     The term of any option granted under the 1995 plan is limited to either
five or 10 years, depending on the nature of the option holder. Upon the
termination of an optionholder's employment with Andover.Net, his or her options
will terminate between 60 and 180 days after that optionholder leaves the employ
of Andover.Net.

     As of September 15, 1999, 1,000,542 options were outstanding under the 1995
plan. No additional shares will be granted under the plan. Options granted vest
over a term established by the board of directors or committee at the date of
grant. The outstanding options have exercise prices ranging from $0.025 to $1.06
per share.

                                       46
54

   1999 Stock Option Plan.

     The 1999 Stock Option Plan, or 1999 plan, provides for the granting of
incentive stock options and non-qualified options defined in Section 422 of the
Internal Revenue Code to Andover.Net's employees, directors, advisors or
consultants. The 1999 plan may be administered by Andover.Net's board of
directors or by a committee. The board has the authority to take the following
actions:

          (a) interpret and apply the 1999 plan;

          (b) determine the eligibility of an individual to participate in the
     1999 plan;

          (c) approve the assignment of options immediately prior to the
     registration of Andover.Net's stock pursuant to the Securities Exchange Act
     of 1934, as amended, if such assignment would increase the number of common
     stockholders; and

          (d) determine and allocate the cancellation or exchange of outstanding
     options in the case of a recapitalization, acquisition, merger or change in
     control.

     No incentive stock options may be granted to an employee who, at the time
of the grant, owns more than 10% of the voting power or greater than 10% of each
class of Andover.Net's outstanding stock, unless the purchase price of the stock
is not less than 110% of the stock's fair market value on the date of the grant
and the option, by its terms, shall not be exercisable more than five years from
the date it is granted.

     Vested options may be exercised in full at one time or in part from time to
time in amounts of 50 shares or more. The payment of the exercise price may be
made as determined by the board, and set forth in the option agreement, by
delivery of one of the following: (a) cash or a check; (b) shares of
Andover.Net's common stock owned by the optionholder having a fair market value
equal in amount to the exercise price of the options being exercised; (c) any
combination of (a) and (b); provided, however, that payment of the exercise
price by delivery of shares of common stock owned by such option holder may be
made if the payment does not result in a charge to earnings for financial
accounting purposes as determined by the board; or (d) a properly executed
exercise notice to Andover.Net, together with a copy of irrevocable instruments
to a broker to deliver promptly to Andover.Net the amount of sale or loan
proceeds to pay the exercise price. Andover.Net may delay the issuance of shares
covered by the exercise of an option until the shares for which the option has
been exercised have been registered or qualified under the applicable federal or
state securities laws, or counsel for Andover.Net has opined that the shares are
exempt from the registration requirements of applicable federal or state
securities laws.

     The term of any option granted under the 1999 plan is limited to either
five or 10 years, depending on the nature of the option holder. Upon the
termination of an optionholder's employment with Andover.Net, his or her options
will terminate between 60 days and 12 months after that optionholder leaves the
employ of Andover.Net.

     As of September 15, 1999, 667,443 options were outstanding under the 1999
plan. Options granted vest over a term established by the board of directors at
the date of grant. The outstanding options have an exercise price ranging from
$0.12 to $1.06 per share.

LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS

     As permitted by the Delaware General Corporation Law, we have included in
our certificate of incorporation a provision to eliminate the personal liability
of its directors for monetary damages for breach or alleged breach of their
fiduciary duties as directors, subject to certain exceptions. In addition, our
bylaws provide that we are required to indemnify our officers and directors
under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and we are required to advance
expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. At present, we are
not aware of any pending or threatened litigation or proceeding involving our
directors, officers, employees or agents in which indemnification would be
required or permitted. We believe that our certificate of incorporation
provisions and indemnification agreements are necessary to attract and retain
qualified persons as directors and officers.
                                       47
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                             PRINCIPAL STOCKHOLDERS

     The following table sets forth information regarding the beneficial
ownership of our common stock as of September 15, 1999, and as adjusted to
reflect the sale of the common stock offered hereby by:

     -  each person who is known by us to own beneficially more than 5% of the
        outstanding shares of our capital stock;
     -  each of our directors;
     -  the named executive officers; and
     -  all directors and executive officers as a group.

     Percentage of ownership is calculated as required by the Securities and
Exchange Commission, or SEC. Except as indicated in the footnotes to this table,
the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them. The
table below includes the number of shares underlying options which are
exercisable within 60 days from September 15, 1999. For purposes of calculating
each person's or group's percentage ownership, stock options exercisable within
60 days after September 15, 1999 are included for that person or group, but not
the stock options of any other person or group. Unless otherwise indicated, the
address of each of the beneficial owners identified is 50 Nagog Park, Acton,
Massachusetts 01720.
PERCENTAGE OF
                                                                                    SHARES OUTSTANDING
                                                                                  ----------------------
                                                              NUMBER OF SHARES    BEFORE THE   AFTER THE
           NAME AND ADDRESS OF BENEFICIAL OWNER              BENEFICIALLY OWNED    OFFERING    OFFERING
           ------------------------------------              ------------------   ----------   ---------
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Bruce A. Twickler(1).......................................       1,911,005          16.1%       12.7%
Adam B. Green(2)...........................................         304,674           2.7         2.0
James E. Patterson(3)......................................          80,022             *           *
William M. Dwyer(4)........................................          80,320             *           *
Derek V. Carroll(5)........................................         100,400             *           *
Janet F. Holian(6).........................................          30,120             *           *
Walter M. Bird III(7)......................................         792,692           7.2         5.3
Jonathan M. Goldstein(8)...................................       2,381,345          21.7        15.9
James D. Logan(9)..........................................         203,493           1.7         1.3
Robert Malda(10)...........................................              --            --          --
Louis Page(11).............................................       1,327,180          12.1         8.9
Thomas R. Shepherd(12).....................................         199,606           1.7         1.3
John E. Trombly(13)........................................         517,452           4.6         3.4
All Directors and Executive Officers as a Group
  (13 persons, including the above)........................       7,928,309          72.1        52.9
5% STOCKHOLDERS
Massachusetts Technology Development Corp..................         684,142           6.2         4.6
  148 State Street
  Boston, MA 02109
James S. Mulhullond, Jr....................................         926,330           8.4         6.1
  One East 66th Street
  New York, NY 10021
TA/Advent VIII L.P. .......................................       1,592,874          14.5        10.6
  High Street Tower
  125 High Street
  Boston, MA 02110
TA/Atlantic and Pacific IV, L.P. ..........................         726,352           6.6         4.8
  High Street Tower
  125 High Street
  Boston, MA 02110
Window to Wall Street, Inc.................................         561,481           5.1         3.7
  39 Cedar Hill Road
  Dover, MA 02030
Window to Wall Street Limited Partnership..................         569,197           5.1         3.8
  39 Cedar Hill Road
  Dover, MA 02030
48
56

---------------
  *  Less than one percent

 (1) Shares listed as held by Bruce A. Twickler include 617,184 shares which are
     currently held by Barbara Twickler, his wife, as to which Mr. Twickler
     maintains full voting power. Mr. Twickler disclaims beneficial ownership of
     these shares. Shares listed as held by Mr. Twickler also include options to
     purchase 147,760 shares Mr. Twickler has the right to acquire within 60
     days of September 15, 1999.

 (2) Shares listed as held by Adam B. Green include options to purchase 304,674
     shares Mr. Green has the right to acquire within 60 days of September 15,
     1999.

 (3) Shares listed as held by James E. Patterson include options to purchase
     49,818 shares Mr. Patterson has the right to acquire within 60 days of
     September 15, 1999.

 (4) Shares listed as held by William M. Dwyer include options to purchase
     80,320 shares Mr. Dwyer has the right to acquire within 60 days of
     September 15, 1999.

 (5) Shares listed as held by Derek V. Carroll include options to purchase
     100,400 shares Mr. Carroll has the right to acquire within 60 days of
     September 15, 1999.

 (6) Shares listed as held by Janet F. Holian include options to purchase 30,120
     shares Ms. Holian has the right to acquire within 60 days of September 15,
     1999.

 (7) Shares listed as held by Walter M. Bird III include 461,010 shares held by
     Claflin Capital VI, L.P. and 331,682 Claflin Capital VII, L.P. of which Mr.
     Bird is the general partner. Mr. Bird disclaims beneficial ownership of
     these shares.

 (8) Shares listed as held by Jonathan M. Goldstein include an aggregate of
     1,592,874 shares held by TA/Advent VIII L.P., 726,352 shares held by
     TA/Atlantic and Pacific IV, L.P., 30,263 shares held by TA Executives Fund
     LLC, and 31,856 shares held by TA Investors LLC. Mr. Goldstein has
     beneficial ownership of 6,636 of such shares. Mr. Goldstein disclaims
     beneficial ownership of the remaining shares.

 (9) Shares listed as held by James D. Logan include 188,172 shares held by the
     James D. and Kerry M. Logan Family Trust U/A/D 12/31/98 of which his mother
     Bernice C. Logan is a trustee. Mr. Logan disclaims beneficial ownership of
     these shares. Shares listed as held by Mr. Logan also include 15,333
     options for shares Mr. Logan has the right to acquire within 60 days of
     September 15, 1999.

(10) Mr. Malda, a substantial stockholder of BlockStackers, will beneficially
     own a certain number of shares of common stock upon the closing of this
     offering based upon the initial public offering price. See "Relationships
     with Andover.Net and Related Transactions -- Other Transactions with
     Management -- Slashdot.org Purchase Agreement."

(11) Shares listed as held by Louis Page include 561,481 shares held by Window
     to Wall Street, Inc. of which Mr. Page is the president, 569,197 shares
     held by Window to Wall Street Limited Partnership of which Window to Wall
     Street Inc. is the general partner and 196,501 shares held by Window to
     Wall Street II Limited Partnership of which Window to Wall Street, Inc. is
     the general partner. Mr. Page disclaims beneficial ownership of these
     shares.

(12) Shares listed as held by Thomas R. Shepherd include an aggregate of 10,188
     shares held by The Shepherd Group, LLC of which Mr. Shepherd is the
     Chairman and 80,883 shares held by The Shepherd Venture Fund I, L.P. of
     which The Shepherd Group, LLC is the general partner. Mr. Shepherd
     disclaims beneficial ownership of these shares.

(13) Shares listed as held by John E. Trombly include 334,927 shares held by
     Royalty Capital Fund L.P. I, of which Royalty Capital Management, Inc. is
     the general partner. Mr. Trombly is the Executive Vice President of Royalty
     Capital Management, Inc. Mr. Trombly disclaims beneficial ownership of
     these shares.

                                       49
57

            RELATIONSHIPS WITH ANDOVER.NET AND RELATED TRANSACTIONS

SALE OF SERIES B PREFERRED STOCK

     Andover.Net issued and sold 600,568 shares of Series B convertible
preferred stock on September 15, 1999. 480,354 shares were sold and issued to
affiliates of TA Associates, Inc. and others and 120,214 shares, in the
aggregate, were issued to holders of convertible promissory notes in exchange
for the cancellation of their notes. The total aggregate proceeds to Andover.Net
in the private placement was approximately $10,100,000. The Series B convertible
preferred stock is immediately convertible into common stock at the option of
the holder and will convert into 3,017,138 shares of common stock upon the
closing of this offering.

EMPLOYMENT AGREEMENTS

  Robert Malda

     In connection with its acquisition of Slashdot.org, Andover.Net entered
into an employment agreement with Robert Malda, a director of Andover.Net, on
June 28, 1999, for a term of three years. The agreement provides that Mr. Malda
is entitled to a base salary of $90,000 per year. In addition, Mr. Malda is
entitled to customary employee benefits. Mr. Malda's employment agreement may be
terminated by Andover.Net at any time for "cause," which is defined as (a) the
conviction of or plea of no contest to any felony, (b) continued, uncured
insubordination, (c) breach of the non-competition provisions of the employment
agreement or (d) commission of any fraud, embezzlement or similar acts of
dishonesty against Andover.Net. This agreement may also be terminated by
Andover.Net without cause or by Mr. Malda for "good reason," which is defined as
(a) the assignment of any duties inconsistent with those set forth in the
employment agreement, (b) any material reduction in Mr. Malda's salary or
benefits, (c) breach of the employment agreement by Andover.Net or (d) the
requirement by Andover.Net that Mr. Malda perform his duties from any specific
location for a prolonged period of time. If Mr. Malda is terminated without
cause or terminates for "good reason" then Mr. Malda is entitled to continue to
receive his existing base salary and benefits for a period of 12 months and is
entitled to receive the payments set forth in the Slashdot.org purchase
agreement without reduction. See "Other Transactions with Management -
Slashdot.org Purchase Agreement."

     Under the terms of the employment agreement, Mr. Malda has agreed that
during the term of the agreement he will not participate in the management of
any entity which is in competition with Andover.Net. In the event that
Andover.Net terminates Mr. Malda without cause or if Mr. Malda terminates for
good reason, this non-competition period will terminate concurrently with the
termination of employment.

OTHER TRANSACTIONS WITH MANAGEMENT

  Compensation and Benefits.

     Our executive officers receive compensation, bonuses and other benefits
under various employee benefit plan arrangements maintained by us and its
subsidiaries. The executive officers participated in such benefit plans under
the same terms generally made available to our similarly situated employees with
similar responsibilities and levels of compensation.

     Our executive officers are eligible for performance bonuses under our
Executive Officer Incentive Plan. Under this plan, each officer is eligible for
a bonus of up to $9,000 per quarter. The amount of each bonus is based on a
consideration of our quarterly revenues and quarterly traffic as well as the
achievement of specific corporate objectives.

  Slashdot.org Purchase Agreement

     Under the terms of the Asset Purchase Agreement between BlockStackers, Inc.
and Andover.Net, dated as of June 18, 1999, Andover.Net purchased those assets
of BlockStackers relating to the Slashdot.org web site. Andover.Net is obligated
to issue shares of its common stock to BlockStackers over a period of two

                                       50
58

years following this offering. For the purposes of these issuances, the number
of shares of common stock to be issued is determined using an assumed initial
public offering price of $13.50 per share.

     - 148,148 shares issuable upon the closing of this offering;

     - 74,074 shares issuable seven months after the closing of this offering;

     - 49,383 shares issuable 12 months after the closing of this offering;

     - 98,763 shares issuable 12 months after the closing of this offering
       provided that the milestones in the agreement have been met;

     - 49,383 shares issuable 24 months after the closing of this offering; and

     - 98,765 shares issuable 24 months after the closing of this offering
       provided that the milestones in the agreement have been met.

     Pursuant to this purchase agreement, BlockStackers also agreed not to
compete with Andover.Net or to solicit its personnel, customers or suppliers.
Specifically, BlockStackers may not compete with Andover.Net, its subsidiaries
or affiliates by engaging in any business that involves a real-time or
contemporaneous news web site until June 28, 2004. Prior to June 28, 2001,
BlockStackers may not solicit personnel, customers or suppliers from
Andover.Net, its subsidiaries or affiliates. Mr. Malda, a director of
Andover.Net, is a substantial stockholder of BlockStackers.

  Freshmeat.net Purchase Agreement

     Under the terms of the Asset Purchase Agreement between Patrick Lenz (the
owner of Freshmeat.net) and Andover.Net, dated August 6, 1999, Andover.Net
purchased those assets relating to the Freshmeat.net web site. Andover.Net is
obligated to issue shares of its common stock to Mr. Lenz over a period of two
years following this offering. For purposes of these issuances, the number of
shares of common stock to be issued is determined using an assumed initial
public offering price of $13.50 per share.

     - 8,230 shares issuable upon the closing of this offering;

     - 8,230 shares issuable 12 months after the closing of this offering; and

     - 8,230 shares issuable 24 months after the closing of this offering.

     Mr. Lenz is presently an independent contractor of Andover.Net.

  Animation Factory Purchase Agreement

     Under the terms of the Asset Purchase Agreement between Eclipse Digital
Imaging, Inc. and Andover.Net, dated as of June 18, 1999, Andover.Net purchased
certain assets of Eclipse Digital Imaging including certain graphical and
artistic web sites known as Animation Factory. Andover.Net is obligated to issue
shares of its common stock to Eclipse Digital Imaging over a period of two years
following this offering. For the purposes of these issuances, the number of
shares of common stock to be issued is determined using an assumed initial
public offering price of $13.50 per share.

     - 14,815 shares issuable upon the closing of this offering;

     - 14,815 shares issuable 12 months after the closing of this offering; and

     - 14,815 shares issuable 24 months after the closing of this offering.

     James Maloney and Art Holden, employees of Andover.Net, are substantial
stockholders of Eclipse Digital Imaging.

                                       51
59

                          DESCRIPTION OF CAPITAL STOCK

     Upon completion of the offering, our authorized capital stock will consist
of 100,000,000 shares of common stock, $.01 par value per share, of which
15,000,000 shares will be outstanding, and 1,000,000 shares of preferred stock,
$.01 par value per share, none of which will be outstanding. The following
description of our capital stock and certain provisions of our restated
certificate of incorporation, or the certificate of incorporation, and bylaws is
a summary and is qualified in its entirety by the provisions of the certificate
of Incorporation and bylaws, copies of which have been filed as exhibits to this
registration Statement of which this prospectus is a part.

COMMON STOCK

     Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of the stockholders, including the election of
directors. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election if they choose to do so. The certificate of incorporation
does not provide for cumulative voting for the election of directors. Holders of
common stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the board of directors out of funds legally
available therefor, and shall be entitled to receive, pro rata, all assets of
Andover.Net available for distribution to such holders upon liquidation. Holders
of common stock have no preemptive, subscription or redemption rights.

PREFERRED STOCK

     We are authorized to issue "blank check" preferred stock, which may be
issued from time to time in one or more series upon authorization by our board
of directors. The board of directors, without further approval of the
stockholders, is authorized to fix the dividend rights and terms, conversion
rights, voting rights, redemption rights and terms, liquidation preferences and
any other rights, preferences, privileges and restrictions applicable to each
series of the preferred stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of the
holders of common stock and, under certain circumstances, make it more difficult
for a third party to gain control of Andover.Net, discourage bids for our common
stock at a premium or otherwise adversely affect the market price of our common
stock. We currently have no plans to issue any preferred stock.

CERTAIN CERTIFICATE OF INCORPORATION, BYLAW AND STATUTORY ANTI-TAKEOVER
PROVISIONS AFFECTING STOCKHOLDERS

     Classified Board.  Our board of directors is divided into three classes,
each of which, after a transitional period, will serve for three years, with one
class being elected each year. Removal of a member of the board of directors
with or without cause requires a majority vote of the board of directors or of
the stockholders. A majority of the remaining directors then in office, though
less than a quorum, and the stockholders, are empowered to fill any vacancy on
the board of directors. A majority vote of the stockholders is required to
alter, amend or repeal the foregoing provisions.

     Section 203 of Delaware Law.  We are subject to the "business combination"
statute of the Delaware General Corporation Law. In general, this statute
prohibits a publicly held Delaware corporation from engaging in various
"business combination" transactions with any "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless (a) the transaction is approved by
the board of directors prior to the date the interested stockholder obtained
such status, (b) upon consummation of the transaction which resulted in the
shareholder 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 by (x) persons who are directors and
also officers and (y) 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 (c) on or

                                       52
60

subsequent to such date the "business combination" is approved by the board of
directors and authorized at an annual or special meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the "interested stockholder." A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
a stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's voting stock. By virtue of our decision not to elect out of the
statute's provisions, the statute applies to us. None of our current
stockholders is an "interested stockholder" because their acquisition of shares
was approved by our board of directors. The statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.

     Directors Liability.  The certificate of incorporation provides that no
director shall be personally liable to us or our stockholders for monetary
damages for breach of fiduciary duty as a director notwithstanding any provision
of law imposing such liability, provided that, to the extent provided by
applicable law, the certificate of incorporation shall not eliminate the
liability of a director for (a) any breach of the director's duty of loyalty to
us or our stockholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) acts or omissions in
respect of certain unlawful dividend payments or stock redemptions or
repurchases or (d) any transaction from which such director derives improper
personal benefit. The effect of this provision is to eliminate the rights of
Andover.Net and our stockholders (through stockholders' derivative suits against
Andover.Net) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (a) through (d) above. The limitations summarized above, however, do not
affect the ability of Andover.Net or our stockholders to seek non-monetary based
remedies, such as an injunction or rescission, against a director for breach of
his fiduciary duty nor would such limitations limit liability under the Federal
securities laws. Our bylaws provide that we shall, to the extent permitted by
Delaware law, as amended from time to time, indemnify and advance expenses to
the currently acting and former directors, officers, employees and agents of
Andover.Net or of another corporation, partnership, joint venture, trust or
other enterprise if serving at our request arising in connection with their
acting in such capacities.

     Certain provisions described above may also have the effect of delaying
stockholder actions with respect to certain business combinations and the
election of new members to our board of directors. As such, the provisions could
have the effect of discouraging open market purchases of our common stock
because they may be considered disadvantageous by a stockholder who desires to
participate in a business combination with us or elect a new director to our
board.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

     Following this offering, the holders of approximately 9,497,449 shares of
common stock will have certain rights to register those shares under the
Securities Act of 1933, as amended, the Securities Act, pursuant to a third
amended and restated registration rights agreement. Subject to certain
limitations in the agreement, the holders of at least 50% of:

     - the shares issued upon conversion of the Series B convertible preferred
       stock; or

     - the shares of common stock held by former holders of Series A redeemable
       preferred stock

may require, on a total of three occasions, Andover.Net to use its best efforts
to register all such shares for resale to the public. These holders are
entitled, if Andover.Net registers any of its common stock for its own account
or for the account of other security holders, to include their shares of common
stock in such registration. These holders may also require Andover.Net to
register all or a portion of their shares of common stock in a registration
statement on Form S-3 when Andover.Net is eligible to use that form, provided
that the proposed aggregate price to the public of any offering is at least
$1,000,000. Andover.Net will bear all fees, costs and expenses of these
registrations, other than underwriting discounts and commissions.

                                       53
61

     All of the registration rights described above are subject to conditions
and limitations, among them the right of the underwriters in any underwritten
offering to limit the number of shares of common stock to be included in a
registration. Registrations of any shares of common stock held by holders with
registration rights would result in these shares being freely tradable without
restriction under the Securities Act upon the effective date of the
registration. Under the agreement, Andover.Net has also agreed to indemnify the
holders of registration rights.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock is BankBoston, N.A.

                                       54
62

                        SHARES ELIGIBLE FOR FUTURE SALE

     Upon completion of this offering, Andover.Net will have outstanding
15,000,000 shares of common stock. Of these shares, the 4,000,000 shares offered
hereby (4,600,000 shares if the Underwriters' over-allotment option is exercised
in full) will be freely tradable without restriction or further registration
under the Securities Act, unless purchased by "affiliates" of Andover.Net as
that term is defined in Rule 144 described below. The remaining 11,000,000
shares of common stock outstanding upon closing of the offering are "restricted
securities" as that term is defined in Rule 144. Of the remaining 11,000,000
shares, approximately 5,004,838 shares are subject to 180 day lock-up agreements
(described below).

     Beginning 90 days after commencement of this offering, approximately
2,946,906 shares will become eligible for sale pursuant to Rule 144 or Rule 701
under the Securities Act ("Rule 701"). Upon expiration of the lock-up
agreements, an aggregate of 7,057,506 shares will become immediately eligible
for sale subject to the timing, volume, and manner of sale restrictions of Rule
144. Commencing                     , 2001, all outstanding shares not owned by
affiliates of Andover.Net (currently 2,946,906 shares) will be eligible for sale
pursuant to Rule 144(k). In addition, 913,178 additional shares of common stock
subject to outstanding vested stock options could also be sold as of January 1,
2000, subject in some cases to compliance with certain volume limitations as
described below.

     In general, under Rule 144, as amended, a person (or persons whose shares
are aggregated) who has beneficially owned shares for at least one year
(including the holding period of any prior owner except an affiliate from whom
such shares were purchased) is entitled to sell in "brokers' transactions" or to
market makers, within any three-month period commencing 90 days after the date
of this Prospectus, a number of shares that does not exceed the greater of (i)
one percent of the number of shares of common stock then outstanding
(approximately 150,000 shares immediately after the completion of this offering)
or (ii) generally, the average weekly trading volume in our common stock during
the four calendar weeks preceding the required filing of a Form 144 with respect
to such sale. Sales under Rule 144 are generally subject to the availability of
current public information about Andover.Net. Under Rule 144(k), a person who is
not deemed to have been an affiliate of Andover.Net at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years (including the holding period of any prior owner
other than an affiliate from whom such shares were purchased), is entitled to
sell such shares without having to comply with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Under Rule 701,
persons who purchase shares upon exercise of options granted prior to the
effective date of this offering are entitled to sell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.

     Each of our directors, executive officers and holders of 5% or more of our
outstanding capital stock has agreed to certain restrictions on their ability to
sell, offer, contract or grant any option to sell, pledge, transfer or otherwise
dispose of shares of our common stock for a period of 180 days after the date of
this prospectus, without the prior written consent of WR Hambrecht + Co. Each of
the holders of less than 5% of our outstanding capital stock has agreed to
identical restrictions covering a period of 90 days from the date of this
prospectus.

     The holders of an aggregate of 9,497,449 shares of common stock or their
transferees are entitled to rights with respect to the registration of these
shares under the Securities Act. See "Description of Capital Stock-Registration
Rights of Certain Holders."

     Prior to this offering, there has not been any public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect the prevailing market prices and impair
Andover.Net's ability to raise capital through the sale of equity securities.

                                       55
63

                              PLAN OF DISTRIBUTION

     In accordance with the terms of an underwriting agreement, WR Hambrecht +
Co., LLC, Advest, Inc. and DLJdirect Inc., as underwriters, will purchase from
Andover.Net the following respective number of shares of common stock at the
public offering price less the underwriting discounts and commissions described
on the cover page of this prospectus.
NUMBER OF
                        UNDERWRITER                            SHARES
                        -----------                           ---------
WR Hambrecht + Co., LLC.....................................
Advest, Inc. ...............................................
DLJdirect Inc...............................................
                                                              ---------
          Total.............................................  4,000,000
                                                              =========
The underwriting agreement provides that the obligations of the
underwriters are subject to conditions, including the absence of any material
adverse change in Andover.Net's business, and the receipt of certificates,
opinions and letters from Andover.Net and its counsel and independent
accountants. Subject to those conditions, the underwriters are committed to
purchase all shares of common stock offered if any of the shares are purchased.

     The underwriters propose to offer the shares of common stock directly to
the public at the offering price set forth on the cover page of this prospectus,
as this price is determined by the process described below, and to certain
dealers at this price less a concession not in excess of $     per share. Any
dealers or agents that participate in the distribution of the common stock may
be deemed to be underwriters within the meaning of the Securities Act, and any
discounts, commissions or concessions received by them and any provided by the
sale of the shares by them might be deemed to be underwriting discounts and
commissions under the Securities Act. After the completion of the initial public
offering of the shares, the public offering price and other selling terms may be
changed by the underwriters.

     The public offering price described on the cover page of this prospectus
will be based on the results of an auction process, rather than solely through
negotiations between Andover.Net and the underwriters. The plan of distribution
of the offered shares differs somewhat from traditional underwritten public
offerings of equity securities.

     The auction process will proceed as follows:

     - Prior to the effectiveness of the registration statement relating to this
       offering, the underwriters and participating dealers will solicit
       conditional offers to purchase from prospective investors through the
       Internet as well as by traditional means. The conditional offers to
       purchase will specify the number of shares the potential investor
       proposes to purchase and the price the investor is willing to pay for the
       shares. At least two business days prior to the expected effectiveness of
       the registration statement, WR Hambrecht + Co will send an e-mail (the
       confirmation e-mail) to or contact by telephone, voice mail or facsimile
       investors who have submitted conditional offers, advising them that the
       registration statement for the offering may be declared effective
       shortly, that investors should carefully consider the conditional offer
       that they have transmitted previously, and requesting that the investors
       affirmatively confirm their previously transmitted conditional offer to
       purchase. An affirmative confirmation from an investor remains valid for
       a period of seven business days from the transmission of the confirmation
       e-mail. If WR Hambrecht + Co anticipates that the registration statement
       will not be effective within this seven business day period, WR Hambrecht
       + Co will send out another confirmation e-mail approximately two business
       days prior to the revised time that WR Hambrecht + Co expects the
       registration statement to be effective. All conditional offers to
       purchase that are not confirmed prior to the time specified by the
       underwriters or, if the time is not specified, the pricing of the
       offering, will be deemed withdrawn.

     - After effectiveness, the underwriters will contact by e-mail, telephone,
       voice mail or facsimile all bidders who have affirmatively confirmed
       their conditional offers, to notify them that the registration

                                       56
64

       statement is effective and that WR Hambrecht + Co can accept his or her
       conditional offer to purchase by notice to the bidder sent after the
       auction has closed and the offering has been priced. If the auction is
       closed and the offering is priced on the same day that the registration
       statement becomes effective, notice of effectiveness will be included in
       the notice of acceptance. The bidder has the right to withdraw his or her
       conditional offer at any time prior to the time at which WR Hambrecht +
       Co sends the notice of acceptance by one of the means specified above.
       New conditional offers to purchase may be placed at any time prior to the
       close of the auction. After the auction is closed and a clearing price is
       set as described below, WR Hambrecht + Co will accept the conditional
       offers to purchase from those bidders with conditional offers to purchase
       at or above the clearing price.

     The public offering price will ultimately be determined by negotiation
between the underwriters and Andover.Net following the close of the auction. The
principal factor in establishing the public offering price will be the price per
share, or clearing price, resulting from the auction that equals the highest
price set forth in valid conditional offers at which all of the shares may be
sold to potential investors. The public offering price may be lower (but will
not be higher) than the clearing price based on negotiations between the
underwriters and Andover.Net. However, the clearing price will always determine
the allocation of shares. Thus, if the public offering price is below the
clearing price, all conditional offers which are below the clearing price will
be rejected even if they are higher than the public offering price. If
sufficient conditional offers are not received or Andover.Net does not consider
the clearing price to be adequate or the underwriters and Andover.Net are not
able to reach agreement on the offering price, Andover.Net and the underwriters
will either postpone or cancel the offering or file a post-effective amendment
and conduct a new auction.

     - A simplified example of how the public offering price will be determined
       via the auction process is as follows: Company X offers to sell 100
       shares in its public offering through this auction process. WR Hambrecht
       + Co, on behalf of Company X, receives five conditional offers to
       purchase, all of which are kept confidential until the auction process
       ends. The first conditional offer to purchase is to pay $10 per share for
       10 shares, the second is for $9 per share for 30 shares, the third for $8
       per share for 60 shares, the fourth for $8 per share for 40 shares and
       the last for $7 per share for 80 shares. Assuming that all of these
       conditional offers to purchase are confirmed and not withdrawn or
       modified prior to acceptance by WR Hambrecht + Co, and that no additional
       conditional offers to purchase are received, the clearing price used to
       determine the public offering price would be $8 a share because $8 equals
       the highest price at which all 100 shares may be sold to potential
       investors who have submitted valid bids. The two potential investors with
       the highest conditional offers to purchase would receive all the shares
       they requested, totaling 40 shares. The next two potential investors
       would receive the remaining 60 shares in proportion to the amounts they
       asked for, or 36 and 24 shares each. The potential investor with the
       lowest conditional offer to purchase would receive no shares in this
       example.

     - Valid conditional offers to purchase are those that meet the
       requirements, including eligibility, account status and size, established
       by the underwriters or participating dealers. In addition to minimum
       account balances, a prospective investor submitting a conditional offer
       to purchase through a WR Hambrecht + Co brokerage account may be required
       to have an account balance equal to or in excess of an amount specified
       by WR Hambrecht + Co. Although funds may be required to be in an account
       as a condition to the conditional offer to purchase being considered
       valid, the funds will not be transferred to the underwriters until the
       closing of the offering. Conditions for valid conditional offers to
       purchase, including eligibility standards and account funding
       requirements of other underwriters or participating dealers may vary.

     - The auction will close on a date estimated and publicly disclosed in
       advance by the underwriters on the web site of WR Hambrecht + Co. The
       offered shares will be purchased from Andover.Net by the underwriters and
       sold through the underwriters and participating dealers to investors who
       have submitted offers to purchase at or in excess of the clearing price,
       and these investors will be notified by e-mail, telephone, voice mail,
       facsimile or mail as soon as practicable following the close of the
       auction that their conditional offers to purchase have been accepted. The
       number of shares sold to an investor submitting a conditional offer to
       purchase precisely at the clearing price may be subject to a
                                       57
65

       pro rata reduction. Each participating dealer has agreed with the
       underwriters to sell shares they purchase from the underwriters in this
       manner, unless otherwise consented to by the underwriters. The
       underwriters reserve the right to reject bids that they deem
       manipulative, disruptive or necessary or beneficial to facilitate the
       orderly completion of the offering, and reserve the right, in exceptional
       circumstances, to alter this method of allocation as they deem necessary
       to effect a fair and orderly distribution of the shares. For example,
       large orders may be reduced to insure a public distribution and
       conditional offers to purchase may be rejected by the underwriters or
       participating dealers based on eligibility or creditworthiness criteria.

     Price and volume volatility in the market for Andover.Net's common stock
may result from the somewhat unique nature of the proposed plan of distribution.
Price and volume volatility in the market for Andover.Net's common stock after
the completion of this offering may adversely affect the market price of
Andover.Net's common stock.

     Andover.Net has granted to the underwriters an option, exercisable no later
than 30 days after the date of this prospectus, to purchase up to an aggregate
of 600,000 additional shares of common stock at the offering price, less the
underwriting discount, set forth on the cover page of this prospectus. To the
extent that the underwriters exercise this option, the underwriters will have a
firm commitment to purchase the additional shares, and Andover.Net will be
obligated to sell the additional shares to the underwriters. The underwriters
may exercise the option only to cover over-allotments made in connection with
the sale of shares offered. The underwriting agreement provides that Andover.Net
will indemnify the underwriters against specified liabilities, including
liabilities under the Securities Act, or contribute to payments that the
underwriters may be required to make.

     Andover.Net has agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of common stock, or any options or warrants to purchase
common stock other than the shares of common stock or options to acquire common
stock issued under Andover.Net's stock option plan(s), for a period of 90 days
after the date of this prospectus, except with the prior written consent of WR
Hambrecht + Co. Each of our directors, executive officers and holders of 5% or
more of our outstanding capital stock has agreed to certain restrictions on
their ability to sell, offer, contract or grant any option to sell, pledge,
transfer or otherwise dispose of shares of our common stock for a period of 180
days after the date of this prospectus, without the prior written consent of WR
Hambrecht + Co. Each of the holders of less than 5% of our outstanding capital
stock has agreed to identical restrictions covering a period of 90 days from the
date of this prospectus.

     Prior to the offering, there has been no public market for Andover.Net's
common stock. The initial public offering price for the common stock will be
determined by the process described above and does not necessarily bear any
direct relationship to Andover.Net's assets, current earnings or book value or
to any other established criteria of value, although these factors were
considered in establishing the initial public offering price range. Other
factors considered in determining the initial public offering price range
include:

     -  market conditions;

     -  the industry in which Andover.Net operates;

     -  an assessment of Andover.Net's management;

     -  Andover.Net's operating results;

     -  Andover.Net's capital structure;

     -  the business potential of Andover.Net;

     -  the demand for similar securities of comparable companies; and

     -  other factors deemed relevant.

     In connection with the offering, persons participating in the offering may
purchase and sell shares of common stock on the open market. These transactions
may include short sales, stabilizing transactions in accordance with Rule 104 of
Regulation M under the Securities Exchange Act of 1934, as amended, the Exchange
Act, and purchases to cover positions created by short sales. Short sales
involve the sale by the underwriters of a greater number of shares than they are
required to purchase in the offering which creates a

                                       58
66

syndicate short position. Stabilizing transactions consist of certain bids or
purchases made for the purpose of preventing or retarding a decline in the
market price of the common stock. The underwriters also may impose a penalty
bid. This occurs when a particular underwriter repays to the underwriters a
portion of the underwriting discount received by it because the representative
has repurchased shares sold by or for the account of such underwriter in
stabilizing or short covering transactions. These activities by the underwriters
may stabilize, maintain or otherwise affect the market price of the common
stock. As a result, the price of the common stock may be higher than the price
that otherwise might exist in the open market. If these activities are
commenced, they may be discontinued by the underwriters at any time. These
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.

     Persons participating in this offering may also engage in passive market
making transactions in the common stock on the Nasdaq National Market. Passive
market making consists of displaying bids on the Nasdaq National Market limited
by the prices of independent market makers and affecting purchases limited by
such prices and in response to order flow. Rule 103 of Regulation M promulgated
by the SEC limits the amount of net purchases that each passive market maker may
make and the displayed size of each bid.

     Passive market making may stabilize the market price of the common stock at
a level above that which might otherwise prevail in the open market and, if
commenced, may be discontinued at any time.

     WR Hambrecht + Co currently intends to act as a market maker for the common
stock following this offering. However, WR Hambrecht + Co is not obligated to do
so and may discontinue any market making at any time.

     WR Hambrecht + Co is an investment banking firm formed as a limited
liability company in February 1998. In addition to this offering, WR Hambrecht +
Co has engaged in the business of public and private equity investing and
financial advisory services since its inception. The manager of WR Hambrecht +
Co, William R. Hambrecht, has 40 years of experience in the securities industry.

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for Andover.Net by Hutchins, Wheeler & Dittmar, A Professional Corporation,
Boston, Massachusetts. Certain members of Hutchins, Wheeler & Dittmar may be
deemed to have a beneficial interest in an aggregate of 5,747 shares of common
stock. David P. Kreisler, a member of Hutchins, Wheeler and Dittmar, is also the
Secretary of Andover.Net. Certain legal matters in connection with the offering
will be passed upon for the underwriters by Willkie Farr & Gallagher, New York,
New York.

                                    EXPERTS

     The financial statements of (a) Andover.Net, Inc. as of September 30, 1998
and June 30, 1999, and for each of the two years in the period ending September
30, 1998 and for the nine month period ending June 30, 1999, (b) the financial
statements of BlockStackers, Inc. as of December 31, 1998 and for the period
from Inception (August 24, 1998) through December 31, 1998 and (c) the financial
statements of Eclipse Digital Imaging, Inc. as of December 31, 1998 and for the
year then ended, included in the registration statement of which this prospectus
forms a part have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.

                                       59
67

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission, or SEC, for the common stock we are offering by this
prospectus. This prospectus 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 us and our common stock, we make reference to the
registration statement and to the exhibits and schedules filed therewith.
Statements contained in this prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference. A copy of the registration statement may be
inspected by anyone without charge at the SEC's principal office in Washington,
D.C., and copies of all or any part of the registration statement may be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of certain fees prescribed by the SEC.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. The SEC maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of the web site
is http://www.sec.gov. Upon completion of the offering, we will be subject to
the information reporting requirements of the Securities Exchange Act of 1934,
as amended and, in accordance therewith, will file reports, proxy statements and
other information with the SEC.

     We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent public accountants and quarterly
reports for the first three fiscal quarters of each fiscal year containing
unaudited interim financial information.

                                       60
68

                               ANDOVER.NET, INC.

                         INDEX TO FINANCIAL STATEMENTS
PAGE
                                                              ----
ANDOVER.NET, INC.
Report of Independent Public Accountants....................   F-2
Balance Sheets as of September 30, 1998 and June 30, 1999...   F-3
Statements of Operations for the Years Ended September 30,
  1997 and 1998 and for the Nine Months Ended June 30, 1998
  (Unaudited) and 1999......................................   F-4
Statements of Stockholders' Equity (Deficit) for the Years
  Ended September 30, 1997 and 1998 and the Nine Months
  Ended June 30, 1999.......................................   F-5
Statements of Cash Flows for the Years Ended September 30,
  1997 and 1998 and for the Nine Months Ended June 30, 1998
  (Unaudited) and 1999......................................   F-6
Notes to Financial Statements...............................   F-7

ANDOVER.NET, INC. PRO FORMA UNAUDITED FINANCIAL INFORMATION
Introduction to Pro Forma Financial Information.............  F-21
Pro Forma Combined Statement of Operations for the Year
  Ended September 30, 1998..................................  F-22
Pro Forma Combined Statement of Operations for the Nine
  Months Ended June 30, 1999................................  F-23

BLOCKSTACKERS, INC.
Report of Independent Public Accountants....................  F-24
Balance Sheet as of December 31, 1998.......................  F-25
Statement of Operations for the Period from Inception
  (August 24, 1998) through December 31, 1998...............  F-26
Statements of Stockholders' Deficit from Inception (August
  24, 1998) through December 31, 1998.......................  F-27
Statements of Cash Flows for the Period from Inception
  (August 24, 1998) through December 31, 1998...............  F-28
Notes to Financial Statements...............................  F-29

ECLIPSE DIGITAL IMAGING, INC.
Report of Independent Public Accountants....................  F-32
Balance Sheet as of December 31, 1998.......................  F-33
Statement of Operations for the Years Ended December 31,
  1998......................................................  F-34
Statement of Partners' Capital for the Year Ended December
  31, 1998..................................................  F-35
Statement of Cash Flows for the Year Ended December 31,
  1998......................................................  F-36
Notes to Financial Statements...............................  F-37
F-1
69

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Andover.Net, Inc.:

We have audited the accompanying balance sheets of Andover.Net, Inc. (a Delaware
corporation) as of September 30, 1998 and June 30, 1999 and the related
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended September 30, 1997 and 1998 and for the nine months ended June 30,
1999. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Andover.Net, Inc. as of
September 30, 1998 and June 30, 1999 and the results of its operations and cash
flows for the years ended September 30, 1997 and 1998 and for the nine months
ended June 30, 1999, in conformity with generally accepted accounting
principles.

Boston, Massachusetts
September 16, 1999

                                       F-2
70

                               ANDOVER.NET, INC.

                                 BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, 1999
                                                           SEPTEMBER 30,    ----------------------
                                                               1998         ACTUAL      PRO FORMA
                                                           -------------    -------    -----------
                                                                                       (NOTE 2(C))
                                                                                       (UNAUDITED)
ASSETS
Current assets:
  Cash and cash equivalents..............................     $   196       $ 1,610      $11,710
  Accounts receivable, net of allowance of $13 and $35 as
     of September 30, 1998 and June 30, 1999,
     respectively........................................         308           398          398
  Other current assets...................................           6            37           37
                                                              -------       -------      -------
          Total current assets...........................         510         2,045       12,145
Property and equipment, net..............................          23           168          168
Other assets:
  Intangible assets......................................          --         2,922        2,922
  Other..................................................          --            35           35
                                                              -------       -------      -------
                                                                   --         2,957        2,957
                                                              -------       -------      -------
                                                              $   533       $ 5,170      $15,270
                                                              =======       =======      =======

            LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable.......................................     $   121       $   134      $   134
  Accrued expenses.......................................         159           303          303
  Long-term debt -- current portion......................          --           664          664
  Convertible notes payable to stockholders..............          --         2,090           --
                                                              -------       -------      -------
          Total current liabilities......................         280         3,191        1,101
Long-term debt...........................................          --           487          487
Commitments and contingencies (Note 8)
Series A redeemable preferred stock, at redemption value
  (Note 9)...............................................       2,362         4,713        4,713
Series B redeemable convertible preferred stock (Note
  12(c)).................................................          --            --           --
Stockholders' equity (deficit):
  Common stock, $0.01 par value -- authorized -- 100,000
     shares; issued and outstanding -- 5,119 shares at
     September 30, 1998, 7,951 shares at June 30, 1999
     and 10,968 pro forma at June 30, 1999...............          51            79          110
  Additional paid in capital.............................         105         2,338       28,755
  Deferred compensation..................................          --          (863)        (863)
  Accumulated deficit....................................      (2,265)       (4,775)     (19,033)
                                                              -------       -------      -------
          Total stockholders' equity (deficit)...........      (2,109)       (3,221)       8,969
                                                              -------       -------      -------
                                                              $   533       $ 5,170      $15,270
                                                              =======       =======      =======
The accompanying notes are an integral part of these financial statements.
                                       F-3
71

                               ANDOVER.NET, INC.

                            STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
NINE MONTHS ENDED
                                               YEARS ENDED SEPTEMBER 30,             JUNE 30,
                                               --------------------------    ------------------------
                                                  1997           1998           1998          1999
                                               -----------    -----------    -----------    ---------
                                                                             (UNAUDITED)
Net revenue:
  Advertising................................   $     469      $   1,290      $     986     $     891
  Barter advertising.........................          --             --             --           218
  Software...................................         272             --             --            --
                                                ---------      ---------      ---------     ---------
          Total revenue......................         741          1,290            986         1,109
                                                ---------      ---------      ---------     ---------
Cost of revenue:
  Editorial content and related..............         136            327            255           430
  Software...................................         167             --             --            --
                                                ---------      ---------      ---------     ---------
          Total cost of revenue..............         303            327            255           430
                                                ---------      ---------      ---------     ---------
Gross profit.................................         438            963            731           679
Operating expenses:
  Sales and marketing........................         496            744            582         1,118
  General and administrative.................         338            360            290           678
  Research and development...................         194            304            200           472
  Amortization of deferred compensation......          --             --             --           720
                                                ---------      ---------      ---------     ---------
          Total operating expenses...........       1,028          1,408          1,072         2,988
                                                ---------      ---------      ---------     ---------
          Loss from operations...............        (590)          (445)          (341)       (2,309)
Interest income..............................           1             20             16            59
Interest expense.............................         (75)           (49)           (49)           --
                                                ---------      ---------      ---------     ---------
          Net loss...........................   $    (664)     $    (474)     $    (374)    $  (2,250)
                                                =========      =========      =========     =========
Accrued dividends on redeemable preferred
  stock......................................          41            134             89           260
                                                ---------      ---------      ---------     ---------
          Net loss attributable to common
            stockholders.....................   $    (705)     $    (608)     $    (463)    $  (2,510)
                                                =========      =========      =========     =========
Basic and diluted net loss per share
  applicable to common stockholders (Note
  2(j))......................................   $   (0.29)     $   (0.12)     $   (0.09)    $   (0.36)
                                                =========      =========      =========     =========
Basic and diluted weighted average shares
  outstanding................................       2,468          5,110          5,106         6,990
                                                =========      =========      =========     =========
Pro forma net loss per share (Note 2(j)).....                  $   (0.12)                   $   (0.36)
                                                               =========                    =========
Pro forma basic and diluted weighted average
  shares outstanding.........................                      5,110                        6,992
                                                               =========                    =========
The accompanying notes are an integral part of these financial statements.
                                       F-4
72

                               ANDOVER.NET, INC.

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
COMMON STOCK
                                                  NO PAR VALUE
                                               ------------------                  ADDITIONAL                      TOTAL
                                               NUMBER OF              DEFERRED      PAID-IN     ACCUMULATED    STOCKHOLDERS'
                                                SHARES     AMOUNT   COMPENSATION    CAPITAL       DEFICIT     EQUITY (DEFICIT)
                                               ---------   ------   ------------   ----------   -----------   ----------------
Balance, September 30, 1996..................    1,763      $ 18      $    --       $    --      $   (813)        $  (795)
  Recapitalization of preferred stock........    1,709        17           --            --          (139)           (122)
  Issuance of common stock...................    1,206        12           --            78            --              90
  Issuance costs related to Series A
    redeemable preferred stock...............       --        --           --            --           (41)            (41)
  Conversion of convertible promissory notes
    to Series A redeemable preferred stock
    and common stock.........................      402         4           --            26            --              30
  Exercise of stock options..................       15        --           --            --            --              --
  Net loss...................................       --        --           --            --          (664)           (664)
                                                ------      ----      -------       -------      --------         -------
Balance, September 30, 1997..................    5,095        51           --           104        (1,657)         (1,502)
  Accrued dividends on Series A redeemable
    preferred stock..........................       --        --           --            --          (134)           (134)
  Exercise of stock options..................       24        --           --            --            --              --
  Net loss...................................       --        --           --            --          (474)           (474)
                                                ------      ----      -------       -------      --------         -------
Balance, September 30, 1998..................    5,119        51           --           104        (2,265)         (2,110)
  Accrued dividends on Series A redeemable
    preferred stock..........................       --        --           --            --          (226)           (226)
  Issuance of common stock...................    2,636        26           --           651            --             677
  Issuance costs related to Series A
    redeemable preferred stock...............       --        --           --            --           (34)            (34)
  Exercise of stock options..................      196         2           --            --            --               2
  Deferred compensation related to stock
    options..................................       --        --       (1,583)        1,583            --              --
  Amortization of deferred compensation......       --        --          720            --            --             720
  Net loss...................................       --        --           --            --        (2,250)         (2,250)
                                                ------      ----      -------       -------      --------         -------
Balance, June 30, 1999.......................    7,951      $ 79      $  (863)      $ 2,338      $ (4,775)        $(3,221)
                                                ======      ====      =======       =======      ========         =======
Conversion of Series B redeemable convertible
  preferred stock to common stock
  (Unaudited)................................    3,017        31           --        26,417       (14,258)         12,190
                                                ------      ----      -------       -------      --------         -------
Pro forma balance, June 30, 1999 (Unaudited)
  (Note) 2(c)................................   10,968      $110      $  (863)      $28,755      $(19,033)        $ 8,969
                                                ======      ====      =======       =======      ========         =======
The accompanying notes are an integral part of these financial statements.
                                       F-5
73

                               ANDOVER.NET, INC.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
YEARS ENDED           NINE-MONTHS
                                                        SEPTEMBER 30,         ENDED JUNE 30,
                                                       ---------------    ----------------------
                                                        1997     1998        1998         1999
                                                       ------    -----    -----------    -------
                                                                          (UNAUDITED)
Cash flows from operating activities:
  Net loss...........................................  $ (664)   $(474)      $(374)      $(2,250)
  Adjustments to reconcile net loss to net cash used
     in operating activities --
     Depreciation and amortization...................       6        9           6            23
     Amortization of deferred compensation...........      --       --          --           720
     Changes in operating assets and liabilities --
       Accounts receivable...........................     (91)    (136)       (175)          (90)
       Other current assets..........................     107       69          72           (32)
       Accounts payable..............................      45     (120)        (88)           12
       Accrued expenses..............................      68       78          62           124
                                                       ------    -----       -----       -------
          Net cash used in operating activities......    (529)    (574)       (497)       (1,493)
                                                       ------    -----       -----       -------
Cash flows from investing activities:
  Cash paid for acquisitions.........................      --       --          --        (1,750)
  Purchases of property and equipment................      (8)     (17)        (12)         (168)
  Increase in other assets...........................      --       --          --           (35)
                                                       ------    -----       -----       -------
          Net cash used in investing activities......      (8)     (17)        (12)       (1,953)
                                                       ------    -----       -----       -------
Cash flows from financing activities:
  Proceeds from the issuance of AAT Series B
     convertible preferred stock.....................      10       --          --            --
  Proceeds from the issuance of Series A redeemable
     preferred stock, net of issuance costs..........     769       --          --         2,091
  Proceeds from issuance of common stock.............      90       --          --           677
  Proceeds from exercise of ATT Series B warrants....     103       --          --            --
  Payments on related party notes payable to
     stockholders....................................     (26)     (50)         --            --
  Proceeds from convertible notes payable to
     stockholders....................................      --       --          --         2,090
  Proceeds from convertible notes payable to
     stockholders and issuance of Series A redeemable
     preferred stock and common stock................     300       --          --            --
  Exercise of stock options..........................      --       --           1             2
                                                       ------    -----       -----       -------
          Net cash provided by (used in) financing
            activities...............................   1,246      (50)          1         4,860
                                                       ------    -----       -----       -------
Net increase (decrease) in cash and cash
  equivalents........................................     709     (641)       (508)        1,414
Cash and cash equivalents, beginning of period.......     128      837         837           196
                                                       ------    -----       -----       -------
Cash and cash equivalents, end of period.............  $  837    $ 196       $ 329       $ 1,610
                                                       ======    =====       =====       =======
Supplemental disclosure of cash flow information:
  Cash paid for interest.............................  $   48    $  27       $  --       $    --
                                                       ======    =====       =====       =======
Supplemental disclosure of noncash financing
  transactions:
  Conversion of notes payable to Series A redeemable
     preferred stock and common stock................  $  100    $  --       $  --       $    --
                                                       ======    =====       =====       =======
The accompanying notes are an integral part of these financial statements.
                                       F-6
74

                               ANDOVER.NET, INC.

                         NOTES TO FINANCIAL STATEMENTS
                (INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)

(1) OPERATIONS

     Andover.Net, Inc. (Andover.Net) (formerly Andover Advanced Technologies,
Inc.) is a commercial internet web site designer and developer. Andover.Net has
developed a network of web sites providing news, information, products and
services to technology-oriented users. Andover.Net sells advertising to
companies whose products and services target these users. Prior to September 30,
1996, Andover.Net was a software publisher of multimedia and Internet tools. In
fiscal 1997, Andover.Net made the transition from a software publisher to web
site publisher, focusing all development and sales efforts on Web publishing
after March 31, 1997. The Company was originally incorporated in Massachusetts
in 1992. In September 1999, Andover Advanced Technologies, Inc. (AAT) was merged
into its wholly owned subsidiary, Andover.Net and changed its fiscal year-end to
December 31.

     Andover.Net is subject to the risks associated with emerging,
technology-oriented companies with a limited operating history, including a
developing business model, limited history of commerce on the Internet, initial
and continued market acceptance of Andover.Net's web sites, competition, the
ability to successfully market its current web sites, and the continued ability
to manage and fund Andover.Net's future operations.

     Since its inception, Andover.Net has incurred a significant accumulated
deficit and is devoting substantially all of its efforts toward marketing its
web sites and products. Andover.Net's ability to continue operating as a going
concern is dependent upon its ability to raise additional capital and to achieve
budgeted operating results. See Note 12 (c), which describes Andover.Net's
financing in September 1999.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying financial statements reflect the application of certain
significant accounting policies as described in this note and elsewhere in the
notes to financial statements.

  (a) Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of net revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

  (b) Interim Financial Statements

     The accompanying statements of operations and cash flows for the nine
months ended June 30, 1998 are unaudited, but, in the opinion of management,
include all adjustments, consisting or normal recurring adjustments, necessary
for a fair presentation of results for these interim periods. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted, although Andover.Net believes that the disclosures included are
adequate to make the information presented not misleading. The results of
operations for the nine months ended June 30, 1999 are not necessarily
indicative of the results to be expected for the entire fiscal year or any other
interim period.

  (c) Unaudited Pro Forma Presentation

     The unaudited pro forma balance sheet as of June 30, 1999 and the pro forma
net loss per share for the nine months ended June 30, 1999 gives effect to the
recent issuance and sale of 480,354 shares of Series B redeemable convertible
preferred stock on September 15, 1999 and the concurrent automatic conversion of
all convertible notes payable into 120,214 shares of Series B redeemable
convertible preferred stock equaling an
                                       F-7
75
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

aggregate of 600,568 shares of Series B redeemable convertible preferred stock
and the automatic conversion of the Series B convertible preferred stock into
3,014,851 shares of common stock upon the closing of the initial public
offering. The effects of the Slashdot.org and Eclipse Digital Imaging
acquisitions are included in the actual June 30, 1999 balance sheet data below,
as such acquisitions were consummated before June 30, 1999.

  (d) Revenue Recognition

     Advertising revenues are derived from the sale of advertising space on the
Company's various online services. Advertising revenues are recognized over the
period in which the advertisements are displayed, provided that no significant
Company obligations remain and collection of the receivable is reasonably
assured. Company obligations typically include guarantees of a minimum number of
"impressions" (times that an advertisement is viewed by users of the Company's
online services over a specified period of time). To the extent that minimum
guaranteed impressions are not met, the Company defers recognition of the
corresponding revenues until the guaranteed impressions are achieved.

     Revenues from barter transactions are recorded at the lower of the
estimated fair value of the advertisements, goods or services received or the
estimated fair value of the advertisements given. Andover.Net records barter
revenues only on the portion of the barter transactions which could be paid for
in cash if a barter arrangement was not in place. Otherwise, barter revenue is
not recognized. Revenues from barter transactions, representing advertising
space given, is recognized as income when advertisements are delivered on
Andover.Net's web site. Barter expense, representing advertising space received,
is recognized when our advertisements are run on other companies' web sites,
which is typically in the same period when the related barter revenue is
recognized. Andover.Net did not recognize any barter revenue for the years ended
September 30, 1997 and 1998 and recognized $218,000 of barter revenue for the
nine months ended June 30, 1999.

     Andover.Net derived revenue from web related software products during 1997
for use on desktop computers. Revenue from the licensing of software products
was recognized when the products were shipped, as there were no significant post
delivery obligations. Andover.Net provided for estimated returns and warranty
costs at the time of sale. Andover.Net did not offer maintenance and support on
its products. There were no significant software sales after fiscal 1997.

  (e) Sales and Marketing Expenses

     Sales and marketing expenses consist primarily of costs, including salaries
and sales commissions, of all personnel involved in the sales process and
related expenses. Sales and marketing expenses also include costs of advertising
and trade shows including barter advertising of $218,000 in 1999. All costs of
advertising are expensed as incurred. Advertising expense totaled approximately
$241,000, $546,000 and $421,000 for the years ended September 30, 1997, 1998 and
the nine months ended June 30, 1999, respectively.

  (f) Research and Development

     Research and Development expenses include all research and development
related direct costs, primarily salaries for Andover.Net research and
development personnel and outside contractors related to the development of new
web sites, improved design of existing web sites and related infrastructure.

  (g) Cash and Cash Equivalents

     Cash equivalents are stated at cost, which approximates fair market value.
Andover.Net considers highly liquid investments with original maturities of
ninety days or less to be cash equivalents and includes money market accounts
and commercial paper that are readily convertible to cash.

                                       F-8
76
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (h) Property and Equipment

     Andover.Net provides for depreciation using the straight-line method, by
charges to operations in amounts estimated to allocate the cost of property and
equipment over their estimated useful lives.
ESTIMATED
                 ASSET CLASSIFICATION                     USEFUL LIFE
                 --------------------                    -------------
Computer equipment.....................................     3 years
Furniture and fixtures.................................     7 years
Office equipment.......................................     5 years
Leasehold improvements.................................  Life of lease
Property and equipment consists of the following:
SEPTEMBER 30,    JUNE 30,
                                                            1998           1999
                                                        -------------    --------
                                                             (IN THOUSANDS)
Computer equipment....................................      $ 43           $119
Furniture and fixtures................................        13             36
Office equipment......................................        --             24
Leasehold improvements................................        --             44
                                                            ----           ----
                                                              56            223
Less -- Accumulated depreciation......................       (33)           (55)
                                                            ----           ----
                                                            $ 23           $168
                                                            ====           ====
(i) Concentration of Credit Risk

     Andover.Net has no significant off-balance sheet concentration of credit
risks such as foreign exchange contracts, options contracts or other foreign
hedging arrangements. Financial instruments that potentially expose Andover.Net
to concentrations of credit risk consist primarily of cash equivalents, accounts
receivable, accounts payable, notes payable and redeemable preferred stock.
Concentrated credit risk with respect to accounts receivable is limited to
certain customers to whom Andover.Net makes substantial sales. Andover.Net
performs periodic evaluations of its customers and generally does not require
collateral.

     The following table summarizes the number of customers that individually
comprise greater than 10% of total accounts receivable and total net revenue for
the periods presented:
YEARS ENDED
                                                            SEPTEMBER 30,      NINE MONTHS
                                                            --------------        ENDED
                                                            1997     1998     JUNE 30, 1999
                                                            -----    -----    -------------
Revenue --
  Customer A..............................................    *       26%          14%
  Customer B..............................................    *       20%           *
  Customer C..............................................   21%      10%           *
  Customer D..............................................    *        *            *
  Customer E..............................................    *        *           20%
F-9
77
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SEPTEMBER 30,
                                                            --------------
                                                            1997     1998     JUNE 30, 1999
                                                            -----    -----    -------------
Accounts Receivable --
  Customer A..............................................   17%      21%          18%
  Customer B..............................................    *        *           12%
  Customer C..............................................    *       35%           *
  Customer D..............................................   42%       *            *
  Customer E..............................................    *        *            *
------------------------------
* Less than 10%

  (j) Net Loss Per Share

     Basic and diluted net loss per common share is computed using the weighted
average number of shares of common stock outstanding during the period.
Potentially dilutive shares outstanding have been excluded because their effect
would be antidilutive.

     Pro forma net loss per share is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the conversion
of the convertible notes payable (Note 6) into Series B redeemable convertible
preferred stock and the automatic conversion of the Series B redeemable
convertible preferred stock into shares of Andover.Net's common stock, effective
upon the closing of Andover.Net's proposed initial public offering as if such
conversion occurred on the date of the original issuance.

     The weighted average common shares outstanding, the pro forma weighted
average number of common shares outstanding and the shares under option plans
and convertible notes payable which were antidilutive for all periods presented
are as follows (in thousands):
NINE MONTHS
                                                               YEAR ENDED         ENDED
                                                              SEPTEMBER 30,     JUNE 30,
                                                                  1998            1999
                                                              -------------    -----------
Net loss attributable to common stockholders used in basic
  and diluted net loss per share calculation................     $ (608)         $(2,510)
                                                                 ======          =======
Weighted average common shares used in basic and diluted EPS
  calculation...............................................      5,110            6,990
Weighted average convertible notes payable assumed to
  convert to common shares..................................         --                2
                                                                 ------          -------
Weighted average common shares used in pro forma basic and
  diluted EPS calculations..................................      5,110            6,992
                                                                 ======          =======
Shares under option plans and convertible notes payable
  excluded in computation of diluted earnings per share due
  to antidilutive effects...................................        723            1,001
                                                                 ======          =======
(k) Stock-Based Compensation for Employees

     Andover.Net has adopted Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 defines a
fair-value-based method of accounting for employee stock options and other
stock-based compensation. The compensation expense related to employee stock
based compensation arising from this method of accounting can be included in the
statements of operations or, alternatively, the pro forma net loss and loss per
share effect of the fair-value-based accounting can be disclosed in the
financial statement footnotes. Andover.Net has elected the disclosure-only
alternative (see Note 11).

                                      F-10
78
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (l) Comprehensive Income

     In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, Reporting Comprehensive Income. Under SFAS No. 130, companies are
required to report comprehensive income as a measure of overall performance.
Comprehensive income includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. For the
years ended September 30, 1997 and 1998 and for the nine-month periods ended
June 30, 1998 and 1999, Andover.Net's comprehensive loss is the same as its
reported net loss.

  (m) Segment and Geographic Information

     SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions how to allocate
resources and assess performance. Andover.Net's chief decision-maker, as defined
under SFAS No. 131, is the Chief Executive Officer. At June 30, 1999,
Andover.Net views its operations and its business as principally one segment,
Internet publishing. For all periods presented, Andover.Net did not have
international sales greater than 10% of total net revenues.

  (n) Fair Value of Financial Instruments

     Financial instruments consist principally of cash equivalents, accounts
receivable, accounts payable, notes payable and preferred stock. The estimated
fair value of these instruments approximates their carrying value.

  (o) Impairment of Long-Lived Assets

     Andover.Net applies SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. SFAS No. 121
requires Andover.Net to continually evaluate whether events or circumstances
have occurred that indicate that the estimated remaining useful life of
long-lived assets and certain identifiable intangibles and goodwill may warrant
revision or that the carrying value of these assets may be impaired. To compute
whether assets have been impaired, the estimated gross cash flows for the
estimated remaining useful life of the assets are compared to the carrying
value. To the extent that the gross cash flows are less than the carrying value,
the assets are written down to the estimated fair value of the asset.
Andover.Net does not believe that its long-lived assets have been impaired.

  (p) New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Pursuant to SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133, SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is
not expected to have a material impact on Andover.Net's financial statements.

     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires computer
software costs associated with internal use software to be charged to operations

                                      F-11
79
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

as incurred until certain capitalization criteria are met. SOP 98-1 is effective
beginning January 1, 1999. The adoption of this statement did not have a
material impact on Andover.Net's financial position or consolidated results of
operations.

(3) ACQUISITIONS

  (a) Slashdot.org

     On June 28, 1999, Andover.Net entered in an asset purchase agreement (the
Purchase) to acquire the web site www.slashdot.org, the assets required to run
the web site, and all trademarks from BlockStackers, Inc. (BlockStackers or
Seller). The web site and related assets essentially made up the entire business
of BlockStackers. The web site provides a forum among programmers to discuss
current issues regarding the Linux operating system.

     Andover.Net paid $1,500,000 in cash on June 28, 1999 for the assets
described above. The purchase agreement also contains additional cash payments
and common stock consideration contingent upon certain future events. Maximum
future cash payments are $3,500,000 payable over the next two years contingent
on two key employees continued employment. Maximum future stock consideration of
$7,000,000 is payable over two years, contingent upon the closing of an initial
public offering by Andover.Net in the next two years as defined in the purchase.
The number of shares paid will be calculated based on the price per share
offered in the public offering and are contingent upon the continued employment
of two key employees and other performance milestones relating to the web site.

     In the event that an initial public stock offering does not occur within 18
months of the closing of the acquisition, the Seller has the one time option, to
accept cash consideration instead of the stock consideration as follows:
$1,500,000 five days following the election of cash payment, $1,500,000
twenty-four months after the acquisition closing and $1,500,000 thirty months
after the acquisition closing. This cash election is subject to the same
employment requirement and milestones of the stock election. This option expires
21 months from the closing of the acquisition.

     The acquisition has been accounted for under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16 (APB
16) "Business Combinations" and Emerging Issues Task Force Issue 95-08, (EITF
95-08) Accounting for Contingent Consideration Paid to the Shareholders of an
Acquired Enterprise in a Purchase Business Combination. The purchase price of
$1,500,000 was allocated to the acquired assets based on the fair value of
assets acquired as determined by a valuation performed by an independent
appraiser. Of the purchase price, $242,000 was allocated to the covenant not to
compete, $23,000 was allocated to trademarks and $1,235,000 was allocated to
goodwill. The goodwill can primarily be attributed to the value of the work
force acquired. Trademarks and goodwill will be amortized over two years which
is their estimated useful life. The covenant not to compete will be amortized
over five years, which is the life of the agreement. There was no amortization
expense recorded in the statement of operations for the nine months ended June
30, 1999. The future cash and stock payments which are contingent solely on
future employment in the amount of $6.3 million will be recognized as
compensation expense ratably over the term of the payments as they are directly
linked to the continued employment of the two key employees. The remaining
contingent payments, which are based on performance milestones, will be
recognized as expense once those milestones are reached. To the extent that
there is any appreciation in the market value, the compensation charges could be
materially higher than as disclosed.

  (b) Animation Factory

     Concurrently on June 28, 1999, Andover.Net acquired certain assets and
assumed certain liabilities related to the web site Animation Factory from
Eclipse Digital Imaging, Inc. (Eclipse). Eclipse develops, markets and sells
computer animation via its web site.

                                      F-12
80
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The purchase price is $1,500,000 in cash for the net assets acquired, of
which $250,000 was paid on the closing of the acquisition and $1,250,000 will be
paid in 15 equal monthly installments beginning in October 1999. The future
payments have been discounted to their present value using an imputed interest
rate of prime (8% at June 28, 1999) plus 1% for a present value of 1,151,000.
The discount will be amortized as interest expense over the term of the
payments. The purchase agreement also contains stock consideration of $600,000
payable over two years contingent upon continued employment of the two
principals of Eclipse, Andover.Net completing an initial public offering and
other milestones relating to the creation of new animation images. Any stock
consideration given, when the contingencies are resolved, will be accounted for
as compensation expense over the period earned as they are directly related to
the continued employment and performance of these two key employees. The number
of shares paid will be calculated based on the price per share offered in the
initial public offering.

     In the event that an initial public stock offering does not occur within 18
months of the closing of the acquisition, the seller has the one time option to
accept cash consideration instead of the stock consideration as follows:
$200,000 five days following the election of cash payment, $200,000 twenty-four
months after the acquisition closing and $200,000 thirty-six months after the
acquisition closing. This option expires 19 months from the closing of the
acquisition.

     The acquisition has been accounted for under APB 16 and EITF 95-08 and the
purchase price of $1,421,000 was allocated to the acquired assets based on the
fair value of the assets acquired as determined by a valuation performed by an
independent appraiser. Of the purchase price, $177,000 was allocated to the
covenant not to compete, $213,000 was allocated to the animation library,
$14,000 was allocated to trademarks and $1,017,000 was allocated to goodwill
which is the estimated useful life. The animation library, the trademarks and
the goodwill will be amortized over two years. The covenant not to compete will
be amortized over five years, which is the life of the agreement. There was no
amortization expense for the nine months ended June 30, 1999. The future cash
and stock payments which are contingent solely on future employment in the
amount of $200,000 will be recognized as compensation expense ratably over the
term of the payments as they are directly linked to the continued employment of
the two key employees. The remaining contingent payments, which are based on
performance milestones, will be recognized as expense once those milestones are
reached. To the extent that there is any appreciation in the market value, the
compensation charges could be materially higher than as disclosed.

     The unaudited pro forma results below assume the two acquisitions occurred
on October 1 of each period and therefore have been considered with
Andover.Net's historical results.
NINE
                                                         MONTHS
                                                         ENDED       YEAR ENDED
                                                        JUNE 30,    SEPTEMBER 30,
                                                          1999          1998
                                                        --------    -------------
                                                          (IN THOUSANDS, EXCEPT
                                                             PER SHARE DATA)
Revenues..............................................  $ 1,617        $ 1,539
Operating loss........................................   (5,630)        (4,892)
Net loss applicable to common shareholders............   (7,595)        (6,315)
Net loss per share applicable to common
  shareholders -- basic and diluted...................    (1.06)         (1.19)
F-13
81
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) ACCOUNTS RECEIVABLE

     Accounts receivable, which result primarily from advertising sales, are
presented net of an allowance for doubtful accounts. The activity in
Andover.Net's allowance for doubtful accounts for the years ended September 30,
1997 and 1998 and for the nine months ended June 30, 1999 is presented in the
following table:
BALANCE AT                                    BALANCE AT
                                      BEGINNING OF    CHARGED TO                       END OF
                                         PERIOD        EXPENSE      DEDUCTIONS(A)      PERIOD
                                      ------------    ----------    -------------    ----------
                                                           (IN THOUSANDS)
Year ended September 30, 1997.......      $ --           $ --           $ --            $ --
Year ended September 30, 1998.......        --             13             --              13
Nine months ended June 30, 1999.....        13             28              6              35
------------------------------
(a) Represents amounts written off as uncollectable accounts receivable

(5) ACCRUED EXPENSES

     Accrued expenses consist of the following (in thousands):
SEPTEMBER 30,    JUNE 30,
                                                            1998           1999
                                                        -------------    --------
Accrued vendor commissions............................      $ 80           $ 63
Other.................................................        79            240
                                                            ----           ----
                                                            $159           $303
                                                            ====           ====
(6) CONVERTIBLE NOTES PAYABLE TO STOCKHOLDERS

     On June 30, 1999, Andover.Net received proceeds of $2,090,000 from the
issuance of convertible notes payable in a private placement to various
investors, some of whom are Andover.Net stockholders and certain outsiders (the
Notes). The Notes bear interest at the prime rate (8% at June 30, 1999) per
annum and are due on December 31, 1999. Upon the closing of the financing by
Andover.Net in September 1999 these Notes converted into 120,214 shares of
Series B Convertible Preferred Stock issued under the new capital structure of
Andover.Net (See Note 12b). Upon the closing of an initial public offering, this
Series B Convertible Preferred Stock automatically converts into 603,474 shares
of common stock.

     The original terms of the Notes provided for a formula based conversion
price. Pursuant to the conversion terms, whereby the Noteholders were guaranteed
beneficial conversion features depending on the amount of time the Notes were
held before conversion, Andover.Net recorded an original discount of $2,124,000,
which represents the difference between the offering price and the effective
purchase price. This discount will be amortized to interest expense over 76
days, which is the period from issuance of the Notes to the period in which the
offering occurs. Since the Notes were issued on June 30, 1999, there is no
amortization in any period presented. (See Note 12(c))

(7) INCOME TAXES

     Andover.Net accounts for income taxes using the liability method which
requires the recognition of the amount of current and deferred income taxes at
the date of the financial statements as a result of all differences in the tax
basis and financial statement carrying amounts of assets and liabilities, as
measured by enacted tax laws.

                                      F-14
82
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     No provision for federal or state income taxes has been recorded, as
Andover.Net has incurred net operating losses for all periods presented. As of
June 30, 1999, Andover.Net had net operating loss carryforwards for federal and
state income tax purposes of approximately $3,109,000 available to reduce future
federal and state income taxes, if any. These carryforwards expire at various
dates through 2019 and are subject to review and possible adjustment by the
Internal Revenue Service. Due to the uncertainty surrounding the realization of
the net deferred tax asset, Andover.Net has provided a full valuation allowance
against this amount.

     U.S. tax rules impose annual limitations on the use of net operating losses
following substantial changes in ownership. Andover.Net has completed several
financings since its inception and has incurred an ownership change as defined
by the U.S. tax rules. Andover.Net believes that this change in ownership will
not have a material impact on its ability to utilize its net operating loss
carryforwards.

     The approximate income tax effect of each type of temporary difference and
carryforward is as follows (in thousands):
SEPTEMBER 30,    SEPTEMBER 30,    JUNE 30,
                                                      1997             1998           1999
                                                  -------------    -------------    --------
Net operating loss carryforwards................      $ 530            $ 674        $ 1,252
Non deductible expenses and reserves............         20               37             89
Valuation allowance.............................       (550)            (711)        (1,341)
                                                      -----            -----        -------
          Net deferred tax asset................      $  --            $  --        $    --
                                                      =====            =====        =======
(8) COMMITMENTS AND CONTINGENCIES

  (a) Operating Leases

     Andover.Net leases its office facility and equipment under operating leases
that expire at various dates through April 30, 2004.

     Future minimum lease payments at June 30, 1999 are as follows (in
thousands):
YEAR ENDED SEPTEMBER 30,
------------------------
1999........................................................  $   53
2000........................................................     212
2001........................................................     205
2002........................................................     215
2003........................................................     229
Thereafter..................................................     134
                                                              ------
                                                              $1,048
                                                              ======
Rent expense included in the accompanying statements of operations was
approximately $33,000 and $20,000 for the years ended September 30, 1997 and
1998, respectively. Rent expense for the nine months ended June 30, 1998 and
June 30, 1999 was $24,000 and $62,000, respectively.

  (b) Litigation

     Currently, Andover.Net is not a party to any litigation.

                                      F-15
83
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(9) REDEEMABLE PREFERRED STOCK

     Redeemable preferred stock consists of the following (in thousands):
SEPTEMBER 30,    JUNE 30,
                                                                  1998           1999
                                                              -------------    --------
Series A redeemable preferred stock (Series A) -- $13.50
  redemption value plus accrued dividends; authorized -- 900
  shares, issued and outstanding -- 322 and 165 shares at
  September 30, 1998 and June 30, 1999, respectively (at
  redemption value).........................................     $2,228         $4,353
Accrued dividends on Series A (see Dividends)...............        134            360
                                                                 ------         ------
                                                                 $2,362         $4,713
                                                                 ======         ======
In connection with the recapitalization of Andover.Net in September 1999,
all the Series C redeemable preferred stock of AAT was converted to Series A
redeemable preferred stock of Andover.Net. This new Series A redeemable
preferred stock has all of the same rights, privileges and preferences of the
AAT Series C redeemable preferred stock. The following reflects that conversion
on a retroactive basis.

     During fiscal 1997, Andover.Net amended its bylaws to change its capital
structure and to authorize Series A redeemable preferred stock. Each stockholder
of AAT Series A convertible preferred stock and AAT Series B convertible
preferred stock received one share of Series A redeemable preferred stock and
one share of common stock in a recapitalization. The Series A redeemable
preferred stock has been stated at the redemption value of $13.50 plus accrued
dividends. An adjustment to accumulated deficit of approximately $122,000 is
reflected in the accompanying statements of stockholders' equity (deficit) to
account for the issuance of the Series A redeemable preferred stock at
redemption value.

     In fiscal 1997, Andover.Net sold an additional 80,001 shares of Series A
redeemable preferred stock at a price of $13.50 per share, less stock issuance
costs of approximately $41,000, for aggregate net proceeds of approximately
$1,039,000. During fiscal 1999, Andover.Net sold 157,438 shares of Series A
redeemable preferred stock, and 2,634,436 shares of common stock at a price of
$0.26 per share, less stock issuance costs of $33,000, for aggregate net
proceeds of approximately $2,770,000.

     The Series A redeemable preferred stock (Preferred Stock) holders have the
following rights, preferences and privileges:

     Voting Rights

     The Preferred Stock does not entitle the holder to any voting rights on any
action taken by the stockholders of Andover.Net.

     Dividends

     Beginning January 1, 1998, the holders of Preferred Stock are entitled to
receive cumulative dividends, which will accrue and will be due and payable at
an annual rate, or portion thereof for partial periods, in an amount equal to
the greater of (i) the applicable percentage, as defined, of Andover.Net's
pre-tax earnings or (ii) 8.0% of the original purchase price paid for the number
of shares of Preferred Stock outstanding on the last day of the applicable year.
Dividends are not payable until approved by the Board of Directors and do not
accrue interest. As of June 30, 1999, approximately $360,000 of dividends have
been accrued.

     Liquidation Preference

     In certain events, including liquidation, dissolution or winding up of
Andover.Net, the holders of Preferred Stock are entitled to $13.50 per share
plus all accumulated and unpaid dividends due before any distribution may be
made to common stockholders. If the assets of Andover.Net shall be insufficient
to permit
                                      F-16
84
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

payment in full to the holders of preferred stock, then the entire assets of
Andover.Net that are available for distribution shall be distributed ratably.

     Redemption

     At any time on or after June 2003, at the election of the holders of 70% of
the shares of Preferred Stock, Andover.Net may be required to redeem the
Preferred Stock at a redemption price in an amount equal to the liquidation
payment for the Preferred Stock and shall be paid in cash.

     Andover.Net is required to redeem all shares of the Preferred Stock
outstanding upon the closing of an initial public offering in which the
valuation of Andover.Net is at least $20 million or a qualified acquisition, as
defined.

     The following table summarizes the activity for the AAT Series A, AAT
Series B and Andover.Net Series A Preferred Stock (in thousands, except for
share data):
AAT                      AAT                  ANDOVER.NET
                                          SERIES A CONVERTIBLE     SERIES B CONVERTIBLE     SERIES A REDEEMABLE
                                            PREFERRED STOCK          PREFERRED STOCK          PREFERRED STOCK
                                         ----------------------   ----------------------   ----------------------     TOTAL
                                         NUMBER OF   REDEMPTION   NUMBER OF   REDEMPTION   NUMBER OF   REDEMPTION   REDEMPTION
                                          SHARES       VALUE       SHARES       VALUE       SHARES       VALUE        VALUE
                                         ---------   ----------   ---------   ----------   ---------   ----------   ----------
Balance, September 30, 1996............    50,000      $ 500        27,500      $ 413            --      $   --       $  913
  Exercise of AAT Series B warrants....        --         --         6,875        103            --          --          103
  Issuance AAT Series B convertible
    preferred stock....................        --         --           666         10            --          --           10
  Recapitalization of preferred
    stock..............................   (50,000)      (500)      (35,041)      (526)       85,041       1,148          122
  Issuance of Series A Redeemable
    preferred stock....................        --         --            --         --        60,001         810          810
  Conversion of convertible promissory
    notes and issuance of Series A
    Redeemable preferred stock and
    common stock.......................        --         --            --         --        20,000         270          270
                                          -------      -----       -------      -----      --------      ------       ------
Balance, September 30, 1997............        --         --            --         --       165,042       2,228        2,228
  Accrued dividends on Series A
    Redeemable preferred stock.........        --         --            --         --            --         134          134
                                          -------      -----       -------      -----      --------      ------       ------
Balance, September 30, 1998............        --         --            --         --       165,042       2,362        2,362
  Accrued dividends on Series A
    Redeemable preferred stock.........        --         --            --         --            --         226          226
  Issuance of Series A Redeemable
    preferred stock....................        --         --            --         --       157,438       2,125        2,125
                                          -------      -----       -------      -----      --------      ------       ------
Balance, June 30, 1999.................        --      $  --            --      $  --       322,480      $4,713       $4,713
                                          =======      =====       =======      =====      ========      ======       ======
(10) STOCKHOLDERS' EQUITY

  (a) Common Stock

     In November 1998, the board of directors authorized an additional 3,697,523
shares of Andover.Net's no par value common stock for an aggregate authorization
of 10,987,069 shares. The board of directors also authorized an additional
184,000 shares of preferred stock for an aggregate authorization of 409,000
shares.

     Also in November 1998, the board of directors approved an increase in the
number of authorized options under the Andover.Net 1995 Stock Option Plan to
1,507,142 options.

     In September 1999, the board of directors approved a 4-for-1 stock split of
Andover.Net's $0.01 par value common stock. Also, in September, the board of
directors and anticipate a Andover.Net 5.02 for 1 stock split of Andover.Net's
$0.01 par value common stock upon the effectiveness of this offering. All
references to the number of shares in the accompanying financial statements have
been adjusted to reflect both stock splits on a retroactive basis.

                                      F-17
85
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (b) Stock Warrants

     During the fiscal year 1996, Andover.Net issued warrants to the
stockholders of the previously issued Series B convertible preferred stock. A
total of 6,875 warrants were issued to purchase Series B Convertible preferred
stock at an exercise price of $15.00 share. The value of the warrants when
issued was determined to be immaterial. The warrants were exercised during
fiscal 1997 for total proceeds of approximately $103,000.

  (c) Convertible Notes Payable to Stockholders

     In May 1997, Andover.Net issued convertible promissory notes to certain
stockholders (the Notes) in the sum of $100,000. The notes were mandatorily
convertible upon the additional financing of $200,000 (the conversion financing)
which was completed during fiscal 1997. The notes were converted into shares
identical to the shares sold in the conversion financing. The investors received
a total of 401,905 common shares and 20,000 Series C Preferred shares in
exchange for the notes and an additional $200,000 in cash.

(11) STOCK OPTION PLAN

     On October 12, 1995, Andover.Net's board of directors (the Board) approved
the adoption of the 1995 Stock Option Plan (the Plan), as amended, which
provides for a maximum of 1,507,142 shares of common stock to be issued as
incentive stock option (ISOs) and nonqualified options. The options under the
Plan may be granted to directors, officers, employees, consultants and related
corporations. ISOs may be granted at no less then fair market value (FMV) on the
date of grant, as determined by the Board (no less than 110% of FMV on the date
of grant for 10% or greater stockholders). Options under the Plan expire between
5 to 10 years from the date of grant. Vesting is determined by the Board and can
be fully exercisable on the date of grant or in installments, as approved.

     Stock option activity for the years ended September 30, 1998 and 1997 and
the nine months ended June 30, 1999 is as follows (in thousands, except per
share data):
WEIGHTED
                                                                                AVERAGE
                                                                                EXERCISE
                                                                EXERCISE         PRICE
                                                NUMBER OF       PRICE PER         PER
                                                 SHARES           SHARE          SHARE
                                                ---------    ---------------    --------
Outstanding, September 30, 1996...............      196      $        $0.005     $0.005
  Granted.....................................      482                0.025      0.025
  Exercised...................................      (15)               0.025      0.025
  Canceled....................................      (25)               0.025      0.025
                                                  -----      ---------------     ------
Outstanding, September 30, 1997                     638       0.005 -  0.025      0.019
  Granted.....................................      165                0.025      0.025
  Exercised...................................      (24)               0.025      0.025
  Canceled....................................      (56)               0.025      0.025
                                                  -----      ---------------     ------
Outstanding, September 30, 1998                     723       0.005 -  0.025      0.019
  Granted.....................................      474       0.025 -  1.063      0.124
  Exercised...................................     (196)               0.005      0.005
  Canceled....................................       --                   --         --
                                                  -----      ---------------     ------
Outstanding, June 30, 1999....................    1,001      $0.025 - $1.063     $0.083
                                                  =====      ===============     ======
Exercisable, June 30, 1999....................      513      $0.025 - $1.063     $0.026
                                                  =====      ===============     ======
At June 30, 1999, 352,310 options to purchase shares of common stock were
available for future grants under the Plan.

                                      F-18
86
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     SFAS No. 123, Accounting for Stock-Based Compensation, requires the
measurement of the fair value of stock options to be included in the statements
of operations or disclosed in the notes to the financial statements. Andover.Net
has determined that it will continue to account for stock-based compensation for
employees under the Accounting Principles Board Opinion No. 25 and elect the
disclosure-only alternative under SFAS No. 123. Fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions:
YEARS ENDED SEPTEMBER 30,     NINE MONTHS ENDED JUNE 30,
                                         --------------------------    --------------------------
                                            1997           1998           1998           1999
                                         -----------    -----------    -----------    -----------
Risk free interest rate................  6.18%-6.53%     5.62%-6.11%    5.62%-6.11%    4.45%-5.15%
Expected dividend yield................          --             --             --             --
Expected lives (years).................        5.00           5.00           5.00           5.00
Expected volatility....................         70%            70%            70%            70%
Weighted average fair value per share
  of options granted...................       $1.48          $2.91          $2.91          $3.26
Weighted average remaining contractual
  life of options outstanding
  (years)..............................        6.12           8.25           6.60           8.72
In connection with certain stock option grants during the nine months ended
June 30, 1999, Andover.Net recorded deferred compensation of $1.6 million in
connection with stock option grants totaling 472,632 which represents the
aggregate difference between the exercise price and the fair market value of the
common stock as determined for accounting purposes. The deferred compensation
will be recognized as an expense over the vesting period of the underlying stock
options. Andover.Net recorded compensation expense of $720,000 for the nine
months ended June 30, 1999 related to these options. In addition, the Company
anticipates recording additional deferred compensation of approximately $4.5
million related to the options granted in September 1999 totaling 430,759
options which will be recognized as an expense over the vesting period of these
options.

     Certain options contain provisions that accelerate the vesting to 100% upon
an initial public offering. Upon this event, additional compensation expense of
approximately $800,000 relating to 260,459 options will be recorded as
compensation expense. The remaining deferred compensation will be amortized over
the remaining vesting period.

     Had compensation expense for the options been determined consistent with
SFAS No. 123, Andover.Net's net loss and net loss per share would have been
affected as follows (in thousands):
YEARS ENDED       NINE MONTHS ENDED
                                                           SEPTEMBER 30,          JUNE 30,
                                                          ----------------    -----------------
                                                           1997      1998      1998      1999
                                                          ------    ------    ------    -------
Net loss applicable to common shareholders --
  As reported...........................................  $ (705)   $ (608)   $ (463)   $(2,510)
  Pro forma.............................................  $ (884)   $ (902)   $ (684)   $(3,549)
Basic and diluted net loss per share applicable to
  common shareholders --
  As reported...........................................  $(0.29)   $(0.12)   $(0.09)   $ (0.36)
  Pro forma.............................................  $(0.36)   $(0.18)   $(0.13)   $ (0.51)
(12) OTHER EVENTS

  (a) Recapitalization

     In September 1999, Andover Advanced Technologies, Inc. was merged into its
wholly owned subsidiary, Andover.Net. In connection with this recapitalization,
the Board authorized 100 million shares of Andover.Net's $0.01 par value common
stock and 2 million shares of Preferred Stock, of which 900,000

                                      F-19
87
                               ANDOVER.NET, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

shares were designated as Series A redeemable preferred stock, 700,000 shares
were designated as Series B redeemable convertible preferred stock and 400,000
shares remained undesignated.

  (b) Acquisition

     In August 1999, Andover.Net purchased certain assets related to the web
site Freshmeat. Andover.Net paid $367,000 of cash at the closing and has
guaranteed future payments aggregating $300,000 payable monthly through November
2000. Future stock consideration of $333,000 is contingent upon meeting certain
milestones as defined in the asset purchase agreement. No pro forma information
has been presented as the acquisition is not material to Andover.Net.

  (c) Sale of Series B redeemable convertible preferred stock

     On September 15, 1999, Andover.Net issued 600,568 shares of Series B
redeemable convertible preferred stock at $21.03 per share to private investors
for total consideration of $12,224,000. This includes $10,100,000 of originally
issued shares and the conversion of $2,124,000 of principal and accrued interest
from the June 1999 convertible notes into 120,214 shares of Series B redeemable
convertible preferred stock of which 19,195 shares were issued pursuant to a
beneficial conversion feature (See Note 6).

     The Series B redeemable convertible preferred stock is voting. Dividends
accrue annually and are cumulative at a rate of 8% of the original purchase
price of $21.03 per share, on a per share basis. Dividends must be paid before
any other dividends can be declared or paid on any common stock. The Series B
redeemable convertible preferred stock is convertible at any time by the
holders, at the then applicable conversion rate as adjusted from time to time.
The Series B redeemable convertible preferred stock is redeemable at the option
of the holder beginning in September 2003 if Andover.Net has not made a
qualified initial public offering of its common stock, as defined. Upon
liquidation, holders of Series B redeemable convertible preferred stock are
entitled to receive, out of funds then generally available, 21.03 per share,
plus all accrued and unpaid dividends.

     Upon the closing of this offering, all outstanding shares of Series B
redeemable convertible preferred stock will automatically convert into 3,014,851
shares of common stock, resulting in an effective purchase price of $4.05 per
common share. The difference between the offering price and the deemed effective
purchase price resulted in a beneficial conversion feature of $2,124,000, which
will be reflected as interest expense in the statement of operations in the
period in which this offering occurs.

  (d) 1999 Stock Option Plan

     In August 1999, Andover.Net approved the adoption of the 1999 Stock Option
Plan (the Plan), which provides for a maximum of 1,736,228 shares of common
stock to be issued as incentive stock option (ISOs) and nonqualified options.
The options under the Plan may be granted to directors, officers, employees,
consultants and related corporations. ISOs may be granted at no less than fair
market value (FMV) on the date of grant, as determined by the Board (no less
than 110% of FMV on the date of grant for 10% or greater stockholders). Options
under the Plan expire no more than 10 years from the date of grant. Vesting is
determined by the Board and can be fully exercisable on the date of grant or in
installments as approved.

                                      F-20
88

                INTRODUCTION TO PRO FORMA FINANCIAL INFORMATION

The following unaudited Pro Forma Combined Statements of Operations for the year
ended September 30, 1998, and the nine months ended June 30, 1999 give effect to
the acquisitions by Andover.Net, Inc. of certain assets of BlockStackers, Inc.
and Eclipse Digital Imaging, Inc. as if each had occurred at the beginning of
the earliest period presented. The unaudited Pro Forma Combined Statement of
Operations does not include the effects of the Andover.Net, Inc. acquisition of
the assets related to Freshmeat as of August 6, 1999 as Andover.Net, Inc. has
determined that its effects are immaterial. The unaudited Pro Forma Combined
Statement of Operations gives effect to the issuance of the convertible notes
payable and their subsequent conversion into Series B Redeemable Convertible
Preferred Stock as these notes were used to finance the acquisitions. These
statements do not take into effect the issuance of the Series B Redeemable
Convertible Preferred Stock in September 1999.

The unaudited Pro Forma Combined Statements of Operations have been prepared
using the purchase method of accounting for the Acquisitions whereby the total
cost of each acquisition is allocated to the tangible and intangible assets
acquired and liabilities assumed based upon their respective fair values at the
effective dates of such acquisitions. Such allocations have been made based upon
currently available information and management's estimates. Final allocations
will be determined upon completion of the analysis of the assets acquired and
liabilities assumed.

The unaudited Pro Forma Combined Statement of Operations for the year ended
September 30, 1998 is based on the audited financial statements for the year
ended September 30, 1998 of the Company and the unaudited operating results of
Eclipse Digital Imaging, Inc. for the year ended September 30, 1998 and the
unaudited operating results of BlockStackers, Inc. for the period form inception
(August 24, 1998) to September 30, 1998. The unaudited Pro Forma Combined
Statement of Operations for the nine months ended June 30, 1999 is based on the
audited financial statements for the nine months ended June 30, 1999 of
Andover.Net, Inc. and the unaudited operating results for the nine months ended
June 30, 1999 of Eclipse Digital Imaging, Inc. and BlockStackers, Inc. The
unaudited financial statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management are necessary for a
presentation of results for the respective periods in accordance with the basis
of presentation described in Note 2 of the Notes to Andover.Net, Inc.'s
Financial Statements and similar statements found in the other entities'
financial statements.

The unaudited Pro Forma Combined Statements of Operations do not purport to
represent what the results of operations or financial position of Andover.Net,
Inc. would actually have been if any of the transactions had occurred on such
dates or to project the results of operations or financial positions of
Andover.Net, Inc. for any future date or period. The unaudited Pro Forma
Combined Statements of Operations set forth below should be read in conjunction
with the respective Financial Statements and Notes thereto of the Andover.Net,
Inc. included elsewhere in this Prospectus, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

                                      F-21
89

                               ANDOVER.NET, INC.

                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
                     FOR THE YEAR ENDED SEPTEMBER 30, 1998
HISTORICAL
                                            ------------------------------------------------                     PRO FORMA
                                                                             ECLIPSE DIGITAL                  COMBINED FOR THE
                                            ANDOVER.NET   BLOCKSTACKERS(A)     IMAGING(A)       ADJUSTMENTS     ACQUISITIONS
                                            -----------   ----------------   ---------------    -----------   ----------------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
  Advertising.............................   $   1,290          $ --              $ --            $    --        $   1,290
  Product.................................          --            --               249                 --              249
                                             ---------          ----              ----            -------        ---------
         Total revenues...................       1,290            --               249                 --            1,539
Cost of revenues:
  Advertising.............................         327            --                --                 --              327
  Product.................................          --            --                64                 --               64
                                             ---------          ----              ----            -------        ---------
         Total cost of revenues...........         327            --                64                 --              391
                                             ---------          ----              ----            -------        ---------
Gross profit..............................         963            --               185                 --            1,148
                                             ---------          ----              ----            -------        ---------
Operating expenses........................       1,408             1                54              1,325(b)            --
                                                                                                    3,252(c)         6,040
                                             ---------          ----              ----            -------        ---------
Operating income..........................        (445)           (1)              131             (4,577)          (4,892)
Interest income (expense).................         (29)           --                --               (178)(e)
                                                                                                   (1,083)(f)       (1,290)
Other (expense) income....................          --            (1)                2                 --                1
                                             ---------          ----              ----            -------        ---------
Income (loss) before taxes................        (474)           (2)              133             (5,838)          (6,181)
Income tax benefit (expense)..............          --            --                --                 --               --
                                             ---------          ----              ----            -------        ---------
Net income (loss).........................   $    (474)         $ (2)             $133            $(5,838)       $  (6,181)
                                             =========          ====              ====            =======        =========
Accretion on preferred stock..............         134            --                --                 --              134
Net income (loss) applicable to common
  shareholders............................   $    (608)         $ (2)             $133            $(5,838)       $  (6,315)
                                             =========          ====              ====            =======        =========
Basic and diluted net loss per share
  applicable to common stockholders.......   $   (0.12)                                                          $   (1.19)
                                             =========                                                           =========
Basic and diluted weighted average shares
  outstanding.............................       5,110                                                194(d)         5,304
                                             =========                                            =======        =========
Other operating data:
  Depreciation and amortization...........   $       9          $ --              $ 14            $    --        $      23
                                             =========          ====              ====            =======        =========
------------------------------
(a)  Includes the results of operations of the acquired businesses from the
     beginning of the period reporting through the respective dates of
     acquisition by Andover.Net (both entities on June 28, 1999)

(b)  Reflects the amortization of goodwill and intangible assets associated with
     the acquisition of BlockStackers and Eclipse Digital Imaging

(c)  Reflects additional compensation payments required with the purchase
     agreements. These payments, which are solely contingent upon the continued
     employment of two key employees, are payable over two years and are
     comprised of $3.5 million of cash and $3.0 million in stock compensation.
     Andover.Net is recognizing this compensation expense ratably over the two
     year period. The remaining contingent payments of $4.6 million in stock
     compensation are not reflected as they are contingent upon performance
     milestones. At this time, it is uncertain if or when these milestones will
     be met.

(d)  Reflects weighted shares to be issued as compensation associated with the
     acquisitions of BlockStackers and Eclipse Digital Imaging at an assumed
     offering price of $13.50. These shares are to be issued within the first
     year after the offering

(e)  Reflects interest expense on debt used to finance the acquisitions
     calculated using an assumed interest rate of 8.5% per annum on the
     convertible notes payable

(f)  Reflects the additional charge recorded as interest expense for the
     beneficial conversion effect of the convertible notes payable. The charge
     was computed assuming the issuance of the convertible notes payable at the
     beginning of the period presented and the conversion at the actual date in
     September 1999.

                                      F-22
90

                               ANDOVER.NET, INC.

                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
                    FOR THE NINE MONTHS ENDED JUNE 30, 1999
HISTORICAL
                                           ------------------------------------------------                     PRO FORMA
                                                                            ECLIPSE DIGITAL                  COMBINED FOR THE
                                           ANDOVER.NET   BLOCKSTACKERS(A)     IMAGING(A)       ADJUSTMENTS     ACQUISITIONS
                                           -----------   ----------------   ---------------    -----------   ----------------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
  Advertising............................    $ 1,109           $293              $ --            $    --         $ 1,402
  Product................................         --             --               215                 --             215
                                             -------           ----              ----            -------         -------
         Total revenues..................      1,109            293               215                 --           1,617
Cost of Revenues:
  Editorial content and related..........        430            118                --                 --             548
  Product................................         --             --               155                 --             155
                                             -------           ----              ----            -------         -------
         Total cost of revenues..........        430            118               155                 --             703
                                             -------           ----              ----            -------         -------
Gross Profit.............................        679            175                60                 --             914
                                             -------           ----              ----            -------         -------
Operating Expenses.......................      2,988             55                68                994(b)
                                                                                                   2,439(c)        6,544
                                             -------           ----              ----            -------         -------
Operating Income (Loss)..................     (2,309)           120                (8)            (3,433)         (5,630)
Interest Income (Expense)................         59             --                --               (129)(e)
                                                                                                  (1,658)(f)      (1,728)
Other (Expense) Income...................         --             --                23                 --              23
                                             -------           ----              ----            -------         -------
Income (Loss) before Taxes...............     (2,250)           120                15             (5,220)         (7,335)
Income Tax Benefit
  (Expense)..............................         --             --                --                 --              --
                                             -------           ----              ----            -------         -------
Net Income (Loss)........................    $(2,250)          $120              $ 15            $(5,220)        $(7,335)
                                             =======           ====              ====            =======         =======
Accretion on Preferred Stock.............        260             --                --                 --             260
Net Income (Loss) Applicable to Common
  Shareholders...........................    $(2,510)          $120              $ 15            $(5,220)        $(7,595)
                                             =======           ====              ====            =======         =======
Basic and Diluted Net Loss per Share
  Applicable to Common Stockholders......    $ (0.36)                                                              (1.06)
                                             -------                                                             -------
Basic and Diluted Weighted Average Shares
  Outstanding............................      6,990                                                 179(d)        7,169
                                             =======                                             =======         =======
Other Operating Data:
  Depreciation and amortization..........    $     6           $ --              $ 14            $    --         $    20
                                             =======           ====              ====            =======         =======
------------------------------
(a)  Includes the results of operations of the acquired businesses from the
     beginning of the period reporting through the respective dates of
     acquisition by Andover.Net (both entities on June 28, 1999)

(b)  Reflects the amortization of goodwill and intangible assets associated with
     the acquisition of BlockStackers and Eclipse Digital Imaging

(c)  Reflects additional compensation payments required with the purchase
     agreements. These payments, which are solely contingent upon the continued
     employment of two key employees, are payable over two years and are
     comprised of $3.5 million of cash and $3.0 million in stock compensation.
     Andover.Net is recognizing this compensation expense ratably over the two
     year period. The remaining contingent payments of $4.6 million in stock
     compensation are not reflected as they are contingent upon performance
     milestones. At this time, it is uncertain if or when these milestones will
     be met.

(d)  Reflects weighted shares to be issued as compensation associated with the
     acquisitions of BlockStackers and Eclipse Digital Imaging at an assumed
     offering price of $13.50. These shares are to be issued within the first
     nine months after the offering

(e)  Reflects interest expense on debt used to finance the acquisitions
     calculated using an assumed interest rate of 8.5% per annum on the
     convertible notes payable

(f)  Reflects the additional charge recorded as interest expense for the
     beneficial conversion effect of the convertible notes payable. The charge
     was computed assuming the issuance of the convertible notes payable at the
     beginning of the period presented and the conversion at the actual date in
     September 1999.

                                      F-23
91

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To BlockStackers, Inc.:

We have audited the accompanying balance sheet of BlockStackers, Inc. (a
Michigan corporation) as of December 31, 1998, and the related statements of
operations, stockholders' deficit and cash flows for the period from inception
(August 24, 1998) to December 31, 1998. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BlockStackers, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (August 24, 1998) to December 31, 1998, in conformity with
generally accepted accounting principles.

Boston, Massachusetts
September 16, 1999

                                      F-24
92

                              BLOCKSTACKERS, INC.
                                 BALANCE SHEET
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                                              DECEMBER 31,
                                                                  1998
                                                              ------------
                                  ASSETS
Current assets:
  Cash......................................................      $  3
  Other current assets......................................         1
                                                                  ----
          Total current assets..............................         4
                                                                  ----
          Total assets......................................      $  4
                                                                  ====
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable..........................................      $  5
  Accrued expenses..........................................         4
                                                                  ----
          Total current liabilities.........................         9
Stockholders' deficit:
  Common stock, no par value --
     Authorized -- 60,000 shares
     Issued -- 2,500 shares
     Outstanding -- 2,000 shares............................         5
  Accumulated deficit.......................................       (10)
                                                                  ----
          Total stockholders' deficit.......................        (5)
                                                                  ----
          Total liabilities and stockholders' deficit.......      $  4
                                                                  ====

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

                                      F-25
93

                              BLOCKSTACKERS, INC.

                            STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)
PERIOD FROM INCEPTION
                                                                (AUGUST 24, 1998)
                                                                     THROUGH
                                                                DECEMBER 31, 1998
                                                              ---------------------
Net revenues................................................          $ 18
Cost of revenues............................................            17
                                                                      ----
          Gross profit......................................             1
Operating expenses:
  Selling expenses..........................................             6
  General and administrative expenses.......................             5
                                                                      ----
          Total operating expenses..........................            11
                                                                      ====
          Net loss..........................................          $(10)
                                                                      ====
The accompanying notes are an integral part of these financial statements.

                                      F-26
94

                              BLOCKSTACKERS, INC.

                       STATEMENT OF STOCKHOLDERS' DEFICIT
                       (IN THOUSANDS, EXCEPT SHARE DATA)
COMMON STOCK
                                                     -----------------
                                                                  NO                       TOTAL
                                                     NUMBER OF    PAR    ACCUMULATED   STOCKHOLDERS'
                                                      SHARES     VALUE     DEFICIT        DEFICIT
                                                     ---------   -----   -----------   -------------
August 24, 1998 (Inception)........................       --      $--       $ --           $ --
  Contributed capital..............................    2,500        5         --              5
  Repurchase and retirement of common stock........     (500)      --         --             --
  Net loss.........................................       --       --        (10)           (10)
                                                       -----      ---       ----           ----
Balance, December 31, 1998.........................    2,000      $ 5       $(10)          $ (5)
                                                       =====      ===       ====           ====
The accompanying notes are an integral part of these financial statements.

                                      F-27
95

                              BLOCKSTACKERS, INC.

                            STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
PERIOD FROM INCEPTION
                                                                (AUGUST 24, 1998)
                                                                     THROUGH
                                                                DECEMBER 31, 1998
                                                              ---------------------
Cash flows from operating activities:
  Net loss..................................................          $(10)
  Adjustments to reconcile net loss to net cash provided by
     operating activities --
     Donated services.......................................             4
     Changes in operating assets and liabilities --
       Other current assets.................................            (1)
       Accounts payable.....................................             5
       Accrued expense......................................             4
                                                                      ----
          Net cash provided by operating activities.........             2
                                                                      ----
Cash flows from investing activities........................            --
                                                                      ----
Cash flows from financing activities:
  Contributed capital.......................................             1
                                                                      ----
          Net cash provided by financing activities.........             1
                                                                      ----
Net increase in cash........................................             3
Cash, beginning of period...................................            --
                                                                      ----
Cash, end of period.........................................          $  3
                                                                      ====
The accompanying notes are an integral part of these financial statements

                                      F-28
96

                              BLOCKSTACKERS, INC.

                         NOTES TO FINANCIAL STATEMENTS

(1) OPERATIONS

     BlockStackers, Inc. (BlockStackers) was incorporated in Michigan on August
24, 1998 as an S Corporation. BlockStackers creates and hosts a web site,
Slashdot.org that acts as a forum for Linux software users to discuss
developments and events. Revenues are generated through advertising banners
placed on BlockStackers' web site and through consulting work.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying financial statements reflect the application of certain
significant accounting policies described in this note and elsewhere in the
notes to financial statements.

  (a) Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  (b) Revenue Recognition

     Revenues are recognized ratably in the period in which the advertisement is
displayed providing BlockStackers has no significant remaining obligations.

  (c) Concentrations of Credit Risk

     BlockStackers has no significant off-balance sheet concentration of credit
risks such as foreign exchange contracts, options contracts or other foreign
hedging arrangements. Financial instruments that substantially expose
BlockStackers to concentrations of credit risk consist primarily of cash.
BlockStackers maintains its cash balances with a financial institution.
BlockStackers operates in one industry segment and derives substantially all of
its revenues from U.S. customers.

     The following table summarizes the number of customers that individually
comprise greater than 10% of total revenues for the period presented:
Revenue --
  Customer A................................................   33%
  Customer B................................................   23%
(d)  Comprehensive Income (Loss)

     In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income. Under SFAS No. 130, companies are required to report
comprehensive income as a measure of overall performance. Comprehensive income
includes all changes in equity during a period, except those resulting from
investments by owners and distributions to owners. For the period ended December
31, 1998, BlockStackers' comprehensive loss is the same as its reported net
loss.

  (e) Fair Value of Financial Instruments

     Financial instruments consist principally of cash and accounts payable. The
estimated fair value of these instruments approximates their carrying value.

                                      F-29
97
                              BLOCKSTACKERS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (f) New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Pursuant to SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133, SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is
not expected to have a material impact on BlockStackers' financial statements.

     In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires
computer software costs associated with internal use software to be charged to
operations as incurred until certain capitalization criteria are met. SOP 98-1
is effective for financial statements for fiscal years beginning after December
15, 1998. The adoption of this statement did not have a material impact on
BlockStackers' financial statements.

     In April 1998, AICPA issued Statement of Position 98-5, Reporting on the
Costs of Start-up Activities (SOP 98-5). SOP 98-5 provides guidance on the
financial reporting of start-up activities and organization costs to be expensed
as incurred. SOP 98-5 did not have a material impact on BlockStackers' financial
statements.

(3) INCOME TAXES

     BlockStackers has elected to be taxed as an S corporation for federal
income tax purposes, which results in taxable income of BlockStackers being
reported on the individual tax returns of its stockholders for federal income
taxes.

(4) STOCKHOLDERS' DEFICIT

  (a) Common Stock

     At December 31, 1998, BlockStackers has authorized 60,000 shares of common
stock at no par value.

  (b) Retired Common Stock

     In December 1998, BlockStackers acquired and retired 500 shares of its
common stock at a purchase price of $.10 per share.

  (c) Donated Services

     During 1998, certain shareholders provided services valued at approximately
$4,000 for no charge. This amount was recorded as a contribution to capital in
the accompanying statement of stockholders' deficit.

(5) RELATED PARTY TRANSACTIONS

     During 1998, BlockStackers operated its business from one of the
shareholders' homes. Therefore, BlockStackers did not incur rent and utilities
expenses.

                                      F-30
98
                              BLOCKSTACKERS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(6) SUBSEQUENT EVENT

  (a) Operating Lease

     On May 1, 1999, BlockStackers entered into an operating lease for its
headquarters. The approximate future minimum lease payments due under the
operating lease agreement are as follows (in thousands):
YEAR ENDING DECEMBER 31,
                  ------------------------
1999........................................................  $ 7
2000........................................................    4
                                                              ---
                                                              $11
                                                              ===
(b) Sale of Assets

     On June 28, 1999, BlockStackers sold substantially all of its business
assets, including the Web site www.slashdot.org and all related trademarks,
software code and hardware required to run the Web site for $1,500,000. The
purchase agreement contains additional cash payments of $3,500,000 and stock
consideration of $7,000,000 contingent upon certain events, as defined.

                                      F-31
99

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Eclipse Digital Imaging, Inc.:

We have audited the accompanying balance sheet of Eclipse Digital Imaging, Inc.
(a South Dakota corporation) as of December 31, 1998, and the related statements
of operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of Eclipse Digital Imaging, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eclipse Digital Imaging, Inc.
as of December 31, 1998, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.

Boston, Massachusetts
September 16, 1999

                                      F-32
100

                         ECLIPSE DIGITAL IMAGING, INC.

                                 BALANCE SHEET
                                 (IN THOUSANDS)
DECEMBER 31,
                                                                  1998
                                                              ------------
ASSETS
Current assets:
  Cash......................................................      $ 10
  Accounts receivable.......................................        27
                                                                  ----
          Total current assets..............................        37
Property and equipment, at cost:
  Office equipment..........................................         3
  Computer equipment........................................        51
                                                                  ----
                                                                    54
  Less -- accumulated depreciation..........................       (20)
                                                                  ----
                                                                    34
                                                                  ----
          Total assets......................................      $ 71
                                                                  ====

                    LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
  Accounts payable..........................................      $  6
  Line of credit............................................         5
  Accrued expenses..........................................         1
                                                                  ----
          Total current liabilities.........................        12
Partners' capital...........................................        59
                                                                  ----
          Total liabilities and partners' capital...........      $ 71
                                                                  ====
The accompanying notes are an integral part of these financial statements.
                                      F-33
101

                         ECLIPSE DIGITAL IMAGING, INC.

                            STATEMENT OF OPERATIONS
                                 (IN THOUSANDS)
YEAR ENDED
                                                              DECEMBER 31,
                                                                  1998
                                                              ------------
Net revenue.................................................      $291
Cost of revenue.............................................       100
                                                                  ----
          Gross profit......................................       191
Operating expenses:
  Sales and marketing expenses..............................        14
  General and administrative expenses.......................        36
                                                                  ----
          Income from operations............................       141
Other income................................................        10
                                                                  ----
          Net income........................................      $151
                                                                  ====
The accompanying notes are an integral part of these financial statements.
                                      F-34
102

                         ECLIPSE DIGITAL IMAGING, INC.

                         STATEMENT OF PARTNERS' CAPITAL
                                 (IN THOUSANDS)
YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              -----------------
BALANCE, DECEMBER 31, 1997 (UNAUDITED)......................        $  52
  Contributed capital.......................................            8
  Member distribution.......................................         (152)
  Net income................................................          151
                                                                    -----
BALANCE, DECEMBER 31, 1998..................................        $  59
                                                                    =====
The accompanying notes are an integral part of these financial statements.
                                      F-35
103

                         ECLIPSE DIGITAL IMAGING, INC.

                            STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................        $ 151
  Adjustments to reconcile net income to net cash provided
     by operating activities --
     Depreciation and amortization..........................           14
     Changes in operating assets and liabilities --
       Accounts receivable..................................          (15)
       Accounts payable.....................................            3
       Accrued expenses.....................................            1
                                                                    -----
          Net cash provided by operating activities.........          154
CASH FLOWS USED IN INVESTING ACTIVITIES:
  Purchase of equipment.....................................          (13)
                                                                    -----
CASH FLOWS FROM FINANCING ACTIVITIES:
  Distributions.............................................         (152)
  Borrowings under line of credit...........................            5
                                                                    -----
          Net cash used in financing activities.............         (147)
                                                                    -----
NET DECREASE IN CASH........................................           (6)
CASH, BEGINNING OF YEAR.....................................           16
                                                                    -----
CASH, END OF YEAR...........................................        $  10
                                                                    =====
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING TRANSACTIONS:
  Contributed capital.......................................        $   8
                                                                    =====
The accompanying notes are an integral part of these financial statements
                                      F-36
104

                         ECLIPSE DIGITAL IMAGING, INC.

                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

(1) OPERATIONS

     Eclipse Digital Imaging, Inc. (Eclipse Digital Imaging) was incorporated on
November 25, 1998. From September 1996 through December 1998, Eclipse Digital
Imaging operated was organized as four individual sole proprietors, who were
operating the business. On January 1, 1999, 400 shares of stock were granted to
stockholders at $100 per share in exchange for assets of Eclipse Digital
Imaging, Inc. As such, the period presented reflects the entity as a
partnership. Eclipse Digital Imaging develops and sells animated graphics
software through its Web site.

     Eclipse Digital Imaging, Inc. is subject to risks common to rapidly growing
technology-based companies, including a limited operating history, dependence on
key personnel, and the need for successful development and marketing of
services.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying financial statements reflect the application of certain
significant accounting policies, described in this note and elsewhere in the
notes to financial statements.

  (a) Use of Estimates in the Preparation of Financial Statements

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  (b) Revenue Recognition

     Revenue from the sale of software animation products, for which no
technical support is provided, are generally recognized upon shipment of the
products, net of estimated returns.

  (c) Property and Equipment

     Eclipse Digital Imaging, Inc. provides for depreciation using the
straight-line method, by charges to operations in amounts estimated to allocate
the cost of property and equipment over their estimated useful lives.
ESTIMATED
               ASSET CLASSIFICATION                 USEFUL LIFE
               --------------------                 -----------
Computer equipment/software.......................   3 years
Office equipment..................................   5 years
(d) Concentrations of Credit Risk

     Eclipse Digital Imaging, Inc. has no significant off-balance sheet
concentration of credit risks such as foreign exchange contracts, options
contracts, or other foreign hedging arrangements. Financial instruments that
potentially expose Eclipse Digital Imaging, Inc. to concentrations of credit
risk consist primarily of cash and accounts receivable. Eclipse Digital Imaging,
Inc. maintains the majority of its cash balances with financial institutions.
Concentrated credit risk with respect to accounts receivable is limited to
certain customers to whom Eclipse Digital Imaging, Inc. makes substantial sales.
To reduce risk, Eclipse Digital Imaging, Inc. routinely assesses the financial
strength of its customers and, as a consequence, believes that its

                                      F-37
105
                         ECLIPSE DIGITAL IMAGING, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

accounts receivable credit risk exposure is limited. Eclipse Digital Imaging,
Inc. operates in one industry segment and derives substantially all of its
revenues from U.S. customers.

     During the year ended December 31, 1998, one customer accounted for
approximately 52% of net sales. This customer's accounts receivable balance
represented approximately 98% of accounts receivable as of December 31, 1998.

  (e) Fair Value of Financial Instruments

     Financial instruments consist principally of cash, accounts receivable and
accounts payable. The estimated fair value of these instruments approximates
their carrying value.

  (f) New Accounting Standards

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
Pursuant to SFAS No. 137, Deferral of the Effective Date, SFAS No. 133,
Accounting For Derivative Instruments and Hedging Activities, this statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
SFAS No. 133 is not expected to have a material impact on Eclipse Digital
Imaging's financial statements.

     In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires
computer software costs associated with internal use software to be charged to
operations as incurred until certain capitalization criteria are met. SOP 98-1
is effective for financial statements for fiscal years beginning after December
15, 1998. The adoption of this statement did not have a material impact on
Eclipse Digital Imaging's financial statements.

     In April 1998, AICPA issued Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities (SOP 98-5). SOP 98-5 provides guidance on the
financial reporting of start-up activities and organization costs to be expensed
as incurred. SOP 98-5 did not have a material impact on Eclipse Digital
Imaging's financial statements.

(3) INCOME TAXES

     Eclipse Digital Imaging is treated as a partnership for Federal and State
income tax purposes, whereby the individual members are taxed on their
proportionate share of Eclipse Digital Imaging, Inc.'s income. As a result,
Eclipse Digital Imaging, Inc. does not provide for Federal or State income
taxes.

(4) COMMITMENTS

  (a) Operating Leases

     Eclipse Digital Imaging leased certain office space from a related party.
Included in the accompanying statements of operations for the year ended
December 31, 1998 is rent expense of approximately $5,460.

     The approximate future minimum annual rent due under the operating lease
agreement as of December 31, 1998 is $4,000 for the year ending December 31,
1999.

                                      F-38
106
                         ECLIPSE DIGITAL IMAGING, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  (b) Litigation

     In the ordinary course of business, Eclipse Digital Imaging is party to
various types of litigation. Eclipse Digital Imaging believes it has meritorious
defenses to all claims and, in its opinion, all litigation currently pending or
threatening will not have a material adverse effect on Eclipse Digital Imaging's
financial position or results of operations.

(5) LINE OF CREDIT

     On October 2, 1998, Eclipse Digital Imaging entered into a $20,000 line of
credit with the bank secured by substantially all of its business assets. The
line bears interest at 9.5%. At December 31, 1998, approximately $5,000 was
outstanding under the line. The line of credit expires on October 2, 1999. There
are no financial, negative or affirmative covenants.

(6) SUBSEQUENT EVENT

     On June 28, 1999, Eclipse Digital Imaging sold substantially all the assets
and assumed certain liabilities for $1,500,000. The purchase agreement contains
additional stock consideration of $1,000,000 contingent upon certain events, as
defined.

                                      F-39
107
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108

                        4,000,000 shares of common stock

                       OPEN IPO WR HAMBRECHT & CO [LOGO]

WR HAMBRECHT & CO [LOGO]
                                  ADVEST, INC.

                                  ANDOVER NET                     DLJdirect INC.
                         THE LEADING LINUX DESTINATION
                                     [LOGO]

     Until             , 1999, which is 25 days after the date of this
prospectus, all dealers that buy, sell, or trade Andover.Net's common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
109

                PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The estimated expenses (other than the underwriting discount) payable in
connection with the sale of the common stock offered hereby are as follows, all
of which will be paid by the Company:
AMOUNT
                                                              ----------
SEC Registration fee........................................  $   19,182
NASD filing fee.............................................       7,400
Nasdaq National Market fee..................................       5,000
Printing expenses...........................................     100,000
Legal fees and expenses.....................................     300,000
Accounting Fees and expenses................................     200,000
Transfer agent and registrar fees and expenses..............      25,000
Miscellaneous...............................................  $  343,418
                                                              ----------
Total.......................................................  $1,000,000
                                                              ==========
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the General Corporation Law of the State of Delaware
provides as follows:

     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact the he is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent or another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suite or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and a manner he
reasonably believed to in or not opposed to the best interest of the corporation
and except that no indemnification shall be made in respect to any claim, issue
or matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

     In addition, pursuant to our certificate of incorporation and bylaws, we
shall indemnify our directors and officers against expenses (including judgments
or amounts paid in settlement) incurred in any action, civil

                                      II-1
110

or criminal, to which any such person is a party by reason of any alleged act or
failure to act in his capacity as such, except as to a matter as to which such
director or officer shall have been finally adjudged not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
corporation.

     The underwriting agreement between Andover.Net and the underwriters of this
offering provides that the underwriters are obligated, under certain
circumstances, to indemnify our directors, officers and controlling persons
against certain liabilities, including liabilities under the Securities Act.
Reference is made to the form of Underwriting Agreement filed at Exhibit 1.1
hereto.

     We maintain directors and officers liability insurance for the benefit of
our directors and certain of our officers.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     During the three year period ending September 15, 1999, Andover.Net has
issued the following securities, none of which has been registered under the
Securities Act:

     1. In June and July 1997, we issued and sold an aggregate of 46,667 shares
        of Series C preferred stock for $630,000 and 934,987 shares of common
        stock for $70,000, or $0.07 per share, for an aggregate purchase price
        of approximately $700,000 to a total of three accredited investors.

     2. On September 24, 1997, we issued and sold an aggregate of 33,334 shares
        of Series C preferred stock for $450,000 and 667,856 shares of common
        stock for $50,000, or $0.07 per share, for an aggregate purchase price
        of approximately $500,000 to a total of 14 accredited investors.

     3. On November 13, 1998, we issued and sold an aggregate of 157,438 shares
        of Series C preferred stock for $2.1 million and 2,628,569 shares of
        common stock for $677,000, or $0.26 per share, for an aggregate purchase
        price of approximately $2.8 million to a total of 24 accredited
        investors.

     4. On June 30, 1999, we issued and sold an aggregate of $2,090,000 in
        convertible notes to a total of 17 accredited investors.

     5. On September 15, 1999, we issued and sold an aggregate of 480,354 shares
        of Series B convertible preferred stock for an aggregate purchase price
        of approximately $10.1 million, or $21.0261753 per share, to 6
        accredited investors. In addition, we issued 120,214 shares of Series B
        convertible preferred stock upon conversion of the principal and accrued
        interest of the convertible notes referred to in item 4 above.

     6. From October 1, 1998 to June 30, 1999, we issued to our employees,
        officers, directors and consultants options to purchase an aggregate of
        471,294 shares of our common stock, at exercise prices ranging from
        $0.03 per share to $1.07 per share.

     The sales of securities set forth in paragraphs one to five above were
deemed to be exempt from the registration requirements of the Securities Act in
reliance on Section 4(2) thereof, or Regulation D promulgated thereunder, as
transactions by an issuer not involving a public offering. The sale of
securities set forth in paragraph 6 above was deemed to be exempt from the
registration requirements of the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act as transactions by an
issuer pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The granting of stock options
described in paragraph 6 above did not require registration under the Securities
Act, or an exemption therefrom, insofar as such grants did not involve a "sale"
of securities as such term is used in Section 2(3) of the Securities Act.

     During fiscal 1996, the Company issued warrants to the holders of the
previously issued Series B convertible preferred stock. A total of 6,875
warrants were issued to purchase Series B convertible preferred stock at an
exercise price of $15.00 per share. The warrants were exercised during fiscal
1997 for total proceeds of approximately $103,000.

     In May 1997, the Company issued convertible promissory notes in the sum of
$100,000 to investors. The notes were mandatorily convertible upon the
additional financing of $200,000 which was completed in June
                                      II-2
111

1997. The investors received a total of 20,000 shares of common stock and 20,000
shares of Series C preferred stock in exchange for the notes and an additional
$200,000.

ITEM 16.  EXHIBITS
NO.                     DESCRIPTION OF DOCUMENTS
 ---                     ------------------------
1.1  Form of Underwriting Agreement
  3.1  Form of Amended and Restated Certificate of Incorporation of
       the Registrant
  3.2  Form of Amended and Restated Bylaws of the Registrant
  5.1  Opinion of Hutchins, Wheeler & Dittmar, A Professional
       Corporation*
 10.1  Third Amended and Restated Registration Rights Agreement,
       dated as of September 15, 1999 among the Registrant and
       certain of its stockholders.
 10.2  Asset Purchase Agreement, between the Registrant and
       BlockStackers, Inc., dated as of June 18, 1999.
 10.3  Asset Purchase Agreement, between the Registrant and Eclipse
       Digital Imaging, Inc., dated as of June 18, 1999.
 10.4  Asset Purchase Agreement, between the Registrant and Patrick
       Lenz (d/b/a Freshmeat), dated as of August 6, 1999.
 10.5  Lease dated March 23,1999 between the Registrant and Nagog
       Park Investors, L.L.C.
 10.6  Form of Advertising Insertion Order
 10.7  Employment Agreement between the Registrant and Robert
       Malda, dated as of June 28, 1999.
 10.8  1995 Stock Option Plan, as amended
 10.9  1999 Stock Option Plan
 23.1  Consent of Arthur Andersen LLP
 23.2  Consent of Hutchins, Wheeler & Dittmar, A Professional
       Corporation (included in Exhibit 5.1)*
 24.1  Power of Attorney (included on page II-4)
 27.1  Financial Data Schedule
---------------

* To be filed by amendment

     All other schedules for which provisions are made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.

ITEM 17.  UNDERTAKINGS

     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing of this offering specified in the underwriting agreement
certificates in such denomination and registered in such names as required by
the underwriters to permit proper delivery to each purchaser.

     The undersigned registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement 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.

                                      II-3
112

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                      II-4
113

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Acton, Massachusetts, on September
16, 1999.

                                          ANDOVER.NET, INC.

                                          By:      /s/ BRUCE A. TWICKLER
                                            ------------------------------------
                                                Bruce A. Twickler, President

     We, the undersigned officers and directors of Andover.Net, Inc., hereby
severally constitute and appoint Bruce A. Twickler, to sign for us and in our
names in the capacities indicated below, the Registration Statement on Form S-1
filed herewith and any and all pre-effective and post-effective amendments to
said Registration Statement, and, in connection with any registration of
additional securities pursuant to Rule 462(b) under the Securities Act of 1933,
to sign any abbreviated registration statement and any and all amendments
thereto, and to file the same, with all exhibits thereto and other documents in
connection therewith, in each case, with the Securities and Exchange Commission,
and generally to do all such things in our names and on our behalf in our
capacities with the provisions of the Securities Act of 1933, as amended, and
all requirements of the Securities and Exchange Commission.

     Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                   TITLE                      DATE
                     ---------                                   -----                      ----
/s/ BRUCE A. TWICKLER                 President and Chief Executive   September 16, 1999
---------------------------------------------------    Officer and Chairman of the
                 Bruce A. Twickler                     Board (Principal Executive
                                                       Officer and Principal
                                                       Financial Officer)

              /s/ WALTER H. BIRD, III                Director                        September 16, 1999
---------------------------------------------------
                Walter H. Bird, III

                /s/ JAMES D. LOGAN                   Director                        September 16, 1999
---------------------------------------------------
                  James D. Logan

                  /s/ LOUIS PAGE                     Director                        September 16, 1999
---------------------------------------------------
                    Louis Page

                /s/ JOHN E. TROMBLY                  Director                        September 16, 1999
---------------------------------------------------
                  John E. Trombly

              /s/ THOMAS R. SHEPHERD                 Director                        September 16, 1999
---------------------------------------------------
                Thomas R. Shepherd

                 /s/ ROBERT MALDA                    Director                        September 16, 1999
---------------------------------------------------
                   Robert Malda

             /s/ JONATHAN M. GOLDSTEIN               Director                        September 16, 1999
---------------------------------------------------
               Jonathan M. Goldstein
II-5
114

                                 EXHIBIT INDEX
NO.                     DESCRIPTION OF DOCUMENTS
 ---                     ------------------------
1.1   Form of Underwriting Agreement
 3.1   Form of Amended and Restated Certificate of Incorporation of
       the Registrant
 3.2   Form of Amended and Restated Bylaws of the Registrant
 5.1   Form of Opinion of Hutchins, Wheeler & Dittmar, A
       Professional Corporation*
10.1   Third Amended and Restated Registration Rights Agreement,
       dated as of September 15, 1997 among the Registrant and
       certain of its stockholders.
10.2   Asset Purchase Agreement, between the Registrant and
       BlockStackers, Inc., dated as of June 18, 1999.
10.3   Asset Purchase Agreement, between the Registrant and Eclipse
       Digital Imaging, Inc., dated as of June 18, 1999.
10.4   Asset Purchase Agreement, between the Registrant and Patrick
       Lenz (d/b/a Freshmeat), dated as of August 6, 1999.
10.5   Lease dated March 23, 1999, between the Registrant and Nagog
       Park Investors, L.L.C.
10.6   Form of Advertising Insertion Order
10.7   Employment Agreement between the Registrant and Robert
       Malda, dated as of June 28, 1999.
10.8   1995 Stock Option Plan, as amended
10.9   1999 Stock Option Plan
23.1   Consent of Arthur Andersen LLP
23.2   Consent of Hutchins, Wheeler & Dittmar, A Professional
       Corporation (included in Exhibit 5.1)*
24.1   Power of Attorney (included on page II-4)
27.1   Financial Data Schedule
---------------

* To be filed by amendment