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N2H2 flunks in debut

N2H2, Inc.(Nasdaq: NTWO), which filters Internet content for schools, shed over 3 percent dropping to 12 9/16 Friday morning after pricing 5 million shares at $13 for its initial public offering.

The offering, which had an estimated price range of $10 to $12 a share, was underwritten by CIBC World Markets and U.S. Bancorp Piper Jaffray. N2H2 has granted the underwriters an option to purchase up to an additional 675,000 shares at the initial public offering price to cover over-allotments. Of the shares being offered, 4.95 million are being sold by N2H2 and 50,000 are being sold by selling shareholders.

N2H2 runs, an educational Internet portal, as well as delivering Internet content for schools, home users, and businesses. The company also serves international markets.

Revenue of $1.4 million for the three months ended March 31, 1999, net loss was $1.4 million, according to the company's regulatory filings. From N2H2's inception in 1995 through March 31, 1999, the company has lost $6.4 million.

So far, the company has gotten revenue through subscription and installation fees for its filtering services, but it plans to launch a new fee structure which may reduce or eliminate subscription fees, and rely on advertising income the company said. The controversial nature of filtering was also cited in the company's regulatory filings as a risk to its financial well-being.