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Optional form for the registration of securities to be sold to the public by small business issuers

SB-2



As  filed  with  the  Securities  and  Exchange Commission  on  April 30,  1999.
                                                      Registration No. 333-_____
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM SB-2
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

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

                      FRONTLINE COMMUNICATIONS CORPORATION
             (Exact name of registrant as specified in its charter)

    Delaware                          7379                         13-3950283
 (state or other          (Primary standard industrial            (IRS employer
 jurisdiction of             classification number)              identification
  incorporation                                                      number)
or organization)

                         One Blue Hill Plaza, 6th Floor
                           Pearl River, New York 10965
                                 (914) 623-8553

  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)

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

                Stephen J. Cole-Hatchard, Chief Executive Officer
                      Frontline Communications Corporation
                         One Blue Hill Plaza, 6th Floor
                           Pearl River, New York 10965
                                 (914) 623-8553

 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                               -------------------
                                   Copies to:

                             Robert J. Mittman, Esq.
                              Tenzer Greenblatt LLP
                              The Chrysler Building
                              405 Lexington Avenue
                            New York, New York 10174
                          Telephone No. (212) 885-5000
                          Telecopier No. (212) 885-5001

     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.|X|

     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 the earlier effective
registration statement for the same offering. |_|

     If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

     If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|






                         CALCULATION OF REGISTRATION FEE





- ---------------------------------------------------------------------------------------------------------------------------------
                                                                   Proposed Maximum          Proposed Maximum
        Title of each Class of                   Amount to be       Offering Price          Aggregate Offering      Amount of
     Securities to be Registered                  Registered         Per Share(1)                Price(1)        Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Common Stock, par value $.01 per share
issuable upon exercise of warrants                1,840,000                $4.80                $8,832,000                *
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share
issuable upon exercise of underwriter
warrants                                            160,000                $6.60                $1,056,000                *
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share
issuable upon exercise of underwriter
warrants                                            160,000                $7.92                $1,267,200                *
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share
underlying warrants                                 300,000                $5.00                $1,500,000           417.00
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share              357,290(3)          $12.6875                $4,533,117         1,260.20
- ---------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share
issuable upon exercise of warrants                   21,662(3)           $13.849                   300,019            83.40
- ---------------------------------------------------------------------------------------------------------------------------------

      Total                                                                                                       $2,134.51
=================================================================================================================================



(1)  Estimated solely for the purpose of calculating the registration fee based
     on the exercise price of outstanding warrants and the closing price of the
     common stock on Nasdaq on April 23, 1999.

(2)  Under Rule 416, there are also being registered additional shares of common
     stock as may become issuable pursuant to the anti-dilution provisions of
     the plan.

(3)  Under Rule 416, includes up to 180,518 additional shares of common stock as
     may become issuable pursuant to anti-dilution provisions of the shares and
     warrants.

Pursuant to Rule 429 under the Securities Act of 1933, this Registration
Statement relates to the Registration Statement on Form SB-2 (File No.
333-34115), as amended.

* Filing fees of $2,605.44 and $685.34 were previously paid with respect to the
1,840,000 shares issuable upon exercise of the warrants and the 320,000 shares
issuable upon exercise of the underwriter's warrants.

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

The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.






The information in this prospectus is not complete and may be 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 is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.

                   Subject to completion, dated April 30, 1999

                                3,140,518 Shares

                      Frontline Communications Corporation

                                  Common Stock

     This prospectus relates to 1,840,000 shares of common stock issuable upon
the exercise of warrants issued in connection with our initial public offering
in May 1998. Each public warrant entitles the holder to purchase one share of
common stock at a price of $4.80 at any time commencing May 13, 1999 until May
13, 2003. The warrants are redeemable by us at any time after June 13, 1999 upon
notice of not less than 30 days, at a price of $.10 per warrant, provided that
the closing bid quotation of our common stock on all 20 trading days ending on
the third trading day prior to the day on which we give notice has been at least
$7.20 and we obtain the written consent of the underwriter of our initial public
offering.

     This prospectus also relates to an offering by selling stockholders of:

     o    320,000 shares of common stock issuable upon the exercise of warrants
          issued to the underwriter and its designees in connection with our
          initial public offering;

     o    500,000 shares of common stock issuable upon the exercise of options
          granted under our 1997 stock option plan;

     o    300,000 shares of common stock issuable upon the exercise of warrants
          issued in a private placement in December 1997;

     o    158,856 shares of common stock issued in a private placement in March
          1999; and

     o    21,662 shares of common stock issuable upon exercise of warrants
          issued in a private placement in March 1999.

     An additional 180,518 shares may be issuable under repricing rights and
anti-dilution provisions of the shares and warrants issued in the private
placement in March 1999.

     We will not receive any of the proceeds from shares sold by selling
stockholders.

     Our common stock is listed for trading on the Nasdaq SmallCap Market under
the symbol FCCN. On April 23, 1999, the last reported sale price of our common
stock on Nasdaq was $12.6875.

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

     Investing in our common stock involves certain risks. See "Risk Factors"
beginning on page 5.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.


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


                     This prospectus is dated _____ __, 1999






                               PROSPECTUS SUMMARY

     This summary highlights certain information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including our
financial statements and related notes, and especially the risks described under
"Risk Factors."

                                   The Company

Our Business

     We are an Internet service provider offering Internet access to individual
and small business subscribers located in our target markets in the Northeast
United States. We provide subscribers with direct access to a wide range of
Internet applications and resources, including electronic mail, web site hosting
and design, dedicated circuits, e-commerce solutions, access to world wide web
sites and regional and local information and data services.

     Since our initial public offering in May 1998, we have increased our
subscriber base from approximately 1,400 subscribers to approximately 15,000
subscribers. Our growth has been achieved primarily through acquisitions of the
customer bases of other Internet service providers. We are now focusing our
marketing efforts primarily on small business subscribers.

     We also acquired WOWFactor, Inc., which provides e-commerce information and
services to women. Over 1.2 million women business owners are currently profiled
in WOWFactor's on-line directory. Our proposed WOWFactor web site is expected to
provide comprehensive e-commerce solutions, advanced business searches, on-line
requests for proposals and personal search services for women-owned businesses.

     Our wholly owned subsidiary, CLEC Communications Corp. was granted
competitive local exchange carrier status by the New York State Public Service
Commission in December 1998. Our subsidiary will have the ability to subscribe
to and resell all forms of local telephone service in New York. Before our
subsidiary can provide such services, it must enter into an interconnection
agreement with a local exchange carrier.

     We will seek to build our own network infrastructure, which we believe will
reduce our reliance on incumbent local exchange carriers. We believe that our
subsidiary's competitive local exchange carrier status, combined with the
efficiencies inherent in operating our own telecommunications network, should
benefit our customers by reducing costs and providing more predictable Internet
connections.

     Our principal executive offices are located at One Blue Hill Plaza, Pearl
River, New York 10965, and our telephone number is (914) 623-8553. Our Internet
web site is located at www.fcc.net. WOWFactor's web site is located at
www.wowfactor.com.


                                       -2-










                                  The Offering


Common stock offered ...................     3,140,518 shares.



Common stock outstanding ...............     3,388,700 shares.

Use of Proceeds ........................     Assuming that all of the public
                                             warrants are exercised, we will
                                             realize proceeds of $8,832,000.
                                             Assuming the warrants held by
                                             selling stockholders are exercised,
                                             we will realize proceeds of
                                             $1,799,997. Proceeds will be used
                                             for working capital and potential
                                             acquisitions. We will not receive
                                             any of the proceeds from the sale
                                             of common stock by the selling
                                             stockholders.

Nasdaq SmallCap Market symbol ..........     FCCN

Risk Factors ...........................     You should read the "Risk Factors"
                                             section beginning on page 5 and the
                                             other cautionary statements in this
                                             prospectus to ensure that you
                                             understand the risks associated
                                             with an investment in our common
                                             stock.

              Cautionary Note Regarding Forward-Looking Statements

     This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. We intend
the forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements in these sections. All statements regarding our
expected financial position and operating results, our business strategy and our
plans are forward-looking statements. These statements can sometimes be
identified by our use of words such as "may," "anticipate," "expect," "intend,"
"believe," "estimate" or similar expressions. Our expectations in any
forward-looking statements may not turn out to be correct. Our actual results
could be materially different from our expectations. Important factors that
could cause our actual results to be materially different from our expectations
include those discussed under "Risk Factors." We have no obligation to update
these statements to reflect events and circumstances after the date of this
prospectus.


                                       -3-







                          Summary Financial Information

     You should read the following summary financial information together with
the "Use of Proceeds" section and our financial statements and related notes
included elsewhere in this prospectus.

Statement of Operations Data:

                                                        Years Ended December 31,
                                                     ---------------------------

                                                        1997           1998
                                                     ---------       ----------

Revenues .........................................    $321,706         $574,964

Cost of revenues .................................     251,928          651,378

Selling, general and administrative costs ........     540,883        1,744,029

Non-cash special compensation charge .............   1,537,000             --

Net loss .........................................  (2,037,417)      (1,744,099)

Net loss per share ...............................       (1.67)            (.72)

Weighted average number
   of shares outstanding .........................   1,218,000        2,435,035


Balance Sheet Data:

                                                       December 31, 1998
                                                       -----------------

Working capital ..................................        $1,245,536

Total assets .....................................         6,286,403

Total liabilities ................................         1,239,016

Stockholders' equity .............................         5,047,387


                                       -4-





                                  RISK FACTORS

     The shares offered hereby involve a high degree of risk. Each prospective
investor should carefully consider the following risk factors before making an
investment decision.

We have a history of losses and anticipate that we will continue to incur losses
in the future.

     Since our inception we have incurred significant losses. For the years
ended December 31, 1997 and 1998 our net losses were $2,037,417 and $1,744,099.
We had an accumulated deficit of $3,843,647 as of December 31, 1998. We expect
that our losses will continue as we incur increased operating costs associated
with expanding our subscriber base, establishing additional points-of-presence
and expanding our product offerings to include e-commerce and web site design.
We may not be able to achieve profitability or, if achieved, maintain
profitability for any extended period of time.

As an early stage company, we have a limited operating history upon which you
can make an investment decision.

     We were organized in February 1997 and are in an early stage of
development. Accordingly, we have a limited operating history upon which you can
evaluate our performance and future prospects. In considering our prospects, you
should realize that, as a new business in a rapidly evolving industry, we may
encounter many expenses, delays, problems and difficulties which we lack the
experience to identify or quantify at this time.

In order to become profitable, we will need to implement our business plan
successfully, including by attracting new subscribers to our Internet access
services and increasing the number and efficiency of our points-of-presence.

     The success of our plan of operation depends upon our ability to attract
and retain significant numbers of subscribers, consolidate our
points-of-presence and establish and equip additional points-of-presence on a
timely and cost effective basis. At the same time, we will need to hire and
retain skilled management, technical, marketing and other personnel and expand
our product and service offerings. We have limited experience in commercializing
new Internet products and services. In addition, there is limited information
available concerning the potential performance or market acceptance of our
points-of-presence or other services. We may not be able to implement our
business plan successfully, and we may also encounter unanticipated expenses,
problems or technical difficulties which could materially delay the
implementation of our business plan.

We plan to change our marketing focus and to offer additional products and
services, both of which will place a significant strain on us.

     Historically, we have marketed our Internet services to individual
subscribers and the majority of our revenues to date have been generated through
individual subscriptions. In electing to expand our target market, we have
decided to market our services aggressively to small businesses. We are also in
the process of increasing our product offerings. In addition to providing
Internet access services, we plan to offer small businesses e-commerce
solutions, including commerce-enabled Web sites, document security services and
Internet payment services. We also intend to become a reseller of
telecommunications services in the near future.

     The expansion of our target markets and product offerings will place
significant demands on the time and attention of our senior management and will
involve significant financial and other costs,

                                       -5-






including building necessary network infrastructures, marketing and promoting
our new products and services and hiring personnel to provide these new
services. We may not be able to enter new markets and offer new services
successfully, and we may not be able to undertake these activities while
maintaining sufficient levels of customer service to retain our existing
subscribers. Any increase in subscriber attrition rate as a result of our shift
in business emphasis would have a material adverse effect on us, our reputation
and our operations.

We are pursuing a strategy of rapid growth through acquisitions, which may
strain our operations and which we may not be able to manage effectively.

     We are pursuing aggressive and rapid growth through the acquisitions of
other Internet service providers and companies involved in related
Internet-based businesses such as web site design and e-commerce. Our rapid
growth has in the past placed, and may continue to place, a significant strain
on our business resources. Our growth strategy will create significant demands
on the time and attention of our senior management and will involve significant
financial and other costs, including identifying and investigating acquisition
candidates, negotiating acquisition agreements and integrating the acquired
businesses with our existing operations.

     Future acquisitions and the hiring of necessary additional personnel will
result in higher capital expenditures and operating expenses for us. Employees
and customers of acquired businesses may terminate their relationships with
these businesses after we acquire them. We may not be able to successfully
consummate any attempted acquisitions or integrate any acquired businesses into
our operations.

     Our ability to manage our planned future growth through acquisitions will
depend upon our success in:

     o hiring and retaining qualified management, technical and marketing
     personnel;

     o effectively maintaining high levels of customer service required to
     retain subscribers while undertaking expansion; and

     o expanding our network infrastructure capacity to service a growing
     subscriber base.

     If we fail to achieve any of these factors, our business, financial
condition, results of operations and the market price of our securities could be
materially adversely affected.

We will require a significant amount of capital to carry out our business plan
and may need to seek additional financing soon.

     Implementing our current business plan will require significant capital. In
the past, we have relied on the issuance of equity securities and borrowings to
finance our operations. Based upon certain assumptions related to our business
plan and operations, we anticipate that our available capital, together with our
projected revenues, will satisfy our anticipated cash requirements through at
least the end of 1999. However, our available capital may not be sufficient to
permit us to implement our business plan, and our assumptions relating to our
business plan may prove to be flawed. If our business plan changes or if our
assumptions prove to be inaccurate, we may be forced either to seek additional
financing sooner than we currently anticipate or to curtail our expansion
activities. Sources of financing may not be available to us on commercially
reasonable terms or at all, either of which could have a material adverse effect
on our business plan and proposed expansion.


                                       -6-





We have no experience consolidating our points-of-presence and cannot predict
the effects of consolidation on our operations.

     We currently operate eleven points-of-presence, which are located in New
York, New Jersey and Pennsylvania. In an attempt to reduce operating costs and
take advantage of economies of scale, we have decided to consolidate our
existing points-of-presence into three SuperPOPs which will be located in New
York, New Jersey and Pennsylvania and which will cover broader geographic areas.

     The process of consolidating our points-of-presence will be lengthy and
will require network installations to complete. We may not be able to
consolidate our points-of-presence successfully. The consolidation process may
also encounter unforeseen delays and costs. Events such as failure to obtain and
install telephone lines and network equipment on a timely and cost-effective
basis could materially delay our consolidation plans. Even if we are able to
consolidate our points-of-presence, we may not realize savings in operating
expenses. We have limited operating experience and have limited financial and
other resources to rely on if our initial consolidation efforts fail.

     The results achieved to date by our points-of-presence may not be
indicative of the prospects or market acceptance of three larger SuperPOPs
serving wider and more geographically dispersed areas. Our points-of-presence
are located in the Northeastern United States, making it difficult to predict
market reaction to our services outside of the Northeast. In addition, SuperPOPs
may not be able to provide the same service to subscribers as our existing
points-of-presence. Any disruption to our services and any problems encountered
by subscribers as a result of the consolidation could result in increased
subscriber attrition, damage our reputation and materially adversely affect our
operations and revenues.

We do not have contracts with the supplier that we rely on for our access to
telecommunications networks or with the manufacturers of our hardware
components.

     We depend on one supplier to provide us with Internet access through leased
telecommunications lines, but we have not entered into an interconnect agreement
with this supplier. If this supplier increases the rates it charges us, it could
materially adversely affect our operating margins. If our relationship with this
supplier terminates or if we otherwise fail to obtain continuing access to
telecommunications networks on a cost-effective and continuous basis, we could
be required to significantly curtail or cease our operations. Our operations
require our points-of-presence and third-party telecommunications networks to
operate on a continuous basis. Any service interruptions or equipment failures
with our points-of-presence or third-party telecommunications networks would
diminish subscriber confidence and adversely affect our business operations and
reputation.

     We also depend on third-party manufacturers of hardware components. We
acquire certain components that we use in providing networking services from
only one source, including high performance routers manufactured by Cisco
Systems, Inc. and remote access servers manufactured by U.S. Robotics, Inc. We
have not entered into agreements with any equipment manufacturer, and we
purchase equipment components pursuant to purchase orders placed from time to
time in the ordinary course of business. If these or other manufacturers fail to
deliver quality products to us on a timely basis, if we are not able to develop
alternative manufacturing sources when we need them, or if we experience other
delays in receiving components, our business would be materially adversely
affected, and our ability to expand our operations would be limited.


                                       -7-






The Internet services industry is relatively new and evolving, and any
significant changes in it may adversely affect us.

     The Internet connectivity services industry is rapidly evolving, with
frequent introductions of new services and products, and it is characterized by
a high rate of business failures. We cannot predict the rate at which the market
for our products and services will grow, how quickly consumer tastes may change
or whether new products will result in market saturation. The novelty of the
market for Internet access services may adversely affect our ability to retain
new subscribers, some of whom may be unfamiliar with the Internet and may be
likely to discontinue our services after an initial trial period. Any
significant decline in demand for Internet connectivity services, in the
computer industry generally or in particular target markets would have a
substantial adverse effect on our business and prospects.

Significant increases in subscriber attrition rates would adversely effect our
operating results.

     Subscribers are permitted to discontinue our services without penalty for
any reason. From December 1997 through December 1999, the number of subscribers
for our services increased from 1,400 to approximately 15,000, which may result
in an increase in our subscriber attrition rate. A significant increase in the
subscriber attrition rate would have a material adverse effect on our operating
results.

Keeping pace with rapidly changing Internet technology may be time-consuming,
expensive or impossible for us.

     The market for Internet access is characterized by rapidly changing
technology, evolving industry standards and frequent new software and service
introductions. Our business is also subject to fundamental changes in the way
Internet access services are delivered.

     Currently, Internet services are accessed primarily by computers and are
delivered by telephone lines. If the Internet becomes widely accessible by
screen-based telephones, television or other consumer electronic devices, or if
customer requirements change the way Internet access is provided, we may have to
acquire or develop new technology or modify our existing technology to
accommodate these developments. Recent technological advances in Internet
services include data compression, full-motion video, and integration of video,
voice, data and graphics. Attempting to keep our services current with recent
technological advances may require substantial time and expense, and we may not
be able to adapt our Internet service business to alternate access devices and
conduits. We may not be able to identify new product and service opportunities
as they arise or develop or bring new products and services to market in a
timely manner. To the extent that high-speed Internet access is increasingly
delivered by large carriers and cable companies, our business could be
materially adversely effected.

We have limited experience in marketing our services and limited marketing and
customer support resources.

     Our success depends to a significant degree on our ability to continually
replace subscribers who terminate our services and attract and retain new
subscribers. We have limited marketing experience and limited marketing,
customer support and other resources. Full-scale marketing of our services to
individuals and small businesses may require us to rely on third party
distribution channels, such as retail stores, catalogs, book publishers and
computer hardware and software vendors. We may not be able to develop or
maintain relationships with these parties. Our business plan will also require
us to expand our customer service and support capabilities in order to satisfy
increasing customer demands. We may not be able to successfully expand our
customer service or support capabilities, and our marketing efforts may not
result in initial or continued acceptance for our Internet access services.


                                       -8-






We may not have the financial resources, technical expertise or marketing and
support capabilities to withstand intense competition in the Internet services
industry.

     The market for Internet access services is intensely competitive, and we
expect that competition will intensify in the future. There are no substantial
barriers to entry, and this industry is characterized by rapidly increasing
numbers of new market entrants and new Internet products and services.

     Our competitors include many large companies that have significantly
greater market presence and financial, technical, marketing and other resources
than we do, including international, national and regional commercial Internet
service providers; established online services companies that currently offer
Internet access; computer hardware and software and other technology companies;
national long distance carriers; and cable operators. New competitors, including
large computer hardware and software, media, cable and telecommunications
companies, have also increased their focus on the Internet access market. We
also compete with smaller Internet service providers in the Northeast that seek
to provide Internet access to individual and small business subscribers.

     Increased competition has resulted and could continue to result in
significant price competition, which in turn could result in significant price
reductions. In addition, increased competition for new subscribers could result
in increased sales and marketing expenses and related subscriber acquisition
costs, which could materially adversely affect our operating results. We may not
be able to offset the effects of any such price reductions or increased expenses
through an increase in the number of our subscribers or higher revenue from
enhanced services. We may not have the financial resources, technical expertise
or marketing and support capabilities to compete successfully, and the software,
services or technologies developed by others may render our services or
technologies obsolete or less marketable.

Our operations require us to use significant resources in expanding and
protecting our network infrastructure and computer equipment.

     Our operations depend upon the capacity, reliability and security of our
network infrastructure. We have limited network capacity and must continually
expand our network infrastructure to accommodate increasing numbers of users and
the range of information they may wish to access. Expanding our network
infrastructure will continue to demand significant financial, operational and
management resources, and we may not be able to expand our network
infrastructure to meet potential demand on a timely basis, at a commercially
reasonable cost, or at all.

     The success of our operations also depends on our ability to protect our
computer equipment against damage from fire, power loss, telecommunications
failures and similar events. Our network infrastructure is vulnerable to
break-ins and similar disruptions from unauthorized tampering with our computer
systems. Computer viruses or problems caused by third parties could lead to
material interruptions, delays or interruptions in service to consumers.

We lack effective methods for protecting our proprietary information.

     We have no registered copyrights or patents or patent applications pending.
We do not have any proprietary applications software. We rely on a combination
of copyright and trademark laws, trade secrets, software security measures,
license agreements and nondisclosure agreements to protect our proprietary
information. It may be possible for unauthorized third parties to copy aspects
of, or otherwise obtain and use, our proprietary information without
authorization. We employ confidentiality agreements with our employees and
license agreements with our customers, but these agreements may not provide


                                       -9-






meaningful protection of our proprietary information in the event of any
unauthorized use or disclosure of such information.

Changes in regulations and legislation may increase our liability, our expenses
and competition for our services.

     Recently enacted federal, state and local legislation aimed at limiting the
use of the Internet to transmit certain content and materials could result in
significant potential liability to Internet service providers for information
disseminated through their systems. The adoption or strict enforcement of these
or any other future laws or regulations could increase our cost of doing
business. The application of existing laws governing issues such as property
ownership, libel and personal privacy to the Internet is uncertain. Any new
legislation or regulation or the clarification of the application of existing
laws and regulations to the Internet could have an adverse effect on our
business and prospects. Changes in the regulatory environment relating to the
Internet connectivity industry, including regulatory changes which directly or
indirectly affect telecommunication costs, could increase the likelihood or
scope of competition from local and regional telephone companies or others.

If we are unable to attract and retain qualified management and other personnel,
our business and operations could suffer.

     Our success depends on the personal efforts of our key personnel. The loss
of the services of these individuals could have a material adverse effect on our
business and prospects.

     Our success also depends on our ability to hire and retain additional
qualified management, marketing, technical, financial and other personnel.
Competition for qualified personnel is intense, and we may not be able to hire
or retain additional qualified personnel.

We are effectively controlled by members of our management, whose interests may
not be aligned with yours.

     Members of our management beneficially own a significant number of shares
of our common stock. Accordingly, such persons, acting together, are in a
position to control us, elect all of our directors, cause an increase in the
authorized capital or the dissolution, merger or sale of our assets, and
generally direct our affairs.

We could be delisted from the Nasdaq SmallCap Market.

     If, at any time, we become unable to maintain the requirements for
continued listing on Nasdaq, our common stock will no longer be traded on Nasdaq
and trading in our common stock would thereafter be conducted in the non-Nasdaq
over-the-counter market. If the common stock were not listed on Nasdaq and the
trading price of the common stock were to fall below $5.00 per share, trading in
the common stock would become subject to the Security and Exchange Commission's
penny stock rules. The penny stock rules require additional disclosure by
broker-dealers in connection with any trades involving penny stock. The
additional burdens imposed upon broker-dealers by such requirements could, if
the common stock were deemed to be a penny stock, discourage broker-dealers from
effecting transactions in the common stock, which could severely limit the
market liquidity of the common stock and the ability of purchasers in this
offering to sell the common stock in the secondary market.

It is possible that Investors may not be able to exercise the public warrants.


                                      -10-






     The Company initially qualified the sale of the public warrants in a
limited number of states. We may be prevented from issuing common stock in
states other than those in which the warrants were initially qualified, upon the
exercise of public warrants unless an exemption from qualification is available
or unless the issuance of common stock upon exercise of the public warrants is
qualified. We may decide not to seek or may not be able to obtain qualification
of the issuance of such common stock in all of the states in which the holders
of the public warrants reside. In this case, the public warrants held by
purchasers will expire and have no value if such public warrants cannot be sold.
Further, a current prospectus covering the common stock issuable upon exercise
of the public warrants must be in effect before we may accept public warrant
exercises.

Certain of our suppliers may experience problems with the Year 2000.

     We depend on third party telecommunications and hardware suppliers and upon
our access to and the uninterrupted operation of the Internet. Service
interruptions or supplier delays may result from year 2000 issues. Our business
would be materially adversely effected if there are any interruptions in service
resulting from an inability of such third-party systems to recognize the year
2000.


                                      -11-







                                 USE OF PROCEEDS

     Assuming that all of the public warrants are exercised, we will realize
proceeds of $8,832,000. Assuming the warrants held by selling stockholders are
exercised, we will realize proceeds of $1,799,997. We have agreed to pay certain
expenses in connection with this offering, currently expected to be
approximately $50,000. Proceeds will be used for working capital and potential
acquisitions. We will not receive any of the proceeds from the sale of common
stock by the selling stockholders.

                 PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

     Our common stock has been traded on the Nasdaq SmallCap Market under the
symbol "FCCN" since May 15, 1998. The following table shows the high and low
closing sales prices per share of our common stock as reported by Nasdaq for
each quarter since we have been public.


                                                               High         Low
                                                               ----         ---

Fiscal Year Ended December 31, 1998

           Second Quarter (from May 15, 1998) ..........      $5.250      $4.250

           Third Quarter ...............................       8.125       2.125

           Fourth Quarter ..............................       8.218       2.375

Fiscal Year Ended December 31, 1999

           First Quarter ...............................      13.625       5.625

           Second Quarter (through April 26, 1999) .....      16.875      11.750


     On April 23, 1999, the last reported price of our common stock on the
Nasdaq SmallCap Market was $12.6875 per share. At April 23, 1999, there were
approximately 55 holders of record of our common stock. We believe that we have
an excess of 400 beneficial owners of our common stock.

     We have never declared or paid any dividends on our common stock, and we do
not expect to declare or pay any cash dividends in the foreseeable future. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon our earnings, if any, our capital
requirements and financial condition and other relevant factors.


                                      -12-






                                 CAPITALIZATION

     The following table sets forth our capitalization as of December 31, 1998.
You should read this table together with the "Use of Proceeds" section and our
financial statements and related notes included elsewhere in this prospectus.

Current portion of capitalized lease obligations ..............     $    38,569
                                                                    ===========

Long-term debt and capital lease obligations ..................         284,433
                                                                    -----------

Stockholders' equity:

           Preferred stock, $.01 par value; 1,000,000
           shares authorized; 10 issued and outstanding .......            --

           Common stock, $.01 par value
           10,000,000 shares authorized; 3,361,364
           issued and outstanding .............................          33,614


           Additional paid-in capital .........................       9,121,533

           Accumulated deficit ................................      (3,843,647)

           Treasury stock .....................................        (264,113)

           Total stockholders' equity .........................       5,047,387
                                                                    -----------

            Total capitalization ..............................     $ 5,331,820
                                                                    ===========


                                      -13-







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

Overview

     Our revenues are derived primarily from providing Internet access services
to individual and business subscribers. Revenues are comprised principally of
recurring revenues from our customer base, non-recurring start-up fees for modem
and leased line connections and from various ancillary services. We charge
subscription fees, which are billed monthly or quarterly, in advance, typically
under pre-authorized credit card accounts or automatic bank transfers. We have
not yet generated any revenues from local exchange carrier or e-commerce
activities.

     Monthly subscription service revenue is recognized over the period in which
services are provided. Service revenues derived from dedicated access services,
which require the installation and use of equipment we provide at a subscriber's
location, are recognized when the service is commenced. Fee revenues for
ancillary services are recognized as services are performed.

     Our operating results may be significantly affected by subscriber attrition
rates. Subscribers may discontinue service without penalty at any time.
Significant subscriber attrition would have a material adverse effect on our
operating results.

     Acceleration in the growth of our subscriber base or changes in usage
patterns among subscribers may increase operating costs. Acceleration in the
growth of the subscriber base could require us to hire additional personnel and
increase our expenses related to marketing, network infrastructure and customer
support sooner than anticipated. An increase in peak time usage or an overall
increase in usage by subscribers could adversely affect our ability to
consistently meet the demand for our access services. As a result, we may be
required to hire additional personnel and increase expenses related to network
infrastructure capacity with minimal corresponding increases in revenue on a per
subscriber basis.

Acquisitions

     We expanded our operations through acquisitions, which has placed and may
continue to place a significant strain on our management, personnel,
administrative, operational, financial and other resources. To successfully
manage our growth, we will be required to continue to implement and improve our
information and operating systems, hire, train and manage an increasing number
of management and other personnel and monitor our operations.

WOWFactor, Inc.

     In October 1998, we acquired all of the issued and outstanding capital
stock of WOWFactor, Inc., a company engaged in the business of promoting
e-commerce through its web sites primarily for women's businesses. We issued to
the stockholders of WOWFactor ten shares of newly created Series A Preferred
Stock, which are convertible on July 15, 1999 into common stock with a market
value of $1,000,000, subject to a maximum issuance of 250,000 shares of common
stock.

Roxy Systems, Inc. d/b/a Magic Carpet

     In October 1998, we acquired substantially all of the assets used in the
business of Roxy Systems, Inc. d/b/a Magic Carpet in consideration of $75,000 in
cash and the assumption of approximately $60,000

                                      -14-





of liabilities. At the time of the acquisition, Magic Carpet was an Internet
service provider with approximately 1,000 subscribers in Orange County, New
York.

US Online, Inc.

     In October 1998, we acquired assets used in the business of US Online,
Inc., including a point-of-presence the Philadelphia area, and assumed two of US
Online's executory contracts for $570,000 in cash. At the time of the
acquisition, US Online was engaged in the business of providing Internet access,
web hosting and leased communications lines to approximately 3,500 subscribers
in New York, New Jersey and Pennsylvania.

Webspan, Inc.

     In December 1998, we acquired substantially all of the assets used in the
business of Webspan Communications, Inc. for $500,000 in cash, the assumption of
$544,000 in liabilities and 113,364 shares of our common stock. At the time of
the acquisition, Webspan was an Internet service provider with approximately
9,000 subscribers in New York and New Jersey.

     The acquisitions resulted in our recording intangible assets of
approximately $3,215,000 during 1998 which are being amortized over a period of
three years. See Note 4 in the Consolidated Financial Statements.

Results of Operations

Comparison of the Years ended December 31, 1998 and 1997

     Revenues: Revenues for the year ended December 31, 1998 were $574,964
compared to $321,706 for the year ended December 31, 1997. The increase was
attributable to an expanded subscriber base. We had approximately 15,000 and
1,400 subscribers at December 31, 1998 and 1997. The increase in subscriber base
was principally due to acquisitions.

     Cost of Revenues: Cost of revenues for 1998 were $651,378 compared to
$251,928 for 1997. Cost of revenues as a percentage of revenues for 1998 was
113.3% compared to 78.3% for 1997. The increase in cost of revenues was due to
increased communication, depreciation and technical personnel expenses incurred
to support the increased subscriber base and in anticipation of future
subscriber growth. We expect these costs to increase in absolute dollars as
additional subscribers are added.

     Operating Expenses: Operating expenses for 1998 were $1,744,029 compared to
$2,077,883 for 1997. Operating expenses for 1998 and 1997 included non-cash
compensation charges of $175,137 and $1,537,000. Excluding the non-cash charges,
operating expenses increased by $1,028,009 in 1998 compared to 1997. This
increase in operating expenses was attributable to higher advertising, payroll,
professional fees and rent expenses incurred in 1998 to support the increased
revenue base and in


                                      -15-





anticipation of future growth. Management anticipates future increases in
operating expenses related to advertising, rent payroll, depreciation and
professional fees.

     Interest Income: Interest income net of interest expense for 1998 was
$76,344 compared to net interest expense of $28,421 for 1997. The increase in
interest income was due to investment of the proceeds of our initial public
offering.

     Net Loss: We incurred significant losses and anticipate that we will
continue to incur losses until sufficient revenues are generated to offset the
substantial up-front expenditures and operating costs associated with attracting
and retaining additional subscribers. For the years ended December 31, 1998 and
1997, we incurred net losses of $1,744,099 and $2,037,417.

     We have outstanding options to purchase 613,000 shares of common stock, net
of forteitures and exercises, under the stock option plan at exercise prices
ranging from $2.00 to $5.18 per share. The grant of 213,000 of the options are
subject to shareholder approval at our 1999 stockholder meeting. To the extent
the market value of our common stock subject to these options on the date of
such approval exceeds the exercise price approval of the option grants will
result in compensation expense equal to the amount of such excess.

Liquidity and Capital Resources

     In May 1997, we completed a private placement in which we issued 200,000
shares of common stock and received proceeds of $400,000.

     In December 1997, we completed a private placement in which we issued
$150,000 principal amount of promissory notes and warrants to purchase 300,000
shares of common stock at an exercise price of $5.00 per share. The notes were
repaid in May 1998.

     In May 1998, we completed our initial public offering of our securities and
received net proceeds of approximately $5.8 million. Out of the proceeds,
$443,000 was used for repayment of indebtedness and $264,113 was used to
repurchase 231,520 shares of our common stock. We completed four acquisitions in
1998 and used approximately $1,482,000 for the cash portion of the purchase
price and related expenses. The remaining proceeds, after meeting our working
capital and capital expenditure requirements, are currently held in
interest-bearing bank accounts.

     Our working capital at December 31, 1998 was $1,245,536 compared to a
working capital deficit of $423,369 at December 31, 1997. The increase in
working capital was due to receipt of the proceeds of our initial public
offering.

     In March 1999, we sold 158,856 shares of our common stock to two investors
for $2,000,000. We also issued warrants to purchase 21,662 shares of common
stock at an exercise price of $13.849 per share. We agreed to include the shares
as well as the shares underlying the warrants in the registration statement of
which this prospectus forms a part and granted repricing rights with respect to
the shares, and anti-dilution rights with respect to the warrants, subject to an
aggregate maximum issuance of 450,000 shares. See "Description of Securities."

     Our primary cash requirements are to fund acquisition of subscriber bases
and related Internet businesses, establish additional points-of-presence,
install network equipment, lease space for consolidated points-of-presence and
working capital. To date, we financed our cash requirements primarily through
issuance of debt and equity securities. We currently do not have any lines of
credit. The availability of cash sources is dependent upon prevailing market
conditions, interest rates and our financial condition. We will require
additional cash resources in connection with our continued expansion.

     Our capital expenditures for 1999 are expected to be between $300,000 to
$400,000. In addition, we have issued orders to purchase communications
equipment and professional services in the amount of $2,000,000 from a major
telecommunications equipment manufacturer. The manufacturer would provide


                                      -16-




the necessary financing through a lease. The transaction is subject to the
negotiation and execution of a definitive agreement.

Year 2000

     The Year 2000 problem involves the ability of computer hardware and
software systems to accurately recognize and process date sensitive information
when the year changes to 2000. Systems that cannot recognize dates in the year
2000 or thereafter could generate erroneous data or fail.

     We have undertaken a two phase process to evaluate our internal status with
respect to the Year 2000 problem. Phase one involves assessing both computer
systems and non-computer systems which contain embedded technology for Year 2000
compliance. To date, we have not discovered Year 2000 issues in the course of
our assessment that would have a material adverse effect on our business,
results of operations or financial condition. Our phase one evaluation is an
ongoing process and we cannot assure you that we will not discover Year 2000
problems or that we failed to identify Year 2000 problems that could have a
material effect on our operations. Phase one has been conducted by our employees
and, to date, the costs and expenses associated with phase one have not been
material.

     Phase two of our evaluation process will involve taking any needed
corrective actions to bring our systems into compliance and to develop a
contingency plan in the event any critical systems fail as a result of the Year
2000 problem. We will also attempt to quantify the impact on our business should
any critical systems fail. Although we cannot currently estimate the magnitude
of such impact, if systems material to our operations have not been made Year
2000 compliant by the end of the year, the Year 2000 problem could materially
adversely affect us. To date, the costs incurred with respect to phase two have
not been material. Future costs are difficult to estimate; however, we do not
currently anticipate that such costs will be material.

     We have begun a survey of third-parties with which we transact business,
including critical vendors and financial institutions, for Year 2000 compliance.
We are in the process of evaluating the Year 2000 preparedness of our
telecommunications providers, on which we are reliant for the network services
crucial to web hosting and Internet connectivity services. We are actively
working to mitigate any potential impact by seeking to maintain diverse
providers for such network services. However, failure of any one provider may
have a material adverse effect on our operations.


                                      -17-






 
                                   BUSINESS

Industry Overview

     In recent years, the Internet has experienced a rapid increase in its
number of users. According to IntelliQuest Research, it is estimated that the
number of adults online in the United States is approximately 79.4 million, with
an additional 18.8 million people planning to go online in 1999. Forrester
Research estimated that the total goods traded over the web in the U.S. in 1997
reached $9 billion. In the year 2000, Forrester expects the total goods traded
to increase to $160 billion, and by year 2002, $327 billion.

     We believe that the following key trends will contribute favorably to
expected continued popularity of the Internet:

     o    Increased Online Advertising and Shopping: Corporate spending on
          online advertising has increased as the emerging demographics of Web
          users have begun to mirror worldwide demographics. According to a
          report by Simba Information, spending on online advertising will reach
          $7.1 billion by 2002, as a significantly higher percentage of women
          and middle-income users visit the Internet. Research from CnetNews.com
          indicates that online buyers are spending more over time. In 1998,
          thirty-five percent of online buyers spent more than $300 online. This
          was an eleven percent increase from 1997.

     o    Increased Availability of user-friendly technology and support for
          E-commerce: Internet use is promoted by the development of software
          tools that simplify access to the Internet's applications and
          resources. As users become more comfortable with the Internet and the
          Internet increasingly becomes a medium for business transactions,
          personal financial management, entertainment and personal
          communication, we believe that demand by individuals for competitively
          priced, direct, high speed access to commerce-enabled businesses,
          updated information, personal home pages, interactive multimedia games
          and entertainment will continue to grow.

     o    Continuing Penetration of Computers and Modems in the Home: An
          increasing percentage of computer owners also own modems, which are
          now pre-installed in a growing number of new computers. According to a
          1997 survey by FIND/SVP's, more than 42.7 million households in the
          United States own a personal computer; approximately 40 million also
          own a modem; and 36.5 million households use the Internet.

     o    Growth of the Informational, Entertainment and Commercial Applications
          of the Internet: Use of the Internet has grown rapidly since its
          commercialization in the early 1990s. An increasing number of servers
          and web sites are connected to the Internet, making available text,
          graphics, audio and video information which may be accessed by
          consumers. Through an Internet connection, users can access
          commercial, educational and governmental databases, entertainment
          software, photographs and videos, newspapers, magazines, library card
          catalogs, industry newsletters, weather updates and other information.
          Traditional and emerging Internet applications, including electronic
          mail, the world wide web and usenet news groups are also increasing in
          popularity.


                                      -18-





Our Strategy

     Our strategy is to become a leading provider of Internet access and related
services to individuals and small businesses. We are concentrating our resources
on developing key elements of our business strategy in order to accomplish our
goal. We will seek to concurrently:

     o    develop our Internet service provider business and increase our
          subscriber base;

     o    initiate and foster our e-commerce business; and

     o    expand and develop our network capabilities and the services that we
          make available to our customers.

Development of the Internet Service Provider Business

     Our core business is providing Internet access service to individual and
small business subscribers. We offer a range of services starting at a simple
$19.95 per month basic package that includes e-mail and Internet access, to
higher priced individualized service that may include web hosting, dedicated
circuits, and digital subscriber lines service. We intend to provide our
customers with a full range of Internet access services, including dial-up
access, web site hosting, dedicated connections and digital subscriber line
services. Digital subscriber line service provides customers with high-speed
access the Internet over conventional telephone lines rather than digital lines.

     We currently have approximately 15,000 customers who subscribe for our
services. We will seek to increase the number of subscribers primarily through
referrals. Thus, we have made generating positive referrals and stimulating
subscriber growth and retention through high-quality customer service a focus of
our marketing efforts. We offer incentives to existing subscribers and
value-added resellers who refer our service to new customers. A subscriber who
refers a new dial-up customer to us will receive one free month of service for
each referral, provided that the new subscriber remains active for a minimum of
sixty days. Value added resellers receive a commission based on a percentage of
the value of any service contract that they refer to us. We will also seek to
expand our subscriber base by acquiring Internet service providers.

Development of E-commerce Business

     We also intend to increase our services by offering small business owners
cost-effective, full-service e-commerce solutions which are easy to implement
and maintain. Available e-commerce solutions will include commerce-enabled web
sites, document security services, Internet payment services, digital coupons
and on-line merchandising technologies. To properly promote our services and
thereby potentially increase our subscriber base, we are expanding our sales and
marketing staff by seeking to recruit qualified staff and management.

     In October 1998, we acquired WOWFactor, Inc., a company engaged in the
business of promoting e-commerce through its web site devoted to professional
women and women-owned businesses. WOWFactor has not yet launched its web site.
We anticipate three sources of revenue from the proposed WOWFactor web site:

     o    corporate sponsorships;


                                      -19-





     o    advertising, including banner advertisements, posting links to
          affiliate partners and shared revenue from advertisements provided by
          content partners; and

     o    providing web hosting and e-commerce enabling services to other sites.

     Services to be provided through the WOWFactor Web site are expected to
include a unique service that allows the user to request a personal, limited
search of the businesses profiled in the WOWFactor directory. WOWFactor will
respond with listings from its database. WOWFactor will also offer users a
unique business reply card service that allows users to submit online requests
for proposals by completing a template on the site. Both services promote
WOWFactor's overriding goal: bringing buyers and sellers together on the
Internet.

Expansion and Development of Capabilities and Services

     The Internet access and e-commerce business is rapidly developing, and we
recognize that if we do not keep pace with, or even ahead of, the advances in
the industry, we will fall behind the competition. We are continually looking
for new and innovative ways that we can offer better, more complete, more
efficient and less expensive service to its customers such as:

     o    Consolidating our points-of-presence for operational efficiency by
          creating one SuperPOP in each of New York, New Jersey and
          Pennsylvania. Points-of-presence permit subscribers to access the
          Internet through a local telephone call. By consolidating our
          points-of-presence, we hope to lower our monthly overhead by taking
          advantage of economies of scale.

     o    Becoming a reseller of local telephone service. Through our
          subsidiary, CLEC Communications Corp., we are authorized to subscribe
          and resell all forms of local telephone service in the State of New
          York. The provision of services requires us to enter into an
          interconnection agreement with the incumbent local exchange carrier.
          We intend to build our own network infrastructure, which may reduce
          our reliance upon the infrastructures of the incumbent local exchange
          carriers. By becoming a competitive local exchange carrier, we intend
          to directly provide certain services directly which we currently
          provide indirectly through partnerships and contracts with third
          parties, such as digital subscriber line service.

Internet Services

     We provide a variety of competitively priced Internet access services,
including dial-up accounts and dedicated access.

     o    Dial-Up Accounts: We believe that dial-up accounts present an
          attractive opportunity for growth. Dial-up subscribers access the
          Internet through a telephone call to one of our points-of-presence. A
          user can quickly activate an account with us, obtain two Internet
          e-mail addresses, web space and establish automatic billing to the
          user's credit card. Subscriber accounts are priced from $19.95 per
          month for unlimited connections, $48 per month for an unlimited
          integrated services digital network (ISDN) use account and $6.95 per
          month for limited use customers. There is no connection fee.
          Connections for ISDN services require the customer to obtain an ISDN
          line from the local telephone company. Our network supports
          connectivity software which utilizes standard communication

                                      -20-





          protocols, which enable a user's computer to communicate with other
          computers over the Internet.

     o    Dedicated Access: We also offer high speed, high bandwidth dedicated
          leased lines principally for business users who desire to connect
          their internal computer networks to the Internet, 24 hours a day,
          seven days a week. Our leased line accounts to provide Internet
          services to businesses at various speeds, including 56K circuits,
          fractional T-1 and full T-1 lines, depending on the customer's needs.
          We provide our customers with dedicated leased lines and bills
          subscribers on a monthly basis through a consolidated bill which
          includes the phone company's charges.

     Our product offerings to subscribers also include:

     o    Web Design and Hosting Services: We offer web site hosting services
          for a 24-hour interactive presence on the Internet. Our web servers
          connect directly to the Internet via high speed T-1 lines providing
          maximum bandwidth. This service includes domain name registration,
          24-hour access, file upload and/or download capability and statistical
          logs. We also offer web page design and development services and will
          seek to expand the scope of such services in the future.

     o    Co-Location Space: We provide a physical location at within our
          facilities for customers to install equipment and connect directly to
          the Internet. This service provides customers with a low cost direct
          connection to our router. We provide this service under maintenance
          agreements with pricing determined by the amount of space occupied and
          bandwidth needed.

Network Infrastructure

     As of December 31, 1998, we offered Internet access service through
points-of-presence located in four states. Users located within local dialing
range of the our points-of-presence connect to the points-of-presence through
telephone lines provided by the local telephone company. Each of our
points-of-presence generally connects to the Internet directly or through our
main hub in New York City.

     The number and location of our points-of-presence depends upon subscriber
demand, relative costs of telecommunications facilities, and the availability of
other competitive local exchange carriers. We are continuously evaluating the
usage and traffic at each of our points-of-presence in order to optimize network
traffic and Internet access times.

     Our network hub in New York City is connected to the Internet through data
communications lines leased from Internet backbone providers that carry data
traffic for us and other subscribers and deliver it either to its end
destination, if that destination is connected directly to their networks, or to
the Internet gateway points where the traffic is routed onward to its ultimate
destination. As we grow, we will need to increase the bandwidth of our
connection to the rest of the Internet. This may be done through increasing the
bandwidth of our connections through current providers, by adding new
connections through other providers or by establishing leased line connections
directly to the Internet gateway points.

     We maintain a network management center at our Pearl River, New York
headquarters through which our technical staff monitors network traffic, service
quality and security, as well as equipment at

                                      -21-





our points-of-presence, to ensure reliable Internet access. The network
management center is monitored 24 hours a day, 7 days a week. In addition, we
are continuing to invest in improved network monitoring software and hardware
systems.

Marketing and Sales

     Although we continue to provide Internet service to a growing number of
individual subscribers, our primary focus has shifted to providing Internet
service to small businesses in the northeastern United States. We currently
obtain new individual subscribers by (1) responding to inbound calls and e-mails
which are largely generated from referrals from existing subscribers and (2)
acquisitions of other Internet service providers. We are continuing our
marketing programs that target retention and referrals that are associated with
our current base of dial-up customers.

     The primary methods planned for targeting new small business customers
include direct response marketing programs such as radio, outbound
telemarketing, online marketing and broadcast fax. Affinity marketing programs,
such as those with affiliates such as online book and record sellers, will also
be employed. In a highly competitive industry such as this one, we believe that
name recognition is essential. Our marketing personnel are actively working to
achieve name recognition through radio, trade and local business print media
advertising and local event marketing. We believe that this will also aid in the
development of a quality, value-added reseller and affiliate channel.

     We are transitioning our marketing position to be the Internet service
provider for small businesses. We have adopted the slogan Effortless E-commerce
& Internet Access. This slogan is intended to communicate our focus to potential
small business customers.

     We currently have an in-house sales staff consisting of an Executive Vice
President of Marketing and Sales, a Director of Business Development, a Sales
Manager, and inbound sales representatives. We plan to outsource outbound
telemarketing.

     Our investment in WOWFactor is an initial step in our efforts to reach
small businesses. WOWFactor, with its focus on women business owners nationally,
is believed to be a potential distribution channel for our services.

Customer Support

     Providing prompt and effective technical assistance to our subscribers and
customers is essential for retention of our customers, cost containment and
quality improvement efforts. We provide network monitoring and emergency
subscriber assistance services 24 hours a day, seven days a week. Regular
support and technical assistance is available 16 hours per day, 7 days per week.
We plan to implement 24-hour technical support during 1999. In house technical
personnel respond to telephone and e-mail inquiries. All customer service is
handled in-house in order to maintain the support levels required to retain
customers in a competitive market.

Competition

     The market for Internet access services is highly competitive. There are no
substantial barriers to entry, and we expect that competition will intensify in
the future. Our ability to compete successfully is significantly affected by
numerous factors, including price, ease of use, reliability, customer support,
geographic coverage and industry and general economic trends, particularly
unfavorable economic conditions adversely affecting consumer discretionary
spending. Our competitors include many large

                                      -22-





companies that have substantially greater market presence and financial,
technical, marketing and other resources than we do, including

     o    international, national and regional commercial Internet service
          providers, such as Performance Systems International, Inc.;

     o    established on-line services companies that currently offer Internet
          access, such as America Online, Inc.;

     o    computer hardware and software and other technology companies, such as
          IBM and Microsoft Corp.;

     o    national long distance carriers, such as AT&T; Corp., MCI
          Communications Corp. and Sprint Corp.;

     o    regional telephone companies; and

     o    cable operators, such as TeleCommunications, Inc.

     We also compete with smaller Internet service providers in the northeastern
regional area that also focus on providing Internet access to individual
subscribers and smaller businesses. These smaller Internet service providers are
competing with us for the same market share. Such companies include SimLab
Network, SageNetworks, RCN Network, and Verio Network.

     Our entry into the e-commerce market through our anticipated launch of the
WOWFactor site will expose us to additional competitors. WOWFactor plans to
enter a market that is also targeted by iVillage, Oxygen Media,
womencentral.com, womenowned.com, women.com and herspace.com.

Employees

     As of March 1, 1999, we had 40 employees in addition to our 6 executive
officers. Of such employees, 20 are engaged in customer support, 4 are engaged
in sales and marketing, 1 in business development, 5 in accounting and finance,
1 in legal and 9 in administration. We engage part-time employees from time to
time. None of our employees is represented by a union. We consider our employee
relations to be good.

Properties

     Our executive offices are located in Pearl River, New York, where we lease
approximately 5,525 square feet under a lease that expires in June 2002. The
annual rental ranges from approximately $100,000 to $110,000 through the lease
term. We also lease space, typically less than 100 square feet in various
geographic locations to house the telecommunications equipment for each of our
points-of-presence. Leased facilities for points-of-presence have various
expiration dates through May 2002. Aggregate annual rentals for
points-of-presence are approximately $17,000.


                                      -23-




                                   MANAGEMENT

Directors and Executive Officers

Our directors and executive officers are:





Name                               Age             Position
- ----                               ---             --------

                                             
Stephen J. Cole-Hatchard.......    41              Chairman of the Board, Chief Executive Officer and
                                                   President

Nicko Feinberg.................    27              Chief Information Officer, Executive Vice President
                                                   of Technology and Director

Michael Olbermann..............    42              Chief Operating Officer, Executive Vice President
                                                   and Director

Vasan Thatham..................    41              Vice President and Chief Financial Officer

Amy Wagner-Mele................    30              Executive Vice President, Secretary and General
                                                   Counsel

Margaret McGillin..............    37              Executive Vice President of Sales and Marketing

Ronald C. Signore..............    38              Director

Ronald Shapss..................    52              Director



     Stephen J. Cole-Hatchard has been our Chairman, Chief Executive Officer and
President since August 1997. Mr. Cole-Hatchard was our Vice President of Finance
from February 1997 to August 1997 and has been one of our directors since
February 1997. Prior to joining us, Mr. Cole-Hatchard was Chief Financial
Officer for Hudson Technologies, Inc. from 1993 to 1997. A 1989 cum laude
graduate of Pace Law School, Mr. Cole-Hatchard is a member of the bar of the
State of New York.

     Nicko Feinberg has been one of our directors and our Vice President of
Technology since November 1996 and our Chief Information Officer since August
1997. From April 1994 to October 1996, Mr. Feinberg was a Sales Manager and,
from April 1991 to April 1994, a Sales Account Executive for Microage Computer
Outlet, Inc., a company engaged in computer sales and training.

     Michael Olbermann has been our Chief Operating Officer since September 1997
and one of our directors since February 1997. Mr. Olbermann was also our Vice
President of Business Development from February 1997 until September 1997. Mr.
Olbermann has owned and operated Rock House Construction Co., Inc., a company
engaged in commercial and residential construction, since 1986.

     Vasan Thatham has been our Vice President and Chief Financial Officer since
February 1999. Prior to joining us, from 1994 through 1998, Mr. Thatham was Vice
President and Chief Financial Officer of Esquire Communications Ltd., a company
engaged in providing legal support services. From 1987 to 1993, Mr. Thatham was
comptroller and ultimately Chief Financial Officer of Strings Ltd., a specialty
retail chain. From 1978 to 1987, Mr. Thatham held various positions with Ernst &
Young in Kuwait and KMPG Peat Marwick in India. Mr. Thatham is a chartered
accountant under the laws of India.

     Amy Wagner-Mele has been our Vice President, Secretary and Corporate
Counsel since September 1998, and was recently promoted to Executive Vice
President and General Counsel. Prior to joining us, Ms. Wagner-Mele was an
associate with the New York office of Winston & Strawn, an international

                                      -24-




Corporate/litigation firm, where she litigated securities actions, contract
disputes and appellate matters. From 1993 to 1997, Ms. Wagner-Mele was an
associate with Podvey, Sachs, Meanor, Catenacci, Hildner & Cocoziello, P.C. in
Newark, New Jersey. Ms. Wagner-Mele received her Juris Doctor from the New York
University School of Law in 1993. She received her bachelor's degree, magna cum
laude, from the University of Delaware in 1990. She is admitted to the New York
and New Jersey bars.

     Margaret McGillin has been our Vice President of Marketing and Sales since
October 1998 and was recently promoted to Executive Vice President of Marketing
and Sales. She is also President of WOWFactor. Ms. McGillin earned her MBA from
The Leonard N. Stern School of Business at New York University and a bachelor's
degree from Northeastern University with degrees in marketing, finance and
international business. During her 15 year career, Ms. McGillin has served as
Account Director for Modem Media, and as District Product Manager for AT&T;,
before founding WOWFactor, Inc. in 1995. Ms. McGillin is an active lecturer and
panelist on issues concerning women in marketing and technology. Her memberships
include: Women in New Media, Women, Inc., The National Association of Female
Executives, The National Association of Women Business Owners, George Dean's
50/50 by 2000, and the New York New Media Association.

     Ronald C. Signore has been one of our directors since December 1997. Mr.
Signore, a Certified Public Accountant licensed in New York and New Jersey, has
been a partner in the accounting firm of Robert Gray & Co., LLP for more than
the past five years.

     Ronald Shapss has been one of our directors since December 1997. Mr. Shapss
is the founder of Ronald Shapss Corporate Services, Inc., a company engaged in
consolidating fragmented industries since 1992. Ronald Shapss Corporate Services
was instrumental in facilitating the roll-up of several companies into such
entities as U.S. Delivery, Inc., Consolidated Delivery & Logistics, Inc. and
Corestaff, Inc. Mr. Shapss was also the founder of Coach USA, Inc. and is
presently on the advisory boards of Consolidated Partners Founding Fund, L.L.C.,
and 1+ USA, Inc., which founded Advanced Communications Group, Inc., a
competitive local exchange carrier which trades on the New York Stock Exchange.
A 1970 graduate of Brooklyn Law School, Mr. Shapss is a member of the New York
bar.

     All directors hold office until the next annual meeting of stockholders for
the ensuing year or until their successors have been duly elected and qualified.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board. We established an Audit Committee of the Board of
Directors consisting of Messrs. Signore and Shapss.


                                      -25-





                             EXECUTIVE COMPENSATION

     The following table sets forth the cash compensation paid during the fiscal
years ended December 31, 1997 and 1998 to our Chief Executive Officer. We refer
to the executive officer below as our "Named Executive." No other officer
received more than $100,000 during the year ended December 31, 1998.

                           Summary Compensation Table




                                                                                                                     Long-Term
                                                                                                                    Compensation
                                                                  Annual Compensation                                  Award
                                          -------------------------------------------------------------------       -------------

                                                                                                                     Securities
                                           Year Ended                                           Other Annual         Underlying
Name and Principal Position               December 31,         Salary($)           Bonus($)      Compensation         Options(#)
- ---------------------------               ------------         ---------           --------      ------------         ----------
                                                                                                           
Stephen J. Cole-Hatchard                    1998                 34,846               --               --             79,000
Chief Executive Officer..................   1997                     --               --               --                 --



     The following table sets forth information concerning options granted in
the fiscal year ended December 31, 1998 to the Named Executive:

              Option Grants in Fiscal Year Ended December 31, 1998




                                              Individual Grants

                                 Number of
                                 Securities             Percent of Total
                                 Underlying             Options Granted             Exercise
                                 Options                to Employees in             Price            Expiration
Name                             Granted (#)            Fiscal Year(%)              ($/Sh)              Date
- ----                             -----------            --------------              ------              ----


                                                                                             
Stephen J. Cole-
Hatchard......................    79,000                      18.54                  2.50             10/08/03






                                                         Aggregated Option Exercises and Year End Values

                                                                       Number of Securities
                                                                       Underlying                       Value of Unexercised
                                    Shares          Value           Unexercised Options                 In-the-Money Options
                                  Acquired on      Realized      at December 31, 1998 (#)              at December 31, 1998 ($)*
                                                   --------    ---------------------------         ------------------------------
Name                             Exercise (#)        ($)       Exercisable    Unexercisable        Exercisable      Unexercisable
- ----                             ------------        ---       ----------------------------        ------------------------------

                                                                                                         
Stephen J. Cole-                       0              0          79,000               0              333,301               0
Hatchard...................



- ----------

* Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end market
value of the common stock, which was $6.719 on December 31, 1998.


                                      -26-




Director Compensation

     We do not currently pay our employee directors any fees for attending Board
meetings. We pay our non-employee directors $3,000 per annum for attending Board
Meetings.

     In December 1997, we entered into a consulting agreement with Mr. Shapss
which provides for Mr. Shapss to assist us with mergers and acquisitions. In
consideration of such services, we issued to Mr. Shapss 100,000 shares of common
stock and non-plan options to purchase 80,000 shares of common stock at an
exercise price of $2.00 per share. We also agreed to pay to Mr. Shapss $2,000
per month through May 1999.

Employment Agreements

     We have entered into three-year employment agreements with each of Messrs.
Feinberg, Cole-Hatchard and Olbermann which provide for an annual base
compensation of not less than $88,000, $45,000 and $88,000 and such bonuses as
the Board of Directors may, in its sole discretion, from time to time determine.

     We have also entered into a three-year employment agreement with Margaret
M. McGillin pursuant to which Ms. McGillin agreed to serve as Executive Vice
President of Sales at a salary of $82,000 per annum, for year one, and not less
than $98,000 per annum for year two and thereafter.

     We have also entered into a three-year employment agreement with Amy
Wagner-Mele pursuant to which Ms. Wagner-Mele agreed to serve as Corporate
Counsel at a salary of not less than $98,000 per annum.

     The employment agreements provide for employment on a full-time basis and
contain a provision that the employee will not compete or engage in a business
competitive with the current or anticipated business of our company during the
term of the employment agreement and for a period of two years thereafter.

Stock Option Plan

     In February 1997, our Board of Directors and stockholders adopted the 1997
stock option plan under which 500,000 shares of common stock are reserved for
issuance upon exercise of options. The Stock option plan is designed to serve as
an incentive for attracting and retaining qualified and competent employees,
directors and consultants.

     Our Board of Directors, or a committee thereof, administers the stock
option plan and is authorized to grant options to all of our eligible employees,
including officers, directors and consultants. The stock option plan provides
for the granting of both incentive stock options and non-qualified stock
options.

     Options can be granted under the stock option plan on such terms and at
such prices as determined by the Board of Directors, or a committee thereof,
except that the per share exercise price of options will not be less than the
fair market value of the common stock on the date of grant. In the case of an
incentive stock option granted to a stockholder who owns stock of the our
company possessing more than

                                      -27-






10% of the total combined voting power of all classes of stock, the per share
exercise price will not be less than 110% of such fair market value.

     Options granted under the stock option plan are not exercisable after the
expiration of ten years from the date of grant or five years in the case of
incentive stock options granted to a 10% stockholder, and are not transferable
other than by will or by the laws of descent and distribution.

     We have outstanding options to purchase 613,000 shares of common stock, net
of forfeitures and exercises, under the stock option plan at exercise prices
ranging from $2.00 to $5.18 per share. The grant of 213,000 of the options are
subject to shareholder approval. 

                                      -28-





                             PRINCIPAL STOCKHOLDERS

     The following table sets forth certain information as of April 23, 1999,
relating to the beneficial ownership of shares of common stock by (1) each
person or entity who we know to own beneficially 5% or more of our outstanding
common stock, (2) each of our directors, (3) the Named Executive, and (4) all of
our directors and executive officers as a group. Except as noted, we believe
that all persons named in the table have sole voting and investment power with
respect to all shares of common stock beneficially owned by them.




                                                                     Number of Shares                   Percentage of Outstanding
                                                                      of Common Stock                          Common Stock
Name of Beneficial Owner                                            Beneficially Owned                     Beneficially Owned
- ------------------------                                            ------------------                     ------------------
                                                                                                             
Nicko Feinberg..........................................                   296,000                                  8.6%

Stephen J. Cole-Hatchard................................                   296,000                                  8.5

Michael Olbermann.......................................                   228,000                                  6.2

Ronald Shapss...........................................                   200,000                                  5.9

Ronald Signore..........................................                    67,400                                  2.0

All directors and executive officers as a
group (eight persons)...................................                 1,122,400                                 30.6



     The number of shares of common stock beneficially owned by Nicko Feinberg's
shares includes options to purchase 40,000 shares of common stock held by Mr.
Feinberg.

     The number of shares of common stock beneficially owned by Stephen J.
Cole-Hatchard includes 144,000 shares held by the Cole-Hatchard Family Limited
Partnership, of which Mr. Cole-Hatchard is the general partner, and options to
purchase 99,000 shares of common stock. Does not include 17,500 shares held by
Mr. Cole-Hatchard's mother and brother and warrants to purchase 64,000 shares
held by Mr. Cole-Hatchard's mother.

     The number of shares beneficially owned by Michael Olbermann includes
options and warrants to purchase 40,000 shares of common stock.

     The number of shares of common stock beneficially owned by Ronald Signore
includes (1) warrants to purchase 39,200 shares of common stock held by The
Rough Group, of which Mr. Signore is a general partner, (2) 3,200 shares of
common stock held by The Rough Group and (3) options to purchase 25,000 shares
of common stock held by Mr. Signore. Mr. Signore disclaims beneficial ownership
of other securities held by The Rough Group.

     The number of shares of common stock beneficially owned by all directors
and executive officers as a group includes options and warrants to purchase
278,200 shares of common stock.

                                      -29-





                              CERTAIN TRANSACTIONS

     In May 1997 we issued promissory notes in the amounts of $141,800, $66,800
and $163,537 to Nicko Feinberg and Stephen J. Cole-Hatchard, officers and
directors of our company, and Michael Char, a former officer and director of our
company. Included in such indebtedness was $21,737 and $35,000 of advances made
to us by Messrs. Char and Cole-Hatchard to establish additional
points-of-presence. The promissory notes were issued to Messrs. Feinberg, Char
and Cole-Hatchard in partial consideration of their efforts in founding our
company.

     In August 1997, we borrowed $60,000 from Mr. Cole-Hatchard bearing interest
at the rate of 9.25% per annum. We repaid $30,000 of such indebtedness in
December 1997. The balance was repaid in May 1998 directly to Mr.
Cole-Hatchard's lender, Provident Savings Bank.

     In March 1998, we entered into a settlement agreement with Mr. Char under
which Mr. Char discontinued a lawsuit and released us from all claims in
consideration of (1) $65,000 and (ii) a payment of $435,000 in May 1998 to
satisfy $240,000 of existing obligations due to Mr. Char and repurchase 231,520
shares from Mr. Char.

     In May 1998, we repaid $20,000 of indebtedness to each of Messrs.
Cole-Hatchard and Feinberg. The balance of the indebtedness owed to Messrs.
Cole-Hatchard and Feinberg of $46,800 and $121,800 bears interest at the rate of
8% per annum and is due at such time as we achieve $1.9 million in pre-tax
earnings, but in no event sooner than May 13, 2000.

     Mr. Cole-Hatchard's mother and brother purchased 20,000 shares at $2.00 per
share in our private placement in May 1997. The Rough Group, a general
partnership of which Mr. Signore, one of our directors, is a general partner,
purchased 16,000 shares in our private placement in May 1997. In addition, Mr.
Cole-Hatchard's mother and The Rough Group purchased $40,000 and $85,000
principal amount of promissory notes in our December 1997 private placement, and
received warrants to purchase 64,000 and 196,000 shares at an exercise price of
$5.00 per share. The notes were repaid in May 1998.

     In August 1998, Mr. Cole-Hatchard borrowed $46,800 from us evidenced by a
demand promissory note bearing interest at the rate of 8% per annum.

     In September 1998, Mr. Feinberg borrowed $55,000 from us evidenced by a
demand promissory note bearing interest at the rate of 8% per annum. In October
1998, Mr. Feinberg borrowed an additional $42,000 on the same terms.

     We believe that the foregoing transactions were on terms no less favorable
than those that could have been obtained from unaffiliated third parties. All
future transactions between us and our affiliates will be on terms no less
favorable than would be obtained from unaffiliated third parties.


                                      -30-





                          DESCRIPTION OF CAPITAL STOCK

General

     We are authorized to issue 10,000,000 shares of common stock, par value
$.01 per share, and 1,000,000 shares of preferred stock, par value $.01 per
share. As of the date of this prospectus, there are 3,388,700 shares of common
stock outstanding and 10 shares of preferred stock outstanding designated as
series A preferred stock.

Common Stock

     The holders of our common stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of
common stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of our company, the holders of common
stock are entitled to share in all assets remaining which are available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any, having preference over the common stock.
Holders of shares of common stock, have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to the
common stock. All of the outstanding shares of common stock are, and the shares
of common stock offered hereby, will be, fully paid and nonassessable.

Preferred Stock

     We are authorized to issue 1,000,000 shares of preferred stock from time to
time in one or more series, in all cases ranking senior to the common stock with
respect to payment of dividends and in the event of the liquidation, dissolution
or winding-up of our company. There are currently 10 shares of preferred stock
outstanding, designated as series A convertible preferred stock. The Board has
the power, without stockholder approval, to issue shares of one or more series
of preferred stock, at any time, for such consideration and with such relative
rights, privileges, preferences and other terms as the Board may determine,
including terms relating to dividend rates, redemption rates, liquidation
preferences and voting, sinking fund and conversion or other rights. The rights
and terms relating to any new series of preferred stock could adversely affect
the voting power or other rights of the holders of the common stock or could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of our company.

Series A Convertible Preferred Stock

     The shares of series A convertible preferred stock will be automatically
converted on July 15, 1999 into shares of common stock having a market value of
$1,000,000 on the date of conversion, up to a maximum of 250,000 shares. Holders
of the shares of series A convertible preferred stock are not entitled to voting
or preemptive rights.


                                      -31-






Public Warrants

     Each public warrant entitles the holder to purchase one share of common
stock at a price of $4.80 at any time between May 13, 1999 and May 13, 2003.

     We may redeem the public warrants at any time commencing June 13, 1999,
upon notice of not less than 30 days, at a price of $.10 per public warrant,
provided that the closing bid quotation of our common stock on all 20 trading
days ending on the third day prior to the day on which we give notice has been
at least $7.20 and we obtain written approval of the underwriter of our initial
public offering to such redemption. The public warrant holders shall have the
right to exercise their public warrants until the close of business on the date
fixed for redemption.

     The public warrants may be exercised upon surrender of the public warrant
certificate during the exercise period at the offices of the warrant agent, with
the exercise form on the reverse side of the public warrant certificate
completed and executed as indicated, accompanied by full payment of the exercise
price to the warrant agent for the number of public warrants being exercised.
The public warrant holders do not have the rights or privileges of holders of
common stock.

     No public warrant will be exercisable unless at the time of exercise we
have filed a current registration statement with the Securities and Exchange
Commission covering the shares of common stock issuable upon exercise of such
public warrant and such shares have been registered or qualified or deemed to be
exempt from registration or qualification under state securities laws. We will
use our best efforts to have all such shares so registered or qualified on or
before the exercise date and to maintain a current prospectus relating thereto
until the expiration of the public warrants.

Underwriter's Warrants

     We issued to the underwriter of our initial public offering and its
designees warrants to purchase 160,000 shares of Common Stock at an exercise
price of $6.60 per share and 160,000 warrants (each to purchase one share of
common stock at $7.92 per share) at an exercise price of $.165 per warrant. The
underwriter's warrants are exercisable at any time and from time to time, in
whole or in part, during the five-year period ending on May 13, 2003.

Private Placement Warrants

     In December 1997, we issued warrants to purchase 300,000 shares of common
stock in a private transaction. Each such warrant entitles the holder to
purchase one share of common stock at a price of $5.00 per share subject to
adjustment in certain circumstances.

     In March 1999, we issued warrants to purchase 21,662 shares of common
stock. Each such warrant entitles the holder to purchase one share of common
stock at a price of $13.849 at any time between March 25, 1999 and March 25,
2002.

Repricing and Anti-Dilution Rights

     In March 1999, we issued 158,856 shares of common stock in a private
placement for $2,000,000. Each purchaser also received one repricing right to
receive additional shares of common stock if the market price of our common
stock falls to certain price levels. We may be required to issue up to an
additional 180,518 shares of common stock to satisfy repricing rights as well as
adjustments to the warrants issued in March 1999 described above.

                                      -32-





Transfer Agent and Warrant Agent

     The transfer and registrar agent for our common stock and warrant agent for
the public warrants is American Securities Transfer & Trust, Inc., Denver,
Colorado.


                                      -33-





                              SELLING STOCKHOLDERS

     The following table sets forth certain information as of April 23, 1999,
relating to the selling stockholders. None of the selling stockholders has ever
held any position or office with us or had any material relationship with us,
other than Doris Cole-Hatchard, who is the mother of Stephen J. Cole-Hatchard,
our chief executive officer, The Rough Group, a general partnership of which
Ronald Signore, who is one of our directors, is a general partner, and
Werbel-Roth Securities, Inc. and Comprehensive Capital Corporation and their
designees, the underwriters of our initial public offering. The shares
beneficially owned do not include shares issuable under repricing rights or
anti-dilution provisions.




                                                            Shares Beneficially Owned                      Shares Beneficially
                                                               Prior to Offering                          Owned After Offering
                                                           --------------------------                     -------------------

                                                                                          Shares Being
Name of Beneficial Owner                                     Number         Percent         Offered       Number       Percent
- ------------------------                                     ------         -------         -------       ------       -------
                                                                                                          
Canadian Advantage Limited Partnership                        88,093          2.6%           88,093          --          --

Aberdeen Avenue LLC                                           88,093          2.6            88,093          --          --

Merchant Bancorp of America                                    4,332           .1             4,332          --          --

Werbel-Roth Securities, Inc.                                 120,000          3.4           120,000          --          --

Howard Roth                                                   90,000          2.6            90,000          --          --

Lawrence Feirstein                                            20,000           .6            20,000          --          --

Myron Sayer                                                   10,000           .3            10,000          --          --

Comprehensive Capital Corporation                             80,000          2.3            80,000          --          --

Doris Cole-Hatchard                                           64,000          1.8            64,000          --          --

Edward Anderson                                               40,000          1.2            40,000          --          --

The Rough Group                                              196,000          5.5           196,000          --          --




                                      -34-





                              PLAN OF DISTRIBUTION

        Sales of the shares may be made from time to time by the selling
stockholders. Such sales may be made on the Nasdaq SmallCap Market in another
over-the-counter market, on a national securities exchange, any of which may
involve crosses and block transactions, in privately negotiated transactions or
otherwise or in a combination of such transactions at prices and at terms then
prevailing or at prices related to the then current market price, or at
privately negotiated prices. In addition, any shares covered by this prospectus
which qualify for sale pursuant to Section 4(1) of the Securities Act of 1933 or
Rule 144 promulgated thereunder may be sold under such provisions rather than
pursuant to this prospectus. Without limiting the generality of the foregoing,
the shares may be sold in one or more of the following types of transactions:

     o    a block trade in which the broker-dealer so engaged will attempt to
          sell the shares as agent but may position and resell a portion of the
          block as principal to facilitate the transaction;

     o    purchases by a broker or dealer as principal and resale by such broker
          or dealer for its account pursuant to this prospectus;

     o    an exchange distribution in accordance with the rules of such
          exchange;

     o    ordinary brokerage transactions and transactions in which the broker
          solicits purchasers; and

     o    face-to-face transactions between sellers and purchasers without a
          broker-dealer. In effecting sales, brokers or dealers engaged by the
          selling stockholders may arrange for other brokers or dealers to
          participate in the resale.

     In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with selling
stockholders. The selling stockholders may also sell shares short and deliver
the shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the shares, which the broker-dealer may resell
under this prospectus. The selling stockholders may also pledge the shares to a
broker or dealer and upon a default, the broker or dealer may effect sales of
the pledged shares.

     Brokers or dealers may receive compensation in the form of commissions,
discounts or concessions from selling stockholders in amounts to be negotiated
in connection with the sale. Such brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales and any such commission, discount or concession may be deemed to
be underwriting discounts or commissions under the Securities Act of 1933.
Compensation to be received by broker-dealers retained by the selling
stockholders in excess of usual and customary commissions, will, to the extent
required, be set forth in a supplement to this prospectus. Any dealer or broker
participating in any distribution of the shares may be required to deliver a
copy of this prospectus, including a supplement to any person who purchases any
of the shares from or through such dealer or broker.

     During such time as they may be engaged in a distribution of the shares the
selling stockholders are required to comply with Regulation M promulgated under
the Securities Exchange Act of 1934. With certain exceptions, Regulation M
precludes any selling stockholder, any affiliated purchasers and any
broker-dealer or other person who participates in such distribution from bidding
for or purchasing, or attempting to induce any person to bid for or purchase any
security which is the subject of the distribution until the entire distribution
is complete. Regulation M also prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the distribution of that
security. All of the foregoing may affect the marketability of the common stock.


                                      -35-





     It is possible that a significant number of shares may be sold and,
accordingly, such sales or the possibility thereof may have a depressive effect
on the market price of our common stock.

     In connection with the solicitation of the exercise of the public warrants
after June 13, 1999, Werbel-Roth Securities, Inc. may receive a fee of 5% of the
exercise price for each warrant exercised. Werbel-Roth Securities, Inc. will not
be entitled to receive such compensation in warrant exercise transactions in
which (1) the market price of common stock at the time of exercise is lower than
the exercise price of the warrants; (2) the warrants are held in any
discretionary account; (3) disclosure of compensation arrangements is not made,
in addition to the disclosure provided in this prospectus, in documents provided
to holders of warrants at the time of exercise; (4) the exercise of the warrants
is unsolicited; or (5) the solicitation of the warrants was in violation of
Regulation M promulgated under the Exchange Act.


                                      -36-






                                  LEGAL MATTERS

     Tenzer Greenblatt LLP, New York, New York will pass upon the validity of
the common stock.

                                     EXPERTS

     Our financial statements as of December 31, 1998 and for the two years then
ended included in this prospectus have been included in reliance upon the
report of BDO Seidman, LLP, independent accountants, given upon the authority
of that firm as experts in accounting and auditing.

     The financial statements of WOWfactor, Inc. as of December 31, 1997 and for
the two years then ended included in this prospectus have been included in
reliance upon the report of BDO Seidman, LLP, independent accountants, given
upon the authority of that firm as experts in accounting and auditing.

     The financial statements of Roxy Systems, Inc. d/b/a Magic Carpet as of
December 31, 1997 and for the one year then ended included in this prospectus
have been included in reliance upon the report of BDO Seidman, LLP, independent
accountants, given upon the authority of that firm as experts in accounting and
auditing.

     The financial statements of US Online, Inc. as of December 31, 1996 and
1997 and for the two years then ended included in this prospectus have been
included in reliance upon the reports of Joseph J. Repko, CPA given upon his
authority as expert in accounting and auditing.

     The financial statements of Webspan, Inc. as of December 31, 1996 and 1997
and for the two years then ended included in this prospectus have been included
in reliance upon the reports of Steven H. Mermelstein, CPA, given upon his
authority as expert in accounting and auditing.

                             ADDITIONAL INFORMATION

     We are subject to the reporting requirements of the Securities Exchange Act
of 1934 and, in accordance therewith, file reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, IL 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the SEC upon payment of certain fees prescribed by the SEC.
The SEC's Web site contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of that site is http://www.sec.gov. Our common stock is quoted on the
Nasdaq National Market and our reports, proxy statements and other information
may also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.

     We have filed a registration statement on Form SB-2 with the SEC under the
Securities Act with respect to the securities offered in this prospectus. This
prospectus, which is filed as part of a registration statement, does not contain
all of the information set forth in the registration statement, certain portions
of which have been omitted in accordance with the SEC's rules and regulations.
Statements made in this prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete and are qualified in
their entirety by reference to each such contract, agreement or other document
which is filed as an exhibit to the registration statement. The registration
statement may be inspected without charge at the public reference facilities
maintained by the SEC, and copies of such materials can be obtained from the
Public Reference Section of the SEC at prescribed rates.

                                      -37-






 
                            Frontline Communications
                                         Corporation


                                               Consolidated Financial Statements
                                          Years Ended December 31, 1997 and 1998





                            Frontline Communications
                                         Corporation






================================================================================
                                               Consolidated Financial Statements
                                          Years Ended December 31, 1997 and 1998


                                                                             F-1




                                            Frontline Communications Corporation



                                                                        Contents

================================================================================

Report of independent certified public accountants                           F-3

Consolidated financial statements:
   Balance sheet                                                             F-4
   Statements of operations                                                  F-5
   Statements of stockholders' equity (deficit)                              F-6
   Statements of cash flows                                                  F-7
   Notes to consolidated financial statements                         F-8 - F-22





                                                                             F-2





Report of Independent Certified Public Accountants



To the Board of Directors of
   Frontline Communications Corporation

We have  audited  the  accompanying  consolidated  balance  sheet  of  Frontline
Communications  Corporation  (the  "Company")  as of December 31, 1998,  and the
related  consolidated  statements of operations,  stockholders' equity (deficit)
and cash flows for the years ended December 31, 1997 and 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 audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as of
December 31, 1998,  and the results of its operations and its cash flows for the
years ended December 31, 1997 and 1998, in conformity  with  generally  accepted
accounting principles.


BDO Seidman, LLP


New York, New York

March 12, 1999, except   

  for Note 13 which is 
  as of March 26, 1999



                                                                             F-3



                                            Frontline Communications Corporation


                                                      Consolidated Balance Sheet

================================================================================




December 31, 1998
- --------------------------------------------------------------------------------------------
                                                                                      
Assets
Current:
   Cash and cash equivalents                                                     $ 1,994,711
   Accounts receivable, less allowances for doubtful accounts of $5,526                3,327
   Notes receivable from stockholders (Note 3)                                       143,800
   Prepaid expenses and other                                                         58,281
- --------------------------------------------------------------------------------------------
           Total current assets                                                    2,200,119
Property and equipment, net (Note 5)                                                 981,785
Intangibles (Note 4)                                                               3,081,326
Other                                                                                 23,173
- --------------------------------------------------------------------------------------------
                                                                                 $ 6,286,403
============================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                              $   163,805
   Accrued expenses                                                                  137,357
   Deferred revenue                                                                  614,852
   Current portion of capitalized lease obligations (Note 7)                          38,569
- --------------------------------------------------------------------------------------------
        Total current liabilities                                                    954,583
Notes payable to stockholders (Note 6)                                               168,600
Capitalized lease obligations - net of current portion (Note 7)                      115,833
- --------------------------------------------------------------------------------------------
        Total liabilities                                                          1,239,016
- --------------------------------------------------------------------------------------------
Commitments and contingencies  (Notes 8, 9 and 12)
Stockholders'  equity (Notes 1, 2, 9, 10 and 12):
   Preferred stock, $.01 par value, 1,000,000 shares authorized, 10 issued and
      outstanding                                                                         --
   Common stock, $.01 par value, 10,000,000 shares authorized, 3,361,364
      issued                                                                          33,614
   Additional paid-in capital                                                      9,121,533
   Accumulated deficit                                                            (3,843,647)
- --------------------------------------------------------------------------------------------
                                                                                   5,311,500
   Treasury stock, at cost, 231,520 shares                                          (264,113)
- --------------------------------------------------------------------------------------------
        Total stockholders' equity                                                 5,047,387
- --------------------------------------------------------------------------------------------
                                                                                 $ 6,286,403
============================================================================================



          See accompanying notes to consolidated financial statements.


                                                                             F-4




                                            Frontline Communications Corporation


                                           Consolidated Statements of Operations

================================================================================

Year ended December 31,                                     1997           1998
- -------------------------------------------------------------------------------
Revenues                                             $   321,706    $   574,964
Cost of revenues                                         251,928        651,378
- -------------------------------------------------------------------------------
           Gross profit (loss)                            69,778        (76,414)
Operating expenses:
   Selling, general and administrative                   540,883      1,744,029
   Non-cash special compensation charge (Note 1)       1,537,000             --
- -------------------------------------------------------------------------------
           Loss from operations                       (2,008,105)    (1,820,443)
Other income (expense):
   Interest income                                            --        108,194
   Interest expense                                      (28,421)       (31,850)
   Other                                                    (891)            --
- -------------------------------------------------------------------------------
Net loss                                             $(2,037,417)   $(1,744,099)
- -------------------------------------------------------------------------------
Loss per share - basic and diluted                   $     (1.67)   $      (.72)
- -------------------------------------------------------------------------------
Weighted average number of shares outstanding -
  basic and diluted                                    1,218,000      2,435,035
- -------------------------------------------------------------------------------

                    See accompanying notes to consolidated financial statements.


                                                                             F-5




                                            Frontline Communications Corporation



                       Consolidated Statements of Stockholders' Equity (Deficit)





 Years ended December  31, 1997 and 1998
 --------------------------------------------------------------------------------------------------------------------------
                                                                                            
                                                                                                                           
                                            Preferred stock               Common stock         Additional                  
                                         --------------------        ---------------------      paid-in      Accumulated   
                                         Shares        Amount        Shares         Amount      capital        deficit     
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                   
 Balance, December 31, 1996                  --   $        --            --    $        --    $     6,000    $   (62,131)  
 Frontline reorganization
    (Note 2)                                 --            --       640,000          6,400       (325,000)            --   
 Shares issued as compensation
    (Note 9)                                 --            --       100,000          1,000        199,000             --   
 Shares issued as compensation
    (Note 1)                                 --            --       820,000          8,200      1,230,000             --   
 Officer salary contributed to
    capital                                  --            --            --             --          3,000             --   
 Private placement  sale of
    shares at $2 per share                   --            --       200,000          2,000        398,000             --   
 Common stock options issued for
    services (Note 9)                        --            --            --             --        108,000             --   
 Warrants issue to debtholders
    (Note 6)                                 --            --            --             --         24,000             --   
 Recapitalization (4-for-5
    reverse split) (Note 10)                 --            --      (352,000)        (3,520)         3,520             --   
 Net loss                                    --            --            --             --             --     (2,037,417)  
- ---------------------------------------------------------------------------------------------------------------------------
 Balance, December 31, 1997           1,408,000        14,080     1,646,520     (2,099,548)        (6,000)            --   
 Payment of stock subscription               --            --            --             --             --             --   
 Initial public offering of
    common stock, net (Note 1)               --            --     1,840,000         18,400      5,792,005             --   
 Purchase of treasury stock, at
    cost (231,520 shares)
    (Note 12)                                --            --            --             --             --             --   
 Common stock options issued for
    services (Note 9)                        --            --            --             --        175,137             --   
 Preferred shares issued for
    acquisition of subsidiary
    (Note 4)                                 10            --            --             --      1,000,000             --   
 Shares issued to acquire
    business (Note 4)                        --            --       113,364          1,134        507,871             --   
 Net loss                                    --            --            --             --             --     (1,744,099)  
- ---------------------------------------------------------------------------------------------------------------------------
 Balance, December  31, 1998                 10   $        --     3,361,364    $    33,614    $ 9,121,533    $(3,843,647)  
===========================================================================================================================


 Years ended December  31, 1997 and 1998
 --------------------------------------------------------------------------------
                                      
                                                                          Total       
                                          Stock          Treasury     stockholders'   
                                       subscriptions    stock, at       equity       
                                         receivable        cost        (deficit)     
- ---------------------------------------------------------------------------------
                                                               
 Balance, December 31, 1996             $        --    $        --    $   (56,131)
 Frontline reorganization
    (Note 2)                                     --             --       (318,600)
 Shares issued as compensation
    (Note 9)                                     --             --        200,000
 Shares issued as compensation
    (Note 1)                                 (6,000)            --      1,232,200
 Officer salary contributed to
    capital                                      --             --          3,000
 Private placement  sale of
    shares at $2 per share                       --             --        400,000
 Common stock options issued for
    services (Note 9)                            --             --        108,000
 Warrants issue to debtholders
    (Note 6)                                     --             --         24,000
 Recapitalization (4-for-5
    reverse split) (Note 10)                     --             --             --
 Net loss                                        --             --     (2,037,417)
- ---------------------------------------------------------------------------------
 Balance, December 31, 1997                (444,948)
 Payment of stock subscription                6,000             --          6,000
 Initial public offering of
    common stock, net (Note 1)                   --             --      5,810,405
 Purchase of treasury stock, at
    cost (231,520 shares)
    (Note 12)                                    --       (264,113)      (264,113)
 Common stock options issued for
    services (Note 9)                            --             --        175,137
 Preferred shares issued for
    acquisition of subsidiary
    (Note 4)                                     --             --      1,000,000
 Shares issued to acquire
    business (Note 4)                            --             --        509,005
 Net loss                                        --             --     (1,744,099)
- ---------------------------------------------------------------------------------
 Balance, December  31, 1998            $        --    $  (264,113)   $ 5,047,387
=================================================================================



                    See accompanying notes to consolidated financial statements.


F-6






                                            Frontline Communications Corporation


                                           Consolidated Statements of Cash Flows

================================================================================




Year ended December 31,                                                   1997           1998
- -----------------------------------------------------------------------------------------------
                                                                                      
Cash flows from operating activities:
   Net loss                                                          $(2,037,417)   $(1,744,099)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
        Depreciation and amortization                                     44,558        220,575
        Officer salary contributed to capital                              3,000             --
        Noncash compensation charge                                    1,537,000        175,137
        Allowance for doubtful accounts                                   16,666        (11,140)
        Accounts receivable write-off                                      8,605             --
        Changes in assets and liabilities, net of effects from
           acquisitions in 1998:
              Accounts receivable                                        (35,169)        25,561
              Notes receivable from stockholders                              --       (143,800)
              Prepaid expenses and other                                  (5,479)       (49,754)
              Other assets                                               (16,354)        (5,206)
              Accounts payable and accrued expenses                      300,816        (58,012)
              Interest due on stockholders loans                          19,452             --
              Deferred revenue                                            24,385         46,467
- -----------------------------------------------------------------------------------------------
                Net cash used in operating activities                   (139,937)    (1,544,271)
- -----------------------------------------------------------------------------------------------
Cash flows from investing activities:
   Acquisition of property and equipment                                (176,304)      (423,297)
   Acquisition of businesses                                                  --     (1,481,820)
- -----------------------------------------------------------------------------------------------
                Net cash used in investing activities                   (176,304)    (1,905,117)
- -----------------------------------------------------------------------------------------------
Cash flows from financing activities:
   Repayments of stockholder loans                                       (45,266)      (378,989)
   Proceeds from stockholder loans, net                                  230,000             --
   Proceeds from sale of common stock                                    400,000          6,000
   Proceeds from initial public offering of common stock                      --      6,041,476
   Registration costs                                                   (231,071)            --
   Payments to acquire treasury stock                                         --       (264,113)
- -----------------------------------------------------------------------------------------------
                Net cash provided by financing activities                353,663      5,404,374
- -----------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents                                 37,422      1,954,986
Cash and cash equivalents, beginning of year                               2,303         39,725
- -----------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                               $    39,725    $ 1,994,711
===============================================================================================
Supplemental disclosure of cash flow information:
   Cash paid for interest                                            $    10,451    $    31,000
Noncash investing and financing activities:
   Common stock issued for reduction of stockholder loans                  9,600             --
   Notes payable to stockholders issued as distributions                 325,000             --

   Capital lease obligations incurred                                         --        207,725
   Preferred shares issued to acquire subsidiaries                            --      1,000,000
   Common stock issued to acquire business                                    --        509,005
===============================================================================================



                    See accompanying notes to consolidated financial statements.


                                                                             F-7




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

1.   Summary of Significant Accounting Policies

     Business
                                                  
     Frontline  Communications  Corporation ("Frontline" or the "Company") is an
     internet service  provider and Competitive  Local Exchange Carrier ("CLEC")
     that offers  E-commerce  and  internet  access to  individual  and business
     subscribers located in the Northeast United States.
                                                  

     Frontline  consummated an initial public  offering  ("IPO") during May 1998
     and raised net proceeds of $5,810,405 (see Note 10).

     Reorganization and Principles of Combination

     The consolidated financial statements include the accounts of Hobbes & Co.,
     LLC ("Hobbes"),  INET Communications Company, LLC ("INET") and Sarah Girl &
     Co., LLC ("Sarah Girl"),  (collectively  the  "Predecessor  Companies") and
     Frontline Communications Corporation. As described more fully in Note 2, on
     May  30,  1997,  Frontline  acquired  the  net  assets  of the  Predecessor
     Companies.  For accounting  purposes,  the business  consolidation has been
     accounted  for  as  if  the  acquirer  was  Hobbes.  With  respect  to  the
     acquisition  of  INET,  the   acquisition  has  been  accounted  for  as  a
     consolidation  of entities  under common  control in a manner  similar to a
     pooling of  interests  and reflects the  consolidated  financial  position,
     operating  results  and cash  flows of Hobbes  and INET as if they had been
     consolidated  for all  periods  presented.  With  respect to Sarah Girl and
     Frontline, the business consolidation has been accounted for using purchase
     accounting, which resulted in the recording of a special non-cash charge of
     $1,230,000.  The non-cash charge represents the estimated fair market value
     of the Company's  820,000 shares of common stock issued to certain founding
     shareholders  in  February  1997  for  current  and  future  services.   An
     additional  non-cash  charge was taken for the value of  services  on stock
     issued  to  a  director.  The  Predecessor  Companies  were  dissolved  and
     Frontline is the continuing  legal entity.  All  intercompany  accounts and
     transactions have been eliminated.


                                                                             F-8



                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================


     Principles of Consolidation


     The consolidated  financial  statements include the accounts of the Company
     and its wholly-owned  subsidiaries.  Intercompany balances and transactions
     have been eliminated.

     Property, Equipment and Depreciation

     Property and equipment is stated at cost, less accumulated depreciation and
     amortization.  Depreciation and amortization is computed over the estimated
     useful lives of the assets using the straight-line method.

     The  following  estimated  useful lives are applied in the  computation  of
     depreciation and amortization:


                                                                      Years
     ----------------------------------------------------------------------
     Computer and office equipment                                      3-5
     Furniture and fixtures                                               5
     Leasehold improvements                                      Lease term
     ======================================================================

     Intangible Assets

     Intangible  assets  include  goodwill,  the excess of the cost of purchased
     businesses over the fair value of the net acquired,  and purchased customer
     bases.  Amortization is computed using the  straight-line  basis over three
     years, the expected benefit period.

     Revenue Recognition

     Monthly subscription service revenue is recognized over the period in which
     services are  provided.  Service  revenues  derived from  dedicated  access
     services,  which  require  the  installation  and use of  Company  provided
     equipment at a subscriber's  location,  are recognized  when the service is
     commenced.  Fee revenues for ancillary  services are recognized as services
     are  performed.   Deferred  revenue   represents  prepaid  access  fees  by
     subscribers.


                                                                             F-9



                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================


     Long-Lived Assets

     Long-lived assets, such as property and equipment, intangibles and customer
     bases, are evaluated for impairment when events or changes in circumstances
     indicate  that the  carrying  amount of the assets  may not be  recoverable
     through the estimated  undiscounted future cash flows from the use of these
     assets. When any such impairment exists, the related assets will be written
     down to fair  value.  No write  downs were  necessary  for the years  ended
     December 31, 1997 and 1998.

     Income Taxes

     Deferred  income taxes are provided on  differences  between the  financial
     reporting  and  income  tax  bases of assets  and  liabilities  based  upon
     statutory tax rates enacted for future  periods.  Valuation  allowances are
     established  when  necessary  to reduce  deferred  tax assets to the amount
     expected to be realized.

     Use of Estimates

     In preparing the  consolidated  financial  statements  in  conformity  with
     generally accepted  accounting  principles,  management is required to make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and the disclosure of contingent  assets and liabilities at the
     date of the consolidated  financial statements,  and the reported amount of
     revenues and expenses  during the reporting  period.  Actual  results could
     differ  from  those  estimates.   Many  of  the  Company's   estimates  and
     assumptions  used in the  financial  statements  related  to the  Company's
     industry which are subject to rapid technological  change. It is reasonably
     possible  that  changes  may  occur  in the near  term  that  would  affect
     management's  estimates  with respect to the  carrying  values of plant and
     equipment, intangibles and customer bases.


                                                                            F-10



                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

     Credit Risk

     Financial   instruments   which   potentially   subject   the   Company  to
     concentrations  of  credit  risk  consist  principally  of  temporary  cash
     investments and trade accounts  receivable.  The Company's cash investments
     are placed with high credit quality  financial  institutions and may exceed
     the amount of federal deposit insurance. Concentrations of credit risk with
     respect  to trade  receivables  are  limited  due to the  large  number  of
     customers comprising the Company's customer base.

     Cash and Cash Equivalents

     The Company considers all highly liquid money market instruments  purchased
     with an original  maturity of three months or less to be cash  equivalents.
     Cash equivalent  instruments  were $-0- and $1,766,267 at December 31, 1997
     and 1998, respectively.

     Financial Instruments

     The carrying  amounts of financial  instruments  including  cash,  accounts
     receivable,  notes  receivable from (payable to)  stockholders and accounts
     payable  approximated  fair value as of December 31,  1998,  because of the
     relatively short maturity of these instruments.

     Stock-Based Compensation

     Statement of Financial  Accounting  Standards ("SFAS") No. 123, "Accounting
     for  Stock-Based  Compensation",   establishes  a  fair  value  method  for
     accounting for stock-based compensation plans either through recognition or
     disclosure.  The Company  adopted  the  employee  stock-based  compensation
     provisions of SFAS No. 123 by  disclosing  the pro forma net income and pro
     forma net income per share amounts  assuming the fair value  method.  Stock
     arrangements with non-employees, if applicable, are recorded at fair value.


                                                                            F-11




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

     Advertising

     All costs associated with  advertising  services are expensed in the period
     incurred.  Advertising expense was approximately  $28,000 and $ 136,000 for
     the years ended December 31, 1997 and 1998, respectively.

     Loss Per Share

     The Company has adopted SFAS No. 128,  "Earnings per Share," which provides
     for the  calculation  of "basic" and  "diluted"  earnings per share.  Basic
     earnings per share includes no dilution and is computed by dividing  income
     available to common  shareholders by the weighted  average number of common
     shares outstanding for the period.  Diluted earnings per share reflect,  in
     periods in which they have a dilutive  effect,  the effect of common shares
     issuable upon exercise of stock options and warrants.  Diluted earnings per
     share amounts have not been reported because the Company has a net loss and
     the impact of the assumed  conversion  of  preferred  stock and exercise of
     stock options and warrants would be anti-dilutive.

     Effect of Recent Accounting Pronouncement

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
     "Accounting  for  Derivative  Instruments  and Hedging  Activities",  which
     requires  companies  to  recognize  all  derivatives  as  either  assets or
     liabilities  in the  statement  of  financial  position  and measure  those
     instruments  at fair  value.  SFAS No. 133 is  effective  for fiscal  years
     beginning  after June 15, 1999.  The Company does not presently  enter into
     any   transactions   involving   derivative   financial   instruments  and,
     accordingly,  does not  anticipate the new standard will have any effect on
     its financial statements.


                                                                            F-12




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

2.   Reorganization

     On May 30, 1997, the Predecessor  Companies were acquired by the Company by
     issuing  three  notes  aggregating  $325,000  (see  Note  6)  for  all  the
     membership interest in the Predecessor  Companies.  For accounting purposes
     Hobbes has been  considered to be the acquirer.  As a result,  the business
     consolidation  of Hobbes and INET has been accounted for as a consolidation
     of  entities  under  common  control  in a manner  similar  to a pooling of
     interests.  The business  consolidation  with Sarah Girl and Frontline have
     been  accounted  for as purchases.  The net assets and  operations of Sarah
     Girl  and  Frontline  are  not  material  to  the  Company's  consolidation
     financial  statements.  Notes  payable to the  members  of the  Predecessor
     Companies  are  accounted  for  as   distributions   in  the   accompanying
     consolidated statements of stockholders' equity.

3.   Notes Receivable from Stockholders

     During  August and October  1998,  the Company  made  advances  aggregating
     $143,800 to two of its  stockholders.  The notes are due on demand and bear
     interest  at 8% which is  offset  against  the  interest  payable  from the
     stockholders (see Note 6).

4.   Acquisition of Businesses

     During 1998, the Company made the following  acquisitions all of which were
     accounted for using the purchase  method of accounting  with the results of
     each acquisition included in the consolidated financial statements from the
     respective  acquisition  date. The  acquisition  resulted in intangibles of
     $3,215,226, which are being amortized over their expected benefit period of
     3 years.

     At December 31, 1998, intangibles were as follows:


                                                Customer                    
                                   Goodwill        bases       Total
     -----------------------------------------------------------------
     Intangibles                 $1,143,998   $2,071,228  $3,215,226
     Less:  Accumulated                                               
               amortization          88,979       44,921     133,900
     -----------------------------------------------------------------
                                 $1,055,019   $2,026,307  $3,081,326
     =================================================================


                                                                            F-13




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

     WOWFactor

     On October 9, 1998, the Company  acquired all of the issued and outstanding
     capital stock of WOWFactor,  Inc.  ("WOWFactor"),  a New Jersey corporation
     engaged in the  business  of  promoting  e-commerce  through  its web sites
     primarily for women's businesses. The Company issued to the stockholders of
     WOWFactor ten shares of newly created  Series A preferred  stock,  which is
     convertible  on July 15,  1999 into  common  stock  with a market  value of
     $1,000,000,  subject to a maximum issuance of 250,000 shares.  In addition,
     to the extent that the  Company's  common  stock has a market value on July
     15,  1999 of (i) less than $3.00 per share or (ii)  greater  than $3.00 per
     share but less than $4.00 per  share,  the  Company  agreed to issue to the
     WOWFactor stockholders options to purchase up to an aggregate of 100,000 or
     50,000 shares, respectively.

     Roxy Systems d/b/a Magic Carpet

     On October 9, 1998, the Company  acquired  substantially  all of the assets
     used in the business of Roxy Systems,  Inc. d/b/a Magic Carpet  ("Roxy") in
     consideration  of  $75,000  in cash  and the  assumption  of  approximately
     $60,000 of liabilities.  Roxy is an internet service provider which, at the
     date of  acquisition,  had  approximately  1,000  individual  and  business
     subscribers in Orange County, New York.

     US Online

     Pursuant to an order of the United States Bankruptcy Court, District of New
     Jersey, on October 23, 1998, the Company acquired  substantially all of the
     assets used in the business of US Online,  Inc. ("US Online"),  including a
     point of presence in the Philadelphia  area, and assumed two of US Online's
     executory  contracts  for  consideration  of  $570,000  in cash  paid  upon
     closing.  At the time of the  acquisition,  US Online  was  engaged  in the
     business   of   providing   internet   access,   web   hosting  and  leased
     communications  lines to approximately  3,500  subscribers in New York, New
     Jersey and Pennsylvania.


                                                                            F-14



                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

     Webspan

     On December 17, 1998, the Company acquired  substantially all of the assets
     used  in the  business  of  Webspan  Communications,  Inc.  ("Webspan")  in
     consideration of $500,000 in cash, assumption of approximately  $544,000 of
     liabilities  and an aggregate  of 113,364  shares of the  Company's  common
     stock (approximately $509,000). At the time of the acquisition, Webspan was
     an internet  service  provider  with  approximately  9,000  individual  and
     business subscribers in New York and New Jersey.

     The  following  pro  forma  consolidated  financial  information  has  been
     prepared  to  reflect  the  1998  acquisitions.  The  pro  forma  financial
     information is based on the historical  financial statements of the Company
     and those of the acquired businesses.  The accompanying pro forma operating
     statements  are  presented  as if the  acquisitions  occurred on January 1,
     1997.  The  pro  forma  financial  information  is  unaudited  and  is  not
     necessarily  indicative  of what the actual  results of  operations  of the
     Company would have been assuming the  acquisitions had been completed as of
     January 1, 1997, and neither is it necessarily indicative of the results of
     operations for future periods.

     Year ended December 31,                            1997              1998
     --------------------------------------------------------------------------
                                                         (unaudited)
     Revenues                                    $ 2,383,063        $ 2,635,923
     Net loss                                     (5,320,805)        (4,307,399)
     ==========================================================================
     Net loss per share - basic and diluted      $     (3.85)       $     (1.69)
     ==========================================================================

     The above unaudited pro forma consolidated  financial  information has been
     adjusted  to  reflect  amortization  of  intangibles  as  generated  by the
     acquisitions  over a  three-year  period,  WOWFactor  officer's  employment
     agreement  entered into at the date of  acquisition,  the conversion of the
     preferred  shares issued in the WOWFactor  acquisition  and the issuance of
     113,364 common shares in the Webspan acquisition.


                                                                            F-15




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

5.   Property and Equipment

     Property and equipment consisted of the following:

     December 31, 1998
     -------------------------------------------------------------------
     Computer and office equipment                            $1,070,492
     Furniture and fixtures                                       38,705
     Leasehold improvements                                       13,783
     -------------------------------------------------------------------
                                                               1,122,980
     Less:  Accumulated depreciation and                                   
               amortization                                      141,195
     -------------------------------------------------------------------
                                                              $  981,785
     ===================================================================

6.   Notes Payable Stockholders

     On May 30, 1997, the Company issued notes aggregating  $372,137 to three of
     its  stockholders  related to the  reorganization  discussed in Note 2, and
     certain  advances  made to the  Company  since  inception.  The notes  bear
     interest  at 8%. To date  $203,537  has been  repaid and  $168,600  will be
     deferred  until such time as the Company  achieves  $1.9 million in pre-tax
     earnings, but in no event sooner than May 2000.

7.   Capital Lease Obligations

     The Company leases  computer  equipment  under capital  leases.  The assets
     acquired  under  capital  leases  have a cost of $207,725  and  accumulated
     depreciation of $-0- as of December 31, 1998.



                                                                            F-16




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================


     The  following  is a  schedule  of  future  minimum  lease  payments  under
     capitalized  leases,  together  with the  present  value of the net minimum
     lease payments at December 31, 1998.


     ------------------------------------------------------------------
     Payments for the year ending:
        1999                                                  $  75,745
        2000                                                     75,745
        2001                                                     75,745
     ------------------------------------------------------------------
     Total minimum lease payments                               227,235
     Less:  Amount representing interest                         72,833
     ------------------------------------------------------------------
     Present value of net minimum lease payments                154,402
     Less:  Current portion                                      38,569
     ------------------------------------------------------------------
     Long-term lease obligations                               $115,833
     ==================================================================

8.   Commitments and Contingencies


     Leases

     The  Company  rents  office  space  and  equipment  under  operating  lease
     agreements expiring at various dates through 2000.

     Future  minimum  rental  payments  required  under  operating  leases as of
     December 31, 1998 are approximately as follows:

     --------------------------------------------------------------
     1999                                                  $121,000
     2000                                                   119,000
     2001                                                   118,000
     2002                                                    57,000
     --------------------------------------------------------------
     Total                                                 $415,000
     ===============================================================

     Rental  expense was $69,981 and $134,249  for the years ended  December 31,
     1997 and 1998, respectively.


                                                                            F-17




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================



     The Company has entered into three-year  employment agreements with certain
     officers and employees which provide for aggregate annual base compensation
     of approximately  $401,000, and such bonuses as the Board of Directors may,
     in its sole  discretion,  from  time to time  determine.  These  employment
     agreements,  which expire in August 2000 and  September  2001,  provide for
     employment on a full-time  basis (except for the Company's  agreement  with
     its Chief Executive Officer) and contain a provision that the employee will
     not  compete  or engage  in a  business  competitive  with the  current  or
     anticipated  business  of the  Company  during  the term of the  employment
     agreement and for a period of two years thereafter.


9.   Stock Options


     The Company has a stock  option plan (the  "Plan"),  which  authorized  the
     issuance of incentive options and  non-qualified  options to purchase up to
     500,000  shares of common  stock.  The plan has a ten year term.  The Board
     retained the authority to determine the  individuals to whom, and the times
     at which,  stock  options  would be made,  along with the number of shares,
     vesting schedule and other provisions related to the stock options.

     The Company applies Accounting  Principles Board Opinion No. 25 "Accounting
     for Stock Issued to  Employees"  and related  interpretations  by recording
     compensation   expense  for  the  excess  of  fair  market  value  and  the
     exercisable  price per share as of the date of the grant in accounting  for
     its stock options.  Accordingly, no compensation costs have been recognized
     for its issuance of options to employees  since the exercise price exceeded
     the then fair market  value on the date of the grant.  In  accordance  with
     SFAS No. 123, the Company has recognized  $108,000 and $175,137 as the fair
     value of services  received for the 136,000 and 103,000  options granted to
     non-employees during 1997 and 1998, respectively.


                                                                            F-18




                                            Frontline Communications Corporation


                                      Notes to Consolidated Financial Statements

================================================================================


     SFAS No.  123  requires  the  Company  to  provide  pro  forma  information
     regarding net loss and net loss per share as if  compensation  cost for the
     Company's  stock options had been  determined  in accordance  with the fair
     value based method  prescribed in SFAS No. 123. The Company  estimates fair
     value of each stock  based  option at the date of the grant using the Black
     Scholes   option-pricing   model  with  the  following   weighted   average
     assumptions used for options in 1997 and 1998:

                                                      1997               1998
     --------------------------------------------------------------------------
     Risk-free interest rate                          6.51%       4.29% - 5.48%
     Expected life                                  5 years             5 years
     Expected volatility                             15.00%              46.10%
     Dividend yield                                    None                None
     ==========================================================================

     Under the accounting provisions of SFAS No. 123, the Company's net loss and
     loss per share would have been reduced to the pro forma  amounts  indicated
     below:

                                                           1997           1998
     --------------------------------------------------------------------------
     Net loss:
        As reported                                 $(2,037,417)    $(1,744,099)
        Pro forma                                    (2,037,417)     (2,060,753)
     ==========================================================================
     Net loss per share (basic and diluted):
        As reported                                 $    (1.67)     $      (.72)
        Pro forma                                        (1.67)            (.85)
     ==========================================================================

     Stock options  granted prior to 1998 were  considered to have minimal value
     based on the fair value method of SFAS No. 123.


                                                                            F-19




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================


     A summary of the status of the  Company's  stock option plan as of December
     31, 1997 and 1998, and changes  during the years ending on those dates,  is
     presented below:




     December 31,                                                 1997                                    1998
     -----------------------------------------------------------------------------------------------------------------------
                                                                Weighted average                            Weighted average
                                                       Shares    exercise price                Shares      exercise price
     -----------------------------------------------------------------------------------------------------------------------
                                                                                                      
     Outstanding at beginning of year                      --        $   --                    165,600         $ 2.00
     Granted                                          280,000          2.00                    426,200           3.00
     Exercised                                             --            --                         --             --
     Forfeited                                       (114,400)        (2.00)                    (8,800)         (2.00)
     -----------------------------------------------------------------------------------------------------------------------
     Outstanding at end of year                       165,600        $ 2.00                    583,000         $ 2.73
     =======================================================================================================================
     Options exercisable at year-end                       --        $   --                    457,000         $ 2.66
     =======================================================================================================================
     Weighted average fair value of options                                                                                 
       granted during the year                                       $   --                                    $ 1.62
     =======================================================================================================================



     The following table summarizes  information about stock options outstanding
     at December 31, 1998.




                                                      Options outstanding                             Options exercisable
                                       ----------------------------------------------          ----------------------------------
                                                             Weighted                                                            
                                                             average         Weighted               Number                       
                                            Number          remaining         average           exercisable at      Weighted
                                        outstanding at     contractual       exercise            December 31,        average
     Range of exercise prices          December 31, 1998       life            price                 1998        exercise price
     ----------------------------------------------------------------------------------------------------------------------------
                                                                                                         
     $2.00 to $3.00                         418,600                 9.4        $2.31               358,600            $2.27
     $3.00 to $5.18                         164,400                 9.4         3.81                98,400             4.09
     ============================================================================================================================




F-20




                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

10.  Capital Stock and Warrants

     At  December  31,  1998,  there  was an  aggregate  of  2,460,000  warrants
     outstanding at exercise prices between $4.80 and $7.92 per share,  expiring
     at various times through 2003, as follows:

     In December 1997, as partial  consideration for a loan, the Company granted
     warrants  to purchase  300,000  shares,  at an exercise  price of $5.00 per
     share, expiring in December 2003. These warrants were valued at $24,000 and
     recorded as a debt discount.

     As part of its IPO in February 1998, the Company  offered and sold warrants
     (the "Public  Warrants") to purchase 1,840,000 shares, at an exercise price
     of $4.80 per share, expiring in February 2003.

     In March 1998,  the Company  effected a 4 for 5 reverse  stock  split.  All
     shares and per share data in the  consolidated  financial  statements  have
     been adjusted to give retroactive effect to the reverse stock split.

     Additionally,  during May 1998, the Company sold to the  underwriter of the
     IPO, warrants to purchase 160,000 shares, at an exercise price of $6.60 per
     share, and 160,000 shares,  at an exercise price of $7.92 per share.  These
     warrants expire in May 2003.

     The  Board of  Directors  is  authorized  to fix the  rights,  preferences,
     privileges and restrictions of any series of preferred stock, including the
     dividend rights,  original issue price,  conversion rights,  voting rights,
     terms  of  redemption,  liquidation  preferences  and  sinking  fund  terms
     thereof,  and the  number of shares  constituting  any such  series and the
     designation  thereof  and to  increase  or  decrease  the  number of shares
     subsequent  to the  issuance  of shares of such  series  (but not below the
     number of shares of such series then outstanding).


                                                                            F-21





                                            Frontline Communications Corporation



                                      Notes to Consolidated Financial Statements

================================================================================

11.  Income Taxes

     The  Company  had  net  operating  loss   carryforwards   of  approximately
     $1,500,000 at December 31, 1998,  which expire  beginning in 2111.  The tax
     benefit of these losses has been completely offset by a valuation allowance
     due to the uncertainty of its realization.

12.  Litigation Settlement

     In connection with a settlement of all disputes with a former officer,  the
     Company  purchased 231,520 shares of common stock owned by that officer for
     $264,113.  These  amounts  were  accounted  for as  treasury  stock  in the
     accompanying balance sheet.

13.  Subsequent Event

     In March 1999, the Company entered into an agreement with two institutional
     investors  pursuant  to which the  Company  sold  158,856  shares of common
     stock,  at prevailing  market  price,  for an aggregate  purchase  price of
     $2,000,000.   The  agreement  with  the  investors   provides  for  certain
     registration  and repricing  rights.  The Company may, at any time prior to
     the  effectiveness of  registration,  redeem the common stock issued in its
     entirety for a premium. The Company also issued 21,662 warrants to purchase
     common  stock for 13.849 per share.  The  warrants  are  exercisable  on or
     before March 25, 2002.


                                                                            F-22










                      FRONTLINE COMMUNICATIONS CORPORATION
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                          Year Ended December 31, 1998













                      FRONTLINE COMMUNICATIONS CORPORATION
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                          Year Ended December 31, 1998


BASIS OF COMBINATION- PRO FORMA

     The accompanying  unaudited pro forma combined  statement of operations has
been  derived  from  Frontline  Communications  Corporation's  (the "  Company")
consolidated  statement of operations  for the year ended  December 31, 1998 and
the historical  statements of operations of the acquired businesses from January
1, 1998 to the respective  dates of acquisition.  Adjustments  have been made to
such  information to give effect to the following  transaction  and events as if
each had  occurred as of the  beginning  of the period  covered by the  combined
statement of operations:

     A.   The Company's  acquisition of all of the issued and outstanding  stock
          of WOW Factor, Inc. ("WOWFactor) on October 9, 1998.

     B.   The Company's  acquisition of substantially  all of the assets used in
          the business of Roxy Systems,  Inc.  d/b/a Magic Carpets on October 9,
          1998.

     C.   The Company's  acquisition of substantially  all of the assets used in
          the business of US Online, Inc. on October 23, 1998

     D.   The Company's  acquisition of substantially  all of the assets used in
          the business of Webspan  Communications,  Inc. ("Webspan") on December
          17, 1998.

     The  aggregate  consideration  for  the  above  acquisitions   approximated
     $3,595,000 and resulted in intangibles of $3,215,226.  The  intangibles are
     being amortized over their expected benefit period of 3 years.

     The pro forma combined statement of operations has been adjusted to reflect
     amortization  of  intangibles  as  generated  by  the  acquisitions  over a
     three-year period, WOW Factor officer's  employment  agreement entered into
     at the date of acquisition,  the conversion of the preferred  shares issued
     in the WOWFactor  acquisition  and the issuance of 113,364 common shares in
     the Webspan acquisition.

The accompanying pro forma financial information has been included as required
and allowed by the rules of the Commission, is provided for information purposes
only and does not purport to represent what the Company's results of operations
would have been had such transactions in fact occurred at the beginning of the
period presented or to project the Company's results of operations or financial
position in, or for, any future periods.

The accompanying unaudited proforma condensed financial statements should be
read in conjunction with the respective historical financial statements of the
Company, WOW Factor, Magic Carpets, US Online, Inc. and Webspan, which are
contained elsewhere herein.


                                       -1-





FRONTLINE COMMUNICATIONS CORPORATION
UNADUITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1998




                          Frontline       Roxy           WOW           U.S. Online  Webspan               Pro forma     Pro forma
                          Communications  Systems, Inc   Factor, Inc.  Inc.         Communications, Inc   adjustments   Combined
                          -----------------------------------------------------------------------------   -----------   ------------
                                                                                                           
Revenues                  $   574,964     $  192,037     $  29,029     $ 768,142    $1,071,741                          $ 2,635,913
Cost of revenues              651,378        129,521         3,293       915,454     1,117,311                            2,816,957
                          -----------------------------------------------------------------------------   --------      -----------
      Gross profit (loss)     (76,414)        62,516        25,736      (147,312)      (45,570)                            (181,044)
                                                                                                          
Operating expenses:                                                                                       
  Selling, general                                                                                        
    and administrative      1,744,029         73,782        42,067       825,379       345,442             990,000(1)     4,020,699
                          -----------------------------------------------------------------------------   --------      -----------
Loss from operations       (1,820,443)       (11,266)      (16,331)     (972,691)     (391,012)           (990,000)      (4,201,743)
                                                                                                          
Other income (expense):                                                                                   
  Interest income             108,194                                                                                       108,194
  Interest expense            (31,850)                                                                                      (31,850)
                                                                                                          
                          =============================================================================   ========      ===========
Net loss                   (1,744,099)       (11,266)      (16,331)     (972,691)     (391,012)           (990,000)      (4,125,399)
                          =============================================================================   ========      ===========
                                                                                                          
Loss per share-                                                                                           
  basic and diluted            ($0.72)                                                                                       ($1.58)
                          ===========                                                                                   ===========
                                                                                                          
Weighted average number                                                                                   
  of shares outstanding-                                                                                  
  basic and diluted         2,435,035                                                                                     2,606,754
                          ===========                                                                                   ===========

                     (1) The pro forma adjustments consist of the following:
                     
                          (a)  To record additional salary expense for
                               Margaret McGillen, president of WOW
                               Factor Inc. from January 1, 1998 to date
                               of acquisition                                                             $ 75,000
                                                                                                           
                          (b)  To record additional amortization of the                                    
                               acquired intangible assets from January                                     
                               1, 1998 to date of acquistion for the                                       
                               following:                                                                  
                                                                                                           
                                      Roxy Systems, Inc.                                                    39,000
                                      WOW Factor, Inc.                                                     286,000
                                      U.S. Online, Inc.                                                    148,000
                                      Webspan Communications, Inc.                                         442,000
                                                                                                          --------
                                                                                                          $990,000
                                                                                                          ========




                                      -2-










                                 WOWFactor, Inc.






                                                            Financial Statements
                                          Years Ended December 31, 1997 and 1996





                                                                             F-1




                                                                 WOWFactor, Inc.



                                                                        Contents


================================================================================

R
eport of independent certified public accountants                           F-3

Financial statements:
   Balance sheet                                                             F-4
   Statements of operations                                                  F-5
   Statements of stockholders' deficit                                       F-6
   Statements of cash flows                                                  F-7
   Summary of business and significant accounting policies                   F-8
   Notes to financial statements                                             F-9



                                                                             F-2




Report of Independent Certified Public Accountants

WOWFactor, Inc.
Montclair, New Jersey

We have audited the accompanying balance sheet of WOWFactor, Inc. as of December
31, 1997 and the related  statements of  operations,  stockholders'  deficit and
cash  flows for each of the two years in the period  ended  December  31,  1997.
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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit  also  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 WOWFactor,  Inc. as of December
31, 1997,  and the results of its  operations and its cash flows for each of the
two years in the period ended  December 31, 1997 in  conformity  with  generally
accepted accounting principles.



BDO Seidman, LLP


New York, New York

December 18, 1998



                                                                             F-3




                                                                 WOWFactor, Inc.

                                                                   Balance Sheet

================================================================================

December 31, 1997
- -------------------------------------------------------------------------------
Assets
Equipment, net (Note 1)                                               $  12,170
===============================================================================
Liabilities and Stockholders' Deficit
Current liabilities:
   Accounts payable                                                   $  31,668
   Accrued expenses                                                      25,301
   Notes payable (Note 2)                                                60,000

- -------------------------------------------------------------------------------
        Total current liabilities                                       116,969
- -------------------------------------------------------------------------------
Stockholders' deficit:
   Common stock, no par value - 100 shares authorized, issued and
      outstanding (Note 2)                                              657,263
   Accumulated deficit                                                 (762,062)
- -------------------------------------------------------------------------------
        Total stockholders' deficit                                    (104,799)
- -------------------------------------------------------------------------------
                                                                      $  12,170
===============================================================================

                 See accompanying summary of business and significant accounting
                                     policies and notes to financial statements.



                                                                             F-4




                                                                 WOWFactor, Inc.


                                                        Statements of Operations

================================================================================

Year ended December 31,                                   1997            1996
- -------------------------------------------------------------------------------
Net sales                                             $   4,754       $      25
Cost of sales                                            47,676          34,369
- -------------------------------------------------------------------------------
      Gross margin                                      (42,922)        (34,344)
- -------------------------------------------------------------------------------
Operating expenses:
   Selling, general and administrative                   96,173          95,976
   Noncash compensation (Note 3)                        234,000         259,000
- -------------------------------------------------------------------------------
      Total operating expenses                          330,173         354,976
- -------------------------------------------------------------------------------
                                                       (373,095)       (389,320)
Other income:
   Interest income                                           --             353
- -------------------------------------------------------------------------------
Net loss                                               (373,095)       (388,967)
Accumulated deficit, beginning of year                 (388,967)             --
- -------------------------------------------------------------------------------
Accumulated deficit, end of year                      $(762,062)      $(388,967)
===============================================================================

          See  accompanying  summary  of  business  and  significant  accounting
                                     policies and notes to financial statements.


                                                                             F-5




                                                                 WOWFactor, Inc.



                                             Statements of Stockholders' Deficit

================================================================================

 Years ended December 31, 1997 and 1996
 ------------------------------------------------------------------------------
                                                       Accumulated          
                                         Capital stock     deficit        Total
- -------------------------------------------------------------------------------
Balance, January 1, 1996                     $      --   $      --    $      --
Net loss                                            --    (388,967)    (388,967)
Capital contributions (Notes 2(b) and 3)       327,140          --      327,140
- -------------------------------------------------------------------------------
Balance, December 31, 1996                     327,140    (388,967)     (61,827)
Net loss                                            --    (373,095)    (373,095)
Capital contributions (Notes 2(b) and 3)       330,123          --      330,123
- -------------------------------------------------------------------------------
Balance, December 31, 1997                   $ 657,263   $(762,062)   $(104,799)
===============================================================================

          See  accompanying  summary  of  business  and  significant  accounting
                                     policies and notes to financial statements.


                                      F-6




                                                                 WOWFactor, Inc.


                                                        Statements of Cash Flows
                                                                        (Note 3)
================================================================================




Year ended December 31,                                          1997         1996
- ------------------------------------------------------------------------------------
                                                                           
Cash flows from operating activities:
   Net loss                                                   $(373,095)   $(388,967)
- ------------------------------------------------------------------------------------
   Adjustments to reconcile net loss to net cash used in
     operating activities:
        Depreciation                                              8,121        5,088
        Capital contributed through performance of services     234,000      259,000
        Change in assets and liabilities:
           (Increase) decrease in:
              Accounts payable                                   13,462       18,206
              Accrued expenses                                   (8,883)      34,184
- ------------------------------------------------------------------------------------
                Total adjustments                               246,700      316,478
- ------------------------------------------------------------------------------------
                Net cash used in operating activities          (126,395)     (72,489)
- ------------------------------------------------------------------------------------
Cash flows from investing activities:
   Purchase of equipment                                             --      (25,379)
- ------------------------------------------------------------------------------------
Cash flows from financing activities:
   Proceeds from issuance of notes                               25,000       35,000
   Contributions of capital - cash                               96,123       68,140
- ------------------------------------------------------------------------------------
                Net cash provided by financing activities       121,123      103,140
- ------------------------------------------------------------------------------------
Net increase (decrease) in cash                                  (5,272)       5,272
Cash, beginning of year                                           5,272           --
- ------------------------------------------------------------------------------------
Cash, end of year                                             $      --    $   5,272
====================================================================================
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
      Interest                                                $      --    $      --
      Income                                                         --           --
====================================================================================



          See  accompanying  summary  of  business  and  significant  accounting
                                     policies and notes to financial statements.


                                                                             F-7




                                                                 WOWFactor, Inc.


                         Summary of Business and Significant Accounting Policies

================================================================================

Business                      

     WOWFactor,  Inc.  (the  "Company")  which  was  incorporated  in 1995,  and
     commenced  business as an internet web-based Company providing consumer and
     business goods and services, focusing on women business owners.
                            
                            
Use of Estimates              

     The  preparation of the 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.
                            
                            
Equipment and Depreciation

     Equipment  is stated at cost.  Depreciation  is  computed  using the double
     declining  balance method over the estimated  useful lives of the assets of
     five years.

Income Taxes                  

     The  Company  is taxed as an S  corporation  under  the  provisions  of the
     Internal  Revenue Code.  The  stockholder's  report the  Company's  taxable
     income or loss in their personal income tax returns.  Accordingly,  Federal
     as well as State of New Jersey  income taxes or benefits are not  reflected
     in the financial statements.
                            
     Deferred taxes are inconsequential as a result of the Company's tax status.
                            
Revenue Recognition           

     Revenues  were  derived  from  various  internet  related  services and are
     recognized in the month in which services are provided.
                           

                                      F-8




                                                                 WOWFactor, Inc.



                                                   Notes to Financial Statements

================================================================================


1.   Equipment

     Equipment, as presented on the balance sheet, is as follows:


     December 31, 1997
     -------------------------------------------------
     Equipment                                $ 25,379
     Less:  Accumulated depreciation           (13,209)
     -------------------------------------------------
                                              $ 12,170
     =================================================


                                      
2.   Related Party Transactions
                                      

     (a)  The Company has outstanding, at December 31, 1997, noninterest bearing
          notes payable to a related party  totaling  $60,000.  These notes were
          repaid during 1998.

     (b)  In 1997 and 1996,  shareholders  made cash  capital  contributions  of
          $96,123 and $68,140, respectively.

     (c)  The  Company's  operations  are conducted at the home of the principal
          stockholder  at no expense to the Company.  Management  has determined
          that the cost of such space  cannot be  reasonably  estimated  and has
          therefore chosen not to disclose such information.

3.   Noncash Compensation

     During 1997 and 1996, the Company recognized contributed capital in lieu of
     the  payments of  salaries  and fees to certain  stockholders.  The amounts
     recognized as expense and contributed  capital in the financial  statements
     were $234,000 and $259,000 in 1997 and 1996, respectively.


                                                                             F-9



                                                                 WOWFactor, Inc.



                                                   Notes to Financial Statements

================================================================================

4.   Subsequent Event


     On October 9, 1998,  the Company  entered into an agreement  with Frontline
     Communications  Corporation  (the  "Purchaser")  whereby ten (10) shares of
     Series  A  Convertible   Preferred  Stock  of  the  Purchaser   ("Series  A
     Preferred"), convertible on July 15, 1999 into common stock, par value $0.1
     per share, having a market value of $1,000,000 on the conversion date, were
     transferred in consideration of all the authorized,  issued and outstanding
     shares of the Company's  common stock.  The  conversion  feature,  however,
     provides for a limitation  that under no  circumstances  shall the Series A
     Preferred  stock  be  convertible   into  the   Purchaser's   common  stock
     aggregating more than 250,000 shares.  In connection with the transactions,
     stock  options  were granted to the  Company's  former  shareholders  to be
     exercised on July 15, 1999 under the conditions that (a) if the Purchaser's
     common  stock has a market  value on July 15,  1999 of less than  $3.00 per
     share, up to 100,000 shares may be purchased under the option or (b) if the
     Purchaser's  common  stock has a market  value of less than $4.00 per share
     but greater  than $3.00 per share,  options to purchase  will be limited to
     50,000 shares.




                                                                            F-10





                               Roxy Systems, Inc.,
                               D/B/A Magic Carpet




                                                    Financial Statements
                                                    Year Ended December 31, 1997




                                                                             F-1




                                                             Roxy Systems, Inc.,
                                                              D/B/A Magic Carpet

                                                                        Contents

================================================================================



R
eport of independent certified public accountants                           F-3

Financial statements:
   Balance sheet                                                             F-4
   Statement of operations                                                   F-5
   Statement of stockholder's deficit                                        F-6
   Statement of cash flows                                                   F-7
   Summary of business and significant accounting policies                   F-8
   Notes to financial statements                                             F-9



                                                                             F-2





Report of Independent Certified Public Accountants


Roxy Systems, Inc., D/B/A Magic Carpet
Middletown, New York

We have audited the  accompanying  balance  sheet of Roxy Systems,  Inc.,  D/B/A
Magic Carpet as of December 31, 1997 and the related  statements of  operations,
stockholder's  deficit and cash flows for the year then ended.  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  also  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 Roxy Systems, Inc., D/B/A Magic
Carpet at December  31,  1997,  and the results of its  operations  and its cash
flows for the year then ended, in conformity with generally accepted  accounting
principles.


Certified Public Accountants


New York, New York

December 22, 1998



                                                                             F-3




                                                             Roxy Systems, Inc.,
                                                              D/B/A Magic Carpet


                                                                   Balance Sheet

================================================================================




December 31, 1997
- -----------------------------------------------------------------------------------------
                                                                                   
Assets
Current:
   Accounts receivable, less allowance for doubtful accounts of $10,000         $   2,686
Property and equipment, net (Note 1)                                               21,080
Other                                                                                 774
- -----------------------------------------------------------------------------------------
                                                                                $  24,540
=========================================================================================
Liabilities and Stockholder's Deficit
Current liabilities:
   Accounts payable and accrued expenses                                        $  46,387
   Due to stockholder (Note 2)                                                     15,860
- -----------------------------------------------------------------------------------------
      Total current liabilities                                                    62,247
- -----------------------------------------------------------------------------------------
Stockholder's deficit:
   Common stock, no par value - shares authorized, issued and outstanding 100      80,000
   Accumulated deficit                                                           (117,707)
- -----------------------------------------------------------------------------------------
      Total stockholder's deficit                                                 (37,707)
- -----------------------------------------------------------------------------------------
                                                                                $  24,540
=========================================================================================



              See  accompanying  summary of business and significant  accounting
                                     policies and notes to financial statements.


                                                                             F-4




                                                             Roxy Systems, Inc.,
                                                              D/B/A Magic Carpet


                                                         Statement of Operations

================================================================================

 Year ended December 31, 1997
- -------------------------------------------------------------------------------
 Net sales                                                            $ 180,569
 Cost of sales                                                          157,542
- -------------------------------------------------------------------------------
       Gross profit                                                      23,027
 Operating expenses:
    Selling, general and administrative                                  79,740
- -------------------------------------------------------------------------------
 Net loss                                                               (56,713)
 Accumulated deficit, beginning of year                                 (60,994)
- -------------------------------------------------------------------------------
 Accumulated deficit, end of year                                     $(117,707)
===============================================================================

              See  accompanying  summary of business and significant  accounting
                                     policies and notes to financial statements.


                                                                             F-5




                                                             Roxy Systems, Inc.,
                                                              D/B/A Magic Carpet

                                              Statement of Stockholder's Deficit

================================================================================

 Year ended December 31, 1997
- -------------------------------------------------------------------------------
                                                    Accumulated          
                                   Capital stock        deficit          Total
- -------------------------------------------------------------------------------
 Balance, January 1, 1997              $  80,000      $ (60,994)      $  19,006
 Net loss                                     --        (56,713)        (56,713)
- -------------------------------------------------------------------------------
 Balance, December 31, 1997            $  80,000      $(117,707)      $ (37,707)
===============================================================================

              See  accompanying  summary of business and significant  accounting
                                     policies and notes to financial statements.


                                                                             F-6




                                                             Roxy Systems, Inc.,
                                                              D/B/A Magic Carpet


                                                         Statement of Cash Flows

================================================================================




 Year ended December 31, 1997
- -----------------------------------------------------------------------------------------
                                                                                    
 Cash flows from operating activities:
    Net loss                                                                     $(56,713)
- -----------------------------------------------------------------------------------------
    Adjustments to reconcile net loss to net cash used in operating activities:
       Depreciation                                                                 6,770
       Allowance for doubtful accounts                                             10,000
       Change in assets and liabilities:
         Increase in:
            Accounts receivable                                                   (12,686)
            Other assets                                                             (774)
         Increase in accounts payable and accrued expenses                         31,795
- -----------------------------------------------------------------------------------------
               Total adjustments                                                   35,105
- -----------------------------------------------------------------------------------------
               Net cash used in operating  activities                             (21,608)
 Cash flows from investing activities:
    Purchase of equipment                                                          (3,850)
 Cash flows from financing activities:
    Advances received from stockholder                                             20,836
- -----------------------------------------------------------------------------------------
 Net decrease in cash                                                              (4,622)
 Cash, beginning of year                                                            4,622
- -----------------------------------------------------------------------------------------
 Cash, end of year                                                               $     --
=========================================================================================
 Supplemental disclosure of cash flow information:
    Cash paid during the year for:
       Interest                                                                  $     --
       Income taxes                                                                    --
=========================================================================================



                 See accompanying summary of business and significant accounting
                                     policies and notes to financial statements.


                                                                             F-7




                                                             Roxy Systems, Inc.,
                                                              D/B/A Magic Carpet


                         Summary of Business and Significant Accounting Policies

================================================================================


Business                             Roxy Systems, Inc., D/B/A Magic Carpet (the
                                     "Company") is an internet  service provider
                                     that  offers   "dial-up"   Internet  access
                                     primarily to  individual  subscribers.  The
                                     Company  provides  subscribers  with direct
                                     access   to  a  wide   range  of   Internet
                                     applications   and   resources,   including
                                     electronic  mail,  world wide web sites and
                                     regional  and  local  information  and data
                                     services.

Use of Estimates                     The preparation of the 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.


Property, Equipment and              Equipment  is stated at cost.  Depreciation
Depreciation                         is computed over the estimated useful lives
                                     of the assets by the  straight-line  method
                                     for property and equipment.                
                                     
                                     
Revenue                              Revenue from monthly  Internet  service are
                                     recognized  in the month in which  services
                                     are provided.

Income Taxes                         The  Company  is taxed as an S  corporation
                                     under  the   provisions   of  the  Internal
                                     Revenue Code. The  stockholder  reports the
                                     Company's  taxable  income  or  loss in his
                                     personal  income tax  return.  Accordingly,
                                     Federal  as well as New York  State  income
                                     taxes or benefits are not  reflected in the
                                     financial statements.  

                                     Deferred  taxes  are  inconsequential  as a
                                     result of the Company's tax status.


                                                                             F-8




                                                             Roxy Systems, Inc.,
                                                              D/B/A Magic Carpet



                                                   Notes to Financial Statements

================================================================================


1.   Property and                    Property and equipment, as presented on the
     Equipment, Net                  balance sheet, is as follows:              

                                     December 31, 1997
                                     -------------------------------------------
                                     Equipment                         $ 31,825
                                     Furniture and fixtures               2,025
                                     -------------------------------------------
                                                                         33,850
                                     Less:  Accumulated depreciation    (12,770)
                                     -------------------------------------------
                                                                       $ 21,080
                                     ===========================================

2.   Related Party                   The  stockholder  of the  Company  has made
     Transactions                    advances to the Company totaling $15,860 at
                                     December 31, 1997.  These  advances were in
                                     the form of noninterest-bearing  notes that
                                     are due on demand.                         
                                                                          
                                     The Company's  operations  are conducted at
                                     the home of a relative  of the  stockholder
                                     on a month-to-month basis at a rate of $100
                                     per month.

3.   Subsequent Event                On October 9, 1998, the Company transferred
                                     all  assets,  trademarks,   service  marks,
                                     patents,  contracts  and similar  rights to
                                     Frontline    Communications   Corp.,   (the
                                     "Purchaser").  Pursuant  to the  agreement,
                                     the Purchaser assumed up to $60,348 in past
                                     due    obligations    of    the    Company.
                                     Additionally,   a   two   year   noncompete
                                     agreement  was  executed by the Company and
                                     all   stockholders,    partners,    owners,
                                     officers and  directors of the Company,  as
                                     relating to the  ownership,  operations of,
                                     or  employment   in  an  Internet   service
                                     provider  or  other  web  services  company
                                     directly   competing  with  purchaser.   In
                                     consideration thereof, the Company received
                                     $100,000.


                                                                             F-9











                                U.S. ONLINE, INC.

                         (FORMERLY VENTURE QUEST, INC.)

                          COMBINED FINANCIAL STATEMENTS

                                DECEMBER 31, 1997

















                                U.S. ONLINE, INC.
                          COMBINED FINANCIAL STATEMENTS
                          YEAR ENDED DECEMBER 31, 1997



                                    CONTENTS





R
eport of Independent Certified Public Accountant                          3

Combined Balance Sheet                                                     4

Combined Statement of Operations                                           6

Combined Statement of Changes in Shareholders' Equity                      7

Combined Statement of Cash Flows                                           9

Combined Notes to Financial Statements                                    11-22

Combined Supplemental Information                                         23

Combined Cost of Revenue                                                  24

Combined Operating Expenses                                               25



                                       2




                                JOSEPH J. REPKO
                          Certified Public Accountant
                               435 N. STATE ROAD
                        Springfield, PENNSYLVANIA 19064
                                 (610) 328-9551



                          INDEPENDENT AUDITOR'S REPORT


The Board of Directors and Shareholders
U.S. Online, Inc.
Mount Laurel, NJ 08054

I have audited the accompanying balance sheet of U.S. Online, Inc. as of
December 31, 1997 and the related statement of operations, shareholders equity,
and cash flows for the period then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from 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.
I believe that my audits provide a reasonable basis for my opinion.

The accompanying financial statements have been prepared assuming that the
company will continue as a going concern.

As shown in the financial statements, the company incurred a substantial net
loss of $1,310,142 for 1997. At December 31, 1997, current liabilities exceeded
current assets by $1,399,853 and total liabilities exceed total assets by
$1,036,621. These factors, and others discussed in Note 18 specifically the
bankruptcy filings under Chapter 11 and then conversion to Chapter 7,
liquidation, indicates that the company will not continue to exist. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that will be necessary in the circumstances. In
addition, I was unable to obtain written representations from one of the
directors of U.S. Online, Inc.

Because of the effects of any adjustments that might have resulted had the
ultimate outcome of the uncertainty referred to in the preceding paragraph been
known, I do not express an opinion on the financial statements referred to
above.

January 6, 1999



Joseph J. Repko, C.P.A


                                       3




                                U.S. ONLINE, INC.
                             COMBINED BALANCE SHEET
                                DECEMBER 31, 1997





                                     ASSETS


 CURRENT ASSETS
    Cash and cash equivalents                                             $6,573
    Accounts receivable:
      Franchise                                                           34,000
      Customers                                                           19,783
    Due from shareholders                                                  4,800
    Due from franchise owners                                             34,610
                                                                        --------
                    Total current assets                                 $99,766


FIXED ASSETS - AT COST                                                   709,319
    Less accumulated depreciation and amortization                       187,550
                                                                        --------
                                                                         521,769

OTHER ASSETS
    Deposits                                                              13,647
    Organization Costs - Net                                              12,500
                                                                        --------
                                                                          26,147

                                                                        --------
                    TOTAL ASSETS                                        $647,682
                                                                        ========








                                       4




                                U.S. ONLINE, INC.
                             COMBINED BALANCE SHEET
                                DECEMBER 31, 1997



                      LIABILITIES AND SHAREHOLDERS' EQUITY



CURRENT LIABILITIES

    Current portion of capital lease obligations                        169,512
    Accounts payable and accrued expenses                               714,050
    Franchise deposits                                                  485,030
    Sales tax payable                                                     3,852
    Deferred revenue                                                     47,175
                                                                    -----------
                    Total current liabilities                        $1,419,619



CAPITAL LEASE OBLIGATIONS, net of current portion                       264,684
                                                                    -----------

                    Total Liabilities                                 1,684,303
                                                                    -----------



SHAREHOLDERS' EQUITY

    Common stock - authorized 200,000,000 shares par value
       $.002, issued and outstanding 9,936,000 shares                    19,871
    Additional paid in capital                                          756,076
    Accumulated deficit                                              (1,812,568)
                                                                    -----------
                    Total Shareholders' Equity                       (1,036,621)
                                                                    -----------

                    TOTAL LIABILITIES AND SHAREHOLDERS EQUITY          $647,682
                                                                    ===========




                                       5




                                U.S. ONLINE, INC.
                        COMBINED STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 1997




Operating revenue                                                     $ 610,564

Cost of revenue                                                       1,119,580
                                                                    -----------

          Gross profit                                                 (509,016)

Operating expenses                                                      692,789
                                                                    -----------

          Operating loss                                             (1,201,805)

Other income (expense)
    Depreciation                                                       (148,494)
    Interest expense                                                    (70,347)
    Interest income                                                      13,143
    Debt forgiveness income                                              97,361
                                                                    -----------

          NET LOSS                                                   (1,310,142)
                                                                    ===========


Net loss per share of common stock                                    $    (.21)
                                                                    ===========

Weighted average shares outstanding                                   6,260,319
                                                                    ===========



                                       6




                                U.S. ONLINE, INC
              COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                          YEAR ENDED DECEMBER 31, 1997

                        



                                                                                                                          Total  
                                                        Common Stock              Capital In                             Share-  
                                             -----------------------------        Excess of         Accumulated          Holders'
                                                 Shares           Amount          Par Value           Deficit            Equity
                                             ---------------    ------------    ---------------    --------------     -------------

                                                                                                                 
Balance, January 1, 1997                            875,000          $1,750            $27,858         ($44,483)        ($14,875)

Issuance of common stock in
 January 1997 to Venture Quest
 Shareholders for cancellation of
 Debt                                                55,000             110             12,190                            12,300

Issuance of common stock in
 January 1997 to Venture Quest
 Shareholders for investment return
 Under the Rule 419 offering                        362,500             725                                                  725

Issuance of common stock in
 January 1997 to Venture Quest
 Shareholders for service to be
 Rendered                                             7,500              15                                                   15

U.S. Online, Inc. prior to merger                 6,400,000           6,400            449,400         (457,943)          (2,143)

Issuance of common stock to
 Investors in private placement
 Prior to merger in June 1997
 U.S. Online                                         17,333              17             12,982                            12,999





                                       7







                                U.S. ONLINE, INC.
          COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (cont)
                          YEAR ENDED DECEMBER 31, 1997

                            



                                                                                                                          Total 
                                                            Common Stock               Capital In                         Share- 
                                                    ----------------------------       Excess Of       Accumulated        Holders'
                                                       Shares           Amount         Par Value         Deficit          Equity
                                                    -----------      -----------      -----------      -----------      -----------
                                                                                                                  
Exchange of U.S. Online Stock                        (6,417,333)         ($6,417)           6,417

Issuance of common stock to
 U.S. Online, Inc. shareholders
 In a 1:1 exchange                                    6,417,333           12,834          (12,834)



Issuance of common stock to
Investors in a private placement
On July 19, 1997 at $.75 per share                       19,667               39           14,711                            14,750

Issuance of common stock to
Investors in a private placement
On October 29,1997 at $.25 per share
                                                        199,000              398           49,352                            49,750
Issuance of common stock to
Investors in a private placement
On October 29,1997 at $.10 per
Share
                                                      2,000,000            4,000          196,000                           200,000


Net loss for the year
 ended December 31, 1997                                                                               ($1,310,142)      (1,310,142)

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

Balance                                               9,936,000          $19,871         $756,076      ($1,812,568)     ($1,036,621)
                                                    ===========      ===========      ===========      ===========      ===========




                                       8




                                U.S. ONLINE, INC
                        COMBINED STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1997



                                                                           1997
                                                                    -----------
Cash flows from operating activities:
    Net loss                                                        ($1,310,142)
Adjustments to reconcile net (loss) to net
  cash provided by operating activities:
    Depreciation and amortization                                      154,0810
    Changes in assets and liabilities:
        Increase in accounts receivable                                 (12,143)
        Decrease in due from Franchise Pop's                             63,500
        Increase in due from franchise owners                           (34,610)
        Increase in accounts payable and accrued expenses               589,151

        Increase in franchise deposits                                   88,030
        Increase in deferred revenue                                     47,175
        Increase in sales tax payable                                     3,852
                                                                    -----------
        Increase in security deposits                                    (8,459)

                                                                    -----------

                    Net cash used in operating activities              (419,565)
                                                                    -----------

Cash flows from investing activities:
    Additions to property and equipment                                  99,111
    Payment for organizational costs                                    (14,750)
                                                                    -----------

                    Net cash used in investing activities              (113,861)
                                                                    -----------


                                       9




                                U.S. ONLINE, INC.
                        COMBINED STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1997


Cash flows from financing activities:
    Repayment of principle under capital lease obligations             (189,550)

    Issuance of common stock in a private placement                     264,500

                                                                      ---------

                    Net cash provided by financing activities            74,950
                                                                      ---------

                    Net decrease in cash                               (458,476)

Cash and cash equivalents - beginning of year                           465,049
                                                                      ---------

Cash and cash equivalents - ending of year                               $6,573
                                                                      =========



                                       10




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

     Summary of Significant Accounting Policies

     This summary of significant accounting policies of U.S. Online, Inc.
     (formerly Venture Quest, Inc.) "the Company" is presented to assist in
     understanding the Company's financial statements. The financial statements
     and notes are representations of the Company's management who is
     responsible for their integrity and objectivity.

     Nature of Operations

     U.S. Online, Inc. (formerly Venture Quest, Inc.) "the Company", was
     organized under the laws of New York on July 18, 1989, and is engaged in
     the business of providing computer internet access service and point of
     sale internet franchise sales to customers primarily in the Eastern Region
     of the United States.

     Basis of Combination

     The combined financial statements include the accounts of U.S. Online,
     Inc., a Pennsylvania Corporation and Venture Quest, Inc., a New York
     Corporation. All significant intercompany accounts and transactions have
     been eliminated in the combination.

     Fixed Assets

     Fixed assets are stated at cost. Depreciation is provided for by the
     straight-line and accelerated methods over the estimated useful lives of
     the assets. Organization costs are amortized on a straight-line basis over
     a period of five years.

     Income Taxes

     Income taxes are provided for the tax effects of transactions reported in
     the financial statements and consist of taxes currently due. The Company
     had a net loss of $1,310,410 at December 31, 1997 and accordingly no
     provision for income taxes is necessary. The Company has loss carry forward
     that may be offset against future federal income taxes expiring 2112.

     Use of Estimates

     In preparing financial statements in conformity with generally accepted
     accounting principles, management makes estimates and assumptions that
     affect the reported amounts of assets and liabilities and disclosures of
     contingent assets and liabilities at the date of the financial statements,
     as well as the reported amounts of revenue and expenses during the
     reporting period. Actual results could differ from those estimates.


                                       11




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (con't)

     Repairs and Maintenance

     Expenditures for repairs, maintenance, and minor renewals are charged
     against income as incurred and expenditures for major renewals and
     betterments are capitalized and amortized over five years. The cost and
     accumulated depreciation of assets sold or retired are removed from the
     respective accounts with any gain or loss on disposal reflected in income.

     Cash and Cash Equivalents

     The Company considers cash equivalents to be those short-term investments
     maturing within three months of the balance sheet date.

     Loss per Share

     The loss per share is based on the weighted average number of shares of
     common stock outstanding during the year.

     Fair Value of Financial Instruments

     The note due from shareholders is based on the terms at which those same
     loans would be made currently and approximate their fair value. At December
     31, 1997, the carrying value of the assets were $647,682 which equates
     their fair value. The carrying value of the capital lease obligations was
     $434,196 and are reflective of borrowing rates currently available to the
     Company.

     Deferred Revenue

     Deferred revenue represents prepayment of customer accounts for services to
     be rendered. These revenues are amortized over the number of months in the
     period.

NOTE 2 - CONCENTRATION OF CREDIT RISK

     The Company has a potential concentration of credit risk consisting
     primarily of temporary cash deposits and trade accounts receivable.
     Concentrations of credit with respect to trade receivables are limited due
     to the large number of customers comprising the Company's customer base and
     their dispersion across different geographic locations.


NOTE 3- FIXED ASSETS

Major classifications of property and equipment are summarized below:

                                                            Dec. 31,1997
                                                              --------
                   
                   Computer equipment and software            $666,784
                   Furniture and Fixtures                       41,100
                   Leasehold improvements                        1,435
                                                              --------
                   
                                                              $709,319
                                                              ========


                                       12




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 4 - RELATED PARTY TRANSACTIONS

     Balance Sheet Items

     Long Term Debt

     U.S. Online, Inc. had incurred a related party obligation to a company for
     expenses paid on the Company's behalf. Such expenses included: payroll,
     advertising, rent and other operating expenses advanced since inception. At
     December 31, 1996, the net advanced costs were $242,945 and were included
     on the balance sheet financial statement as long-term debt related party.

     Retirement of Long Term Debt

     On April 7, 1997, the Board of Directors voted to exchange $200,000 of long
     term debt to a related party for POP (Point of Presence) deposits. The
     value of the deposits are estimated at a fair market value established by
     the Board of Directors. The deposits are to be converted later to
     franchises. Under such agreement, the franchises will be located in the
     following territories: Manhattan, NY, Edison, NJ, Eatontown, NJ and
     Morristown, NJ.

     On August 3, 1997, the Board of Directors voted to exchange the remaining
     $40,000 demand note to a related party for POP (Point of Presence)
     deposits. The value of the deposits were issued at an estimated discount of
     between 28% and 38% established by the Board of Directors. The deposits are
     to be converted later to franchises. Under such agreement, the franchises
     will be located in the following territories: Nassau County, Long Island
     New York, Southern Westhester County, New York and Vineland, New Jersey.

     Advances

     Related parties had advanced expenses including payroll, advertising, rent,
     equipment and other expenses since inception. The amounts outstanding at
     December 31, 1996 was $94,416 and were included in the financial statement
     as advances from related parties.

     Forgiveness of Debt (Advances)

     On April 7, 1997, management reached an agreement with the related
     companies concerning the advances. The related companies agreed to forgive
     the advances in the amount of $97,661 of which $94,416 was listed as
     related party advances on the balance sheet at December 31, 1996.

     Operating Sub-Lease

     The Company maintains a related party obligation on several non cancelable
     operating sub-leases from a Company controlled by an executive officer of
     the Company and a principle shareholder. The master leases from which the
     sub-leases are derived from are guaranteed by the principles of the
     affiliated Company. The details of these related party leases are as
     follows:

     Facility rentals, monthly payments of $2,972, with certain operating
     expenses and amortized costs, expiring May 1998.

     Telephone system, monthly payments of $361, expiring March 1998.



                                       13




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 4 - RELATED PARTY TRANSACTIONS (cont)

     Security system, monthly payments of $355, expiring May 2000.

     Computer equipment, monthly payments of $979, on various leases expiring
     December 1999.


NOTE 5 - CAPITAL LEASE OBLIGATIONS

     The Company has purchased certain computer equipment and furniture under
     capital lease obligations expiring through 2001. Accordingly, SFAS 13
     requires that the asset be capitalized and depreciated and the related
     lease obligations be recorded at the present value of the future minimum
     lease payments and interest imputed. Some of the lease obligations are
     secured by the corresponding assets, guaranteed by a related party Company
     and personal guarantees by the executive officers and a principal
     shareholder of the Company. Future minimum lease obligations at December
     31, 1997 for capital lease obligations were as follows:




                                                                Minimum            Gross
                                                                Monthly            Lease
                                                               Obligation        Obligations
                                                               ----------        -----------
                                                                                  
Capital lease obligation for modem pools, including interest   $ 621.               $27,324
  of 12 5/8%, expires August 2001                                                  
Capital lease obligation for modem pools, including interest     539.                19,404
  of 18 3/8%, expires December 2000                                                
Capital lease obligation for computer network, including         101.                   404
  interest of 20 11/16%, expires April 1998                                        
Capital lease obligation for computer server, including          468.                 9,828
  interest of 19.2%, expires September 1999                                        
Capital lease obligation for computer web space, including       520.                 7,800
  interest of 22.8%, expires March 1999                                            
Capital lease obligation for computer equipment, including       414.                 6,210
  interest of 23 7/16%, expires March 1999                                         
Capital lease obligation for computer equipment, including       259.                 3,626
  interest of 86 1/8%, expires February 1999                                       
Capital lease obligation for office furniture, including         416.                15,392
  interest of 19 15/16%, expires January 2001                                      
Capital lease obligation for computer equipment                 5,189               217,938
    including interest of 13.41%, expires June 2001                                
Capital lease obligation for furniture, including               1,199                19,184
    interest of 29.47%, expires April 1999                                         
Capital lease obligation for computer network bundle,             141                 4,089
    Including interest of 5.93%, expires May 2000                                  
Capital lease obligation for furniture, including                 163                 4,564
    Interest of 29.9%, expires April 2000                                          
Capital lease obligation for copier machine,                      175                 9,275
    including interest of 21.05%, expires May 2002                      




                                       15





                             U.S. ONLINE, INC.
                  COMBINED NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 1997




                                                                                          
Capital lease obligation for modem pool equipment,                                 196        5,488
    including interest of 25.3%, expires April 2000
Capital lease obligation for computer equipment                                    640       26,240
    including interest of 11.91%, expires May 2001
Capital lease obligation for modem bundles                                       6,052      121,040
    including interest of 9.47%, expires August 1999
Capital lease obligation for monitors, keyboards & routers                         235        7,755
    including interest of 11.91%, expires September 2000
Capital lease obligation for scanners and printers                                 186        6,138
    including interest of 18.05%, expires September 2000
Capital lease obligation for racks and cards                                       134        4,422
    including interest of 14.0%, expires September 2000
Capital lease obligation for net frames and processors                             184        6,624
    including interest of 15.49%, expires December 2000
Capital lease obligation for tiget switch and ports                                163        5,216
    including interest of 12.8%, expires August 2000
Capital lease obligation for master switch and conv. rack                          335       12,060
    including interest of 12.81%, expires December 2000


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

Future minimum lease payments                                                 $18,330.     $540,021
                                                                             =========    =========

Annual maturities are as follows:

                                                                             1998          $219,152
                                                                             1999           172,548
                                                                             2000           105,628
                                                                             2001            41,818
                                                                             Thereafter         875
                                                                                          ---------
                                                                                           $540,021

Less amounts representing interest                                                         (108,554)
                                                                                          ---------

Present value of minimum lease payments                                                    $431,467

Less current portion                                                                        169,512
                                                                                          ---------

Capital lease obligation, net of current portion                                           $261,955
                                                                                          =========





                                       16




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997


NOTE 6 - LEASES

     The Company maintains a related party obligation on several non cancelable
     operating sub-leases from a Company controlled by an executive officer of
     the Company and a principle shareholder. The master leases from which the
     sub-leases are derived from are guaranteed by the principles of the
     affiliated Company. The details of these related party leases are as
     follows:

     Facility rentals, monthly payments of $2,972, with certain operating
     expenses and amortized costs, expiring May 1998.

     Telephone system, monthly payments of $361, expiring March 1998.

     Security System, monthly payments of $355, expiring May 2000.

     Computer equipment, monthly payments of $979, on various leases expiring
     December 1999.

     Future minimum rentals under all non cancelable operating leases are as
     follows:

                            Year Ending December 31,

                             1998          $23,235
                             1999           15,409
                             2000            1,225
                                           -------
                                           $39,869
                                           =======

     On August 3, 1997, the Board of Directors voted to exchange $60,000 of
     related party rents, or five months of payments where the equivalent is
     $60,000, for POP (Point of Presence) deposits. The value of the deposits
     were issued at an estimated discount of between 28% and 38% as established
     by the Board of Directors. The deposits are to be converted later to
     franchises. Under such agreement, the franchises will be located in the
     following territories: Nassau County, Long Island New York, Southern
     Westchester County, New York and Vineland, New Jersey. (See Retirement of
     Long Term Debt footnote above)



                                       17




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997


NOTE 7 - AGREEMENT, MERGER AND CORPORATE NAME CHANGE

     On May 7, 1997, U.S. Online, Inc., a Pennsylvania Corporation, signed a
     merger agreement with Venture Quest, Inc., a New York corporation. One
     share of the Company's common stock was exchanged for one share of Venture
     Quest, Inc. common stock with Venture Quest, Inc. being the surviving
     corporation. The exchange is intended to qualify as a tax-free transaction
     under Section 351 of the Internal Revenue Code. Venture Quest, Inc. has
     elected to adopt the U.S. Online, Inc. name effective the date of the
     merger which was June 26, 1997.

NOTE 8 - OMNIBUS AND SENIOR EMPLOYEE STOCK OPTION PLAN

     On December 11, 1997, the Company voted to authorize 10,000,000 shares of
     common stock for an employee stock option plan. The term of the plan will
     be 10 years. The Company issued 864,000 shares to certain executives of the
     Company with various employment restrictions and an exercise price of $.25.

NOTE 9 - EQUITY FINANCING, CAPITAL STOCK AND WARRANT PURCHASE SHARES

     On June 19, 1997 the Board of Directors voted for the Company to offer on a
     "best efforts basis ", under Regulation A, 133,334 shares of common stock
     at a price of $.75 per share. The offering closed with 19,667 shares being
     issued and raised $14,750.

     On October 29, 1997 the Board of Directors voted for the Company to offer
     on a "best efforts basis ", under Regulation A, 400,000 shares of common
     stock at a price of $.25 per share. The offering closed with 199,000 shares
     being issued and raised $49,750.

     On October 29, 1997 the Board of Directors voted for the Company to offer
     on a "best efforts basis ", under Regulation A, 2,000,000 shares of common
     stock at a price of $.10 per share with a minimum purchase of five thousand
     dollars ($5,000) during the third and fourth quarters of 1997. The offering
     closed on October 29, 1997 with the maximum shares being issued and raised
     $200,000.

     On July 18, 1997, the Board of Directors voted to issue to all shareholders
     of record as of July 18, 1997 a Class A Common Stock Purchase Warrant with
     an exercise price of $2.00 per share and a maturity of two years from
     issuance.

     On October 31, 1997, the Board of Directors voted to issue to all
     shareholders of record a Class B Common Stock Purchase Warrant, whereby the
     shareholder of record could exercise the warrant shares at an exercise
     price of four dollars ($4.00) per share on a one for one basis and a
     maturity of one year from date of issuance.



                                       18




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 10 - NONMONETARY TRANSACTION

Capital lease obligations were incurred for the purchase of equipment in the
amount of $428,640.

NOTE 11 - FRANCHISE

     The Company intends to sell Point of Presence territorial rights and
     equipment under franchising arrangements. These rights granted under the
     franchise will allow the franchise to exclusively market services provided
     by the Company throughout a particular geographic region.

NOTE 12 - RETIREMENT OF LONG-TERM DEBT AND NONMONETARY TRANSACTIONS

     On April 7, 1997 and August 3, 1997 respectively, the Board of Directors
     voted to exchange $242,000 of long term debt to a related party for POP
     (Point of Presence) deposits. The value of the April 7, 1997 deposits are
     at a fair market value and the August 3, 1997 deposits were issued at a
     discount as established by the Board of Directors.

NOTE 13 - FOREGIVENESS OF DEBT AND NONMONETARY TRANSACTIONS

     On April 7, 1997 and August 3, 1997 respectively, the Company reached an
     agreement with the related companies concerning outstanding debt. The
     related companies agreed to forgive debt in the following amounts which are
     listed as related party advances on the balance sheet at December 31, 1996.



                                       19




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997


NOTE 14 - COMBINED FINANCIAL STATEMENTS

     Included in the financial statements at December 31, 1997 is the following
     proforma balance sheet and income statement activity of Venture Quest, Inc,
     the former development stage company.




            Venture Quest, Inc.                               Venture Quest, Inc.
              Balance Sheet                                 Statement of Operations
            December 31, 1997                                    Year  Ended
            -------------------                               December 31, 1997
                                                            -----------------------

                                                                            
 Assets                                               Sales                     $    --
 ------
 Cash                                    $222
 Loan Receivable Officers               1,170         Bank Fees                      57
                                     -------- 
                                       $1,392         Professional Fees          (3,000)
                                     ========
                                                      Taxes                         976
                                                                               --------
 Liabilities and Shareholder's Equity
 ------------------------------------
 Loan Payable Officer                 $12,300         Net Income                 $1,967
                                                                               ========
 Loan Payable Affiliate                 2,000
                                     -------- 
                                       14,300         Retained Earnings
                                                       - Beginning              (44,483)
                                                                               --------
 Common Stock                           1,750
 Additional Paid In Capital            27,858         Retained Earnings
 Retained Earnings                    (42,516)         - Ending                ($42,516)
                                     --------                                  ========
                                     ($12,908)
                                     -------- 
                                       $1,392
                                     ======== 




                                       20




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

NOTE 15 - FRANCHISE DEPOSITS

     The Company has received certain deposits in the amount of $344,500 which
     is reflected as franchise deposit liabilities at December 31, 1997. Upon
     completion of the Uniform Franchise Offering Circular and the specific
     performance and obligations of the Company to install these franchise
     points-of-presence (POP) the Company will recognize such amounts as
     revenue.

NOTE 16 - REALIZATION OF ASSETS AND GOING CONCERN

     As shown in the accompanying financial statements, the Company incurred a
     net loss of $1,310,142 during the year ended December 31, 1997, and as of
     that date, the Company's current liabilities exceeded its current assets by
     $1,319,853 and its total liabilities exceeded its total assets by
     $1,036,621. These factors create an uncertainty as to the Company's ability
     to continue as a going concern. The Company has developed a plan to reduce
     its liabilities through the sale of assets (POP franchises) and/or a
     possible third party financing. The ability of the Company to continue as a
     going concern is dependent upon the success of the plan. The financial
     statements do not include any adjustments that might be necessary should
     the Company be unable to continue as a going concern.

NOTE 17 - COMMITMENTS

     On June 5, 1997 the Board of Directors agreed to issue 50,000 shares of
     common stock to the Company's internal legal council in exchange for
     services.

     On February 4, 1997 the Board of Directors agreed to issue 3,333 shares of
     common stock to the Company's franchise legal council in exchange for
     services.

     On December 11, 1997, the Company voted to issue the Company's Principal
     Executive Officer 500,000 shares under the Senior Stock Option Plan and a
     maximum compensation package of $125,000 annually inclusive of the stock
     options. In addition, this employment contract would require certain
     performance results.

NOTE 18 - SUBSEQUENT EVENTS

     Issuance of Convertible Subordinated Debentures.

     The Board of Directors voted on September 16, 1997 to issue and register
     with the securities and exchange commission under Regulation A, 300,000
     shares of 9% subordinated convertible debentures with a floating exercise
     price at a 20% discount to the average closing bid price 15 days prior to
     conversion and a five year maturity. Under the Securities Purchase
     Agreement dated May 6, 1998, the Company raised $300,000 by issuing these
     subordinated debentures and entered into an Intercreditor Agreement with
     the Note Holders.


                                       21




                                U.S. ONLINE, INC.
                     COMBINED NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

     Bankruptcy Filings (Chapter 11)

     On August 25, 1998 the Company filed a voluntary petition under Chapter 11
     of the United States Bankruptcy Code with the United states Bankruptcy
     Court for the District of New Jersey. At the time of the filing, the
     Company represented that the going concern of the business exceeded its
     liquidation value.

     Sale of Assets under Chapter 11

     On or about October 23, 1998, the Company and the United States Bankruptcy
     Court entered into an agreement with a competitor to sell substantially all
     of its corporate assets for $566,000, including $161,000 paid to satisfy
     certain executory contracts, eleven point of presence locations and all
     equipment located at the Mount Laurel headquarters of the Company.

     Litigation and Objections to Motions under Chapter 11 protection

     Certain motions of protest were filed against the Company and its
     principles for the sale of the Company's assets. In addition, an injunctive
     relief and compensatory and punitive damages attributable to breach of
     common law fiduciary duties as shareholders and other improper actions are
     being sought by certain Point of Presence owners.

     Bankruptcy Motion of Conversion from Chapter 11 to Chapter 7.

     On December 21, 1998, the United States Trustee motioned to convert the
     Chapter 11 petition to Chapter 7 liquidation proceedings. A United States
     Trustee was appointed to liquidate the affairs of the Company based on the
     debtors inability to: provide certain required documentation and schedules,
     to effectuate a plan of reorganization, to pay quarterly fees due to the
     United States Trustee and other supporting facts as stated in the December
     21,1998 Motion.


                                       22








                        COMBINED SUPPLEMENTAL INFORMATION





                                       23





                                U.S. ONLINE, INC.
                            SUPPLEMENTAL INFORMATION
                            COMBINED COST OF REVENUE
                          YEAR ENDED DECEMBER 31, 1997







Advertising                                                             $539,164
Agent's commissions                                                       33,691
Credit card settlement fees                                               18,154
Electrical expense                                                        15,184
Telecommunication charges                                                513,387
                                                                      ----------

                                                                      $1,119,580
                                                                      ==========


                                       24





                                U.S. ONLINE, INC
                            SUPPLEMENTAL INFORMATION
                           COMBINED OPERATING EXPENSES
                          YEAR ENDED DECEMBER 31, 1997


Salaries office                                                         $269,083
Payroll tax expense                                                       31,918
Bank charges                                                              15,734
Casual labor                                                              17,358
Charity                                                                    1,800
Computer supplies and software                                            13,837
Dues and subscriptions                                                     1,468
Entertainment                                                              5,818
Fuel and oil                                                               5,895
Insurance                                                                  4,855
Lease - telephone system                                                   3,972
Office expenses and printing                                              25,101
Postage                                                                   47,292
Professional fees                                                         41,444
Rent - office                                                             43,931
Rent - computer room                                                         589
Rental equipment                                                           7,344
Repairs and maintenance                                                    7,408
Security system lease                                                      4,258
Taxes Other                                                                2,193
Technical manuals                                                          2,421
Telephone                                                                126,423
Utilities                                                                 12,647
                                                                        --------

                                                                        $692,789
                                                                        ========



                                       25


                                U.S. ONLINE, INC.
                              FINANCIAL STATEMENTS
                                DECEMBER 31, 1996















                                U.S. ONLINE, INC.
                              FINANCIAL STATEMENTS
                          YEAR ENDED DECEMBER 31, 1996






CONTENTS                                                                  Page

   REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT                         1

   FINANCIAL STATEMENTS

                 BALANCE SHEET                                               2

                 STATEMENT OF OPERATIONS                                     3

                 STATEMENT OF CHANGES IN STOCKHOLDERS'EQUITY                 4

                 STATEMENT OF CASH FLOWS                                     5

                 NOTES TO FINANCIAL STATEMENTS                            6-12

   SUPPLEMENTARY INFORMATION

                 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT          13
                   ON SUPPLEMENTAL INFORMATION

                 COST OF REVENUE                                            14

                 OPERATING EXPENSES                                         15






                                 JOSEPH J.REPKO
                           Certified Public Accountant
                                453 N. STATE ROAD
                         SPRINGFIELD, PENNSYLVANIA 19064
                                 (610) 328-9551



               Report of Independent Certified Public Accountants


Board of Directors and Stockholders
U.S. Online, Inc.
Mt. Laurel,  New Jersey

     I have audited the accompanying balance sheet of U.S. Online, Inc. as of
December 31, 1996, and the related statements of operations, stockholders'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.

     I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.

     In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U.S. Online, Inc. as of
December 31, 1996, and the results of its operations, stockholders' equity and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.



JOSEPH J. REPKO, CPA


February 8, 1997



                                       -1-








                                U.S. ONLINE, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 1996

ASSETS

      CURRENT ASSETS
         Cash and cash equivalents                                    $ 459,336
         Accounts receivable:
           Franchise                                                     97,500
           Customers                                                      7,640
         Due from shareholders                                            4,800
                                                                      ---------
                     Total current assets                             $ 569,276

      FIXED ASSETS - AT COST                                            181,568
         Less accumulated depreciation and amortization                  35,719
                                                                      ---------
                                                                        145,849

      OTHER ASSETS                                                        5,188
                                                                      ---------

TOTAL ASSETS                                                          $ 720,313

LIABILITIES AND SHAREHOLDERS'EQUITY

      CURRENT LIABILITIES
         Advances from related parties                                $  94,416
         Current portion of capital lease obligations                    38,993
         Current portion of long term debt - related party               33,320
         Accounts payable and accrued expenses                          124,899
         Accrued interest - related party                                10,932
         Franchise deposits                                             157,000
                                                                      ---------

      Total current liabilities                                         459,560

      LONG TERM DEBT, net of current portion - related party            209,625

      CAPITAL LEASE OBLIGATIONS, net of current portion                  53,271
                                                                      ---------

                     Total Liabilities                                  722,456

      SHAREHOLDERS'EQUITY
         Additional paid in capital                                     449,400
         Common stock - authorized 10,000,000 shares par value
           $.001, issued and outstanding 6,400,000 shares                 6,400
         Accumulated deficit                                           (457,943)
                                                                      ---------
                     Total Shareholders' Equity                          (2,143)
                                                                      ---------

TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                             $ 720,313

        See accountant's audit report and notes to financial statements.


                                       -2-




                                U.S. ONLINE, INC.
                             STATEMENT OF OPERATIONS
                           YEAR ENDED DECEMBER 31, 1996


Operating revenue                                                   $   143,890

Cost of revenue                                                         161,823
                                                                    -----------

         Gross profit                                                   (17,933)

Operating expenses                                                      382,917
                                                                    -----------

         Operating loss (loss)                                         (400,850)

Other income (expense)
         Depreciation                                                   (35,719)
         Interest expense                                               (21,881)
         Interest income                                                    507
                                                                    -----------

NET LOSS                                                               (457,943)


Net loss per share of common stock                                  $     (.072)

Weighted average shares outstanding                                   6,400,000

        See accountant's audit report and notes to financial statements.


                                      -3-






                                U.S. ONLINE, INC.
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                          YEAR ENDED DECEMBER 31, 1996




                                                          Capital in                     Stock-
                                     Common Stock         Excess of       Accum'd       holders'
                                Shares         Amount     Par Value       Deficit        Equity  
                                ------         ------     ---------       -------        ------  

                                                                                
Balance, January 1, 1996         1,000    $     1,000                                 $     1,000
Adjustment for fifty-
eight hundred to one
stock split                  5,799,000    $     4,800                                       4,800

Issuance of common
stock to investors in
a Private Placement
in December 22, 1996           600,000    $       600     $   449,400                     450,000

Net loss for the year
Ended December 31, 1996                                                 ($  457,943)     (457,943)
                            -----------    -----------    -----------   -----------    -----------
Balance, December 31, 1996    6,400,000    $     6,400    $   449,400   ($  457,943)  ($    2,143)




See accountant's audit report and notes to financial statements.

                                       -4-






                                U.S. ONLINE, INC.
                             STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1996


                                                                         1996
                                                                         ----
   Cash flows from operating activities:
        Net loss                                                      ($457,943)
   Adjustments to reconcile net (loss) to net
    cash provided by operating activities:
        Depreciation and amortization                                    35,719
        Changes in assets and liabilities:
            Increase in accounts receivable                            (105,140)
            Increase in other assets                                     (5,188)
            Increase in accounts payable and accrued expenses           135,831
            Increase in deposits                                        157,000
                                                                      ---------

                     Net cash used in operating activities             (239,721)
                                                                      ---------

   Cash flows from investing activities 
        Additions to property and equipment                             (36,244)
        Loans to stockholder                                             (4,800)
                                                                      ---------

                     Net cash used in investing activities              (41,044)

   Cash flows from financing activities:
        Advances from related parties                                    94,416
        Issuance of common stock to related parties                       5,800
        Net related party loans                                         189,885
        Issuance of common stock in a private placement                 450,000
                                                                      ---------

                     Net cash provided by financing activities          740,101
                                                                      ---------

                     Net increase in cash                               459,336

Cash and cash equivalents - beginning                                        -- 
                                                                      ---------

   Cash and cash equivalents - ending                                  $459,336


        See accountant's audit report and notes to financial statements.
                                       -5-






                                U.S. ONLINE, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996

NOTE 1 - SUMMARY OF ACCOUNTING POLICIES

     Nature of Operations

     U.S. Online,Inc. "the Company", a Pennsylvania Corporation, is engaged in
     the business of providing computer internet access service and point of
     sale internet franchise sales to customers primarily in the Eastern Region
     of the United States.

     On October 17, 1996 the Company issued an aggregate of 5,800,000 shares of
     restricted common stock to its shareholders in a 5,800 to 1 stock split.

     During 1996, the Company offered to private investors through a private
     offering a total of 600,000 shares at an offering price of $.75 per share.
     The maximum offering would raise the company $450,000, the minimum would
     raise $300,000. At December 31, 1996, the Company obtained its maximum
     offering.

     Fixed Assets

     Fixed assets are stated at cost. Depreciation is provided for by the
     straight-line and accelerated methods over the estimated useful lives of
     the assets.

     Income Taxes

     The company elected to be taxed as a Subchapter "S" Corporation for both
     federal and state tax purposes. Accordingly, the company's results of
     operations are reflected in the shareholder's individual tax returns"
     therefore, no tax provision has been reflected in the accompanying
     financial statements. On December 22, 1996, the company terminated its
     Subchapter "S" election due to the addition of a corporate shareholder.

     The company filed a regular corporate return for the short period December
     22, to December 31, 1996. No provision for taxes has been reflected on the
     accompanying financial statement due to a net loss for the short period.

     Use of Estimates

     In preparing financial statements in conformity with generally accepted
     accounting principles, management makes estimates and assumptions that
     affect the reported amounts of assets and liabilities and disclosures of
     contingent assets and liabilities at the date of the financial statements,
     as well as the reported amounts of revenue and expenses during the
     reporting period. Actual results could differ from those estimates.


                                        6






                                U.S. ONLINE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996


NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Con't)

     Repairs and Maintenance

     Expenditures for repairs, maintenance, and minor renewals are charged
     against income as incurred and expenditures for major renewals and
     betterments are capitalized and amortized over five years. The cost and
     accumulated depreciation of assets sold or retired are removed from the
     respective accounts with any gain or loss on disposal reflected in income.

     Cash and Cash Equivalents

     The Company considers cash equivalents to be those short-term investments
     maturing within three months of the balance sheet date.

     Loss per Share

     The loss per share is based on the weighted average number of shares of
     common stock outstanding during the year. The effect of the stock split of
     5,800 to 1 has been considered in this calculation.

     Fair Value of Financial Instruments

     The note due from shareholders is based on the terms at which those same
     loans would be made currently and approximate their fair value. At December
     31, 1996, the carrying value of the assets were $720,313 which equates
     their fair value. The carrying value of the capital lease obligations was
     $92,264, the related party long-term note was $242,945, and the related
     party advances were $94,416 and are reflective of borrowing rates currently
     available to the Company.

NOTE 2 - CONCENTRATION OF CREDIT RISK

     The Company has a potential concentration of credit risk consisting
     primarily of temporary cash deposits and trade accounts receivable.
     Concentrations of credit with respect to trade receivables are limited due
     to the large number of customers comprising the Company's customer base and
     their dispersion across different geographic locations. At December 31,
     1996, the Company held $459,336 in one bank account which is in excess of
     the federal deposit insurance company limit of $100,000 creating a
     potential concentration of credit risk of $359,336.


                                        7





                                U.S. ONLINE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996


NOTE 3- FIXED ASSETS

     Major classifications of property and equipment are summarized below:

                                                               1996
                                                               ----
            
            Computer equipment and software                  $164,418
            Furniture and Fixtures                             15,715
            Leasehold improvements                              1,435
                                                             --------
            
                                                             $181,568
                                                             --------

     At December 31, 1996 the Company agreed to assume title of assets under
     capital leases previously leased by a related party. The equipment was
     physically in operation by the Company and payments were made by the
     Company directly to the third party lessors.

NOTE 4 - RELATED PARTY TRANSACTIONS

     Balance Sheet Items

     Notes Payable
     U.S. Online, Inc. has incurred a related party obligation to two companies
     for expenses paid on the Company's behalf. Such expenses included: payroll,
     advertising, rent and other operating expenses advanced since inception. As
     of December 31, 1996, the net advanced costs were $242,945. The note bears
     interest at 9% annually and is payable in monthly installments of $5,043
     beginning March 15, 1997. Interest on the related party debt was $10,932 at
     December 31, 1996.

     Annual maturities are as follows:

                          1997                          $ 33,320
                          1998                            43,413
                          1999                            47,486
                          2000                            51,940
                          2001                            56,812
                          2002                             9,974
                                                        --------
                                                        $242,945
                                                        --------


                                        8





                                U.S. ONLINE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996


     Advances

     Related parties had advanced expenses including payroll, advertising, rent,
     equipment and other expenses since inception. The amounts outstanding at
     December 31, 1996 was $94,416.

     Operating Sub-Lease

     The Company maintains a related party obligation on several non-cancelable
     operating sub-leases from a Company controlled by an executive officer of
     the Company and a principle shareholder. The master leases from which the
     sub-leases are derived from are guaranteed by the principles of the
     affiliated Company. The details of these related party leases are as
     follows:

     Facility rentals, monthly payments of $2,972, with certain operating
     expenses and amortized costs, expiring May 1998.

     Telephone system, monthly payments of $361, expiring March 1998. Security
     System, monthly payments of $355, expiring May 2000. Computer equipment,
     monthly payments of $979, on various leases expiring December 1999.

NOTE 5 - CAPITAL LEASE OBLIGATIONS

     The Company has purchased certain computer equipment and furniture under
     capital lease obligations expiring through 2001. Accordingly, SFAS 13
     requires that the asset be capitalized and depreciated and the related
     lease obligations be recorded at the present value of the future minimum
     lease payments and interest imputed. The lease obligations are secured by
     the corresponding assets, guaranteed by a related party Company and
     personal guarantees by the executive officers and a principal shareholder
     of the Company. Future minimum lease obligations at December 31, 1996 for
     capital lease obligations were as follows:


                                        9





                                U.S. ONLINE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996


                                                      Minimum      Gross
                                                      Monthly      Lease
                                                      Obligation   Obligations
                                                      ----------   -----------

  Capital lease obligation for modem pools,              $586      $32,831
   including interest of 12 5/8%
  Capital lease obligation for modem pools,               539       25,328
   including interest of 18 3/8%
  Capital lease obligation for computer network,          101        1,621
   including interest of 20 11/16%
  Capital lease obligation for computer server,           442       14,595
   including interest of 15 1/16%
  Capital lease obligation for computer web space,        491       13,261
   including interest of 18 9/16%
  Capital lease obligation for computer equipment,        414       11,187
   including interest of 23 7/16%
 Capital lease obligation for computer equipment,         259        6,737
   including interest of 86 1/8%
 Capital lease obligation for office furniture,           416       20,386
                                                     --------     --------
   including interest of 19 15/16%
 Future minimum lease payments                         $3,248     $125,946
                                                     --------     --------

Annual maturities are as follows:
                                                         1997      $38,993
                                                         1998       38,182
                                                         1999       25,709
                                                         2000       17,956
                                                         2001        5,106
                                                                  --------
                                                                  $125,946

Less amounts representing interest                                 (33,682)
                                                               
Present value of minimum lease payments                            $92,264
                                                               
Less current portion                                               (38,993)
                                                               
Capital lease obligation, net of current portion                   $53,271
                                                     
NOTE 6 - LEASES

     The Company maintains a related party obligation on several non-cancelable
     operating sub-leases from a Company controlled by an executive officer of
     the Company and a principle shareholder. The master leases from which the
     sub-leases are derived from are guaranteed by the principles of the
     affiliated Company. The details of these related party leases are as
     follows:

                                       10





                                U.S. ONLINE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996


     Facility rentals, monthly payments of $2,972, with certain operating
     expenses and amortized costs, expiring May 1998.

     Telephone system, monthly payments of $361, expiring March 1998. Security
     System, monthly payments of $355, expiring May 2000. Computer equipment,
     monthly payments of $979, on various leases expiring December 1999.

     Future minimum rentals under all non-cancelable operating leases are as
     follows:


                            Year Ending December 31,

                       1997                   $ 35,085
                       1998                     23,235
                       1999                     15,409
                       2000                      1,225
                                              --------
                                              $ 74,954

NOTE 7 - PROPOSED MERGER

     On December 2, 1996 the Company signed a letter of intent to merge with
     Venture Quest, Inc., a New York corporation. One share of the Company's
     common stock will be exchanged for one share of Venture Quest, Inc. common
     stock with Venture Quest, Inc. being the surviving corporation. The
     exchange is intended to qualify as a tax-free transaction under Section 351
     of the Internal Revenue Code.

NOTE 8 - NOTES PAYABLE

     Notes Payable

     U.S. Online, Inc. has incurred a related party obligation to two companies
     for expenses paid on the Company's behalf. Such expenses included: payroll,
     advertising, rent and other operating expenses advanced since inception. As
     of December 31, 1996, the net advanced costs were $242,945. The note bears
     interest at 9% annually and is payable in monthly installments of $5,043
     beginning March 15, 1997. Interest on the related party debt was $10,932 at
     December 31, 1996.


                                       11





                                U.S. ONLINE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996


NOTE 8 - NOTES PAYABLE (con't)

     Annual maturities are as follows-.

                            1997                    $33,320
                            1998                     43,413
                            1999                     47,486
                            2000                     51,940
                            2001                     56,812
                            2002                      9,974
                                                   --------
                                                   $242,945

NOTE 9 - NONMONETARY TRANSACTION

     Capital lease obligations were incurred for the purchase of equipment in
     the amount of $104,512.

     Related parties contributed equipment in the amount of $48,312 along with
     the payment of Company expenses in the amount of $346,390. The equipment
     has been recorded in the accompanying balance sheet at its fair market
     value on the date of the transfer.

NOTE 10 - FRANCHISE

     The Company intends to sell Point of Presence territorial rights and
     equipment under franchising arrangements. These rights granted under the
     franchise will allow the franchise to exclusively market services provided
     by the Company throughout a particular geographic region.


                                       12





                                 JOSEPH J. REPKO
                           Certified Public Accountant
                                453 N. STATE ROAD
                         SPRINGFIELD, PENNSYLVANIA 19064
                                 (610) 328-9551




 
              Report of Independent Certified Public Accountants 
                          On Supplementary Information








Officers and Directors
U.S Online, Inc.
Mount Laurel, NJ


     My audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole of U.S. Online, Inc. for the year ended
December 31, 1996, which is presented in the preceding section of this report.
The supplementary information presented hereinafter is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the audit of the basic financial statements and, in my opinion, is fairly
stated, in all material respects, in relation to the basic financial statements
taken as a whole.


JOSEPH J. REPKO, CPA


February 8, 1997



                                       13






                                U.S. ONLINE, INC.
                            SUPPLEMENTAL INFORMATION
                                 COST OF REVENUE
                           YEAR ENDED DECEMBER 31, 1996








Advertising                                                              $80,131
Agent's commissions                                                        7,986
Credit card settlement fees                                                6,279
Electrical expense                                                         4,390
Telecommunication charges                                                 63,037
                                                                        --------
                                                                        $161,823
                                                                        ========


              See accountant's report on supplemental information.

                                       14








                                U.S. ONLINE, INC.
                            SUPPLEMENTAL INFORMATION
                               OPERATING EXPENSES
                          YEAR ENDED DECEMBER 31, 1996




Salaries office                                                          $80,325
Payroll tax expense                                                        7,695
Automobile expenses                                                        1,126
Casual labor                                                              13,380
Charity                                                                      600
Computer supplies and software                                            40,409
Consulting                                                                20,000
Corporate taxes                                                              325
Dues and subscriptions                                                     4,485
Entertainment                                                              1,177
Fuel and oil                                                               1,071
Insurance                                                                  1,645
Lease - telephone system                                                   4,334
Office expenses                                                           30,221
Postage                                                                   32,112
Printing                                                                  12,790
Professional fees                                                         48,640
Rent - office                                                             35,674
Rent - computer room                                                         785
Rental equipment                                                          14,181
Repairs and maintenance                                                    1,741
Security system lease                                                      4,876
Technical manuals                                                            865
Telephone                                                                 16,946
Utilities                                                                  7,514
                                                                        --------

                                                                        $382,917
                                                                        ========



              See accountant's report on supplemental information.

                                       15








                                  Webspan, Inc.

                              Financial Statements

                      Year ended December 31, 1997 and 1996








                                  WEBSPAN, INC.
                              FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996



CONTENTS                                                                    Page

         REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT                    1

         FINANCIAL STATEMENTS

                  BALANCE SHEETS                                              2

                  STATEMENTS OF OPERATIONS                                    3

                  STATEMENT OF STOCKHOLDERS' DEFICIT                          4

                  STATEMENTS OF CASH FLOWS                                    5

                  NOTES TO FINANCIAL STATEMENTS                               6









                                  Webspan, Inc.
                                 Balance Sheets

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

                                                     December 31,   December 31,
                                                         1997           1996
                                                     -----------    -----------

ASSETS

Current:
   Cash and cash equivalents                         $    45,161    $    75,245
   Accounts receivable                                        --         57,428
   Prepaid expenses and other current assets              48,683        29,2100
                                                     -----------    -----------
       Total current assets                               93,844        161,883
                                                     -----------    -----------

Fixed:
   Equipment and Equipment Leases                        417,794        406,632
   Less: Accumulated Depreciation                       (213,680)       (81,326)
                                                     -----------    -----------
       Net fixed assets                                  204,114        325,306
                                                     -----------    -----------

   Other assets                                           11,875         41,084
                                                     -----------    -----------
TOTAL ASSETS                                         $   309,833    $   528,273
                                                     ===========    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current:
   Notes payable - current portion                   $   132,372    $    85,416
   Equipment lease payable - current portion              19,344         19,343
   Accounts payable and accrued expenses                 126,810        147,985
   Deferred income                                       751,561        408,898
                                                     -----------    -----------
       Total current liabilities                       1,030,087        661,642
                                                     -----------    -----------

Long Term:
   Notes payable - long term portion                          --         75,428

   Equipment leases payable - long term portion           10,193         29,537
   Deferred income                                        32,890            955
                                                     -----------    -----------
       Total long-term liabilities                        43,083        105,920
                                                     -----------    -----------

Officer Loans Payable                                    105,322        257,932
                                                     -----------    -----------
       Total liabilities                               1,178,492      1,025,494
                                                     -----------    -----------

Stockholders' Deficit:
Capital stock, no par value, 1,000,000 shares            300,000        300,000
   authorized and issued
Accumulated deficit                                   (1,168,659)      (797,221)
                                                     -----------    -----------
       Total stockholders' deficit                      (868,659)      (497,221)
                                                     -----------    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT          $   309,833    $   528,273
                                                     ===========    ===========

       See independent auditor's report and notes to financial statements

                                                                          Page 2







                              Webspan, Inc.
                        Statements of Operations

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

                                                         For the twelve months
                                                          ended December 31,
                                                     ---------------------------


                                                         1997           1996
                                                     -----------    -----------

Revenues                                             $ 1,265,470    $   643,017
Cost of revenues                                       1,356,493        698,388
                                                     -----------    -----------
   Gross Profit                                          (91,023)       (55,371)

Operating expenses:
   Selling, General and Administrative                   270,679        741,850
                                                     -----------    -----------
Loss from operations                                    (361,702)      (797,221)

Other Income(expense):
Interest expense                                           9,736             --
                                                     ===========    ===========
Net Loss                                             $  (371,438)   $  (797,221)
                                                     ===========    ===========

Loss per share of common stock                       $     (0.37)   $     (0.80)
                                                     ===========    ===========

Weighted average number of shares outstanding:         1,000,000      1,000,000
                                                     ===========    ===========


       See independent auditor's report and notes to financial statements



                                                                         Page 3





                                  WEBSPAN, INC.
                       STATEMENT OF STOCKHOLDERS' DEFICIT

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




     Twelve months ended December 31, 1997 and 1996
     -----------------------------------------------------------------------------------------------------------
                                                                                  Accumulated
                                                                Common Stock           Deficit            Total
     -----------------------------------------------------------------------------------------------------------
                                                                                                   
     Balance, January 1, 1996                                       $     --        $       --         $     --
     Issue 1,000,000 shares - Capital Stock, no par                  300,000                --          300,000
     Net Loss                                                             --          (797,221)        (797,221)
     -----------------------------------------------------------------------------------------------------------
     Balance, December 31, 1996                                      300,000          (797,221)        (497,221)
     Net Loss                                                             --          (371,438)        (371,438)
     ===========================================================================================================
     Balance, December 31, 1997                                      300,000        (1,168,659)        (868,659)
     ===========================================================================================================





       See independent auditor's report and notes to financial statements

                                                                          Page 4







                                    Webspan, Inc.
                              Statements of Cash Flows
                        Increase (Decrease) in Cash and Cash Equivalents

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

                                                              Twelve months
                                                            ended December 31,
                                                         -----------------------

                                                            1997         1996
                                                         ---------    ---------
Cash flow from operating activities:

Net Loss                                                 $(371,438)   $(797,221)
Adjustments to reconcile net loss to net cash used
by operating activities:
   Depreciation and amortization                           132,354       81,326
   Changes in assets and liabilities:
      Accounts receivable                                   57,428      (57,428)
      Prepaid expenses and other                           (19,473)     (29,210)
      Other assets                                          29,209      (41,084)
      Accounts payable and accrued expenses                (21,175)     147,985
      Deferred income                                      374,598      409,853
                                                         ---------    ---------
Net cash used by operating activities                      181,503     (285,779)

Cash flows from investing activities:
   Acquisition of equipment                                (11,162)    (406,632)
                                                         ---------    ---------
     Net cash used by operating activities                 (11,162)    (406,632)

Cash flows from financing activities:
   Proceeds from notes payable                                  --      160,844
   Proceeds from officer loans payable                          --      257,932
   Proceeds from equipment leases payable                       --       48,880
   Repayments of notes and officer notes payable          (181,082)          --
   Repayments of equipment leases payable                  (19,343)          --
   Proceeds from sale of capital stock                          --      300,000
                                                         ---------    ---------
     Net cash used by financing activities                (200,425)     767,656

                                                         ---------    ---------
Net increase in cash and cash equivalents:               $ (30,084)   $  75,245

Cash, beginning of period                                   75,245           --
                                                         =========    =========
Cash, end of period                                      $  45,161    $  75,245
                                                         =========    =========


            See independent auditor's report and notes to financial statements

                                                                          Page 5




                                  Webspan, Inc.

                          Notes to Financial Statements

                           December 31, 1997 and 1996


NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

     The Company is a corporation organized on January 5, 1996 under the laws of
the state of New Jersey for the purpose of serving as an internet web host.

NOTE 2 - EQUIPMENT AND DEPRECIATION

     Equipment is stated at cost and equipment leases are all capitalized.
Depreciation is computed over a period of five (5) years using the
double-declining balance method. All equipment is subject to an U. C. C.
security interest.

NOTE 3 - EQUIPMENT LEASE PAYABLE

     Equipment lease payable represents the balance of lease payments due on the
capitalized leases included in note 2.

NOTE 4 - NOTES PAYABLE/DEFERRED INTEREST

     Net server equipment in the amount of $112,425 was purchased from U. S.
Robotics. Note payments of $7,118 are to be made monthly for 24 months of which
$58,419 represents deferred interest. The equipment is subject to an U. C. C.
filing.

NOTE 5 - DEFERRED INCOME-REVENUE RECOGNITION

     Deferred income applies to prepaid customer subscriptions, which if
cancelled at the customer's discretion under each of the respective plans, would
be non-forfeitable. Consequently, income will be recognizable at the point that
payments are forfeitable.

NOTE 6 - SUBSEQUENT EVENTS

     On January 5, 1998 CPHP, a secured creditor of Webspan, Inc., enforced a
security interest against Webspan, Inc. due to its default of an agreement dated
December 10, 1995. The U. C. C. security interest was applicable to much of the
equipment, equipment leases and to the entire customer list. This effectively
terminated Webspan Inc.'s status as a going concern. CPHP subsequently
transferred all the acquired assets to Webspan Communications, Inc. subject to a
new U. C. C. interest on the equipment and customer list in exchange for its
stock.


                                                                          Page 6







We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This prospectus does
not offer to sell or buy any shares in any jurisdiction where it is unlawful.
The information in this prospectus is current only as of its date.

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

 
                               TABLE OF CONTENTS
                                                                            Page
                                                                            ----
Prospectus Summary .......................................................    2
Risk Factors .............................................................    5
Use of Proceeds ..........................................................   12
Dividend Policy ..........................................................   12
Capitalization ...........................................................   13
Management's Discussion and Analysis of Financial
  Condition and Results of Operations ....................................   14
Business .................................................................   18
Management ...............................................................   24
Principal Stockholders ...................................................   29
Certain Transactions .....................................................   30
Description of Capital Stock .............................................   31
Selling Stockholders .....................................................   34
Plan of Distribution .....................................................   35
Legal Matters ............................................................   37
Experts ..................................................................   37
Additional Information ...................................................   37
Index to Financial Statements ............................................   38

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


================================================================================


                                3,140,518 Shares



                            FRONTLINE COMMUNICATIONS
                                   CORPORATION


                                  Common Stock


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






                         _________________________, 1999


================================================================================







                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

SEC registration .........................................            $ 2,134.51

Printing and engraving costs .............................              2,000.00

Legal fees and expenses ..................................             25,000.00

Accounting fees and expenses .............................             15,000.00

Miscellaneous ............................................            $ 5,865.49
                                                                      ----------

        Total ............................................            $50,000.00
                                                                      ==========

- ----------
*    To be provided by amendment.

Item 14. Indemnification of Directors and Officers.

     Section 145 of the Delaware General Corporation Law (the "DGCL") contains
the provisions entitling the Registrant's directors and officers to
indemnification from judgments, fines, amounts paid in settlement, and
reasonable expenses (including attorney's fees) as the result of an action or
proceeding in which they may be involved by reason of having been a director or
officer of the Registrant. In its Certificate of Incorporation, the Registrant
has included a provision that limits, to the fullest extent now or hereafter
permitted by the DGCL, the personal liability of its directors to the Registrant
or its stockholders for monetary damages arising from a breach of their
fiduciary duties as directors. Under the DGCL as currently in effect, this
provision limits a director's liability except where such director (i) breaches
his duty of loyalty to the Registrant or its stockholders, (ii) fails to act in
good faith or engages in intentional misconduct or a knowing violation of law,
(iii) authorizes payment of an unlawful dividend or stock purchase or redemption
as provided in Section 174 of the DGCL, or (iv) obtains an improper personal
benefit. This provision does not prevent the Registrant or its stockholders from
seeking equitable remedies, such as injunctive relief or rescission. If
equitable remedies are found not to be available to stockholders in any
particular case, stockholders may not have any effective remedy against actions
taken by directors that constitute negligence or gross negligence.

     The Certificate of Incorporation also includes provisions to the effect
that (subject to certain exceptions) the Registrant shall, to the maximum extent
permitted from time to time under the law of the State of Delaware, indemnify,
and upon request shall advance expenses to, any director or officer to the
extent that such indemnification and advancement of expenses is permitted under
such law, as may from time to time be in effect. In addition, the By-Laws
require the Registrant to indemnify, to the full extent permitted by law, any
director, officer, employee or agent of the Registrant for acts which such
person reasonably believes are not in violation of the Registrant's corporate
purposes as set forth in the Certificate of Incorporation. At present, the DGCL
provides that, in order to be entitled to indemnification, an individual must
have acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the Registrant's best interests.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any charter provision, by-law, contract, arrangement,
statute or otherwise, the Registrant has been advised that in the opinion of the
Securities and

                                      II-1






Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable.

Item 15. Recent Sales of Unregistered Securities.

     During the past three years, the Company sold the following unregistered
securities:

     In February 1997, the Company issued an aggregate of 1,168,000 shares of
Common Stock for consideration of $.01 per share to the following persons: Nicko
Feinberg, Michael Char, Stephen J. Cole-Hatchard, Stephen Cole-Hatchard Family
Limited Partnership, Michael Olbermann, Vestrco, Inc., Nino Fontana, Michael
Garvey, Jeffrey Cohen, Edward Anderson, Peter Morris and Jay Edward & Partners,
Ltd.

     In February 1997, the Company issued options to purchase an aggregate of
165,600 shares of Common Stock (net of forfeitures) to: Michael Garvey, Jeffrey
Cohen, Sharon Baker, Ron Signore, Chris Ann Stolecki and Jennifer Brodil.
Options issued to Ms. Baker and Mr. Signore were issued in consideration of
consulting services.

     In May 1997, the Company issued an aggregate of 160,000 shares of Common
Stock for consideration of $2.00 per share to the following persons: Allen
Markowitz, William A. Barron, The Rough Group, Robert E. Sullivan and Virginia
M. Sullivan, Richard Baker, William E. Stolecki and James W. Stolecki, Doris
Cole- Hatchard, Patrick Keenan, Douglas J. Cole-Hatchard Jr., James P. Quinn and
Deborah A. Quinn, William J. Collins, Lewis L. Prince, Michael J. Dooling,
Maureen T. Donoghue, Geraldine Garvey, Edwin Kahn and Wilma R. Kahn, Bruce G.
Tracy, Elizabeth M. Dooling, FKF Holding Company, L.P.

     In December 1997, the Company issued 100,000 shares of Common Stock and
options to purchase 80,000 shares to Ronald Shapss. The securities issued to Mr.
Shapss were issued in consideration of consulting services. In addition, 300,000
warrants were issued to Edward Anderson (40,000), Doris Cole-Hatchard (64,000)
and The Rough Group (196,000) in connection with a private placement.

     In October 1998, we issued 10 shares of series A convertible preferred
stock to the stockholders of WOWFactor, Inc. in connection with our acquisition
of all of the outstanding common stock of WOWFactor, Inc. The series A preferred
stock is convertible on July 15, 1999 into a maximum of 250,000 shares of our
common stock.

     In December 1998, we issued 113,364 shares of our common stock to the
stockholders of Webspan, Inc. in connection with our acquisition of
substantially all of the assets of Webspan, Inc.

     In March 1999, we issued 158,856 shares of our common stock and warrants to
purchase 21,662 shares of our common stock to two investors in a private
transaction for aggregate consideration of $2,000,000.

     Each of the above investors had full access to information relating to the
Company and represented to the Company that he or she had the required
investment intent. Each of the above investors was sophisticated in that he or
she had such knowledge and experience in financial and business matters that he
or she is capable of evaluating the merits and risks of the investment. In
addition, the above-referenced securities will bear appropriate restrictive
legends, and stop transfer orders will be placed against such securities.

     In connection with the above referenced issuances, the Company relied on
Section 4(2) under the Securities Act of 1933 as transactions by an issuer not
involving any public offering.


                                      II-2






Item 16.  Exhibits

3.1       Certificate of Incorporation of the Company.+

3.2       By-Laws of the Company.+

4.1       Certificate of Designation of Series A Preferred Stock.++

5.1       Opinion of Tenzer Greenblatt LLP as to the legality of the securities 
          being registered.*

10.1      Employment Agreements with Messrs. Cole-Hatchard, Feinberg and
          Olbermann.+

10.2      Employment Agreement with Ms. Margaret McGillin.++

10.3      Stock Purchase Agreement dated as of October 1, 1998 by and among the
          Company, WOWFactor, Inc. and the WOWFactor stockholders.++

10.4      Form of Registration Rights Agreement among the Company and the
          WOWFactor stockholders.++

10.5      Asset Purchase Agreement dated as of October 9, 1998 by and between
          the Company and Roxy Systems, Inc. d/b/a Magic Carpet.++

10.6      Letter Offer to Purchase Substantially all of the Assets of US Online,
          Inc.+++

10.7      Asset Purchase Agreement dated as of November 24, 1998 by and among
          the Company, Webspan, and the sole stockholder of Webspan.++++

10.8      Amendment to Asset Purchase Agreement dated December 17, 1998 by and
          among the Company, Webspan, and the sole stockholder of Webspan.++++

10.9      Form of Registration Rights Agreement among the Company and the sole
          stockholder of Webspan.++++

10.10     1997 Stock Option Plan of the Company.+

10.11     Stock Purchase Agreement dated March 25, 1999, with Exhibit A+++++

10.12     Registration Rights Agreement dated March 25, 1999, with Exhibit
          A+++++

23.1      Subsidiaries

23.2      Consent of BDO Seidman, LLP

23.3      Consent of Joseph J. Repko, CPA

23.4      Consent of Steven H. Mermelstein, CPA

- ------------
*         To be filed by amendment.

+         Incorporated by reference to the applicable exhibit contained in the
          Company's Registration Statement on Form SB-2 (file no. 333-34115).


                                      II-3






++        Incorporated by reference to the applicable exhibit contained in the
          Company's Current Report on Form 8-K dated October 9, 1998.

+++       Incorporated by reference to the applicable exhibit contained in the
          Company's Current Report on Form 8-K dated October 23, 1998.

++++      Incorporated by reference to the applicable exhibit contained in the
          Company's Current Report on Form 8-K dated December 17, 1998.

+++++     Incorporated by reference to the applicable exhibit contained in the
          Company's Annual Report on Form 10-KSB for the year ended December 31,
          1998.

Item 17. Undertakings.

The undersigned registrant hereby undertakes:

     (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

          (i) To include any prospectus required by Section 10(a)(3) of the
     Securities Act; and

          (ii) To reflect in the prospectus any facts or events arising after
     the effective date of the registration statement (or the most recent
     post-effective amendment thereof) which, individually or in the aggregate,
     represent a fundamental change in the information set forth in the
     registration statement. Notwithstanding the foregoing, any increase or
     decrease in volume of securities offered (if the total dollar value of
     securities offered would not exceed that which was registered) and any
     deviation from the low or high and of the estimated maximum offering range
     may be reflected in the form of prospectus filed with the Commission
     pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
     price represent no more than 20 percent change in the maximum aggregate
     offering price set forth in the "Calculation of Registration Fee" table in
     the effective registration statement; and

          (iii) To include any material information with respect to the plan of
     distribution not previously disclosed in the registration statement or any
     material change to such information in the registration statement;

provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 and Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement.

     (2) That, for purposes of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

     (3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

     (4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration

                                      II-4






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.

     (5) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the commission 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 Securities Act and will be governed by the final
adjudication of such issue.


                                      II-5






                                   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, in the City of Pearl River, State of New York, on April 28, 1999.

                              FRONTLINE COMMUNICATIONS CORPORATION

                               By: /s/ Stephen J. Cole-Hatchard
                                   ---------------------------------------------
                               Stephen J. Cole-Hatchard, Chief Executive Officer

     Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Stephen J. Cole-Hatchard, as his true and lawful
attorney-in-fact and agent, with full power of substitution for him and in his
name, place and stead, in any and all capacities (until revoked in writing) to
sign any and all amendments (including post-effective amendments and amendments
thereto) to this Registration Statement on Form SB-2 of Frontline Communications
Corporation and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:




Signature                                   Title                                           Date
- ---------                                   -----                                           ----

                                                                                      
                                      Chief Executive Officer, President and                April 28, 1999
/s/ Stephen J. Cole-Hatchard          Director (Principal Executive Officer)
Stephen J. Cole-Hatchard

                                      Chief Information Officer, Executive Vice             April 28, 1999
/s/ Nicko Feinberg                    President of Technology and Director
Nicko Feinberg

                                      Chief Operating Officer, Executive Vice               April 28, 1999
/s/ Michael Olbermann                 President and Director
Michael Olbermann

                                      Chief Financial Officer and Executive Vice            April 28, 1999
/s/ Vasan Thatham                     President (Principal Accounting Officer)
Vasan Thatham

                                      Executive Vice President, Secretary and               April 28, 1999
/s/ Amy Wagner-Mele                   General Counsel
Amy Wagner-Mele

                                      Executive Vice President of Sales,                    April 28, 1999
/s/ Margaret McGillin                 Marketing and Business Development
Margaret McGillin

                                      Director                                              April 28, 1999
/s/ Ronald Signore
Ronald Signore

                                      Director                                              April 28, 1999
/s/ Ronald Shapss
Ronald Shapss




                                      II-6







                                  EXHIBIT 21.1


                           Subsidiaries of the Company





Name                                             Ownership                                        Jurisdiction of Incorporation
- ----                                             ---------                                        -----------------------------
                                                                                            
CLEC Communications Corporation                  wholly-owned                                     Delaware

Frontline Commerce Corporation                   wholly-owned                                     Delaware

WOWFactor, Inc.                                  wholly-owned                                     New Jersey









                                  EXHIBIT 23.2


                             CONSENT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS


We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of our report dated March 12, 1999, except
for Note 13 which is as of March 26, 1999, relating to the consolidated
financial statements of Frontline Communications Corporation as of December 31,
1998 and for the two years then ended as well as our report dated December 18,
1998 relating to the financial statements of WOWFactor, Inc. as of December 31,
1997 and for the two years then ended and our report dated December 22, 1998
relating to the financial statements of Roxy Systems, Inc., as of December 31,
1997 and for the year then ended.

We also consent to the reference to us under the caption "Experts" in the
prospectus.

/s/ BDO Seidman, LLP

BDO SEIDMAN, LLP

New York, New York
April 30, 1999







                                 JOSEPH J. REPKO
                           Certified Public Accountant
                                453 N. State Road
                              Springfield, PA 19064



                             CONSENT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS


I hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of my report dated February 8, 1997,
relating to the financial statements of U.S. Online, Inc. as of December 31,
1996 and for the one year then ended and my report dated January 6, 1999
relating to the financial statements of U.S. Online, Inc. as of December 31,
1997 and for the one year then ended.



                                                  /s/ Joseph J. Repko CPA
                                                     -----------------------
                                                  Joseph J. Repko, CPA


April 28, 1999







                              STEVEN H. MERMELSTEIN
                           Certified Public Accountant
                                  2523 Avenue P
                               Brooklyn, NY 11229




                             CONSENT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS


I hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form SB-2 of my report dated February 8, 1999,
relating to the consolidated financial statements of Webspan, Inc. as of
December 31, 1996 and 1997 and for the two years then ended.

I also consent to the reference to me under the caption "Experts" in the
prospectus.


                                                      /s/ Steven H. Mermelstein
                                                      -------------------------
                                                      Steven H. Mermelstein, CPA





Brooklyn, New York
April 30, 1999