SPEEDUS COM INC, 10-K, 2000-03-30

SPEEDUS COM INC
10-K, 2000-03-30
CABLE & OTHER PAY TELEVISION SERVICES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999 Commission File No. 000-27582

SPEEDUS.COM, Inc.
(Exact name of Registrant as specified in its charter)

Delaware 13-3853788
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

140 58th Street, Suite 7E, Brooklyn, NY 11220
(Address of Principal Executive Offices)
(718) 567-4300
(Registrant's telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act: Common Stock, par
value $.01 per share

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|

The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant was $140,500,000 on March 24, 2000, based on
the closing trade price of the Common Stock on the NASDAQ National Market system
on that date.

The number of shares of Common Stock outstanding as of March 24, 2000 was
20,004,838.

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

DOCUMENTS INCORPORATED BY REFERENCE

Sections of the Registrant's Definitive Proxy Statement (as defined in Part III
herein) for its Annual Meeting of Stockholders scheduled to be held in May 2000.

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SPEEDUS.COM, Inc.

TABLE OF CONTENTS

PART I

Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders

PART II

Item 5 Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6 Selected Consolidated Financial Data
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8 Consolidated Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

PART III

Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management
Item 13 Certain Relationships and Related Transactions

PART IV

Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K

This Form 10-K contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). These statements appear in a number of
places in this Form 10-K and include statements regarding the intent, belief or
current expectations of the Company or its officers with respect to, among other
things, the ability of the Company to make capital expenditures, the ability to
incur additional debt, as necessary, to service and repay such debt, if any, as
well as other factors that may effect the Company's financial condition or
results of operations. Forward-looking statements may include, but are not
limited to, projections of revenues, income or losses, capital expenditures,
plans for future operations, financing needs or plans, compliance with covenants
in loan agreements, plans for liquidation or sale of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events, and the ability to obtain additional financing,
including the Company's ability to meet obligations as they become due, and
other pending and possible litigation, as well as assumptions relating to the
foregoing. All statements in this Form 10-K regarding industry prospects and the
Company's financial position are forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct. The
Company undertakes no obligation to publicly release the result of any revisions
to these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

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PART I

ITEM 1. BUSINESS

The Company

We are an emerging facilities-based wireless broadband super high-speed
Internet company.

We have launched a SPEED411sm Portal (located at www.speedus.com) to
promote broadband high-speed Internet access on a nationwide basis. Recognizing
the increasing demand from Internet users for faster access to information, our
portal is designed to provide users with information on how to get high-speed
access and how to take advantage of offerings available to high-speed users.

Currently, we are conducting a limited pilot program of our SPEED(SM)
broadband super high-speed Internet service. SPEED(SM) is delivered via 14
Internet Broadcast Stations operating under the Company's FCC license covering
Metro New York. Our Internet broadcast signal is currently not available at all
locations in our license area. A full marketing effort will not commence until
new LMDS equipment becomes commercially available with cost and performance that
allow implementation of SPEED(SM) service on an economically attractive basis.
In areas where our signal is available, we believe that we offer both small
business and residential customers the lowest-cost, highest downstream speed
Internet access solution available.

In September 1999, we announced our equity investment in SPEEDIA, LLC, a
mobile web to wireless information and e-commerce service company. We also
explore additional incubation opportunities in Internet and e-commerce
companies. Our Network Operations Center ("NOC") is a high-tech facility which
can host new, cost-conscious Internet startups that need Internet backbone
connectivity and quick ramp-up capabilities.

SPEED(SM) Portal

The SPEED(SM) portal is designed to promote broadband high-speed Internet
access on a nationwide basis. Recognizing the increasing demand from Internet
users for faster access to information to help them "live their lives in the
fast lane", the Company's portal is designed to provide users with information
on how to get high-speed access and how to take advantage of offerings available
to high-speed users.

For the convenience of users, the portal also provides broadband bulletin
boards, Internet and technology news, business news, real-time stock quotes and
a real-time stock portfolio, weather, free e-mail and Web to wireless e-mail
messaging service and other popular topics, and will allow users to customize
their version of the portal. The Company has entered into license agreements
with popular content providers such as money.net LLC, a financial community
which provides real time stock portfolio tracking features, TUCOWS, Los Angeles
Times Syndicate, National Weather Services and WAVO Corporation, which delivers
real-time feeds from various well-known content providers.

Since the recent initial launch of the portal, the most popular pages
visited have been the SPEEDCHECKsm meter and the SPEED411sm directory. Users get
an accurate measurement of their Internet access speed and can receive
information on all High-Speed Broadband service providers in their geographic
area by entering their phone numbers and addresses and get a variety of
information on high-speed providers in their area. In addition, SPEEDGADGETsm, a
desktop application which enables users to clock their Internet speed at any
time without having a Web browser open, also scrolls such timely broadband
features as Internet News and alerts users to broadband specials for DSL, cable
modem or wireless broadband.

In addition to promoting high-speed access for users, as well as
SPEEDUS.COM name recognition, the Company will generate revenues from Web site
advertising and possible e-commerce transactions.

SPEED(SM) Broadband Super High-Speed Internet Service

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Currently, we are conducting a limited pilot program of our SPEED(SM)
service. We operate the pilot program in the Metro New York area, a concentrated
population center in which the Company believes there is substantial unmet
demand for high-speed Internet service within the residential and small business
market. SPEED(SM) is delivered via 14 Internet Broadcast Stations operating
under the Company's FCC license covering Metro New York. Our Internet broadcast
signal is currently not available at all locations in our license area. A full
marketing effort will not commence until new LMDS equipment becomes commercially
available with cost and performance that allow implementation of SPEED(SM)
service on an economically attractive basis.

Incubation of Internet and E-commerce Companies

Intellectual Property

In February 2000, BroadBand Patents, LLC, ("BroadBand Patents"), a new
wholly-owned subsidiary established to develop and market our broadband wireless
technology, purchased certain intellectual property from GEC Partners, LLP
("GEC") pertaining to wireless transmissions including U. S. Patent 5,594,937
titled "System for the transmission and reception of directional radio signals
utilizing a gigahertz implosion concept." GEC's predecessor company, GHz
Equipment Company, Inc., developed the nation's first 38 GHz broadband wireless
system in joint venture with Pacific Telesis using the patented technology.
BroadBand Patents has also entered into an alliance agreement with Cornerstone
Wireless Communications, LLC ("Cornerstone") to assist in the development and
marketing of its wireless technology. Cornerstone is a Tempe, Arizona based RF
engineering and FCC regulatory consulting firm with extensive experience in the
design of broadband wireless systems and equipment. We have the rights to all
complementary wireless technology developed in the future whether it is
developed jointly, under the Cornerstone alliance, or separately by GEC and its
personnel.

BroadBand Patents has also acquired 20% of CellularVision Technology &
Telecommunications, L. P. ("CT&T") and certain other rights from a U.S.
subsidiary of Philips Electronics, N. V. ("Philips"). CT&T, which was formed by
Shant S. Hovnanian, our Chairman of the Board, President and Chief Executive
Officer, Vahak S. Hovnanian, a director of the Company, and Bernard B. Bossard,
a former director and officer of our Company, (collectively, the "Founders") and
Philips, is a holder of a portfolio of fundamental broadband wireless patents
and licenses. This intellectual property includes U.S. Patent 5,983,078 titled
"Channel spacing for distortion reduction," U.S. Patent 5,668,610 titled "LMDS
transmitter array with polarization-diversity sub-cells," U.S. Patent 5,949,793
titled "Transmission of digital and analog signals in the same band" and U.S.
Patent 4,747,160 titled "Low power multi-function cellular television system".
We have operated our super high-speed Internet broadband wireless network under
a technology license from CT&T.

The acquisition of Philips' interest in CT&T was part of a settlement of
litigation commenced by M/A-COM, a unit of Tyco International Ltd. Our portion
of the settlement was $2.4 million which we have expensed for the year ended
December 31, 1999. The Founders have agreed in principle to contribute their 80%
interest in CT&T to us as part of the settlement agreement.

Sales and Marketing

We are presently offering on a limited pilot program basis our super
high-speed Internet access service to small business and residential subscribers
in Manhattan, Brooklyn and Queens. Our Internet broadcast signal is currently
not available at all locations in our license area. A full marketing effort will
not commence until new LMDS equipment becomes commercially available with cost
and performance that allow implementation of SPEED(SM) service on an
economically attractive basis.

We have signed the legendary actor Dennis Hopper for a promotional
campaign for the SPEED(SM) portal.

FCC License

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license was renewed as a standard LMDS license through February 1, 2006. The
license provides that the spectrum may be used for a wide variety of fixed
wireless purposes, including wireless local loop telephony, high-speed Internet
access and two-way teleconferencing. The license covers 1,150 MHz of spectrum in
the 28 GHz range encompassing the New York Primary Metropolitan Statistical
Area, a region which includes the five boroughs of New York City as well as the
New York Counties of Westchester, Rockland, and Putnam. Under FCC authorization,
the license includes an additional 150 MHz of spectrum until the first Ka band
satellite is launched, an event which is not expected to occur prior to 2002.

Risk Factors

Competition

The market for Internet products and services overall is highly
competitive and lacks significant barriers to entry, enabling new businesses to
enter this market relatively easily. Competition in the market for Internet
products and services may intensify in the future. Numerous well-established
companies and smaller entrepreneurial companies are focusing significant
resources on developing and marketing services that will compete with our
services. In addition, many of our current and potential competitors have
greater financial, technical, operational and marketing resources. We may not be
able to compete successfully against these competitors in selling our services.
Competitive pressures may also force prices for our Internet services down and
such price reductions may affect our revenues.

Adapting our existing architecture to accommodate increased traffic and
technology advances

In the future, we may be required to make significant changes to our
architecture, including moving to a completely new architecture, in order to
accommodate growth. If we are required to switch architectures, we may incur
substantial costs and experience delays or interruptions in our service. If we
experience delays or interruptions in our service due to inadequacies in our
current architecture or as a result of a change in architectures, users may
become dissatisfied with our service and move to competing services. These
changes are likely to be expensive and complex and require additional technical
expertise. Also, as we acquire users who rely upon us for a wide variety of
services, it becomes more technologically complex and costly to retrieve, store
and integrate data that will enable us to track each users' preferences. Any
loss of traffic, increased costs, inefficiencies or failures to adapt to new
technologies and the associated adjustments to our architecture would have a
material adverse effect on our business.

Reliance upon the supply of critical elements, including content, from third
parties

We will depend to a substantial extent upon third parties for several
critical elements of our SPEED(SM) Portal including various technology,
infrastructure and content development.

We rely on a private third party provider for our principal Internet
connections. Any disruption in the Internet access provided by this third party
provider or any failure of this third-party provider to handle current or higher
volumes of use could have a material adverse effect on our business, operating
results, and financial condition. We license technology and related databases
from third parties for certain elements of our properties, including, among
others, technology underlying the delivery of news, stock quotes and current
financial information and similar services. Our ability to maintain and build
relationships with third-party content providers will be critical to our
success. We may be unable to enter into or preserve relationships with the third
parties whose content we seek to obtain. In addition, we have experienced and
expect to continue to experience interruptions and delays in service and
availability for such elements. Any errors, failures, interruptions, or delays
experienced in connection with these third party technologies and information
services could negatively impact our relationship with users and adversely
affect our brand and our business, and could expose us to liabilities to third
parties.

Internet advertising may not be an effective means of advertising in the future

We expect that a portion of our revenues will come from advertisements
displayed on our SPEED(SM) Portal. Our ability to generate substantial
advertising revenue will depend upon the size and growth of our user base, the
user base being attractive to advertisers and the continued acceptance by
advertisers of the Web as an advertising medium.

If we are unsuccessful in adapting to the needs of our advertisers, it
could have a material adverse effect on our business, operating results and
financial condition.

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Risk of acceptance; no direct billing relationship with users

Our SPEED(SM) Portal will link users with a network of e-commerce
companies, including retailers. However, we do not establish a direct billing
relationship with our users as a result of any purchases they may make. The
revenue that we will generate from our e-commerce services will be a commission
paid by the retailer. The user may contact that retailer directly in the future
rather than through our SPEED(SM) Portal. If users bypass our Portal and contact
retailers directly, we will not receive any revenue for purchases made through
that contact.

New system architecture for SPEED(SM) super high-speed Internet service

Our system utilizes a new technology that has a limited operating history
and that remains subject to further development and refinement. We have
encountered a number of technical problems in the installation of equipment at
the subscriber sites, which require us to develop new and often difficult
solutions to these problems. We cannot assure you that we can continue to
resolve these technical problems and the failure to develop solutions to these
problems could adversely affect the availability of our service to certain
potential subscribers. Furthermore, the addition of simultaneous two-way
communications, which would eliminate the need for subscribers to use their
local telephone lines to send information on the Internet, will require the
development and mass production of appropriate equipment. We cannot assure you
that such equipment will become commercially available at a cost acceptable to
the Company.

Internet broadcast signal not currently available at all locations in license
area

We currently have fourteen Internet Broadcast Stations servicing only a
small portion of our licensed territory. As is customary in wireless service,
our Internet broadcast signal is currently not available at all locations in our
license area. A full marketing effort will not commence until new LMDS equipment
becomes commercially available with cost and performance that allow
implementation of SPEED(SM) service on an economically attractive basis. We
cannot assure you that such equipment will become commercially available at a
cost acceptable to the Company.

Competitors with broader market coverage offering high-speed Internet access

The market for Internet access and related services is highly competitive.
We expect to encounter competition for our super high-speed Internet access
service from local, regional and national Internet service providers, often
referred to as ISPs. These include large companies like @Home, America On-Line
and ATT World Net. Among the competitors are the telephone companies with
Digital Subscriber Line, or DSL, technology, which increases the effective
capacity of existing copper telephone cables, and cable operators with
high-speed cable modems are among the other communications companies also
providing high-speed Internet access. The competing ISPs using DSL or cable
modems do not currently have the ability to provide the same downstream speed as
our SPEED(SM) service and are not providing high-speed Internet service at
pricing competitive with ours. Many of the competing ISPs have, or can be
expected to have, greater financial, marketing and other resources than us. No
assurance can be given that we will be able to compete successfully with these
entities.

Other LMDS licensees in the metropolitan New York area

The heart of our Internet broadcast system is our LMDS license from the
FCC, which covers New York City and the surrounding area where 8.6 million
people live or work. In November 1998 and October 1999, we assigned portions of
our LMDS license to WinStar and NEXTLINK, respectively. Although neither company
is currently providing LMDS services that compete with our high-speed Internet
access service, there can be no assurance that they will not offer competing
LMDS services in the future.

Customer loyalty

The success of our business strategy will depend upon consumer acceptance
of our Super High-Speed Internet access service. Subscriber acceptance could be
adversely affected by, among other things, customer loyalty to more established
competitors and unfamiliarity with our Company and its system. In addition, we
cannot assure you that technical problems will not impede or delay subscriber
acceptance of our service.

Sole-source suppliers

We have obtained Internet Broadcast Station components and customer
premises equipment either from sole-source third party suppliers or from CT&T,
which purchased them from third party sole-source suppliers. We are now working
directly with vendors. If we are unable to obtain a sufficient supply of
components from these sources, it is likely that we would experience a delay in
developing alternative sources. Inability to obtain adequate

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supplies of equipment could result in a delay in providing service to new
subscribers, which would adversely affect our operating results and could damage
future marketing efforts. In addition, a significant increase in the price of
the requisite equipment would adversely affect our financial condition and
operating results. Further, if any of the equipment fails or fails to be
supported by its vendors, it could be necessary for us to redesign substantial
portions of the equipment. Any of these events could have a material adverse
effect on our financial condition and operating results.

Patents or intellectual property rights

Through our wholly-owned subsidiary, BroadBand Patents, LLP, we have title
or access to patents and intellectual property rights necessary for our
business. However, given the rapid development of technology in the
telecommunications industry, there can be no assurance that certain aspects of
our system will not infringe on the proprietary rights of others. We believe
that if such infringement were to exist based on the establishment of current or
future proprietary rights of others, we could obtain requisite licenses or
rights to use such technology. However, we cannot assure you that these licenses
or rights could be obtained on terms which would not have a material adverse
effect on our financial condition and operating results.

Ability to successfully identify Internet and e-commerce companies to incubate

We will face substantial competition in incubating and acquiring Internet
and e-commerce companies from, among others, venture capital firms, large
corporate investors and other publicly-traded Internet companies. These
competitors may limit our opportunity to acquire interests in new partner
companies. In addition, we may be unable to acquire interests in emerging
companies for other reasons, including the inability to agree on terms, such as
price and ownership percentages, incompatibility between us and management and
access to sufficient funding. Our growth will be materially adversely affected
if we cannot successfully identify investments in a sufficient number of
emerging growth companies.

The value of our business may fluctuate because of companies that we invest in

The value of our business may fluctuate because of companies that we
invest in. We have a 45% equity interest in SPEEDIA, LLC, a mobile Web to
wireless information and e-commerce service company, and are continuing to
explore additional incubation opportunities in Internet and e-commerce
companies. These companies, similar to SPEEDIA, LLC, will likely be development
stage entities for which no public market exists for their stock. SPEEDIA, LLC
is in the early stage of developing and marketing its services and there can be
no assurance how successful they will be.

While we are a co-manager of SPEEDIA, LLC and, as such, have a degree of
control over their activities, there can be no assurance that we will be able to
exercise any control over other companies that we may invest in. The valuations
of our investments in SPEEDIA, LLC and other privately-held companies that we
may invest in are indeterminate prior to their public offerings, and there can
be no assurance that these offerings will occur since they will be dependent
upon the development of these businesses, market conditions and other conditions
over which we have no control.

Capital and management resources

There will be a number of special issues that we will have to address in
the incubation of start-up companies, including: the diversion of management
attention in connection with both negotiating and overseeing these transactions;
the potential issuance of additional shares of our Common Stock in connection
with these transactions, which could dilute the rights of existing shareholders,
and the need to incur additional debt in connection with these transactions. In
addition, many, if not all, of these start-up companies will face the same, or
similar, risks as we face in our own business.

Natural disaster or other catastrophic event

Our operations are susceptible to outages due to fire, floods, power loss,
telecommunications failures, break-ins and similar events. We do not have
multiple site capacity for our services in the event of any such occurrence.
Despite our implementation of network security measures, our servers are
vulnerable to computer viruses, break-ins, and similar disruptions from
unauthorized tampering with our systems. We do not carry sufficient business
interruption insurance to compensate us for losses that may occur as a result of
any of these events. Any such event could have a material adverse effect on our
business, operating results, and financial condition.

Use of the Internet

Our success will depend greatly on increased use of the Internet for
advertising, marketing, providing services, and conducting business. Commercial
use of the Internet is currently at an early stage of development and the future
of the Internet is not clear. In addition, it is not clear how effective
advertising on the Internet is in generating business as compared to more
traditional types of advertising such as print, television and radio. Our
business will suffer if commercial use of the Internet fails to grow in the
future.

Early growth stage; limited operations to date

Since the discontinuance of our subscription television services, our
operations in other areas have been limited. We have only had an initial launch
of our Portal, are conducting a limited pilot program for our super high-speed
Internet service and have only invested in one Internet start-up company. Our
most recent historical financial information reflects this limited activity and
our early growth stage of development. Prospective investors should be aware of
the difficulties encountered by enterprises in their early growth stage, like
us, especially in view of the highly competitive nature of the
telecommunications industry.

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Lack of profitable operations

We have recorded operating losses and negative operating cash flows in
each reporting period since inception and, at December 31, 1999, had an
accumulated deficit of approximately $ 26.3 million. These losses and negative
operating cash flows are attributable to the start-up costs and expenses
incurred in connection with the commercial roll-out of our now-discontinued
subscription television system, and expenses incurred in connection with the
LMDS rulemaking proceeding. We believe that consummation of the spectrum
assignments in 1998 and 1999, as well as the sale of 2,000,000 shares of our
Common Stock to NEXTLINK for $20 million in July 1999, have provided sufficient
liquidity for us to finance our current level of operations. However, we do not
expect to have a positive operating cash flow until such time as we
substantially increase our Internet customer base, and/or form a strategic
alliance for use of our Internet capabilities or invest in a successful
incubation opportunity in the future. We cannot assure you that we will be able
to grow our Portal or increase the number of super high-speed Internet access
subscribers to the levels necessary to attain profitability in future years, or
that we will succeed in commercializing any other possible applications of our
system.

Additional financing in the future

Since the completion of our initial public offering in February 1996, the
proceeds of which were used primarily to fund the build-out of our LMDS
transmission system and marketing and equipment costs, we have sought to raise
the additional capital necessary to execute our business plan. During 1998, we
issued convertible debt and convertible preferred stock that provided for, or
potentially provided for, the issuance of our Common Stock upon conversion at a
discount from market prices at the time of funding. As a result of a decline in
the market price of our Common Stock, the convertible securities issued by us
could have been converted into Common Stock that would have substantially
diluted our existing stockholders. We avoided such dilution by redeeming the
convertible securities using some of the proceeds from the spectrum assignment,
which was consummated in November 1998 for a purchase price of $32.5 million in
cash, before closing costs.

While we believe that consummation of the spectrum assignments and stock
sale have provided sufficient liquidity to finance our current level of
operations through 2000, we do not expect to have a positive operating cash flow
until such time as we substantially grow our SPEED(SM) Portal, increase our
Internet customer base and/or form a strategic alliance for use of our Internet
capabilities or invest in a successful incubation opportunity in the future. The
lack of additional capital in the near future could have a material adverse
effect on our financial condition, operating results and prospects for growth.

The agreement in principle to acquire CT&T will present us with some special
issues to address

We have acquired 20% of CT&T and have an agreement in principle to acquire
the remaining 80% from the Founders.

CT&T has a portfolio of fundamental broadband wireless patents and
licenses. The patent expiration dates range from March 2007 through March 2017.
After these dates, others will be able to use the technology without a licensing
agreement from CT&T. In addition, while we have operated our super high-speed
Internet broadband wireless network under a technology license from CT&T, CT&T
has not generated any substantial royalties from other licensing agreements.
There can be no assurance that we will be able to use these patents and
intellectual property profitably. Third parties may not readily accept our
contention that they require licensing and future litigation proving
infringement may be costly and its outcome difficult to project.

CT&T has liabilities, known and contingent, and may not have the liquidity
or future earnings to satisfy these obligations. As a result, CT&T may require
funding from us. We have had outstanding long-term orders with CT&T for the
purchase of equipment in the aggregate amount of approximately $1,400,000
represented by set-top converters and head-end equipment which has been
delivered to us but have experienced performance problems. We have not accepted
billings for this equipment and no amounts are reflected in our financial
statements. As a result, CT&T has not paid the vendor of this equipment and is
in litigation with the vendor. If the vendor prevails in this suit, we may be
forced to pay for this equipment, which may have little or no value and would
have to be written off.

Managing growth

Successful implementation of our business plan will require the management
of growth. We cannot assure you that our existing operations and infrastructure
will be adequate to manage such growth, or that any steps taken to improve such
systems and controls will be sufficient. Our future success will depend in part
upon attracting and retaining the services of current management and technical
personnel. We cannot assure you that we will be successful in attracting,
assimilating and retaining new personnel in the future as future growth takes
place. We do not maintain "key person" life insurance policies on any of our key
personnel.

Our stock price has historically been volatile, which may make it more difficult
for you to resell shares when you want at prices you find attractive.

The trading price of our common stock has been and may continue to be
subject to wide fluctuations. During 1999, the high and low sale prices of our
Common Stock on the Nasdaq Stock Market ranged from $9.25 to $.9063. In 2000,
through March 24, the high and low sale prices of our Common Stock ranged from
$24.75 to $4.50. The closing sale price of our Common Stock was $12.188 on March
24, 2000. Our stock price may fluctuate in response to a number of events and
factors, such as quarterly variations in operating results, announcements of
technological innovations or new products and media properties by us or our
competitors, the operating and stock price performance of other companies that
investors may deem comparable, and news reports relating to trends in our
markets. The stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of such companies. These broad market and
industry fluctuations may adversely affect the price of our stock.

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Conflicts relating to VisionStar, Inc. ("VisionStar") may distract our
management's attention from implementation of our business plan

Shant S. Hovnanian, our Chairman of the Board, President and Chief
Executive Officer, is the sole stockholder of VisionStar, a company that holds a
license from the FCC, granted in May 1997, to construct, launch and operate a
telecommunications satellite operating in the radio frequency range of 28 GHz,
which is commonly referred to as the Ka-band, positioned over the continental
United States. If VisionStar constructs and launches a satellite and begins
providing service, we might purchase services from it, and any such transaction
might involve a conflict of interest for Mr. Hovnanian.

According to the FCC order granting the license, VisionStar proposes to
offer broadband services covering the nation and in urban areas in conjunction
with broadband service operators such as LMDS operators. These broadband
services may include high-speed Internet access, high-speed data services, video
teleconferencing distance learning and video programming.

In 1998, we received an offer from Mr. Hovnanian to convey to us all of
the outstanding shares of VisionStar, together with related patent application
rights for reimbursement of his verifiable VisionStar-related out-of-pocket
expenses. Through a special committee of the Board of Directors, the Company had
been considering Mr. Hovnanian's offer. At a meeting of the Board of Directors
in August 1998, the Board voted 2-1 against Mr. Hovnanian's offer, with Mr.
Hovnanian voting against the offer as a result of an earlier representation that
he would vote in the same manner as Mr. Bossard, who voted against the offer
based on his belief that the VisionStar satellite license was already an asset
of the Company and that VisionStar and Mr. Hovnanian held the asset in trust for
the Company. Thereafter, the Board and Mr. Hovnanian have had additional
discussions concerning the acquisition of VisionStar.

In May 1999, Mr. Bossard changed his previous position on the Company's
ownership of VisionStar and commenced a lawsuit in New York State court against
Mr. Hovnanian and VisionStar alleging that, among other things, insofar as Mr.
Hovnanian procured the Ka-band satellite license for his own company,
VisionStar, he breached the partnership agreement among Shant S. Hovnanian,
Vahak S. Hovnanian and Mr. Bossard, which Mr. Bossard claims entitles him to a
free one-third interest in Vision Star arising from the partnership agreement.
In the lawsuit, Mr. Bossard claims that VisionStar represented in its
application to the FCC that the Ka-band license would be used in conjunction
with CT&T's technology. Mr. Bossard is requesting that the court grant him
one-third of the value of VisionStar and its Ka-band license and that the court
impose a constructive trust on the shares and assets of VisionStar, including
the Ka-band license. We are not a party to this lawsuit, either as a plaintiff
or a defendant.

Shant S. Hovnanian and Vahak S. Hovnanian, who in the aggregate own
approximately 32% of our Common Stock, may have the power acting together to
control the direction and future operations of our company.

Shant S. Hovnanian and Vahak S. Hovnanian in the aggregate own
approximately 32% of our outstanding Common Stock at December 31, 1999. As a
result, acting together they may have the power to elect all of the members of
our Board of Directors, amend our Certificate of Incorporation and By-Laws and
control the direction and future operations of our Company, in each case without
the approval of any of our other stockholders.

Shant S. Hovnanian, Vahak S. Hovnanian and Bernard B. Bossard are also
parties to a stockholders' agreement, which provides that except for "cause" as
defined under the Delaware corporation statute they will vote to elect each
other to the Board of Directors so long as each such elected director owns 5% or
more of the shares of Common Stock outstanding and including all shares of
Common Stock that may be issued pursuant to the exercise of existing options,
warrants and other rights to acquire Common Stock (i.e., "on a fully diluted
basis"). At the meeting of the nominating committee of our Board held on May 26,
1999, over his objection, Mr. Bossard was not nominated for re-election to our
Board. Mr. Bossard currently owns less than 5% of our outstanding Common Stock
and has no basis for a claim for re-election.

Sales of shares of Common Stock by Shant S. Hovnanian and Vahak S. Hovnanian
could adversely affect the market price of the Common Stock.

We cannot predict the effect that future sales of shares of Common Stock,
or the availability of shares of Common Stock for future sale, will have on the
market price of the Common Stock prevailing from time to time. Sales of
substantial amounts of our Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of the Common Stock.

Shares of Common Stock held by Shant S. Hovnanian and Vahak S. Hovnanian
have been held by each of them for the requisite holding periods under Rule 144
under the Securities Act and may be sold thereunder in accordance with volume
restrictions.

9
<PAGE>

Our charter and bylaws, and the Delaware corporation statute contain certain
anti-takeover provisions that could limit the price that certain investors might
be willing to pay in the future for shares of our Common Stock.

Our Certificate of Incorporation and By-Laws, and the Delaware corporation
statute contain certain provisions that could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of us. These provisions could limit the price
that certain investors might be willing to pay in the future for shares of our
Common Stock. These provisions also allow us to issue preferred stock with
rights senior to those of the Common Stock and impose various procedural and
other requirements which could make it more difficult for stockholders to effect
certain corporate actions. We could issue a series of Preferred Stock that
could, depending upon the terms of such series, impede a merger, tender offer or
other transaction that some, or a majority, of our stockholders might believe to
be in their best interests or in which stockholders might receive a premium for
their stock over the then current market price of such stock. In addition, the
Delaware corporation statute, which is applicable to us, contains provisions
that restrict certain business combinations with interested stockholders, which
may have the effect of inhibiting a non-negotiated tender offer or other
business combination.

Year 2000

Although the date is now past January 1, 2000, and we have not experienced
immediate adverse impact from the transition to the Year 2000, we cannot provide
assurance that we or our suppliers and customers have not been affected in a
manner that is not yet apparent. In addition, some computer programs that were
date sensitive to the Year 2000 may not have been programmed to process the Year
2000 as a leap year, and any negative consequential effects remain unknown. As a
result, we will continue to monitor our Year 2000 compliance and the Year 2000
compliance of our suppliers and customers. The costs incurred during 1999 and
1998 to address the Year 2000 issue were approximately $70,000.

Equipment and Facilities

The SPEED service is delivered via the Company's state of the art Internet
Broadband Broadcast System. The completed construction to date of the IBBS
infrastructure combines a dedicated fiber optic backbone with microwave relays
delivering high-speed Internet connectivity to fourteen fully functional IBBS
Stations. Six Internet Broadband Broadcast Stations are located in Manhattan,
six are in Brooklyn and two are in Queens.

The NOC has a complete satellite downlink facility with access to international
media sources and a fully equipped data center along with Cisco 7200 hardware
and New Media Communication CyberStreamTM TRX100 Linux based gateway transmitter
hardware and software. The CyberStream hardware and software is compliant with
Digital Video Broadcast Multi-Protocol Encapsulation (DVB/MPE) and Motion
Picture Experts Group (MPEG) standards.

In addition to the NOC, the Company has a Manhattan point of presence
("POP"). The POP houses dial-up modems that support the Company's Internet
access services.

The principal physical assets incorporated in the Company's system consist
of headend equipment, 28GHz transmitters, fiber optic transmitters and
receivers, repeaters and customer premise equipment (antennas and the SPEED
modem), as well as office space.

Internet access is obtained through dedicated T-1 lines connecting the NOC
to the Internet "backbone." Signals from the NOC are then transmitted via fiber
optic cable to Internet Broadcast Stations. Signal is distributed by the
Company's fourteen Internet Broadcast Stations, six in Manhattan, six in
Brooklyn and two in Queens, although the availability of signal in particular
localities varies depending upon a number of factors. Increased signal coverage
through additional Internet Broadcast Stations is crucial to widespread
availability of the SPEED service.

The signal is received at the subscriber's premises by a small flat plate,
high-gain antenna positioned in or outside the window or roof, wherever signal
level is adequate. A co-axial cable connects the antenna to a super high-speed
SPEED modem. The subscriber's system requires an existing modem to maintain the
upstream connection. The two modems work together. The SPEED modem handles the
downstream data and the subscriber's existing modem handles the upstream request
for files.

ITEM 2. PROPERTIES

The Company leases 20,000 square feet of space at the Brooklyn Army
Terminal for its NOC, as well as, executive and administrative offices. This
lease expires in 2004 and provides for 2 five-year renewal options.

The Company also leases approximately 100 square feet of space on each of
15 rooftops for its Internet Broadcast Stations and relays. These leases,
several of which contain seven-year renewal options, expire from 1999

10
<PAGE>

to 2003. The Company believes that leased space on rooftops in New York City and
other locations in the New York PMSA will be readily available to serve as
additional Internet Broadcast Stations.

ITEM 3. LEGAL PROCEEDINGS

(a) At December 31, 1999, we were party to an arbitration proceeding with
Charles N. Garber, our former Chief Financial Officer, who asserted that his
employment agreement was breached by our failure to pay him guaranteed minimum
annual performance bonuses and certain other matters. Mr. Garber sought damages
in an amount estimated to total $488,000, plus his costs and reasonable
attorney's fees. In March 2000, the arbitrator ruled in favor of Mr. Garber but
only awarded him $100,000, plus costs, attorney's fees and interest of
approximately $ 92,000. We have accrued these amounts at December 31, 1999.

(b) The Company has been named in 3 lawsuits brought in the normal course
of its business in the aggregate amount of approximately $575,000, exclusive of
expenses. The Company believes it has substantial defenses to a material portion
of these claims and is prepared to pursue litigation if a reasonable and
structured settlement cannot be reached with the parties. In the event adverse
judgments are rendered in the same period, the aggregate effect could be
material to the Company's financial position and it could have a material effect
on operating results in the period in which the matters are resolved.

Legal proceedings terminated during the fourth quarter

In October 1999, a final judgment was entered in the United States
District Court Southern District of New York dismissing the action brought by
Akcess Pacific Group, LLC ("Akcess") against the Company, SPEEDUSNY and other
defendants in connection with the assignment of spectrum in November 1998 and a
convertible preferred stock issue of the Company that was outstanding at that
time.

In December 1999, SPEEDUS, Philips and M/A-COM, a unit of Tyco
International Ltd., entered into a settlement agreement pursuant to which we
paid $2.4 million to M/A-COM in settlement of a proceeding commenced by M/A-COM
in August 1998 against us and certain other parties. Our portion of the
settlement was $2.4 million which we have expensed for the year ended December
31, 1999. As part of the settlement, Philips transferred its 20% interest in
CT&T to us. Also in connection with the settlement, the Founders have agreed in
principle to transfer their 80% interest in CT&T to us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the stockholders during the
fourth quarter of fiscal 1999.

11
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock is listed for quotation on the NASDAQ National Market
system under the symbol "SPDE." Prior to January 6, 1999, our trading symbol was
"CVUS". The following table sets forth high, low and closing trade prices for
the Common Stock for the fiscal quarters indicated.

High Sale Low Sale Closing Sale
--------- -------- ------------

1999
- -----
First Quarter $4.500 $0.906 $2.719
Second Quarter 9.250 2.063 5.875
Third quarter 7.875 3.750 4.125
Fourth quarter 6.813 3.125 4.781

1998
- -----
First Quarter $8.250 $3.375 $5.000
Second Quarter 4.875 0.750 1.000
Third Quarter 1.625 0.094 0.281
Fourth Quarter 2.156 0.188 0.906

On March 24, 2000, the closing trade price of our Common Stock was $12.188
per share. As of December 31, 1999, there were approximately 300 registered
shareholders and, to the best of our belief, approximately 11,000 beneficial
owners of our Common Stock. During the year ended December 31, 1999, we did not
make any sales of securities that were not registered under the Securities Act
of 1933, as amended (the "Securities Act").

We have never declared or paid any cash dividends on our Common Stock and
do not intend to declare or pay cash dividends on the Common Stock at any time
in the foreseeable future. Future earnings, if any, will be used for the
expansion of our business.

12
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company and Notes thereto included elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------

(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues ............... $ 612 $ 3,648 $ 4,943 $ 2,190 $ 1,196
------------ ------------ ------------ ------------ ------------
Selling, general and
administrative ...... 5,425 9,691 13,259 10,223 5,435
Depreciation and
amortization ........ 2,779 6,174 3,881 2,258 1,376
Service costs .......... -- 1,479 2,314 1,175 603
Bad debts .............. -- 730 550 351 202
Management fees ........ -- -- -- -- 2,699
------------ ------------ ------------ ------------ ------------
Total operating expenses 8,204 18,074 20,004 14,007 10,315
------------ ------------ ------------ ------------ ------------
Operating loss ......... (7,592) (14,426) (15,061) (11,817) (9,119)
Equity in loss ......... (351) -- -- -- --
Other income ........... 624 -- -- -- --
Net interest income
(expense) ........... 1,278 (2,365) (202) 186 (2,184)
Gain on assignment
of spectrum ......... 19,442 28,066 -- -- --
Intellectual property
settlement .......... (2,425) -- -- -- --
Income taxes ........... (330) (302) -- -- --
------------ ------------ ------------ ------------ ------------
Net earnings/(loss) .... $ 10,646 $ 10,973 $ (15,263) $ (11,631) $ (11,303)
============ ============ ============ ============ ============
Per Common Share
Basic earnings/(loss) .. $ 0.58 $ 0.59 ($ .95) ($ .75) ($ .91)
Weighted average
outstanding ......... 18,465,974 16,551,417 16,000,000 15,576,478 12,395,142
Diluted earnings/(loss) $ 0.57 $ 0.57 ($ .95) ($ .75) ($ .91)
Weighted average
outstanding ......... 18,680,082 17,612,443 16,000,000 15,576,478 12,395,142
</TABLE>

December 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
Balance Sheet Data:
Cash and cash
equivalents ....... $ 44,613 $ 12,902 $ 408 $ 19,600 $ 3,536
Working capital
(deficiency) ...... 42,794 9,312 (7,029) 16,765 (1,647)
Net property and
equipment ......... 10,959 12,836 20,608 14,158 6,322
Total assets ......... 55,769 25,915 23,154 35,924 12,995
Total debt ........... 211 338 7,495 6,260 18,871
Total liabilities .... 1,969 3,868 11,464 8,972 26,314
Total equity (deficit) 53,799 22,047 11,690 26,952 (13,319)

13
<PAGE>

Summary of Quarterly Financial Data

<TABLE>
<CAPTION>
Quarters Ended

1999 March 31 June 30 September 30 December 31 Year End
<S> <C> <C> <C> <C> <C>
Revenues $ 15,211 $ 26,959 $ 509,899 $ 60,066 $ 612,135

Selling, general and
administrative expenses 1,146,725 1,455,933 1,328,781 1,494,096 5,425,535

Operating loss (1,812,213) (2,101,099) (1,523,294) (2,155,417) (7,592,023)

Gain on assignment
of spectrum -- -- -- 19,442,000 19,442,000

Intellectual property
Settlement -- -- -- 2,425,000 2,425,000

Net earnings (loss) $ (1,263,083) $ (2,114,519) $ (1,207,324) $ 15,230,864 $ 10,645,938

Per share - Basic $ (0.07) $ (0.12) $ (0.06) $.77 $.58

- Diluted $ (0.07) $ (0.12) $ (0.06) $.76 $.57
</TABLE>

<TABLE>
<CAPTION>
1998 March 31 June 30 September 30 December 31 Year End
<S> <C> <C> <C> <C> <C>
Revenues $ 1,423,682 $ 1,363,340 $ 1,169,434 $ (308,785) $ 3,647,671

Selling, general and
administrative expenses 2,643,281 2,833,481 2,870,916 1,342,761 9,690,439

Operating (loss) (3,405,661) (3,435,002) (4,455,325) (3,130,583) (14,426,571)

Gain on assignment
of spectrum -- -- -- 28,066,109 28,066,109

Net earnings (loss) $ (3,687,749) $ (3,691,356) $ (5,640,915) $ 23,993,030 $ 10,973,010

Per share - Basic $ (0.23) $ (0.23) $ (0.33) $ 1.38 $ 0.59

- Diluted $ (0.23) $ (0.23) $ (0.33) $ 1.36 $ 0.57
</TABLE>

14
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following should be read in conjunction with the Consolidated
Financial Statements of the Company and Notes thereto and the other financial
information appearing elsewhere in this Form 10-K.

Operations

From 1992 until November 1998, we operated a 49-channel analog
subscription television service utilizing 1,300 MHz of spectrum under a LMDS
license from the FCC. The FCC commercial operating license was awarded to us in
recognition of our efforts in developing and deploying LMDS technology, and for
spearheading its regulatory approval at the FCC. In September 1997, our pioneer
LMDS license was renewed as a standard LMDS license through February 1, 2006.
The license provides that the spectrum may be used for a wide variety of fixed
wireless purposes, including wireless local loop telephony, high-speed Internet
access and two-way teleconferencing. The license covers 1,150 MHz of spectrum in
the 28 GHz range encompassing the New York Primary Metropolitan Statistical
Area, a region which includes the five boroughs of New York City as well as the
New York Counties of Westchester, Rockland, and Putnam. Under FCC authorization,
the license includes an additional 150 MHz of spectrum until the first Ka band
satellite is launched, an event which is not expected to occur prior to 2002.

In November 1998, we assigned an 850 MHz portion of our license to WinStar
Communications, Inc. ("WinStar"). In connection with this assignment, we
discontinued our subscription television service. In October 1999, we assigned a
150Mhz portion of our license to NEXTLINK Communications, Inc. ("NEXTLINK").
From July 1999 to October 1999, pending regulatory approval of the license
assignment, NEXTLINK made monthly payments of approximately $172,000 to us.

We have launched a SPEED(SM) Portal to promote broadband high-speed
Internet access on a nationwide basis. Our portal is designed to provide users
with information on how to get high-speed access and how to take advantage of
offerings available to high-speed users.

Currently, we are also conducting a limited pilot program of our SPEED(SM)
broadband super high-speed Internet service. SPEED(SM) is delivered via 14
Internet Broadcast Stations operating under the Company's FCC license covering
Metro New York. Our Internet broadcast signal is currently not available at all
locations in our license area. A full marketing effort will not commence until
new LMDS equipment becomes commercially available with cost and performance that
allow implementation of SPEED(SM) service on an economically attractive basis.
In areas where our signal penetrates, we believe that we offer both small
business and residential customers the lowest-cost, highest downstream speed
Internet access solution available.

In September 1999, we announced our equity investment in SPEEDIA, LLC, a
mobile web to wireless information and e-commerce service company. We also
explore additional incubation opportunities in Internet and e-commerce
companies. Our Network Operations Center ("NOC") is an ideal facility to house
new, cost-conscious Internet startups that need Internet backbone connectivity
and quick ramp-up and expansion capabilities.

Twelve Months Ended December 31, 1999 Compared to Twelve Months Ended December
31, 1998

Revenues decreased $3,036,000 from $3,648,000 for the twelve months ended
December 31, 1998 to $612,000 for the twelve months ended December 31, 1999.
This decrease is a result of the discontinuance of the subscription television
business in November 1998. Revenues for 1999 reflect the early results of the
Company's pilot program to connect its first Internet subscribers and also
include approximately $550,000 received from NEXTLINK pending FCC approval of
the license assignment which occurred in October 1999.

Selling, general and administrative expenses decreased $4,265,000 from
$9,690,000 for the twelve months ended December 31, 1998 to $5,425,000 for the
twelve months ended December 31, 1999. This decrease is primarily attributable
to the termination of the subscription television business, including reduced
headcount-related costs as a result of personnel reductions during the third and
fourth quarters of 1998. This decrease is net of an increase in stock-based
compensation, which amounted to $615,000 for the twelve months ended December
31, 1999. During 1999, the Company issued warrants to purchase shares of the
Company's Common Stock and grants of Common Stock with an estimated fair value
aggregating approximately $615,000. Similar transactions during the year ended
December 31, 1998 were not material.

Depreciation and amortization decreased $3,395,000 from $6,174,000 for the
twelve months ended December 31, 1998 to $2,779,000 for the twelve months ended
December 31, 1999. This decrease was due primarily to the 1998 write off of
property and equipment previously used by the Company in its discontinued
subscription television service.

15
<PAGE>

Service costs amounted to $1,479,000 for the twelve months ended December
31, 1998. They are no longer incurred as a result of the termination of
subscription television services in early November 1998. Service costs are fees
paid to providers of television programming and royalties paid to CT&T under a
license agreement between CT&T and SPEEDUSNY.

Bad debts amounted to $730,000 for the twelve months ended December 31,
1998. They are no longer incurred as a result of the termination of subscription
television services. The Company will generally require residential subscribers
to its high-speed Internet service to provide credit card information for
monthly billings and therefore does not expect any material exposure for bad
debts in the future.

Equity in loss of associated company amounted to $351,000 for the twelve
months ended December 31, 1999. During 1999, the Company made cash investments
for a 45% equity interest in SPEEDIA, LLC which investment is being accounted
for under the equity method.

Other income amounted to $624,000 for the twelve months ended December 31,
1999. During 1999, the Company negotiated settlements with vendors. As of
December 31, 1998, the Company had unpaid amounts due to these entities in the
aggregate amount of $1,346,000. The Company has settled these billings for an
aggregate of $722,000, resulting in a savings of $624,000.

Interest and investment income increased $1,189,000 from $111,000 for the
twelve months ended December 31, 1998 to $1,300,000 for the twelve months ended
December 31, 1999 since the Company had more funds available for investment.

Interest expense and financing fees decreased $2,452,000 from $2,475,000
for the twelve months ended December 31, 1998 to $23,000 for twelve months ended
December 31, 1999. This decrease is due to the repayment or repurchase of
substantially all of the Company's outstanding debt in the fourth quarter of
1998.

During the year ended December 31, 1999, the Company recognized a gain of
$19,442,000 from the assignment of a portion of its spectrum, compared to a gain
in the amount of $28,066,000 during the year ended December 31, 1998.

During the year ended December 31, 1999, the Company recognized an expense
of $2,425,000 from the acquisition of intellectual property rights and the
settlement of litigation.

During the year ended December 31, 1999, the Company recorded a provision
for income taxes in the amount of $330,000 compared to $302,000 in 1998.

Twelve Months Ended December 31, 1998 Compared to Twelve Months Ended December
31, 1997

Revenues decreased $1,295,000 from $4,943,000 for the twelve months ended
December 31, 1997 to $3,648,000 for the twelve months ended December 31, 1998.
This decrease is a result of the termination of subscription television services
in early November 1998 and increased service cancellations during the third
quarter of 1998. The decrease is net of increases during the first six months of
1998 as a result of increases in the average subscriber base compared to 1997
and increases in fees charged to subscribers.

Service costs decreased $835,000 from $2,314,000 for the twelve months
ended December 31, 1997 to $1,479,000 for the twelve months ended December 31,
1998. This decrease is a result of the termination of subscription television
services in early November 1998, increased service cancellations during the
third quarter of 1998 and the termination of service from several premium
program providers. This decrease is net of increases during the first six months
of 1998 as a result of increases in the average subscriber base compared to
1997.

Selling, general and administrative expenses decreased $3,568,000 from
$13,259,000 for the twelve months ended December 31, 1997 to $9,691,000 for the
twelve months ended December 31, 1998. This decrease is primarily attributable
to reduced headcount-related costs as a result of personnel reductions at the
end of 1997 and during the first and third quarters of 1998. This decrease is
net of increases in legal expenses and other costs incurred in connection with
several financings during 1998 and defending against or settling certain claims
brought against the Company.

Depreciation and amortization increased $2,293,000 from $3,881,000 for the
twelve months ended December 31, 1997 to $6,174,000 for the twelve months ended
December 31, 1998. This increase is due primarily to

16
<PAGE>

1998 having a full year of depreciation on customer premises equipment,
equipment for additional transmitter sites and the continued build-out of the
Company's customer service/administrative facilities in 1997.

Bad debt expense increased $180,000 from $550,000 for the twelve months
ended December 31, 1997 to $730,000 for the twelve months ended December 31,
1998. This increase is a result of the Company's de-emphasis of subscription
television services, the related reductions in force and the termination of
service from several premium channel programmers. Prior to the termination of
subscription television services in early November 1998, the Company experienced
a high level of service cancellations and a drastic decrease in collections from
subscribers. While the Company has significantly increased its allowance for bad
debts at December 31, 1998 to reflect these developments, it is considering
several options to vigorously pursue collection of past due accounts.

Interest income decreased $539,000 from $650,000 for the twelve months
ended December 31, 1997 to $111,000 for the twelve months ended December 31,
1998. This decrease is primarily due to decreases in the Company's cash position
as it continued to fund operations and build out its network.

Interest expense and financing fees increased $1,624,000 from $851,000 for
the twelve months ended December 31, 1997 to $2,475,000 for twelve months ended
December 31, 1998. This increase is a result of a substantial increase in the
level of borrowings by the Company commencing in late 1997, some of which
involved the payment of financing fees, and the costs incurred in connection
with the redemption and repayment of debt.

During the year ended December 31, 1998, the Company recognized a gain of
$28,066,000 from the assignment of a portion of its spectrum.

During the year ended December 31, 1998, the Company recorded a provision
for income taxes in the amount of $302,000.

Twelve Months Ended December 31, 1997 Compared to Twelve Months Ended December
31, 1996

Revenues increased $2,753,000 from $2,190,000 for the twelve months ended
December 31, 1996 to $4,943,000 for the twelve months ended December 31, 1997.
This increase is due primarily to an increase in subscribers.

Service costs increased $1,139,000 from $1,175,000 for the twelve months
ended December 31, 1996 to $2,314,000 for the twelve months ended December 31,
1997. Service costs are fees paid to providers of television programming and
royalties paid to CT&T under a license agreement between CT&T and SPEEDUSNY.
These costs increase as the subscriber count and associated revenues increase.

Selling, general and administrative expense increased $3,036,000 from
$10,223,000 for the twelve months ended December 31, 1996 to $13,259,000 for the
twelve months ended December 31, 1997. This increase is primarily attributable
to headcount-related costs (as the Company's employee base rose from 104 at
December 31, 1996 to 130 at December 31, 1997. At the end of 1997, the Company
elected to focus its immediate efforts on bringing its high-speed Internet
access service to market. Due to the increased focus on such service, the
Company de-emphasized its marketing efforts related to selling subscription
television service in the immediate future. In conjunction with this action, on
December 31, 1997, the Company reduced its workforce by 43 people, most of whom
worked in subscription television sales, marketing and operations. In addition,
during 1997, there were increases in promotion and other sales-related expenses
due to the increase in subscribers and in rent expenses due to the addition of
new facilities and cell sites.

Depreciation and amortization increased $1,623,000 from $2,258,000 for the
twelve months ended December 31, 1996 to $3,881,000 for the twelve months ended
December 31, 1997. This increase is due primarily to the purchase of customer
premises equipment and leasehold improvements at the Company's new
state-of-the-art headend facility, customer care center, and office complex.

Bad debt expense increased $199,000 from $351,000 for the twelve months
ended December 31, 1996 to $550,000 for the twelve months ended December 31,
1997. These expenses increase as the subscriber count and associated revenues
increase.

Interest income decreased $642,000 from $1,292,000 for the twelve months
ended December 31, 1996 to $650,000 for the twelve months ended December 31,
1997. This decrease is primarily due to a decrease in the Company's cash
position as the Company continued to expend funds to build out its network and
increase its subscriber base.

17
<PAGE>

Interest expense and financing fees decreased $254,000 from $1,105,000 for
the twelve months ended December 31, 1996 to $851,000 for twelve months ended
December 31, 1997. This decrease is due primarily to the repayment of the 1997
principal installment of the note to Morgan Guaranty Trust Company of New York
in June 1997.

Liquidity and Capital Resources

The Company has recorded operating losses and negative operating cash
flows in each year of its operations since inception, primarily due to the
start-up costs in connection with the commercial roll-out of the Company's
system, slower than anticipated consumer acceptance of the Company's now
discontinued subscription television services and expenses incurred in
connection with the LMDS rulemaking proceeding.

While the Company believes that consummation of the spectrum assignments
in November 1998 and October 1999 and the sale of Common Stock in July 1999 have
provided sufficient liquidity to finance its current level of operations, it
does not expect to have a positive operating cash flow until such time as it
substantially increases its Internet customer base and/or forms a strategic
alliance for use of its Internet capabilities in the future. The lack of
additional capital in the future could have a material adverse effect on the
Company's financial condition, operating results and prospects for growth.

Year 2000 compliance

The "Year 2000" or "Y2K" concern exists because of the potential for
computer programs to recognize a date using "00" as the year 1900 instead of the
year 2000 which could cause disruption of normal business operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes that its financial instruments as described in
Footnote 2 of this Form 10-K are not subject to material market risk. The
Company's financial instruments at December 31, 1999 and 1998 consist of
short-term investments and long-term debt. The carrying value of each of these
financial instruments approximates its market value, since the investments have
short maturities and the interest rate on the long-term debt periodically
adjusts based on the prime rate.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of the Company and related Notes
thereto and the financial information required to be filed herewith are included
under Item 14 of this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

18
<PAGE>

PART III

The information called for by Item 10, Directors and Executive Officers of
the Registrant; Item 11, Executive Compensation; Item 12, Security Ownership of
Certain Beneficial Owners and Management and Item 13, Certain Relationships and
Related Transactions, is hereby incorporated by reference to the corresponding
sections of the Company's definitive proxy statement that will be filed for its
Annual Meeting of Stockholders.
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Financial Schedule

(1) Consolidated Financial Statements Page(s)
------

Report of Independent Accountants............................ 24

Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998 ........................................... 25

Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997............................. 26

Consolidated Statements of Changes in Partners' Capital and
Stockholders' Equity for the years ended December 31, 1999,
1998 and 1997................................................ 27

Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997............................. 28

Notes to Consolidated Financial Statements................... 29-36

(2) Financial Statement Schedule

Schedule II-- Valuation and Qualifying Accounts.............. S-1

19
<PAGE>

(b) Reports on Form 8-K

The Company filed a Current Report on Form 8-K, for an event specified
in Item 5 of such report, on October 26, 1999.

3.1a Certificate of Incorporation. (1)

3.1b Certificate of Ownership and Merger of CVUSA Merger Corporation

With and Into Cellularvision USA, Inc. (8)

3.2 By-laws. (1)

4.1 Form of Common Stock Certificate. (1)

4.2 Stockholders Agreement, dated as of January 12, 1996, by and among
CellularVision USA, Inc., Shant S. Hovnanian, Bernard B. Bossard and
Vahak S. Hovnanian. (1)

10.1 Amended and Restated License Agreement, together with Addendum to
License Agreement, each dated as of July 7, 1993, by and between
CellularVision Technology & Telecommunications, L.P. and
CellularVision of New York, L.P. and certain amendments and
supplements thereto. (1)

10.2 Reserved Channel Rights Agreement, dated as of July 7, 1993, by and
between Vahak S. Hovnanian, Shant S. Hovnanian, Bernard B. Bossard,
CellularVision of New York, L.P. and Bell Atlantic Ventures XXIII,
Inc. (1)

10.4a CellularVision USA, Inc. 1995 Stock Incentive Plan. (1)

20
<PAGE>

10.4b CellularVision USA, Inc. 1995 Stock Incentive Plan. (Amended and
Restated as of December 2, 1998) (8)

10.6 Employment Agreement, dated as of October 18, 1995, between
CellularVision USA, Inc. and Shant S. Hovnanian. (1)

10.9 Intercompany Agreement, dated January 12, 1996, by and among
CellularVision USA, Inc., CellularVision Technology &
Telecommunications, L.P., CellularVision of New York, L.P., Shant S.
Hovnanian, Bernard B. Bossard and Vahak S. Hovnanian. (1)

10.10 Second Addendum to License Agreement, dated as of January 12, 1996,
by and between CellularVision Technology & Telecommunications, L.P.
and CellularVision of New York, L.P. (1)

10.11 Corporate Name License and Grant of Future Licenses Agreement, dated
as of January 12, 1996, by and between CellularVision Technology &
Telecommunications, L.P. and CellularVision USA, Inc. (1)

10.12 Amended and Restated Agreement of Limited Partnership of
CellularVision of New York, L.P., dated as of July 7, 1993, by and
between Hye Crest Management, Inc., Bell Atlantic Ventures, XXIII,
Inc. and the limited partners set forth on the signature page
thereto. (1)

10.13 Master Amendment Agreement, dated as of October 8, 1993, by and
among Vahak S. Hovnanian, Shant S. Hovnanian, Bernard B. Bossard,
Hye Crest Management, Inc., Suite 12 Group, CellularVision of New
York, L.P., CellularVision Technology & Telecommunications, L.P.,
Bell Atlantic Ventures XIII, Inc. and Philips PGNY Corp. (1)

10.14 Second Master Amendment Agreement, dated as of December 29, 1993, by
and among Hye Crest Management, Inc., Suite 12 Group, CellularVision
of New York, L.P., CellularVision Technology & Telecommunications,
L.P., Bell Atlantic Ventures XXIII, Inc., Philips PGNY Corp., Morgan
Guaranty Trust Company of New York, as trustee of the Commingled
Pension Trust Fund (Multi-Market Special Investment) of Morgan
Guaranty Trust Company of New York, and as Investment Manager and
Agent for an Institutional Investor. (1)

10.16 Agreement of Lease, dated May 9, 1994, by and between Cellular
Vision of New York and New York City Economic Development
Corporation and Sublease, dated March 8, 1995, between
CellularVision of New York, L.P. and Harvard Fax, Inc. (1)

21
<PAGE>

Addendum thereto; Warrant Certificate Nos. 4 and 5, dated December
14, 1995, issued to Boston Financial &Equity Corporation by the
Company. (1)

10.21 Warrant, dated June 1, 1994, issued by CellularVision of New York,
L.P. to Alex. Brown & Sons Incorporated. (1)

10.22 Warrant, dated June 1, 1994, issued by CellularVision of New York,
L.P. to Mark B. Fisher. (1)

10.23 Warrant, dated December 29, 1993, issued by CellularVision of New
York, L.P. to Peter Rinfret. (1)

10.24 Warrant, dated October 8, 1993, issued by Vahak S. Hovnanian and
Shant S. Hovnanian to Alex. Brown Financial Corporation. (1)

10.25 Warrant, dated October 8, 1993, issued by Vahak S. Hovnanian and
Shant S. Hovnanian to Mark B. Fisher. (1)

10.27 Agreement, dated as of January 12, 1996, by and among CellularVision
USA, Inc., CellularVision of New York, L.P., Hye Crest Management,
Inc., Shant S. Hovnanian, Vahak S. Hovnanian, Bernard B. Bossard and
Bell Atlantic Ventures XXIII, Inc. (1)

10.29 Agreement to Purchase LMDS License, dated as of July 10, 1998 by and
between Winstar Communications, Inc., CellularVision USA, Inc. and
CellularVision of New York, L.P. (5)

10.30 Amendment No. 1 to Agreement to Purchase LMDS License, dated as of
October 6, 1998 among Winstar Communications, Inc., CellularVision
USA, Inc. and CellularVision of New York, L.P. (6)

10.31 Amendment No. 2 to Agreement to Purchase LMDS License, dated as of
October 20, 1998 among Winstar Communications, Inc., CellularVision
USA, Inc. and CellularVision of New York, L.P. (7)

10.32 Stock Purchase Agreement, dated as of June 13, 1999, between
SPEEDUS.COM, INC. and NEXTLINK Communications, Inc. (9)

10.33 Strategic Agreement, dated as of June 13, 1999, between SPEEDUS.COM,
INC. and NEXTLINK Communications, Inc. (9)

10.34 Amended and Restated Agreement to Assign LMDS License, dated as of
June 13, 1999, between SPEEDUS.COM. Inc., SPEEDUSNY, L.P. and
NEXTLINK Communications, Inc. (10)

21 Subsidiaries of SPEEDUS.COM, Inc. (1)

23.1 Consent of PricewaterhouseCoopers LLP (2)

27 Financial Data Schedule (2)

- ----------

22
<PAGE>

(1) Incorporated by reference to the Company's Registration Statement in
Form S-1 (File No. 33-98340) which was declared effective by the
Commission on February 7, 1996.

(2) Filed herewith.

(3) Incorporated by reference to the Company's Form 10-Q for the quarter
ended June 30, 1996 filed on August 12, 1996.

(4) An identical note purchase agreement has been entered into by
CellularVision of New York, L.P. and Morgan Guaranty Trust Company
of New York, as Investment Manager and Agent for an Institutional
Investor with respect to the issuance and sale of $3,000,000
principal amount of Convertible Exchangeable Subordinated Notes of
CellularVision of New York, L.P.

(5) Incorporated by reference to the Company's Form 8-K filed on July
15, 1998.

(6) Incorporated by reference to the Company's Form 8-K filed on October
9, 1998.

(7) Incorporated by reference to the Company's Form 8-K filed on October
22, 1998.

(8) Incorporated by reference to the Company's Form 10-K filed on March
31, 1999.

(9) Incorporated by reference to the Company's Form 10-K filed on June
28, 1999.

(10) Incorporated by reference to the Company's Form 10-K filed on
October 26, 1999.

23
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of SPEEDUS.COM, Inc.:

In our opinion, the accompanying consolidated financial statements and financial
statement schedule of SPEEDUS.COM, Inc. (the "Company") listed in Item 14(a) of
this Form 10-K, present fairly, in all material respects, the financial position
of the Company at December 31, 1999 and December 31, 1998, and the consolidated
results of its operations and cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards generally accepted in the United
States which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

March 30, 2000

24
<PAGE>

SPEEDUS.COM, Inc.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 44,613,101 $ 12,902,085
Due from affiliates 93,112 86,444
Prepaid expenses and other assets 50,000 23,348
Accounts receivable, net of allowance for
doubtful accounts of $1,019,933 for 1998 8,064 --
------------ ------------

Total current assets 44,764,277 13,011,877

Property and equipment, net of accumulated
depreciation of $8,092,906 and $5,488,766 10,958,977 12,836,368
Other assets 46,036 67,165
------------ ------------
Total assets $ 55,769,290 $ 25,915,410
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 554,739 $ 2,519,345
Accrued liabilities 1,065,236 807,499
Current portion of notes payable 210,938 168,750
Other current liabilities 138,937 203,812
------------ ------------
Total current liabilities 1,969,850 3,699,406

Notes payable -- 168,750
------------ ------------

Total liabilities 1,969,850 3,868,156

Commitments and Contingencies -- --

Stockholders' equity:
Common stock ($.01 par value; 40,000,000
shares authorized; 19,670,959 and 17,131,357
shares issued and outstanding) 196,710 171,314
Preferred stock ($.01 par value; 20,000,000
shares authorized):
Series A Convertible ($1,000 stated value;
10,000 shares authorized; no shares issued
and outstanding) -- --
Additional paid-in-capital 79,875,699 58,794,847
Accumulated deficit (26,272,969) (36,918,907)
------------ ------------

Stockholders' equity 53,799,440 22,047,254
------------ ------------

Total liabilities and stockholders' equity $ 55,769,290 $ 25,915,410
============ ============
</TABLE>

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

25
<PAGE>

SPEEDUS.COM, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the years ended December 31,
------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 612,135 $ 3,647,671 $ 4,943,210
------------ ------------ ------------

Expenses:
Selling, general and administrative 5,425,535 9,690,439 13,258,558
Depreciation and amortization 2,778,623 6,174,393 3,881,004
Service costs -- 1,479,360 2,314,435
Bad debts -- 730,050 550,290
------------ ------------ ------------
Total operating expenses 8,204,158 18,074,242 20,004,287
------------ ------------ ------------

Operating loss (7,592,023) (14,426,571) (15,061,077)

Equity in loss of associated company (350,722) -- --
Other income 623,804 -- --
Interest and investment income 1,300,469 110,719 649,843
Interest expense and financing fees (22,590) (2,475,247) (851,428)
------------ ------------ ------------

Loss before gain on assignment of spectrum,
intellectual property settlement
and provision for income taxes (6,041,062) (16,791,099) (15,262,662)

Gain on assignment of spectrum 19,442,000 28,066,109 --
Intellectual property settlement (2,425,000) -- --
------------ ------------ ------------

Earnings/(loss) before provision for
income taxes 10,975,938 11,275,010 (15,262,662)

Provision for income taxes 330,000 302,000
------------ ------------ ------------

Net earnings/(loss) $ 10,645,938 $ 10,973,010 $(15,262,662)
============ ============ ============

Per share:
Basic earnings (loss) per common share $ 0.58 $ 0.59 $ (0.95)
============ ============ ============
Weighted average common shares
outstanding 18,465,974 16,551,417 16,000,000
============ ============ ============

Diluted earnings (loss) per common share $ 0.57 $ 0.57 $ (0.95)
============ ============ ============
Weighted average common shares
outstanding 18,680,082 17,612,443 16,000,000
============ ============ ============
</TABLE>

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

26
<PAGE>

SPEEDUS.COM, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

For the years ended December 31, 1997, 1998 and 1999

<TABLE>
<CAPTION>
Total
Common Preferred Additional Accumulated Shareholders'
Stock Stock Paid-in capital Deficit Equity
------------ ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 $ 160,000 $ -- $ 58,267,533 $(31,475,167) $ 26,952,366

Net loss (15,262,662) (15,262,662)
------------ ----------- ------------ ------------ ------------
Balance, December 31, 1997
160,000 -- 58,267,533 (46,737,829) 11,689,704

Issuance of common stock 1,100 1,100

Issuance of preferred stock 3,500,000 3,500,000

Conversion of secured note 8,837 491,163 500,000

Conversion of preferred stock 1,421 (37,000) 35,579 --

Dividends on preferred stock 21 507 (88,728) (88,200)

Redemption of preferred stock (3,463,000) (1,065,360) (4,528,360)

Retirement of common stock (65) 65 --

Net earnings 10,973,010 10,973,010
------------ ----------- ------------ ------------ ------------

Balance, December 31, 1998 171,314 -- 58,794,847 (36,918,907) 22,047,254

Issuance of common stock 25,396 20,407,852 20,433,248

Common stock issuance costs (558,000) (558,000)

Stock based compensation 1,231,000 1,231,000

Net earnings 10,645,938 10,645,938
------------ ----------- ------------ ------------ ------------

Balance, 31, 1999 $ 196,710 $ -- $ 79,875,699 $(26,272,969) $ 53,799,440
============ =========== ============ ============ ============
</TABLE>

27
<PAGE>

SPEEDUS.COM, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings/(loss) $ 10,645,938 $ 10,973,010 $(15,262,662)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,778,623 6,174,393 3,881,004
Stock based compensation 615,000 -- --
Equity in loss of associated company 350,722 -- --
Amortization of placement fees -- 65,590 115,479
Provision for doubtful accounts -- 730,050 550,290
Gain on assignment of spectrum (19,442,000) (28,066,109) --
Noncash increase in notes payable -- 250,000 --
Changes in assets and liabilities:
Due from affiliates (6,668) 94,568 578,515
Prepaid expenses and other (26,652) 88,710 143,742
Accounts receivable (8,064) 503,451 (1,253,458)
Other assets 21,129 104,646 (10,829)
Notes receivable -- 171,245 (79,970)
Accounts payable (1,964,606) 646,028 979,456
Other current liabilities (64,875) 201,051 (252,247)
Accrued liabilities 257,737 (1,285,649) 530,166
------------ ------------ ------------

Net cash used in operating activities (6,843,716) (9,349,016) (10,080,514)
------------ ------------ ------------

Cash flows from investing activities:
Net proceeds from assignment of spectrum 19,750,000 31,041,378 --
Property and equipment additions (901,232) (1,174,898) (10,261,204)
Investment in associated company (350,722) -- --
Intangibles -- -- (86,106)
------------ ------------ ------------

Net cash provided by (used in)
investing activities 18,498,046 29,866,480 (10,347,310)
------------ ------------ ------------

Cash flows from financing activities:
Proceeds from exercise of options and warrants 433,248 -- --
Proceeds from sale of stock 19,750,000 3,501,100 --
Proceeds from notes payable -- 4,691,147 2,996,695
Repayment of notes payable (126,562) (11,598,807) (1,761,200)
Redemption of preferred stock -- (4,616,560) --
------------ ------------ ------------

Net cash (used in) provided by
financing activities 20,056,686 (8,023,120) 1,235,495
------------ ------------ ------------

Net increase (decrease) in cash
and cash equivalents 31,711,016 12,494,344 (19,192,329)

Cash and cash equivalents, beginning of period 12,902,085 407,741 19,600,070
------------ ------------ ------------

Cash and cash equivalents, end of period $ 44,613,101 $ 12,902,085 $ 407,741
============ ============ ============

Supplemental Cash Flow Disclosures:
Cash paid for interest during the period $ 22,238 $ 1,161,379 $ 611,900
============ ============ ============

Cash paid for income taxes during the period $ 302,000 $ -- $ --
============ ============ ============

Noncash transactions:
Common stock issued for convertible debt $ -- $ 500,000 $ --
============ ============ ============
</TABLE>

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

28
<PAGE>

SPEEDUS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Organization

SPEEDUS.COM, Inc. ("SPEEDUS.COM") resulted from the merger of CVUSA Merger
Corporation ("CVUSA Merger"), a wholly-owned subsidiary of CellularVision USA,
Inc. ("CVUS") formed in December 1998, into CVUS in January 1999 with CVUS as
the surviving corporation. At the time of merger, CVUS changed its name to
SPEEDUS.COM.

In February 1999, CellularVision of New York, L.P. ("CVNY"), an indirect
wholly-owned subsidiary of SPEEDUS.COM, by amendment to its certificate of
limited partnership, changed its name to SPEEDUSNY.COM, L.P. ("SPEEDUSNY").
Unless the context requires otherwise, the term Company includes SPEEDUS.COM,
SPEEDUSNY and CVCC, a wholly-owned subsidiary of SPEEDUS.COM and the general
partner of SPEEDUSNY.COM..

Business and FCC License

From 1992 until November 1998, the Company operated a 49-channel analog
subscription television service utilizing 1,300 MHz of spectrum under a Local
Multipoint Distribution Service ("LMDS") license from the Federal Communications
Commission (the "FCC"). In September 1997, the Company's LMDS license was
renewed as a standard LMDS license through February 1, 2006. The Company is
entitled to use its spectrum for a wide variety of fixed wireless purposes,
including wireless local loop telephony, high-speed Internet access and two-way
teleconferencing. The Company's LMDS license entitled it to utilize 1,150 MHz of
spectrum in the 28 GHz range covering New York City, Westchester, Rockland and
Putnam counties. Under FCC rules, the Company has the right to use an additional
150 MHz of spectrum until the first Ka band satellite is launched, an event not
expected to occur prior to 2002.

In November 1998, as a result of the assignment of 850 MHz of spectrum,
the Company discontinued its subscription television service. In October 1999,
the Company assigned an additional 150 MHz of spectrum.

The Company is an emerging facilities-based wireless broadband high-speed
Internet company. The Company has launched a portal to promote broadband
high-speed Internet access on a nationwide basis, is conducting a limited pilot
program of its broadband high-speed Internet service in Metro New York and is
exploring incubation opportunities in Internet and e-commerce companies.

2. Summary of Significant Accounting Policies

Financial statements and principles of consolidation

The consolidated financial statements include the accounts of SPEEDUS.COM,
SPEEDUSNY and CVCC. All significant intercompany accounts and transactions have
been eliminated in consolidation.

The Company's share of earnings or losses of associated companies, that
are 20% to 50% owned, is included in the consolidated operating results using
the equity method of accounting. The Company has a 45% equity interest in
SPEEDIA, LLC.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents. Cash
equivalents consist of commercial paper.

Concentrations of Credit Risk

Financial instruments that potentially could subject the Company to
concentrations of credit risk consist largely of cash equivalents and short-term
investments. These instruments are potentially subject to concentrations of
credit risk but this risk is limited due to diversification and investments
being made in investment grade securities.

29
<PAGE>

Revenue Recognition

Through the year ended December 31, 1998, the majority of the Company's
revenues to date have been derived from subscriber fees, billed one month in
advance and recorded as revenue in the period in which the service was provided.
Deferred revenue associated with advance billings was recorded as a current
liability.

Property and Equipment

Transmission and headend equipment, customer premises equipment, office
equipment and leasehold improvements are recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets, ranging from
three to seven years. Fiber optic lines are depreciated over an estimated
service life of 40 years. Transmitters are not depreciated until such assets are
constructed or placed in service. Depreciation on customer premises equipment
commences the month following receipt of the equipment. When assets are fully
depreciated, it is the Company's policy to remove the costs and related
accumulated depreciation from its books and records.

The Company capitalizes subcontractor labor and materials incurred in
connection with the installation of customer premises equipment and depreciates
them over the shorter of the estimated average period that the subscribers are
expected to remain connected to the Company's system, or five years.

Long-lived assets

The Company periodically evaluates the net realizable value of long-lived
assets, including fixed assets and other assets, relying on a number of factors
including operating results, business plans, economic projections and
anticipated future cash flows. In addition, the Company's evaluation considers
nonfinancial data such as market trends, product and development cycles, and
changes in management's market emphasis. An impairment in the carrying value of
an asset is recognized when the expected future operating cash flows derived
from the asset are less than its carrying value.

Intangible Assets

The costs of field studies to determine line-of-sight transmission
capabilities are capitalized and amortized over five years by the straight-line
method. If a site is abandoned or deemed inoperable, all costs associated with
that site are charged to expense.

Income Taxes

As required by SFAS No. 109, the Company is required to provide for
deferred tax assets or liabilities arising due to temporary differences between
the book and tax basis of assets and liabilities existing at the time of the
consummation of the incorporation transactions immediately prior to the
Company's initial public offering in 1996.

As of December 31, 1999, the Company has a deferred tax asset of
approximately $9.1 million and an offsetting valuation allowance of the same
amount. As of December 31, 1998 and 1997, the Company recorded a deferred tax
asset of approximately $14.2 million and $19.2 million, respectively, primarily
related to operating losses and the difference between the book and tax basis of
the Company's investment in CVNY. An offsetting valuation allowance of $14.2
million and $19.2 million, respectively, was established as the Company had no
ability to carryback its losses and a limited earnings history. For the years
ended December 31, 1999 and 1998, the Company has recorded a provision for
income tax of $330,000 and $302,000, respectively, relating to Federal and State
Alternative Minimum Taxes. This provision was calculated after recognizing a
deferred tax benefit of approximately $5,000,000 in each year relating to
carryforward losses.

For the years ended December 31, 1999 and 1998, the difference between
the Company's provision for income taxes and income taxes computed at the
Federal statutory rate of 35% is primarily due to the deferred income tax
benefit recognized in 1999 and 1998.

Debt Placement Fees

Unamortized debt issuance costs were amortized over the term of the
related debt by the effective interest rate method.

Estimates

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

30
<PAGE>

Fair Value of Financial Instruments

Fair value is a subjective and imprecise measurement that is based on
assumptions and market data which require significant judgment and may only be
valid at a particular point in time.

The Company's financial instruments at December 31, 1999 and 1998 consist
of short-term investments and long-term debt. The carrying value of these
financial instruments approximates market value since the investments have short
maturities and the interest rate on the long-term debt periodically adjusts
based on the prime rate.

Deferred Offering Costs

Expenses associated with the Company's initial public offering were
capitalized as deferred offering costs at December 31, 1995. Upon the successful
completion of the initial public offering in 1996, these costs were deducted
from the proceeds of the initial public offering and recorded as a reduction to
additional paid-in capital.

Earnings Per Share

Basic and diluted earnings/(loss) per common share are determined in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share".

For the year ended December 31, 1999, basic and diluted net earnings
available for common shareholders was equal to net earnings. The weighted
average common shares for diluted earnings per share were determined by adding
weighted average shares in the amounts of 42,221 and 171,887 for the assumed
exercise or conversion of stock options and warrants, respectively, to the
weighted average shares outstanding for basic earnings per share for a total of
18,680,082 weighted average shares outstanding for diluted earnings per share.

For the year ended December 31, 1998, basic net earnings available for
common shareholders in the amount of $9,818,922 was determined by subtracting an
aggregate of $1,154,088, representing the redemption premium and dividends on
the Convertible Preferred Stock, from net earnings of $10,973,010. Diluted net
earnings available for common shareholders in the amount of $9,981,093 was
determined by subtracting the redemption premium in the amount of $1,065,360
from, and adding interest expense on convertible debt in the amount of $73,443
to, net earnings of $10,973,010. The weighted average common shares for diluted
earnings per share were determined by adding weighted average shares in the
amounts of 1,470, 133,740, 212,578 and 713,238 for the assumed exercise or
conversion of stock options, warrants, convertible debt and Convertible
Preferred Stock, respectively, to the weighted average shares outstanding for
basic earnings per share for a total of 17,612,443 weighted average shares
outstanding for diluted earnings per share.

Stock options and warrants have been excluded from the diluted loss per
share for the year ended December 31, 1997 since their effect would be
antidilutive.

Advertising Costs

Advertising costs are amortized and charged to operations over the periods
in which the advertising takes place. Advertising expense for the years ended
December 31, 1999, 1998 and 1997 was not material.

3. Related Party Transactions

CT&T License Agreement

In July 1993, SPEEDUSNY entered into a license agreement with
CellularVision Technology and Telecommunications, L.P. ("CT&T") for use of
certain patented technologies owned by CT&T and for CT&T know-how related to the
LMDS technology. CT&T is 80% owned by Shant S. Hovnanian, the Chairman of the
Board, President, and Chief Executive Officer of the Company, Vahak S.
Hovnanian, a director of the Company, and Bernard B. Bossard, a former officer
and director of the Company, (collectively, the "Founders"). The license
agreement granted SPEEDUSNY the right to utilize the licensed LMDS technology.
Under the license agreement, CT&T earned a royalty equal to 7.5% of gross
revenues on a quarterly basis. The license was to remain in effect until either
the expiration, revocation or invalidation of CT&T patent rights directly
related to the operation of the Company's system, or the year 2028, subject to
earlier termination upon the occurrence of certain events. The license fees were
$288,000 and $324,000 the years ended December 31, 1998 and 1997, respectively.

At December 31, 1999 and 1998, the Company had amounts due from CT&T of
approximately $93,000 and $86,000, respectively, which represent the Company's
allocation of costs to CT&T, reduced by licensing fees. The Company and CT&T had
agreed to apply licensing fees in excess of $80,000 in each calendar year
otherwise

31
<PAGE>

due to CT&T to the outstanding amounts due from CT&T, which will bear interest
at the rate of 6% per annum. The Company has paid $80,000 in licensing fees to
CT&T for each of the years ended December 31, 1998 and 1997.

Under the license agreement, CT&T may charge the Company a fee of up to
2.5% of the value of equipment purchased through CT&T, and the Company's ability
to procure capital equipment relating to its system from sources other than CT&T
had been limited. Pursuant to an amendment dated January 12, 1996, subject to
certain conditions and except for outstanding purchase orders, the Company is
under no obligation to continue to purchase equipment or supplies from CT&T,
although it may continue to do so. The total amount of equipment purchased from
CT&T for the years ended December 31, 1999 and 1997 was $563,000 and $1,467,000,
respectively. No equipment was purchased from CT&T during 1998.

In 1997, the Company had outstanding long-term orders with CT&T for the
purchase of equipment in the aggregate amount of approximately $3,200,000, net
of deposits in the aggregate amount of approximately $600,000. Approximately
$1,400,000 of this amount, net of deposits, is represented by set-top converters
and head-end equipment which has been delivered to the Company but have
experienced performance problems, as a result of which CT&T is presently
involved in litigation with the vendor of this equipment. The Company has not
accepted billings for this equipment and no amounts are reflected in the
accompanying financial statements. As a result of discontinuing the subscription
television service, if the Company is ultimately forced to accept and pay for
this equipment, the equipment may have little or no value and would be written
off. Approximately $1,800,000 of this amount, net of deposits, represents
long-term orders which are still outstanding for modems that would be usable by
the Company in its high-speed internet access business. The Company is now
dealing directly with this vendor.

See note 9 for additional information on CT&T.

Other Transactions

(a) Shant S. Hovnanian is the sole stockholder of VisionStar, Inc.
("VisionStar"), a company that holds a license from the FCC, granted in May
1997, to construct, launch and operate a telecommunications satellite operating
in the radio frequency range of 28 GHz, which is commonly referred to as the
Ka-band, positioned over the continental United States. If VisionStar constructs
and launches a satellite and begins providing service, the Company might
purchase services from it, and any such transaction might involve a conflict of
interest for Mr. Hovnanian.

In 1998, the Company received an offer from Mr. Hovnanian to convey to it
all of the outstanding shares of VisionStar, together with related patent
application rights for reimbursement of his verifiable VisionStar-related
out-of-pocket expenses. Through a special committee of the Board of Directors,
the Company had been considering Mr. Hovnanian's offer. At a meeting of the
Board of Directors in August 1998, the Board voted 2-1 against Mr. Hovnanian's
offer, with Mr. Hovnanian voting against the offer as a result of an earlier
representation that he would vote in the same manner as Mr. Bossard, who voted
against the offer based on his belief that the VisionStar satellite license was
already an asset of the Company and that VisionStar and Mr. Hovnanian held the
asset in trust for the Company. Thereafter, the Board and Mr. Hovnanian have had
additional discussions concerning the acquisition of VisionStar.

In May 1999, Mr. Bossard changed his previous position on the Company's
ownership of VisionStar and commenced a lawsuit in New York State court against
Mr. Hovnanian and VisionStar alleging that, among other things, insofar as Mr.
Hovnanian procured the Ka-band satellite license for his own company,
VisionStar, he breached the partnership agreement among Shant S. Hovnanian,
Vahak S. Hovnanian and Mr. Bossard, which Mr. Bossard claims entitles him to a
one-third interest arising from a partnership acquisition. In the lawsuit, Mr.
Bossard claims that VisionStar represented in its application to the FCC that
the Ka-band license would be used in conjunction with CT&T's technology. Mr.
Bossard is requesting that the court grant him one-third of the value of
VisionStar and its Ka-band license and that the court impose a constructive
trust on the shares and assets of VisionStar, including the Ka-band license. The
Company is not a party to this lawsuit, either as a plaintiff or a defendant.

(b) The Founders are parties to an agreement with SPEEDUSNY, pursuant to
which they have the nontransferable right to require SPEEDUSNY to make available
60 MHz of continuous spectrum per polarization in the spectrum awarded by the
FCC for the purpose of providing certain programming (other than telephony,
two-way voice or data communication services) developed by them. The Founders
have agreed to terminate this agreement as a result of the CT&T transaction. See
Note 9.

32
<PAGE>

(c) SPEEDUSNY has had an agreement with the International CellularVision
Association ("ICVA") to fund, along with all other members of ICVA, operating
expenses of ICVA. SPEEDUSNY funded $15,000, $209,000 and $264,000 for the years
ended December 31, 1999, 1998 and 1997, respectively. The Company had also
subleased certain office space for ICVA on a month-to-month basis which is
included in the foregoing totals. Congressman Matthew J. Rinaldo, a director of
the Company, served as President of ICVA. ICVA was dissolved in 1999.

4. Property and Equipment

Property and equipment consists of the following:

December 31,
-------------------------
1999 1998
----------- -----------
Transmission and headend equipment $11,770,012 $11,519,726
Customer premises equipment 3,618,008 2,950,976
Leasehold improvements 2,259,957 2,298,610
Office equipment 542,967 553,714
Fiber optics 375,000 375,000
Equipment deposits 485,939 627,108
----------- -----------

19,051,883 18,325,134
Less--accumulated depreciation 8,092,906 5,488,766
----------- -----------
Property and equipment $10,958,977 $12,836,368
=========== ===========

Depreciation expense was approximately $2,779,000, $6,104,000 and
$3,811,000 for the years ended December 31, 1999, 1998 and 1997, respectively.

5. Stockholders' Equity

Common Stock

In July 1999, the Company issued 2,000,000 shares of its Common Stock to
NEXTLINK Communications, Inc. for $20,000,000.

Convertible Preferred Stock

In April 1998, the Company issued 3,500 shares of its Series A Convertible
Preferred Stock ("Convertible Preferred Stock") for $3,500,000. Through November
1998, 37 shares of Convertible Preferred Stock had been converted into 144,151
shares of Common Stock. The remaining 3,463 shares of Convertible Preferred
Stock with an aggregate stated value of $3,463,000 were redeemed in November
1998, as a result of the spectrum assignment, for an aggregate price of
$4,616,560, including accrued dividends of $88,200 and a mandatory redemption
premium of $1,065,360.

Stock Options

The Company's 1995 Stock Incentive Plan, as amended, (the "Plan") provides
for the grant of various stock-based incentives, including non-qualified and
incentive stock options. The Plan has reserved 1,750,000 shares of Common Stock
of the Company, including 500,000 shares that were approved by stockholders at
the Company's 1999 annual meeting, for issuance to employees, directors and
consultants.

At December 31, 1996, there were 200,700 options outstanding with a
weighted average exercise price of $11.46 per share.

During 1997, a total of 495,000 non-qualified stock options were granted
at exercise prices ranging from $7 to $9.25 per share and 447,550 options were
cancelled. All options were granted at the market price per share on the date of
grant and have ten-year terms. The weighted average exercise price for the
248,150 options outstanding at December 31, 1997 was $9.98 per share. At
December 31, 1997, there were 1,001,850 shares available for future grant.

During 1998, a total of 91,700 non-qualified stock options were granted at
an exercise price of $.89 and 191,600 options were cancelled. All options were
granted at the market price per share on the date of grant and have ten-year
terms. The weighted average exercise price for the 148,250 options outstanding
at December 31, 1998, all of which were exercisable, was $4.06 per share. At
December 31, 1998, there were 1,101,750 shares available for future grant.

During 1999, a total of 462,516 non-qualified stock options were granted
at exercise prices ranging from $3.59 to $5.34 per share, 62,900 options were
exercised and 7,250 options expired. All options were granted at the market
price per share on the date of grant and have ten-year terms. The weighted
average exercise price for the

33
<PAGE>

540,616 options outstanding at December 31, 1999, 112,979 of which were
exercisable, was $4.86 per share. At December 31, 1999, there were 1,046,484
shares available for future grant.

The Company accounts for the cost of stock-based compensation plans in
accordance with Accounting Principles Board No. 25, "Accounting for Stock Issued
to Employees." Since all options to date have been granted at the market price
per share on the date of grant, no compensation expense has been recognized by
the Company for its stock-based compensation plans during the years ended
December 31, 1999, 1998 and 1997. If the Company had determined compensation
expense based upon the fair value at the date of grant in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," compensation expense would have been $1,081,000, $70,000 and
$398,000 for the years ended December 31, 1999, 1998 and 1997, respectively. On
a pro forma basis, for the years ended December 31, 1999, 1998 and 1997: (i) net
earnings/(loss) would have been $9,565,000, $10,900,000 and $($15,661,000),
respectively; (ii) basic earnings/(loss) per share would have been $.52, $.59
and ($.98), respectively, and (iii) diluted earnings/(loss) per share would have
been $.51, $.57 and ($.98), respectively.

In determining fair value, the stock options were valued using the
Black-Scholes option pricing model. Key assumptions used in valuing the options
granted during 1999 included a risk-free interest rate of 5.0%, an expected life
of 3.5 years and a volatility factor of 131%.

Warrants

Warrants to purchase up to 190,862 shares of Common Stock of the Company,
issued in 1995, were outstanding at December 31, 1999. Of this amount, an
aggregate of up to 113,256 shares were issuable by the Company, and 77,606
shares were issuable by Vahak S. Hovnanian, a director of the Company, from his
Common Stock holdings. The warrants issued by the Company have a ten-year term
and an exercise price ranging from $12.50 to $15.03 per share.

During 1998, a total of 302,000 warrants were issued at exercise prices
ranging from $.01 to $5 per share. All warrants have five-year terms.

During 1999, a total of 550,000 warrants were issued at exercise prices
ranging from $1 to $4.97 per share and 377,000 warrants were exercised. The
warrants have three to five-year terms.

388,256 of the 588,256 outstanding warrants at December 31, 1999 have
registration rights in respect of the shares of Common Stock issuable upon
exercise.

In connection with the issuance of warrants and grants of Common Stock
during the year ended December 31, 1999, stock based compensation in the
aggregate amount of $1,231,000 for financial advisory and other services (and
included in selling, general and administrative expense) ($615,000), common
stock issuance costs ($308,000)and gain on assignment of spectrum ($308,000) was
recorded.

6. Sale of Spectrum

a. In October 1999, pursuant to an agreement dated June 13, 1999, as
amended, between the Company and NEXTLINK Communications, Inc. ("NEXTLINK"), the
Company consummated the assignment of 150 MHz of spectrum to NEXTLINK for
$20,000,000 in cash. The transaction was subject to regulatory approval, which
was received. From July 1999 to October 1999, pending regulatory approval of the
license assignment, NEXTLINK made monthly payments of approximately $172,000 to
the Company. In connection with this transaction, the Company incurred closing
costs and commissions in the aggregate amount of approximately $308,000.

b. In November 1998, pursuant to an agreement dated July 10, 1998, as
amended, between the Company and WinStar Communications, Inc. ("WinStar"), the
Company consummated the assignment of 850 MHz of spectrum to WinStar for
$32,500,000 in cash. The transaction was subject to regulatory and shareholder
approval, both of which were received. At the time of closing, the Company
repaid $3,500,000 which it had borrowed from WinStar in July 1998. The Company
had used these loan proceeds to meet outstanding obligations and finance its
operations pending the closing. As previously indicated, at the time of closing
or shortly thereafter, the Company also repaid the Subordinated Exchange Notes
held by Morgan Guaranty for an aggregate amount of $6,569,355, redeemed the
Convertible Preferred Stock held by Marshall for an aggregate amount of
$4,616,560 and repurchased the Secured Convertible Promissory Note held by
Newstart for an aggregate amount of $1,093,339. In connection with this
transaction, the Company paid an investment banking fee of $1,050,000 and
incurred other closing costs in the aggregate amount of approximately $409,000.
The assignment of spectrum required the Company to discontinue its subscription
television services. As a result, the Company wrote off property and equipment
with a carrying value

34
<PAGE>

aggregating approximately $2,975,000, represented by headend equipment, set-top
converters and capitalized installation costs, which amount has been included in
'Gain on assignment of spectrum'.

7. Commitments and Contingencies

Noncancellable Leases

At December 31, 1999, future minimum lease payments due under
noncancellable leases are as follows:

2000 .............................................................. $ 436,000
2001 .............................................................. 415,000
2002 .............................................................. 388,000
2003 .............................................................. 330,000
2004 .............................................................. 247,000
----------
Total ................................................ $1,816,000
==========

Rent expense was approximately $295,000, $766,000 and $695,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.

Employment Contracts

The Company entered into an employment agreement with Shant S. Hovnanian
in October 1995. The agreement provides that Mr. Hovnanian will act as President
and Chief Executive Officer of the Company and will devote substantially all of
his working time and efforts to the Company's affairs. Pursuant to the
agreement, Mr. Hovnanian may devote such working time and efforts to CT&T and
its affiliates as the due and faithful performance of his obligations under the
agreement permits. The agreement has a one-year term and provides for an annual
salary of $250,000, effective February 7, 1996. Upon the expiration of the
initial employment term on February 7, 1997, the agreement provides for
automatic extensions on a month-to-month basis, unless terminated by either
party upon 30 days advance written notice. Mr. Hovnanian is continuing to serve
as Chairman, President and Chief Executive Officer pursuant to the terms of this
employment agreement.

8. Legal Proceedings

(a) At December 31, 1999, the Company was party to an arbitration
proceeding with Charles N. Garber, its former Chief Financial Officer, who
asserted that his employment agreement was breached by the Company's failure to
pay him guaranteed minimum annual performance bonuses and certain other matters.
Mr. Garber sought damages in an amount estimated to total $488,000, plus his
costs and reasonable attorney's fees. In March 2000, the arbitrator ruled in
favor of Mr. Garber but only awarded him $100,000, plus costs, attorney's fees
and interest of approximately $92,000. This amount has been accrued at December
31, 1999.

9. Intellectual Property and Settlement of Litigation

The Company acquired 20% of CT&T and certain other rights from a U.S.
subsidiary of Philips Electronics, N. V. ("Philips"). CT&T is a holder of a
portfolio of fundamental broadband wireless patents and licenses. The Company
has operated its super high-speed Internet broadband wireless network under a
technology license from CT&T.

The acquisition of Philips' interest in CT&T was part of a settlement of
litigation commenced by M/A-COM, a unit of Tyco International Ltd. The Company's
portion of the settlement was $2.4 million which has been expensed for the year
ended December 31, 1999. The Founders have agreed in principle to contribute
their 80% interest in CT&T to the Company as part of the settlement agreement.

35
<PAGE>

10. Subsequent Events

In February 2000, the Company, through BroadBand Patents, LLC, a new
wholly-owned subsidiary, purchased certain intellectual property from GEC
Partners, LLP, an unaffiliated third party, pertaining to wireless transmissions
including U. S. Patent 5,594,937 titled "System for the transmission and
reception of directional radio signals utilizing a gigahertz implosion
concept.". The purchase price of $2,000,000 was paid $200,000 in cash and
$1,800,000 by the issuance of 332,942 shares of the Company's Common Stock.

36
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in New York, New York
on March 30, 2000.

SPEEDUS.COM, Inc.

/s/ Shant S. Hovnanian
Shant S. Hovnanian
President, Chief Executive Officer and
Chairman of the Board of Directors

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.

Signature Title Date

s/s Shant S. Hovnanian Chairman of the Board March 30, 2000
- ----------------------------------- of Directors, President
Shant S. Hovnanian Chief Executive Officer
and Financial Officer

s/s Angela M. Vaccaro Controller and Chief March 30, 2000
- ------------------------------ Accounting Officer
Angela M. Vaccaro

s/s Vahak S. Hovnanian Director March 30, 2000
- ----------------------
Vahak S. Hovnanian

s/s Matthew J. Rinaldo Director March 30, 2000
- ----------------------
Matthew J. Rinaldo

s/s Catherine Petrossian Director March 30, 2000
- ------------------------------
Catherine Petrossian

37
<PAGE>

SPEEDUS.COM, Inc.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Balance at end
Description of Period Expenses Deductions of Period
----------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C>
1999
Allowance for doubtful accounts $1,019,933 $ 0 $1,019,933 $ 0
========== ========== ========== ==========

1998
Allowance for doubtful accounts $ 290,984 $ 730,050 $ 1,101 $1,019,933
========== ========== ========== ==========

1997
Allowance for doubtful accounts $ 124,370 $ 550,290 $ 383,676 $ 290,984
========== ========== ========== ==========
</TABLE>

S-1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statements on
Form S-3 (File No. 333-53517) and Form S-8 (File No. 333-11585) OF SPEEDUS.COM,
INC. of our report dated March 30, 2000 appearing in this 1999 Form 10-K

PricewaterhouseCoopers LLP

New York, New York
March 30, 2000

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 44,613,101
<SECURITIES> 0
<RECEIVABLES> 8,064
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,764,277
<PP&E> 10,958,977
<DEPRECIATION> 8,092,906
<TOTAL-ASSETS> 55,769,290
<CURRENT-LIABILITIES> 1,969,850
<BONDS> 0
0
0
<COMMON> 196,710
<OTHER-SE> 53,602,730
<TOTAL-LIABILITY-AND-EQUITY> 55,769,290
<SALES> 612,135
<TOTAL-REVENUES> 612,135
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,204,158
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,590
<INCOME-PRETAX> 10,975,938
<INCOME-TAX> 330,000
<INCOME-CONTINUING> 10,645,938
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,645,938
<EPS-BASIC> .58
<EPS-DILUTED> .57

</TABLE>