ROCKY MOUNTAIN INTERNET INC, 424B2, 1998-11-24

ROCKY MOUNTAIN INTERNET INC
424B2, 1998-11-24
COMPUTER PROGRAMMING, DATA PROCESSING, ETC.

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[LOGO] ROCKY MOUNTAIN INTERNET, INC.
RMI
PROSPECTUS 4,596,500 COMMON STOCK PURCHASE WARRANTS
13,880,233 SHARES OF COMMON STOCK

This Prospectus relates to up to 4,000,000 shares (the "Acquisition Shares") of
common stock, $0.001 par value (the "Common Stock"), that may be offered and
issued by Rocky Mountain Internet, Inc., a Delaware corporation (the "Company"
or "RMI"), from time to time in connection with the merger with or acquisition
by the Company of other businesses or assets. With the consent of the Company,
this Prospectus may also be used by persons or entities who have received or
will receive from the Company shares of Common Stock, including the Acquisition
Shares, in connection with such mergers or acquisitions and who may wish to sell
such shares of Common Stock under circumstances requiring or making desirable
the use of this Prospectus and by certain transferees of such persons. The
Company's consent to such use may be conditioned upon such persons or entities
agreeing not to offer more than a specified number of shares following
amendments to this Prospectus, which the Company may agree to use its best
efforts to prepare and file at certain intervals. The Company may require that
any such offering be effected in an organized manner through securities dealers.
The Company anticipates that the terms of mergers, acquisitions, or business
combinations, if any, involving the issuance of securities covered by this
Prospectus will be determined by direct negotiations with the owners or
controlling persons of the businesses or assets to be merged with or acquired by
the Company, and that the shares of Common Stock issued will be valued at prices
reasonably related to market prices current either at the time that a merger or
acquisition are agreed upon or at or about the time of delivery of shares. No
underwriting discounts or commissions will be paid, although finder's fees may
be paid from time to time with respect to specific mergers or acquisitions. Any
person receiving any such fees may be deemed to be an underwriter within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"). There
can be no assurance that the Company will, in fact, consummate a business
combination or asset acquisition on terms that are favorable to the Company.

This Prospectus also relates to 535,000 Common Stock Purchase Warrants (the
"DataXchange Warrants") that may be offered and issued by the Company in
connection with the proposed acquisition by the Company of all of the issued and
outstanding common stock of DataXchange Network, Inc. ("DataXchange"), a
Florida-based national Internet backbone provider. See "RECENT DEVELOPMENTS -
ACQUISITIONS AND PROPOSED ACQUISITIONS." This Prospectus also relates to the
offer and sale of up to 535,000 shares of Common Stock that can be issued upon
the exercise of the DataXchange Warrants. This Prospectus may also be used by
persons or entities who are anticipated to receive the DataXchange Warrants and
the shares of Common Stock underlying the DataXchange Warrants and who may wish
to

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sell such warrants and/or shares of Common Stock under circumstances requiring
or making desirable the use of this Prospectus and by certain transferees of
such persons.

This Prospectus may also be used by donees, pledgees, and other
transferees of up to 3,950,000 shares of Common Stock who receive such shares
as gifts, as security for loans, and similar transactions and who may wish to
sell such shares under circumstances requiring or making desirable the use of
this Prospectus and by certain transferees of such persons or entities.

This Prospectus also relates to 9,880,233 shares of Common Stock (the
"Selling Securityholder Shares"), of which approximately 3,135,538 shares are
currently issued and outstanding and of which approximately 6,744,695 shares
may be issued upon the exercise of currently outstanding warrants to purchase
shares of Common Stock. This Prospectus also relates to such additional
shares of Common Stock that may be issued pursuant to the anti-dilution
provisions of such outstanding warrants. See "DESCRIPTION OF CAPITAL STOCK."
The Selling Securityholder Shares will be offered and sold from time to time
by certain persons identified below under the caption "SELLING
SECURITYHOLDERS" (the "Selling Securityholders"), and the Company will
receive none of the proceeds of any such sales.

This Prospectus also relates to 4,596,500 outstanding warrants to
purchase shares of Common Stock (the "Warrants," which includes the
DataXchange Warrants) of which 4,061,500 Warrants may be offered and sold
from time to time by certain of the Selling Securityholders, and the Company
will receive none of the proceeds of any such sales. However, the Company
will receive proceeds from the exercise of Warrants if any Warrants are
exercised. The remaining 535,000 Warrants are anticipated to be offered and
sold by the Company in connection with the proposed acquisition of
DataXchange. The shares of Common Stock that may be issued upon the exercise
of 4,061,500 of the Warrants are included in the 9,880,233 shares identified
above as being offered by the Selling Securityholders. This Prospectus also
relates to the sale and issuance by the Company of shares of Common Stock to
holders of the Warrants (other than the Selling Securityholders) upon the
exercise of those Warrants.

The Company will pay substantially all of the expenses with respect to
the offering and the sale of the Acquisition Shares, the Selling
Securityholder Shares, and the Warrants (sometimes referred to herein
collectively as the "Securities") to the public, including the costs
associated with registering the Securities under the Securities Act and
preparing and printing this Prospectus. Normal underwriting commissions and
broker fees, however, as well as any applicable transfer taxes, are payable
individually by the Selling Securityholders. See "USE OF PROCEEDS," "RECENT
DEVELOPMENTS--CHANGE IN CONTROL," "SELLING SECURITYHOLDERS," and "DESCRIPTION
OF CAPITAL STOCK."

On October 15, 1998 the closing sale price of the Common Stock on the
NASDAQ SmallCap-TM- Market ("Nasdaq") was $7.50 per share.

SEE "RISK FACTORS," BEGINNING ON PAGE 16, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE SECURITIES.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

THE DATE OF THIS PROSPECTUS IS NOVEMBER 19, 1998.

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So long as the Registration Statement of which this Prospectus forms a part
is effective and the disclosure set forth herein is current, the Selling
Securityholders may sell the Selling Securityholder Shares and the Warrants
publicly and the Company may issue and sell shares of Common Stock upon exercise
of the Warrants. The distribution of the Selling Securityholder Shares and the
Warrants by the Selling Securityholders may be effected in one or more
transactions that may take place on Nasdaq, including ordinary broker's
transactions, privately negotiated transactions, pursuant to Rule 144 under the
Securities Act, or through sales to one or more dealers for resale of such
securities as principals at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specially negotiated brokerage fees or commissions may be paid
by the Selling Securityholders in connection with sales of such Selling
Securityholder Shares.

The Selling Securityholders and intermediaries through whom the Securities
are sold may be deemed to be "underwriters" within the meaning of the Securities
Act with respect to the Securities offered, and any profits realized or
commission received may be deemed underwriting compensation. The Company has
agreed to indemnify certain of the Selling Securityholders against certain
liabilities, including liabilities under the Securities Act.

FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER "PROSPECTUS SUMMARY",
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," AND "BUSINESS" IN ADDITION TO CERTAIN STATEMENTS CONTAINED
ELSEWHERE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND ARE THUS
PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES
AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST
SIGNIFICANT OF SUCH RISKS, UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED UNDER
THE HEADING "RISK FACTORS," BEGINNING ON PAGE 16 OF THIS PROSPECTUS, AND
PROSPECTIVE INVESTORS ARE URGED TO CAREFULLY CONSIDER SUCH FACTORS.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information (the "1934 Act
Filings") with the Securities and Exchange Commission (the "SEC" or the
"Commission"). The Company has filed with the Commission a Registration
Statement on Form S-1 of which this Prospectus forms a part (together with any
amendments thereto, the "Registration Statement") under the Securities Act with
respect to the Securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information,
exhibits, and undertakings contained in the Registration Statement. Statements
contained in this Prospectus concerning the provisions of documents are
necessarily summaries of such documents and each such statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Commission. For further information regarding the Company and the Securities
offered hereby, reference is hereby made to the Registration Statement and the
exhibits and schedules thereto. Copies of the Registration Statement, including
the exhibits thereto and the 1934 Act Filings, can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 500 West Madison Street, Room 1400, Chicago, Illinois
60606, and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth

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Street, Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a web site on the World Wide Web that contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the Commission, including the Company, and the address is
http://www.sec.gov.

PROSPECTUS SUMMARY

THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS QUALIFY THE FOLLOWING
SUMMARY IN ITS ENTIRETY, AND PROSPECTIVE PURCHASERS OF ANY OF THE SECURITIES
OFFERED HEREBY SHOULD READ SUCH MORE DETAILED INFORMATION IN CONJUNCTION WITH
THE FOLLOWING SUMMARY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE
SECTION OF THIS PROSPECTUS UNDER THE CAPTION "RISK FACTORS." THE COMPANY
OBTAINED CERTAIN INDUSTRY DATA USED IN THIS PROSPECTUS FROM INDUSTRY AND
GOVERNMENT SOURCES, AND THE COMPANY HAS NOT INDEPENDENTLY VERIFIED SUCH DATA.
CERTAIN TERMS USED HEREIN ARE DEFINED IN THE GLOSSARY ATTACHED HERETO. THIS
PROSPECTUS MAKES REFERENCE TO TRADEMARKS OF OTHER COMPANIES, WHICH MARKS ARE THE
PROPERTY OF SUCH COMPANIES.

THE COMPANY

The Company is a full service communications solutions provider of switched
and Internet Protocol ("IP")-based communications products and services for
small- and medium-sized business enterprises, as well as dial-up residential
customers. The Company operates 9 Internet points of presence ("POPs") in
Colorado and, through agreements with third-party providers, the Company can
provide Internet access in 90 of the 100 largest metropolitan statistical areas
in the United States. The Company monitors and controls its network through its
Network Operations Center ("NOC") located in Denver, Colorado. The Company
intends to provide to its customers on a nationwide basis comprehensive
communications services, including dedicated Internet access, dial-up Internet
access, IP telephony ("IP Telephony"), point-to-point private line, frame relay
and local and long distance telephone service. In addition, the Company offers
its customers value-added web services, including web site hosting, web site
production and marketing, electronic commerce ("e-commerce") and web training.
The Company had combined pro forma revenues for the year ended December 31, 1997
of $9,052,000 and provided dedicated access and web services to over 1,200
business customers and over 15,300 dial-up customers as of September 30, 1998.

INDUSTRY BACKGROUND. The Company enables its customers to take advantage of
emerging Internet technology. The emergence of the Internet, IP Telephony and
the widespread adoption of IP as a data transmission standard in the 1990's are
rapidly accelerating the standardization of networking protocols. This
standardization has revolutionized business-to-business transactions and e-
commerce for consumer shopping. Moreover, business enterprise networks are
rapidly adopting data communications network plans incorporating IP-based
technologies and migration paths to utilize the Internet as much as possible.

Internet access and IP-based services represent two of the fastest growing
segments of the over $200 billion telecommunications services marketplace
according to International Data Corporation ("IDC"). IDC estimates that the
number of Internet users in the United States who access the World Wide Web
reached approximately 29.2 million in 1997 and is forecasted to grow to
approximately 72.1 million by the year 2000. In addition, total Internet Service
Provider ("ISP") revenues in the United States are projected to grow from $4.6
billion in 1997 to over $18 billion in 2000. In the past, much of the growth in
ISP revenues has been driven by the dial-up or retail sector of the Internet.
However, today businesses represent the largest and fastest growing

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segment of the Internet market. IDC predicts that U.S. corporate Internet access
revenues will grow from approximately $1.9 billion in 1996 to over $6.6 billion
in 2000 and that revenues from enhanced Internet services, such as web site
hosting, security, e-commerce, virtual private networks and advanced Internet
applications, will grow from approximately $352 million in 1997 to over $7
billion in 2000.

The rapidly growing need for Internet access and technology has resulted in
a highly fragmented industry with the proliferation of over 4,000 ISPs operating
within the United States, according to industry estimates. These ISPs are
primarily made up of a few large national providers focused on high bandwidth
access and a large number of smaller providers with limited resources focused on
serving local or regional markets. The Company believes that the solutions
offered by these companies often fail to address certain elements required to
ensure that customers' mission-critical Internet operations are reliable,
scalable and high-performing and that these companies fail to provide a broad
array of efficient and low-cost communications products and services.

POSITIONING OF THE COMPANY. The Company offers a broad array of
communications products and services tailored to meet customer needs and
provides high quality customer support. The Company delivers its products and
services through two divisions: Communication Services and Web Services. The
Company believes that, based upon its experience, a growing number of businesses
will demand one point-of-contact for communications solutions for the following
reasons: (i) to ensure proper system/network integration; (ii) to obtain a
single point of responsibility for products and services that might have
numerous providers; and (iii) to continue to take advantage of evolving
communications technologies. The Company intends to increase the breadth of its
products and services delivered to its customers by adopting new technology,
acquiring complementary businesses and capitalizing on strategic relationships.

DIVISIONS AND SERVICES

DIVISIONS SERVICES DESCRIPTION
COMMUNICATION SERVICES INTERNET ACCESS
CO-LOCATION T-1 or greater Internet access
provided to customer's server
located at the Company's POP

DEDICATED ACCESS Fractional T-1, T-1 or greater
Internet access provided to a
customer's office

DIAL-UP SERVICE Nationwide Internet access for
consumer and small business
customers using modems to dial
into the Company's network

WIRELESS ACCESS Evolving technology allowing
up to 750 kbps wireless
Internet access currently
available in the Denver metro
area
TELEPHONY SERVICES
E-PHONE Long distance calling using
IPTelephony technology

LONG DISTANCE Traditional long distance
services

LOCAL (C-LEC) Traditional local exchange
telephone service on a resale
or facilities-owned basis
throughout Colorado

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DEDICATED
LINE SERVICES Dedicated and frame relay
networks to carry voice and
data for business customers

WEB SERVICES WEB SITE HOSTING A customer's web site is
"hosted" on the Company's
servers and connected to the
Internet via a high-speed
connection

WEB SITE PRODUCTION Design, development and
implementation of customer web
sites
WEB SITE MARKETING
TRAFFIC BUILDER PLUS Unique web site marketing
program whereby customer web
sites are marketed
exclusively to Internet
users

INFOHIWAY Search engine that contains a
large and rapidly growing
database of reference
information on the World Wide
Web

ELECTRONIC COMMERCE
E-SELL Turnkey solution for setting
up an Internet store

WEB TRAINING Various levels of Internet
training for customers from
basic access training to HTML
programming

BUSINESS STRATEGY

The Company's objective is to become a leading national provider of a broad
array of communications services, distinguished by a state-of-the-art network
and high quality customer service and support. Key elements to the Company's
business strategy include the items discussed below. There can be no assurance,
however, that the Company will be able to fully implement its strategy or to
implement its strategy to the extent that it can become profitable.

PROVIDE A BROAD ARRAY OF COMMUNICATIONS SOLUTIONS TO ITS CUSTOMERS. The
Company has built a portfolio of products, services and skill sets to develop
and deliver comprehensive internetworking communications solutions to both
business and residential customers. These products and services are organized
under two divisions including Communication Services and Web Services. The
Company plans to continue to add products and services to its portfolio and
believes that a growing number of businesses and consumers will demand that one
company provide all of their communications needs. The Company believes that
this one point-of-contact service delivery model ensures: (i) high-performance,
cost-effective network planning, design and implementation; (ii) maintenance of
a single point of responsibility; and (iii) an ongoing customer relationship as
a technology partner for communications applications.

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proactive recruitment, retention and training programs; (ii) utilizing the
Company's extranet to provide real-time, interactive customer service; (iii)
developing an on-line billing system enabling customer-controlled account
customization and analysis; and (iv) further deploying and maintaining the
Company's service delivery standards and guarantees. The Company believes that,
due to its high quality customer service, it experiences low turnover rates and
achieves a significant percentage of its subscriber growth from customer
referrals.

MAXIMIZE NETWORK UTILIZATION. Through its network and agreements with
third-party providers, the Company provides Internet access in 90 of the 100
largest metropolitan statistical areas in the United States. The Company plans
to continue to selectively add POPs where it can add value to its customers. The
Company believes that the ISP industry has historically been divided between
ISPs focused on business customers and ISPs focused on residential dial-up
customers. The Company's business strategy is to maximize network utilization 24
hours a day by targeting both daytime business and evening-intensive consumer
users.

SELECTIVELY TARGET KEY CITIES TO EXPAND NATIONWIDE. The Company plans to
expand its sales efforts nationally by focusing on targeted areas where there is
a large concentration of businesses and favorable demographics. In markets where
the Company is using third-party provider networks, the Company intends to
initially target dial-up customers through advertising, promotions, public
relations, telemarketing and customer referrals. Once the Company attains
critical mass in these locations, it intends to establish its own POPs and begin
targeting business and residential customers with its broad array of
communications products and services.

TAKE ADVANTAGE OF SIGNIFICANT CONSOLIDATION OPPORTUNITIES. The Company
believes that the Internet industry is undergoing structural changes with an
increasing use of the Internet for mission-critical applications, which is
creating demand for high quality network operations, customer service and
technical support. The Company also believes that there is a market opportunity
to consolidate ISPs, Internet-based service companies and Internet technologies.
Evidence of this strategy includes the Company's recent acquisitions of
Infohiway, Inc. ("Infohiway") and Application Methods Incorporated (together
with its affiliated entity, e-Sell Commerce Systems, Inc., "Application
Methods"). Infohiway is a company that has developed a search engine that gives
the Company on-line advertising opportunities for its customers. Application
Methods' e-commerce solution, e-SELL, enables the Company to provide business
customers with browser-based software to conduct business over the Internet. The
Company believes these acquisitions enhance the Company's position as a full
service provider of communications solutions. The Company will continue to
evaluate opportunities to acquire companies that it believes will enhance its
product and service offerings. In addition, the Company intends to supplement
its organic national growth efforts by acquiring local ISPs in strategic
locations to maximize economies of scale.

There can be no assurance, however, that the Company will be able to
identify, acquire, or profitably manage additional businesses, if any, without
substantial costs, delays, or other operational or financial difficulties. In
addition, there can be no assurance that acquired businesses, if any, will
achieve anticipated revenues and earnings.

RECENT DEVELOPMENTS

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such action and to assert counterclaims against ICC; however, there can be no
assurance that the Company will prevail in its defense or any counterclaims.
The Company is hopeful that it can resolve the dispute with ICC without the
necessity for a trial; however, there can be no assurance as to the Company's
ability in this regard. In the event that the dispute cannot be resolved
expeditiously, the Company expects that it would incur additional costs and
expenses as a result of the litigation and that the litigation may hamper the
Company's ability to obtain additional financing. As a result of the
terminated merger transaction and the related financing transactions which
were not completed, the Company estimates that it incurred costs, expenses
and related fees of between $3.8 million and $5.2 million, a portion of which
are in dispute. The Company recorded an expense of $4.5 million in the third
quarter, 1998 relating to these items. Of this amount, approximately $2.7
million relates to a non-cash item relating to warrants issued by the
Company. The Company does not currently have the ability to pay all of such
costs, fees and expenses. The Company believes that it will be able to agree
on a schedule for the payment of these costs, fees and expenses that is
satisfactory to all parties; however, there can be no assurance that the
Company will be able to reach an agreement with all parties regarding the
payment of such costs, fees and expenses. See "RECENT DEVELOPMENTS" and
"LEGAL PROCEEDINGS."

In September 1998, the Company entered into a Software License and
Consulting Services Agreement (the "Novazen Agreement") with Novazen Inc.
("Novazen") to provide the Company proprietary billing software tailored to its
business. As consideration for the consulting services to be provided by
Novazen, the Company paid $100,000 in cash and issued to Novazen 25,000 shares
of its Common Stock. The 25,000 shares of Common Stock are being offered for
resale pursuant to this Prospectus. After the Company entered into the Novazen
Agreement, Kevin R. Loud, an officer of the Company, purchased 38,000 shares of
Novazen common stock for $1.60 per share.

In September 1998, the Company entered into non-binding letters of
intent to acquire (i) all of the issued and outstanding capital stock of
DataXchange in exchange for up to 535,000 shares of the Company's Common
Stock and, subject to the achievement of certain financial performance
objectives, warrants to purchase up to 535,000 shares of the Company's Common
Stock; (ii) substantially all of the assets of Stonehenge Business Systems,
Inc. ("Stonehenge"), an ISP located in Englewood, Colorado for approximately
$450,000 payable in the form of shares of the Company's Common Stock and the
assumption of certain liabilities; and (iii) certain assets that comprise the
access and hosting business of Unicom Communications, Inc. ("Unicom"), a
Kansas-based ISP with approximately 3,500 subscribers in exchange for
approximately $1,700,000 payable in the form of shares of the Company's
Common Stock and the assumption of certain liabilities. Additionally, the
Company recently entered into a non-binding memorandum of understanding
regarding the possible acquisition of Internet Now, Inc. ("Internet Now"), an
ISP located in Phoenix, Arizona for $150,000 payable in cash and 171,250
shares of the Company's Common Stock. If, however, the average of the closing
prices for the Company's Common Stock is less than $8.00 per share for the
five trading days ending three days before the closing of the Internet Now
acquisition, the number of shares of Common Stock to be issued by the Company
will be determined by dividing $1,370,000 by such average price. Of the cash
portion of the purchase price, $20,000 has been paid to the shareholders of
Internet Now. The Company is currently negotiating definitive agreements for
the acquisitions of DataXchange, Stonehenge, Unicom and Internet Now
(collectively, the "Proposed Acquisitions") and expects to complete these
transactions prior to the end of November, 1998. There can be no assurance,
however, that such transactions, or any of them, will be completed by such
date. The Company believes these current and proposed acquisitions will
accelerate its existing growth plans; however, there can be no assurance that
the Company will be able to enter into definitive agreements, consummate such
transactions or integrate these companies successfully. See "RECENT
DEVELOPMENTS - ACQUISITIONS AND PROPOSED ACQUISITIONS," "RISK FACTORS,"
"BUSINESS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS."

In August 1998, Douglas H. Hanson loaned $400,000 to the Company for
various working capital needs and in October, 1998 he loaned another $400,000 to
the Company for working capital needs. Such loans have been consolidated and
are evidenced by one promissory note (the "Hanson Loan"). The principal amount
of the promissory note, together with interest at the rate of 11% per annum, is
payable in full 90 days after October 20, 1998. The Company needs to obtain
additional financing to repay the Hanson Loan, to fund its current working
capital needs and to execute its business plan. There can be no assurance that
the Company

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will be able to obtain such financing or, if so, whether such financing will be
on terms which are acceptable to the Company.

On June 5, 1998, RMI acquired Infohiway, a Colorado-based company that
developed a search engine that RMI believes has unique data searching features.
RMI also acquired Seattle-based Application Methods on July 1, 1998. Application
Methods has developed a proprietary e-commerce software package, e-SELL.

At the 1998 Annual Meeting of Stockholders held on March 12, 1998 (the "RMI
Annual Meeting"), RMI's stockholders approved an amendment to RMI's Certificate
of Incorporation that authorized (i) an increase in the number of shares of
Common Stock that may be issued by RMI from 10,000,000 to 25,000,000 and (ii) a
decrease in the number of votes required for stockholder actions from a majority
of the shares of Common Stock outstanding to a majority of the shares present in
person or represented by proxy at a meeting and entitled to vote thereon. Also
at the RMI Annual Meeting, the stockholders of RMI authorized RMI's board of
directors to declare, at any time or from time to time, in its discretion until
March 12, 1999, reverse stock splits of Common Stock, with the exact size of the
stock splits to be determined by the board of directors up to a maximum ratio of
one-for-ten.

RMI is a Delaware corporation incorporated in October 1995. It acquired the
assets of Rocky Mountain Internet, Inc., a Colorado corporation incorporated in
1994 that began doing business in 1993 as an unincorporated enterprise. RMI
completed an initial public offering (the "IPO") of 1,365,000 units of
securities (the "IPO Units") on September 5, 1996. Each IPO Unit consisted of
one share of Common Stock and one IPO Warrant (as defined below) to purchase a
share of Common Stock at a price of $4.375. On September 14, 1997, RMI completed
a private placement of units consisting of two shares of Common Stock and a
warrant to purchase a share of Common Stock. The per unit price was $4.00 and
was allocated $1.90 to each share of Common Stock and $0.20 to the warrant to
purchase a share of Common Stock. The warrants entitle the holder thereof to
purchase a share of Common Stock for $3.00 and expire on June 13, 2000.
Effective October 1, 1997, RMI issued and sold to Mr. Douglas H. Hanson
1,225,000 shares of Common Stock for a purchase price of $2,450,000, or $2.00
per share, as more fully described in "CERTAIN TRANSACTIONS -- CHANGE IN
CONTROL." Mr. Hanson also became RMI's President, Chief Executive Officer and
Chairman of the board of directors of the Company. As a result of these related
transactions, Mr. Hanson obtained effective control of RMI and, as of October
15, 1998, had the authority to vote 52.3% of RMI's Common Stock. The Common
Stock and the IPO Warrants are quoted on Nasdaq under the symbols "RMII" and
"RMIIW," respectively.

RMI's principal executive offices are located at: 1099 18th Street, Suite
3000, Denver, Colorado 80202, telephone (303) 672-0700. RMI's web site is
www.rmi.net.

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THE OFFERING

Common Stock offered by:

The Company 4,000,000 shares (1)
Selling Securityholders 9,880,233 shares (2)

Common Stock Purchase Warrants
("Warrants") offered by: The Company 535,000 Warrants (3)
Selling Securityholders 4,061,500 Warrants (4)

Common Stock Outstanding Prior to this Offering 8,106,252 shares

Common Stock Outstanding After this Offering 18,850,947 shares (5)

Nasdaq Trading Symbols Common Stock: RMII
Common Stock Purchase Warrants: RMIIW

(1) Such shares may be offered and issued from time to time in connection
with future acquisitions by the Company, including the Proposed Acquisitions.
With the consent of the Company, this Prospectus may also be used by persons or
entities who have received or will receive from the Company Common Stock covered
by this Prospectus in connection with acquisitions of businesses, properties or
securities and who may wish to sell such stock under circumstances requiring or
making desirable use of this Prospectus and by certain transferees of such
persons or entities.

(2) Approximately 3,135,538 of such shares are currently issued and
outstanding and may be offered and sold from time to time by the Selling
Securityholders. The remaining approximately 6,744,695 shares may be purchased
upon the exercise of the Warrants and thereafter offered and sold by the holders
thereof pursuant to this Prospectus. Does not include shares of Common Stock
that may be issued pursuant to anti-dilution provisions of various outstanding
warrants, including the Warrants to be offered and sold by certain Selling
Securityholders. This Prospectus may also be used for the resales, from time to
time, of up to 3,950,000 shares that may be acquired by donees, pledgees, and
other transferees who receive shares covered by this Prospectus as gifts, as
security for loans, and in other similar transactions and who may wish to sell
such shares under circumstances requiring or making desirable the use of this
Prospectus. See "SELLING SECURITYHOLDERS" and "DESCRIPTION OF CAPITAL STOCK."

(3) Anticipated to be issued in connection with the proposed acquisition
of DataXchange.

(4) Includes 111,500 Warrants issued to the representative of the
underwriters of the Company's IPO in 1996 and 3,950,000 Warrants owned by
Douglas H. Hanson, President, Chairman, and Chief Executive Officer of the
Company (the "Hanson Warrants"). The Warrants owned by Mr. Hanson may be
exercised until September 22, 1999 for a purchase price of $1.90 per share of
Common Stock purchased. The shares of Common Stock issuable upon exercise of
these Warrants are included in the 9,880,233 shares of Common Stock offered by
the Selling Securityholders. See "CERTAIN TRANSACTIONS--CHANGE IN CONTROL" and
"DESCRIPTION OF CAPITAL STOCK."

(5) Assumes: (i) the issuance of all 4,000,000 of the Acquisition Shares in
one or more mergers by the Company with other businesses or acquisitions by the
Company of other businesses or assets; and (ii) the exercise of all of the
Warrants, including all of the Hanson Warrants. Does not give effect to the
exercise of outstanding options granted to employees or non-employee directors
of the Company pursuant to various stock option plans or shares of Common Stock
that can be issued pursuant to anti-dilution provisions of the Warrants

-10-
<PAGE>

and other derivative securities. See "RISK FACTORS--SHARES ELIGIBLE FOR RESALE,"
"SELLING SECURITYHOLDERS," "CERTAIN TRANSACTIONS--CHANGE IN CONTROL," and
"DESCRIPTION OF CAPITAL STOCK."

RISK FACTORS

The Company and its business are subject to varying risks, and the
securities offered hereby are speculative, involve a high degree of risk, and
should not be purchased by persons who cannot afford the loss of their
investment. See "RISK FACTORS."

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF THE COMPANY

The following summary unaudited pro forma condensed combined financial
information presented below has been derived from the unaudited and audited
historical financial statements of RMI and DataXchange, included elsewhere in
this Prospectus, and reflect management's present estimate of pro forma
adjustments, including a preliminary estimate of purchase price allocations,
which ultimately may be different. The pro forma financial data give effect to
the proposed acquisition of DataXchange and includes revenues and expenses for
Application Methods for the periods prior to its acquisition on July 1, 1998.

The acquisitions are being accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed are recorded at
their estimated fair values, which are subject to further adjustment based upon
appraisals and other analyses, with appropriate recognition given to the effect
of RMI's income tax rates.

The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 1997 gives effect to the acquisitions as if they had
been consummated at the beginning of such year. This pro forma statement of
operations combines the historical consolidated statement of operations for the
year ended December 31, 1997 for RMI, the historical combined statement of
operations for the year ended December 31, 1997 for Application Methods and the
historical statement of operations for the year ended January 31, 1998 for
DataXchange.

The unaudited pro forma condensed combined statement of operations for the
nine months ended September 30, 1998 gives effect to the acquisitions as if they
had been consummated January 1, 1998. This pro forma statement of operations
combines the historical operations for RMI and Application Methods for the nine
month period ended September 30, 1998 and for DataXchange for the nine month
period ended July 31, 1998.

The unaudited pro forma condensed combined balance sheet as of September
30, 1998 gives effect to the acquisitions as if they had been consummated on
that date. This pro forma balance sheet combines the historical consolidated
balance sheet at that date for RMI and the historical balance sheets at such
date for DataXchange.

The unaudited pro forma condensed combined financial statements may not be
indicative of the results that actually would have occurred if the transactions
described above had been completed and in effect for the periods indicated or
the results that may be obtained in the future. The unaudited pro forma
condensed combined financial data presented below should be read in conjunction
with the audited and unaudited historical financial statements and related notes
thereto of RMI and DataXchange and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," included elsewhere in this
Prospectus.

-11-
<PAGE>

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
<S> <C> <C>
Statement of Operations Data(1):
Revenue $ 9,052 $ 8,692
Cost of sales 4,020 3,402
Gross Margin 5,032 5,290
Operating Expenses 11,347 9,377
Other operating expenses --- 4,549
Other Expenses 339 206
---------- -----------
Net loss $ (6,654) $ (8,842)
---------- -----------
---------- -----------

Basic and Diluted loss per
share $ (1.09) $ (1.09)
---------- -----------
---------- -----------

Average number of common
shares outstanding 6,089 8,128
---------- -----------
---------- -----------
</TABLE>

AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>
<S> <C>
Balance Sheet Data (1):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .$ 957
Working capital (deficit) . . . . . . . . . . . . . . . . . . . .$ (3,837)
Goodwill (Net). . . . . . . . . . . . . . . . . . . . . . . . . .$ 9,216
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .$ 15,412
Long Term Debt and Capital Lease Obligations, net of
current portion. . . . . . . . . . . . . . . . . . . . . . . . .$ 654
Total Stockholders' Equity. . . . . . . . . . . . . . . . . . . .$ 8,655
</TABLE>

(1) This summary information should be read in conjunction with the
Selected Unaudited Pro forma Condensed Combined Balance Sheet, Statements
of Operations and Notes included elsewhere herein.

Summary Historical Financial Data

The following table sets forth selected historical financial and other
data of RMI. RMI was formed in October 1993 and has generated operating
losses since inception as well as negative cash flow in 1996 and 1997. The
selected data set forth below as of December 31, 1995 and for the period then
ended have been derived from the financial statements of RMI which have been
audited by McGladrey & Pullen, LLP, independent auditors. The selected
consolidated statements of operations and the balance sheet data set forth
below as of December 31, 1996 and 1997 and for the periods then ended have
been derived from the financial statements of RMI which have been audited by
Baird, Kurtz & Dobson, independent auditors. The selected financial data for
the nine month periods ended September 30, 1998 and 1997 are derived from
unaudited financial statements. The unaudited financial statements include
all adjustments, consisting of normal recurring accruals, which RMI considers
necessary for a fair presentation of the financial position and results of
operations for these periods. The operating results for the nine months ended
September 30, 1998 are not necessarily indicative of the results to be
expected for any future period.

-12-
<PAGE>

The summary historical financial data should be read in conjunction with
the Consolidated Financial Statements and related Notes thereto and the
information included under "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" included elsewhere in this Prospectus.

NINE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------- SEPTEMBER 30,
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................................................... $ 1,179 $ 3,282 $6,127 $ 4,432 $ 6,506
Cost of revenues earned........................................... 320 1,104 2,060 1,485 2,122
Gross profit...................................................... 859 2,178 4,067 2,946 4,385
General, selling and
administrative expenses........................................... 968 4,459 7,868 5,905 11,531
Operating (loss) income........................................... (109) (2,281) (3,801) (2,959) (7,146)
Net (loss) income................................................. (129) (2,343) (4,153) (3,215) (7,328)
Net (loss) income per
share (1)......................................................... $ (0.07) $ (1.03) $ (0.79) $ (0.64) $ (0.99)
OTHER DATA:
EBITDA (2)........................................................ (9) (1,956) (2,918) (2,298) (6,149)
BALANCE SHEET DATA:
Cash and Cash Equivalents......................................... $ 275 $ 349 $1,053 $ 287 $ 731
Investments....................................................... 0 1,357 0 277 0
Working Capital (Deficit)......................................... (187) 371 (209) (1,949) (3,803)
Total Assets...................................................... 925 5,540 5,082 4,708 9,953
Long Term Debt and Capital
Lease Obligations, net of
current portion.................................................. 524 1,134 905 985 654
Total Stockholders'
(deficit) equity................................................. (169) 2,317 2,083 441 3,653
</TABLE>

(1) Loss per share is computed based on 1,868,000 shares outstanding for 1995,
2,295,000 shares outstanding for 1996 and 5,268,000 shares outstanding for
1997, and 5,044,000 and 7,402,000 shares outstanding for the nine months
ended September 30, 1997 and 1998, respectively. This represents the
weighted average of common shares outstanding for both basic and diluted
earnings per share for each period. See Note 1 to the Company's financial
statements included elsewhere in this Prospectus.

(2) EBITDA is earnings from operations before interest, taxes, depreciation and
amortization. EBITDA is included herein because management believes that
certain investors find it to be a useful tool for measuring a company's
ability to service its debt. However, EBITDA does not represent cash flow
from operations, as defined by generally accepted accounting principles
("GAAP"). EBITDA should not be considered as a substitute for net income or
net loss as an indicator of the Company's operating performance or for cash
flow as a measure of liquidity and should be examined in conjunction with
the Consolidated Financial Statements of the Company and the related Notes
thereto included elsewhere in this Prospectus. EBITDA as defined by the
Company may be different from EBITDA as defined by other companies.

-13-
<PAGE>

RECENT DEVELOPMENTS

In June 1998, the Company announced it had entered into a merger agreement
to acquire Internet Communications Corporation ("ICC"). The closing of the
acquisition was subject to various closing conditions, and the merger agreement
contained certain rights of termination. On October 13, 1998, the Company
announced that it terminated the merger agreement due to, among other things,
ICC's failure to satisfy certain obligations under the merger agreement. On
October 14, 1998, ICC filed a complaint against the Company in Denver District
Court claiming $30 million in damages and alleging, among other things, that the
Company had breached the merger agreement and had made certain
misrepresentations to ICC with respect to the proposed merger transaction. The
Company believes ICC's claims to be without merit and intends to vigorously
defend such action and to assert counterclaims against ICC; however, there can
be no assurance that the Company will prevail in its defense or any
counterclaims. The Company is hopeful that it can resolve the dispute with ICC
without the necessity for a trial; however, there can be no assurance as to the
Company's ability in this regard. In the event that the dispute cannot be
resolved expeditiously, the Company expects that it would incur additional costs
and expenses as a result of the litigation and that the litigation may hamper
the Company's ability to obtain additional financing. As a result of the
terminated merger transaction and the related financing transactions which were
not completed, the Company estimates that it incurred costs, expenses and
related fees of between $3.8 million and $5.2 million, a portion of which are in
dispute. Of this amount, approximately $2.7 million relates to a non-cash item
relating to warrants issued by the Company. The Company does not currently have
the ability to pay all of such costs, fees and expenses. The Company believes
that it will be able to agree on a schedule for the payment of these costs, fees
and expenses that is satisfactory to all parties; however, there can be no
assurance that the Company will be able to reach an agreement with all parties
regarding the payment of such costs, fees and expenses.

The terms of the proposed acquisition of ICC required that the Company pay
cash in the aggregate amount of approximately $39,400,000, to the shareholders
of ICC in exchange for their shares of common stock of ICC and required the
Company to repay approximately $5 million of ICC indebtedness. In connection
with the proposed acquisition, and as a condition thereof, the Company obtained
a $42,000,000 loan commitment (the "Bridge Loan") from various lenders (the
"Lenders"). The Lenders also agreed to arrange additional financing of
approximately $8 million (the "Additional Financing"). In connection with the
negotiation of the Bridge Loan and the Additional Financing, the Company agreed
to pay certain fees to and expenses of the Lenders, which are included in the
amounts referred to in the preceding paragraph.

Subsequent to the negotiations for the Bridge Loan commitment and entering
into the ICC merger agreement, the Company sought to obtain financing by means
of issuing $175,000,000 of high-yield debt securities, which securities were to
be issued pursuant to Rule 144A under the Securities Act (the "Rule 144A
Offering"). A portion of the proceeds of the Rule 144A Offering were to have
been used to pay the purchase price and related transactional costs of the ICC
acquisition. The Company incurred fees, costs and expenses in connection the
proposed Rule 144A Offering, which are included in the amounts referred to in
the preceding paragraph.

ACQUISITIONS AND PROPOSED ACQUISITIONS

In September 1998, the Company entered into a Software License and
Consulting Services Agreement with Novazen to provide the Company proprietary
billing software tailored to its business. As consideration for the consulting
services to be provided by Novazen, the Company paid $100,000 in cash and issued
to Novazen 25,000 shares of its Common Stock. The 25,000 shares of Common Stock
are being offered for resale pursuant to this Prospectus. After the Company
entered into the Novazen Agreement, Kevin R. Loud, an officer of the Company,
purchased 38,000 shares of Novazen common stock for $1.60 per share.

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<PAGE>

On July 1, 1998, RMI acquired all of the outstanding common stock of
Application Methods. Based in Seattle, Washington, Application Methods develops
software and has recently developed an e-commerce product. For the year ended
December 31, 1997, Application Methods had gross revenues of $984,000 and a net
loss of $102,000. Pursuant to the terms of a Merger Agreement by and among RMI,
RMI Acquisition Subsidiary, Inc. ("RMI Acquisition"), a Washington corporation
and a wholly-owned subsidiary of RMI, Application Methods and Ronald M.
Stevenson, Gregory A. Brown and Ronald Nicholl, the shareholders of Application
Methods, Application Methods' shareholders received an aggregate of 286,369
shares of RMI Common Stock as a result of the merger of RMI Acquisition with and
into Application Methods. Subsequent to the merger, Application Methods was
merged into a Colorado corporation which is a wholly-owned subsidiary of RMI.
The Application Methods shareholders may receive additional shares of Common
Stock, not to exceed $2.5 million in value, based on the satisfaction of certain
post-merger performance targets over a three-year period. Of the shares issued
to the shareholders of Application Methods, 114,548 are being offered for resale
pursuant to this Prospectus.

On June 5, 1998, RMI acquired all of the outstanding common stock of
Infohiway pursuant to the terms of a Merger Agreement dated June 5, 1998 by and
among RMI, RMI Subsidiary, Inc., Infohiway and Kenneth Covell, John-Michael
Keyes and Jeremy J. Black, the shareholders of Infohiway (the "Infohiway Merger
Agreement"). Infohiway has developed a search engine that the Company believes
has unique data searching features. For the year ended December 31, 1997,
Infohiway had gross revenues of $31,000. The acquisition was effectuated by the
merger of RMI Subsidiary, Inc., a wholly-owned subsidiary of RMI, with and into
Infohiway. As a result of the merger, Infohiway became a wholly-owned subsidiary
of RMI. Pursuant to the Infohiway Merger Agreement, the shareholders of
Infohiway received an aggregate of 150,000 shares of RMI Common Stock. Of the
shares issued to the shareholders of Infohiway, 75,000 are being offered for
resale pursuant this Prospectus.

Additionally, RMI recently entered into a non-binding memorandum of
understanding regarding the possible acquisition of Internet Now, an ISP
located in Phoenix, Arizona for $150,000 payable in cash and 171,250 shares
of the Company's Common Stock. If, however, the average of the closing prices
for the Company's Common Stock is less than $8.00 per share for the five
trading days ending three days before the closing of the Internet Now
acquisition, the number of shares of Common Stock to be issued by the Company
will be determined by dividing $1,370,000 by such average price. For the year
ended December 31, 1997, Internet Now had gross revenues of $620,000 and a
net loss of $70,000. Of the cash portion of the purchase price, $20,000 has
been paid to the shareholder of Internet Now. While the Company believes
these current and proposed acquisitions will accelerate its existing growth
plans, there can be no assurance that all, or any of these proposed
transactions will be consummated or that, if they are consummated, the
Company will be able to integrate these companies successfully.

-15-
<PAGE>

CHANGE IN CONTROL

Effective October 1, 1997, RMI issued and sold to Mr. Hanson 1,225,000
shares of Common Stock for a purchase price of $2,450,000, or $2.00 per share,
as more fully described in "CERTAIN TRANSACTIONS -- CHANGE IN CONTROL." Mr.
Hanson also became RMI's President, Chief Executive Officer and Chairman of the
board of directors of the Company.

RMI also entered into a warrant agreement with Mr. Hanson, dated as of
October 1, 1997, pursuant to which it agreed, subject to obtaining approval of
RMI's stockholders of an increase in the authorized capital stock of RMI, to
issue to Mr. Hanson the Hanson Warrants for an exercise price of $1.90 per
share, for a period of 18 months from the date of issuance of such warrants. As
of the date of the warrant agreement, RMI did not have a sufficient number of
shares of its Common Stock authorized or reserved for issuance upon the exercise
of the Hanson Warrants. At the RMI Annual Meeting, the stockholders of RMI
approved an amendment to RMI's Certificate of Incorporation to increase the
number of shares of Common Stock that RMI is authorized to issue from 10,000,000
to 25,000,000. As a result of the approval, RMI issued all of the Hanson
Warrants to Mr. Hanson on March 23, 1998. On March 23, 1998, Mr. Hanson
exercised 50,000 of these warrants for an aggregate exercise price of $95,000.
On May 15, 1998, Mr. Hanson exercised a portion of the Hanson Warrants to
purchase 421,053 shares of Common Stock for an aggregate exercise price of
$800,000. It was believed at that time that RMI needed such infusion of capital
to remain in compliance with the listing requirements of Nasdaq. RMI
subsequently determined that such investment by Mr. Hanson was not necessary for
the continued qualification of its Common Stock for trading on Nasdaq.
Accordingly, RMI and Mr. Hanson rescinded his exercise of these warrants.

RMI also granted Mr. Hanson incentive stock options to purchase 222,220
shares of Common Stock at an exercise price of $2.25 per share and 377,780
shares of Common Stock for an exercise price of $1.00 per share (the "Hanson
Options") pursuant to RMI's 1997 Stock Option Plan (the "1997 Plan"), which plan
was approved by RMI's stockholders at the RMI Annual Meeting. These Hanson
Options vest one year from the date of grant (subject to acceleration of the
vesting date by the board of directors or a committee thereof that administers
the 1997 Plan). On March 12, 1998 a committee of the board of directors amended
the 1997 Plan, retroactively to October 1, 1997, in accordance with the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), to
provide that the number of incentive stock options was 191,385, the exercise
price of those options was $2.6125 and the number of non-qualified stock options
was 408,615 at an exercise price of $1.00. On March 12, 1998, Mr. Hanson
exercised all of the non-qualified stock options and purchased 408,615 shares of
Common Stock pursuant to such exercise. As a result of the transactions
described above, Mr. Hanson obtained effective control of RMI and, as of October
15, 1998, had the authority to vote 52.3% of RMI's Common Stock after giving
effect to the exercise of 50,000 of the Hanson Warrants and 408,615 of the
Hanson Options. Some or all of the Hanson Warrants and shares of Common Stock
issuable upon the exercise thereof may be offered and sold by means of this
Prospectus.

RISK FACTORS

AN INVESTMENT IN THE SECURITIES BEING OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
BEFORE PURCHASING THE SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THESE FORWARD-
LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW.

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<PAGE>

MANAGEMENT OF GROWTH; NEED FOR ADDITIONAL CAPITAL. The Company's rapid
growth has placed, and in the future is expected to place, a significant strain
on the Company's management, administrative, operational and financial resources
and increased demands on its systems and controls. The Company intends to expand
its Internet network and telecommunications services nationwide. The Company
anticipates that its continued growth will require it to recruit and hire new
managerial, technical, sales, administrative and marketing personnel. The strain
on existing personnel and the need for additional personnel is expected to be
exacerbated to the extent the Company acquires additional businesses, as each
such business must then be integrated into the Company's operations and systems.
See "-- RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY." The inability to
continue to upgrade the Company's networking systems and its operating and
financial control systems, the inability to recruit and hire necessary
personnel, or the emergence of unexpected expansion difficulties would adversely
affect the Company's business, results of operations, financial condition and
cash flow.

The Company requires additional funds through equity, debt, or other
external financing in order to fund its current operations and to achieve its
business plan. There can be no assurance that any additional capital resources
will be available to the Company, or, if so, will be available on terms that
will be acceptable to the Company. Any additional equity financing will dilute
the equity interests of existing security holders. If adequate funds are not
available or are not available on acceptable terms, such unavailability would
have a material adverse effect on the Company's ability to execute its business
plans, and on its results of operations, financial condition and cash flow.

HISTORY OF LOSSES; NEGATIVE CASH FLOW FROM OPERATIONS; NO ASSURANCE OF
PROFITABILITY. RMI has incurred net losses since its inception and management
expects that the Company will incur additional losses. Prospective investors
have limited operating and financial data about the Company upon which to base
an evaluation of the Company's performance and an investment in the Securities
offered hereby. For the years ended December 31, 1995, 1996 and 1997, RMI had
net losses of $129,000, $2,343,000 and $4,153,000, respectively, and for the
nine-month periods ended September 30, 1997 and 1998, it had net losses of
$3,214,700 and $7,328,000, respectively. For the year ended December 31, 1997,
RMI had negative operating cash flow of $3,297,000, and for the nine-month
period ended September 30, 1998, it had negative operating cash flow of
$336,275. As a result of the terminated merger transaction with ICC and the
related financing transactions which were not completed, the Company estimates
that it incurred costs, expenses and related fees of between $3.8 million and
$5.2 million, a portion of which are in dispute. Of this amount, approximately
$2.7 million relates to a non-cash item relating to warrants issued by the
Company. The Company does not currently have the ability to pay all of such
costs, fees and expenses. The Company believes that it will be able to agree on
a schedule for the payment of these costs, fees and expenses that is
satisfactory to all parties; however, there can be no assurance that the Company
will be able to reach an agreement with all parties regarding the payment of
such costs, fees and expenses. There can be no assurance that the Company will
achieve or sustain positive operating cash flow or generate net income in the
future. To achieve profitability, the Company must, among other things, increase
its customer base and develop and market products and services that are broadly
accepted. There can be no assurance that the Company will ever achieve
profitability. See "RECENT DEVELOPMENTS," "RISK FACTORS-- INCREASING
COMPETITION," and "-- DEPENDENCE ON THE INTERNET; UNCERTAIN ADOPTION OF INTERNET
AS A MEDIUM OF COMMERCE AND COMMUNICATIONS" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- LIQUIDITY AND
CAPITAL RESOURCES."

CURRENT LITIGATION; UNCERTAINTY OF OUTCOME. In June 1998, the Company
announced it had entered into a merger agreement to acquire Internet
Communications Corporation ("ICC"). The closing of the acquisition was subject
to various closing conditions, and the merger agreement contained certain rights
of termination. On October 13, 1998, the Company announced that it terminated
the merger agreement due to, among other things, ICC's failure to satisfy
certain obligations under the merger agreement. On October 14,

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<PAGE>

1998, ICC filed a complaint against the Company in Denver District Court
claiming $30 million in damages and alleging, among other things, that the
Company had breached the merger agreement and had made certain
misrepresentations to ICC with respect to the proposed merger transaction. The
Company believes ICC's claims to be without merit and intends to vigorously
defend such action and to assert counterclaims against ICC; however, there can
be no assurance that the Company will prevail in its defense or any
counterclaims. The Company is hopeful that it can resolve the dispute with ICC
without the necessity for a trial; however, there can be no assurance as to the
Company's ability in this regard. In the event that the dispute cannot be
resolved expeditiously, the Company expects that it would incur additional costs
and expenses as a result of the litigation and that the litigation may hamper
the Company's ability to obtain additional financing. See "RECENT DEVELOPMENTS."

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company's operating
results may in the future vary, depending upon factors such as the timing and
installation of circuits ordered by the Company, which in the past have been and
in the future are expected to be, delayed from time to time by delays in the
installation of lines and equipment by the Company's telecommunications
suppliers. Additional factors contributing to variability of operating results
may include the pricing and mix of services and products sold by the Company,
terminations of service by subscribers, introductions of new products and
services by the Company and its competitors, market acceptance of new and
enhanced versions of the Company's services, changes in pricing policies by its
competitors, the timing of the expansion of the Company's network infrastructure
and entry into new businesses. Variations in the timing and amounts of revenues
could have a material adverse effect on the Company's operating results.

RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY. As part of its long-
term business strategy, the Company intends to pursue acquisitions of other
companies. There can be no assurance that the Company will be able to implement
its acquisition plan. Further, acquisitions may involve a number of special
risks, including potentially dilutive issuances of equity securities, the
incurrence of additional debt, risks associated with unanticipated events or
circumstances or legal liabilities and amortization of expenses related to
goodwill and other intangible assets, some or all of which could have a material
adverse effect on the Company's business, financial condition, results of
operations and cash flow. All of the Company's acquisitions have resulted in
the allocation of a large portion of the purchase price to intangible assets
such as customer lists and goodwill. In addition, certain acquisitions that the
Company may consummate in the future may have certain negative effects upon the
business of the Company, such as the potential loss of customers due to
perceived conflicts, duplication of work force and incompatibility of accounting
and other systems. In addition, there can be no assurance that acquired
businesses, if any, will achieve anticipated revenues and earnings. The
potential inability of the Company to implement and manage its acquisition
strategy successfully may have an adverse effect on the future prospects of the
Company. See "BUSINESS -- BUSINESS STRATEGY."

DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
degree upon the continued contributions of its senior operating management,
particularly Douglas H. Hanson, its President, Chief Executive Officer and
Chairman of the Board of Directors. The loss of Mr. Hanson's services or other
senior operating management could have a materially detrimental effect on the
Company. The Company does not maintain key person life insurance on any of its
personnel. The Company's success will also depend on its ability to attract and
retain other qualified management, marketing, technical and sales executives and
personnel.

POSSIBLE ADVERSE EFFECTS OF ISSUANCE OF PREFERRED STOCK OR COMMON STOCK.
The Company has 25,000,000 shares of Common Stock and 750,000 shares of
Preferred Stock authorized, of which 8,106,252 shares of Common Stock and no
shares of Preferred Stock were outstanding as of October 30, 1998. Another
803,164 shares of Common Stock were reserved for issuance pursuant to the
Company's stock option plans and other stock options granted and 7,427,620
shares of Common Stock have

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<PAGE>

been reserved for issuance upon exercise of various warrants, including the
IPO Warrants, the Hanson Warrants, warrants issued to the lenders in
connection with the Bridge Loan commitment, warrants to be issued as part of
the DataXchange acquisition and shares issuable pursuant to various
anti-dilution provisions contained in the warrants and options described
above. In addition, there are approximately 333,333 (assuming a $7.50 per
share price at the date of calculation) additional shares of Common Stock
that may be issued in connection with the acquisition of Application Methods.
Accordingly, after giving effect to the shares of Common Stock issuable
pursuant to the options and warrants described above, there are approximately
3,998,754 shares of Common Stock and 750,000 shares of Preferred Stock that
may be issued in the future at the discretion of the Company's board of
directors. The Preferred Stock may be directed to be issued by the board of
directors in its discretion without stockholder approval, with such
designations, preferences, dividend rates, conversion and other features as
the board of directors may determine. The rights of the holders of Common
Stock will be subject to and may be adversely affected by the terms of any
additional classes of Preferred Stock that the Company may issue in the
future. The issuance of such shares of undesignated Preferred Stock, while
potentially providing desirable flexibility in connection with possible
acquisitions and serving other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or may discourage a
third party from attempting to acquire, a majority of the outstanding voting
stock of the Company or may result in material dilution to holders of Common
Stock depending on the terms of such Preferred Stock. The issuance of
Preferred Stock also could decrease the amount of earnings and assets
available for distribution to the holders of Common Stock. In addition,
future issuances of shares of Common Stock could materially and adversely
affect the market price of the Common Stock, and could materially impair the
Company's future ability to raise capital through an offering of equity
securities. No predictions can be made as to the effect, if any, that market
sales of such shares or the availability of such shares for future sale will
have on the market price of the Common Stock prevailing from time to time.

In addition, the stockholders of RMI approved, at the RMI Annual Meeting,
an amendment to RMI's Certificate of Incorporation to effect a reverse exchange
(a "Reverse Stock Split") of RMI's Common Stock. The Reverse Stock Split would
be in a ratio of up to one-for-ten and would be effected in the event that the
board of directors determines that such a Reverse Stock Split is desirable at
any time within one year from the date of the RMI Annual Meeting, with the exact
ratio of the Reverse Stock Split to be determined by the board of directors in
its discretion. Although the board of directors has no present intention of
doing so, the additional shares of authorized but unissued Common Stock that may
result from the proposed Reverse Stock Split could also be used by the board of
directors to defeat or delay a hostile takeover. Faced with an actual or
proposed hostile takeover, the directors could issue shares of Common Stock, in
a private transaction, to a friendly party that might align itself with the
board of directors in opposing a hostile takeover. Accordingly, the Reverse
Stock Split could be considered to have the effect of discouraging a takeover of
the Company. The directors are not aware, however, of any current proposals by
any party to acquire control of the Company and the Reverse Stock Split is not
intended to be an anti-takeover device.

DEPENDENCE UPON NETWORK INFRASTRUCTURE. The Company's success will
partially depend upon its ability to develop a reputation for reliability over
the long term and the security of its current and future network connections.
The Company must continue to expand and adapt its network infrastructure as the
number of users and the amount of information they wish to transfer increases
and as the requirements of its customers change. The expansion of the Company's
Internet network infrastructure will require substantial financial, operational
and management resources. There can be no assurance that the Company will be
able to expand or adapt its network infrastructure to meet additional demand or
its customers' changing requirements on a timely basis, at a commercially
reasonable cost, or at all.

DEPENDENCE ON THE INTERNET; UNCERTAIN ADOPTION OF INTERNET AS A MEDIUM OF
COMMERCE AND COMMUNICATIONS. Many of the Company's existing and proposed
products and services are targeted toward users of the Internet. As is typical
in the case of a new and rapidly evolving industry

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characterized by rapidly changing technology, evolving industry standards and
frequent new product and service introductions, demand and market acceptance for
recently introduced products and services are subject to a high level of
uncertainty. In addition, critical issues concerning the commercial use of the
Internet remain unresolved and may impact the growth of Internet use, especially
in the business market targeted by the Company. Despite growing interest in the
many commercial uses of the Internet, many businesses have been deterred from
purchasing Internet access services for a number of reasons, including, among
others, inconsistent quality of service, lack of availability of cost-effective,
high-speed options, a limited number of POPs for corporate users, inability to
integrate business applications on the Internet, the need to deal with multiple
and frequently incompatible vendors, inadequate protection of the
confidentiality of stored data and information moving across the Internet and a
lack of tools to simplify Internet access and use. The adoption of the Internet
for commerce and communications, particularly by those individuals and
enterprises that have historically relied upon alternative means of commerce and
communication, generally requires the understanding and acceptance of a new way
of conducting business and exchanging information. In particular, enterprises
that have already invested substantial resources in other means of conducting
commerce and exchanging information may be particularly reluctant or slow to
adopt a new strategy that may make their existing personnel and infrastructure
obsolete.

The Company is at risk as a result of fundamental technological changes in
the way Internet solutions may be marketed and delivered. Integrating
technological advances may require substantial time and expense and there can be
no assurance that the Company will succeed in adapting its network
infrastructure. While the Company believes that its plan of combining the scale
and scope of a national operation with the local presence of its ISP operations
offers significant advantages for commerce and communication over the Internet,
there can be no assurance that commerce and communication over the Internet will
become widespread, or that the Company's offered Internet access and
communications services will become widely adopted for these purposes.

New technologies or industry standards have the potential to replace or
provide lower cost alternatives to the Company's existing products and services.
The adoption of such new technologies or industry standards could render the
Company's existing products and services obsolete and unmarketable. If the
market for Internet access services fails to develop, develops more slowly than
expected, or becomes saturated with competitors, or if the Internet access and
services offered by the Company are not broadly accepted, the Company's
business, operating results, financial condition and cash flow may be materially
adversely affected. Although the Company intends to support emerging standards
in the market for Internet connectivity, there can be no assurance that industry
standards will emerge or if they become established, that the Company will be
able to conform to these new standards in a timely fashion and maintain a
competitive position in the market.

RISK OF TECHNOLOGICAL CHANGE AND EVOLVING INDUSTRY STANDARDS. To date the
Company has not been adversely affected by product or service obsolescence
because changes in the Internet service industry have been largely a matter of
improvements in hardware which have been readily available to the Company and
its competitors. The Company's future success depends, however, upon its ability
to develop new services that meet changing customer requirements. The market for
the Company's service is characterized by rapidly changing technology, evolving
industry standards, emerging competition and frequent new service introductions.
There can be no assurance that the Company can successfully identify new
opportunities and develop and bring new services to market in a timely manner or
that services or technologies developed by others will not render the Company's
services noncompetitive or obsolete.

The Company believes that its ability to compete successfully is also
dependent upon the continued compatibility and interoperability of its services
with products and architectures offered by various vendors. Although the Company
intends to support emerging standards in the market for Internet access, there
can be no assurance that any industry standards will be established or, if they
become established, that the Company will be able to conform to these new
standards in a timely fashion or maintain a competitive position in the

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market. The failure of the Company to anticipate the prevailing standards, or
the failure of common standards to emerge could have a material adverse effect
on the Company.

POTENTIAL LIABILITY FOR INFORMATION DISSEMINATED THROUGH NETWORK. The law
relating to the liability of ISPs and on-line service companies for information
carried on or disseminated through their networks has not yet been definitively
established. Internet access and content providers face potential liability of
uncertain scope for the actions of subscribers and others using their systems,
including liability for infringement of intellectual property rights, rights of
publicity, defamation, libel and criminal activity under the laws of the United
States and foreign jurisdictions.

The Company does not maintain errors and omissions insurance. Any
imposition of liability on the Company for alleged negligence, intentional
torts, or other liability could have a material adverse effect on the Company.
In addition, recent legislative enactments and pending legislative proposals
aimed at limiting the use of the Internet to transmit indecent or pornographic
materials could, depending upon their interpretation and application, result in
significant potential liability to Internet access and service providers
including the Company, as well as additional costs and technological challenges
in complying with any statutory or regulatory requirements imposed by such
legislation. For example, the Communications Decency Act of 1996 (amending 47
U.S.C. Section 223), which is part of the Telecommunications Act of 1996 (the
"1996 Telecommunications Act"), became effective on February 8, 1996. The 1996
Telecommunications Act imposes criminal liability on persons sending or
displaying in a manner available to minors indecent material on an interactive
computer service such as the Internet and on an entity knowingly permitting
facilities under its control to be used for such activities. While the
constitutionality of these provisions has been successfully challenged in the
U.S. Supreme Court, there can be no assurance as to the final result regarding
the constitutionality of the 1996 Telecommunications Act, or as to the scope and
content of any substitute legislation or other legislation in the United States
or foreign jurisdictions restricting the type of content being provided over the
Internet. If these provisions or related legislation are upheld, the effect on
the Internet industry could have a material adverse effect on the Company's
business, financial condition, results of operation, or cash flow. A number of
countries are considering content restrictions based on such factors as
political or religious views expressed and pornography or indecency.

INCREASING COMPETITION. The markets in which the Company operates and
intends to operate are extremely competitive and can be significantly influenced
by the marketing and pricing decisions of the larger industry participants.

INTERNET ACCESS. The Company expects competition in these markets to
intensify in the future. The Company's current and prospective competitors in
the Internet access market include many large companies that have substantially
greater market presence and financial, technical, operational, marketing and
other resources and experience than the Company. The Company's Internet access
business competes or expects to compete directly or indirectly with the
following categories of companies: (i) other national and regional commercial
ISPs, such as Verio Inc. or one or more of its affiliates and PSINet, Inc.
("PSINet"); (ii) established on-line services companies that currently offer
Internet access, such as America Online, Inc. ("AOL"), CompuServe and Prodigy
Services Company; (iii) computer hardware and software and other technology
companies, such as Microsoft Corporation ("Microsoft"); (iv) national long-
distance telecommunications carriers, such as AT&T (AT&T WorldNet), Sprint
(SprintNet) and Qwest Communications International, Inc.; (v) regional Bell
operating companies ("RBOCs" or "I-LECs"); (vi) cable television system
operators, such as Comcast Corporation, Tele-Communications, Inc. ("TCI") and
Time Warner Inc.; (vii) nonprofit or educational ISPs; and (viii) newly-licensed
providers of spectrum-based wireless data services.

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<PAGE>

entrants to the long distance market such as the RBOCs who have entered or have
announced plans to enter the U.S. intrastate and interstate long-distance market
pursuant to recent legislation authorizing such entry. See "REGULATION." On
April 22, 1998, the Public Utilities Commission of Colorado granted the request
of Rocky Mountain Broadband, Inc. ("RMB"), a wholly-owned subsidiary of RMI, to
become a competitive local exchange carrier ("C-LEC"). Likewise, the Company's
intention to provide IP Telephony services and C-LEC services will place it
directly in competition with other providers (either resellers or facilities-
based carriers) that provide the same services. Some of the Company's
competitors are significantly larger and have substantially greater market
presence as well as financial, technical, operational, marketing and other
resources and experience than the Company.

PRICING PRESSURES. The Company reduced the prices it charges its Internet
customers during 1995, 1997 and 1998 partly as a result of competitive pricing
pressures in the market for Internet services. The Company expects that
continued price pressures may cause the Company to reduce prices further in
order to remain competitive and the Company expects that such further price
reductions could adversely effect the Company's results of operations, unless it
can lower its costs commensurate with such price decreases. The Company may also
face price pressures from its competitors in the telecommunications services
markets in which the Company intends to compete.

SECURITY RISKS. A risk faced by all ISPs, including the Company, is the
risk that, despite the implementation of network security measures by the
Company, its infrastructure remains vulnerable to computer viruses, sabotage,
break-ins and similar disruptive problems caused by its subscribers or other
Internet users. Furthermore, inappropriate use of the Internet by third parties
could potentially jeopardize the security of confidential information stored in
the computer systems of the Company's customers, which may deter potential
subscribers and may inhibit the growth of the Internet service industry in
general. Security problems continue to plague public and private data networks.
Alleviating or attempting to avoid problems caused by computer viruses, break-
ins, or other problems caused by third parties may require significant
expenditures of capital and resources by the Company, which could have a
material adverse effect on the Company. Until more comprehensive security
technologies are developed, the security and privacy concerns of existing and
potential customers may inhibit the growth of the Internet service industry in
general and the Company's customer base and revenues in particular.

RISKS OF SYSTEM FAILURE. The Company's Internet operations are dependent
upon its ability to protect its network infrastructure against damage from acts
of nature, power failures, telecommunications failures and similar events.
Physical protection of the Company's network infrastructure is a primary
responsibility of the Company. However, because it leases its lines from long-
distance telecommunications companies, RBOCs and C-LECs, the Company is
dependent upon these companies for physical repair and maintenance of the leased
lines. The Company maintains multiple carrier agreements to reduce the risk of
loss of operations from damage, power failures, telecommunications failures and
similar events. Despite precautions taken by the Company, the occurrence of a
natural disaster or other unanticipated problems at the Company's NOC or any of
its POPs may cause interruptions in the services provided by the Company. In
addition, failure of the Company's telecommunications providers to provide the
data communications capacity required by the Company as a result of a natural
disaster, operational disruption or for any other reason could cause
interruptions in the services provided by the Company. Any damage or failure
that causes interruptions in the Company's operations could have a material
adverse effect on the Company.

DEPENDENCE ON TELECOMMUNICATIONS ACCESS. All Internet and most
telecommunications service providers, including the Company, depend on other
companies to provide communications capacity via leased facilities. If one or
more of these companies is unable or unwilling to provide or expand its current
levels of service to the Company in the future, the Company's operations could
be materially and adversely affected. Although leased facilities are available
from several alternative suppliers, including AT&T and Sprint, there can be no
assurance that the Company could obtain substitute services. In

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addition, the Company is dependent on local telephone companies to provide local
dial-up and leased, high-speed dedicated access phone lines for access to each
of the Company's POPs. The Company is presently dependent on US West (an RBOC),
ICG Communications, Inc. and Teleport Communications Group, all of which are
competitors of the Company, to provide timely installation of new circuits and
to maintain existing circuits. The Company has experienced delays in the
installation of circuits and inconsistencies in maintenance service which have
adversely affected the Company.

DEPENDENCE UPON SUPPLIERS. In order to provide Internet access and other
on-line services to its customers, the Company leases long distance fiber optic
telecommunications lines from multiple national telecommunications services
provider. The Company is dependent upon these providers of data communications
facilities. In addition, the Company has a wholesale usage agreement with
PSINet, which allows the Company to provide dial-up and "switched" network
access to its customers through PSINet's 235 POPs throughout the United States
and has other agreements with service providers which the Company relies on to
deliver its product and service offerings. Certain of the Company's suppliers,
including RBOCs and C-LECs, currently are subject to various price constraints,
including tariff controls, which in the future may change. In addition,
regulatory proposals are pending that may affect the prices charged by the RBOCs
and C-LECs to the Company. Such regulatory changes could result in increased
prices of products and services, which could have a material adverse effect on
the Company.

The Company relies on other companies to supply certain components of its
computer inventory as well as its network infrastructure (including
telecommunications services and networking equipment) which, in the quantities
and quality required by the Company, is available only from sole or limited
sources. The Company has in the past and may from time to time, experience
delays in receiving telecommunications services and shipments of merchandise
purchased for resale. There can be no assurance that the Company will be able to
obtain such telecommunication services and shipments of merchandise on the scale
and at the times required by the Company at an affordable cost, or at all. There
also can be no assurance that the Company's suppliers will not enter into
exclusive arrangements with the Company's competitors to stop selling their
products or components to the Company at commercially reasonable prices, or at
all, or that such agreements will be terminated for other reasons. Any failure
of the Company's sole or limited-source suppliers to provide products or
components that comply with its standards could have a material adverse effect
on the Company.

DIFFICULTIES IN IMPLEMENTING LOCAL EXCHANGE AND LONG DISTANCE TELEPHONE
SERVICES. The Company is a recent entrant into the newly created competitive
local telephony services industry. The local exchange telephony services market
in most states was only recently opened to competition due to the passage of the
1996 Telecommunications Act and related regulatory rulings. There are numerous
operating complexities associated with providing these services. The Company
will be required to develop new products, services and systems and will need to
develop new marketing initiatives to sell these services. The inability to
overcome any of these operating complexities could have a material adverse
effect on the Company.

The Company intends to resell local telephony services provided by I-LECs.
Although the 1996 Telecommunications Act requires all I-LECs to permit resale of
their telephony services without unreasonable restrictions or conditions and
requires I-LECs to offer their retail telecommunications services to other
telecommunications carriers for resale at discounted rates, based on the costs
avoided by the I-LEC in such offering, there can be no assurance that the
Company will be able to initiate or provide service in a timely manner or at
competitive prices.

The Company also offers long distance services to its customers. The long
distance business is highly competitive. In addition, the long distance industry
has historically had a high average churn rate and customers continue to change
local distance providers frequently in response to the offering of lower rate or
promotional incentives by competitors. The Company relies on other carriers to
provide transmission and termination

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<PAGE>

services for all of its long distance traffic pursuant to resale agreements.
Such agreements typically provide for the resale of long distance services on a
per-minute basis. Negotiation of these agreements involves estimates of future
supply and demand for transmission capacity as well as estimates of the calling
pattern and traffic levels of the Company's future customers. In the event the
Company underestimates its need for transmission capacity, it may be required to
obtain capacity through more expensive means.

GOVERNMENT REGULATORY POLICY RISKS; POTENTIAL TAXES. The telecommunications
businesses in which the Company engages are subject to extensive federal and
state regulation. The provision of long distance telephone service is subject to
the provisions of the Communications Act of 1934, as amended, including
amendments effected by the 1996 Telecommunications Act and the FCC regulations
thereunder, as well as the applicable laws and regulations of the various
states, including regulation by Public Utility Commissions ("PUCs") and other
state agencies. Federal laws and FCC regulations apply to interstate
telecommunications (including international telecommunications that originate or
terminate in the United States), while state regulatory authorities have
jurisdiction over telecommunications both originating and terminating within a
state.

Regulation of the telecommunications industry is changing rapidly and the
regulatory environment varies substantially from state to state. Moreover, as
deregulation at the federal level occurs, some states are reassessing the level
and scope of regulation that may be applicable to the Company. There can be no
assurance that future regulatory, judicial, or legislative activities will not
have a material adverse effect on the Company.

A recent federal legislative change, the 1996 Telecommunications Act, may
have potentially significant effects on the operations of the Company. The 1996
Telecommunications Act, among other things, allows the RBOCs and other companies
to enter the long distance business and enables other entities, including
entities affiliated with power utilities and ventures between local exchange
carriers ("LECs") and cable television companies, to provide an expanded range
of telecommunications services. Entry of such companies into the long distance
business would result in substantial additional competition in one of the
markets into which the Company intends to expand and may have a material adverse
effect on the Company.

On April 10, 1998, the FCC submitted a report to Congress in which it
stated that telephone-to-telephone IP Telephony bears the characteristics of
"telecommunications services" and that the providers of those services may be
"telecommunications carriers," as those terms are defined in the 1996
Telecommunications Act. The FCC deferred a more definitive resolution of this
issue until a more "fully-developed" record is available. However, the April 10,
1998 report states that, to the extent the FCC concludes that certain forms of
telephone-to-telephone IP Telephony service are "telecommunications services,"
and to the extent the providers of those services obtain the same circuit-
switched access as obtained by other IXCs and therefore impose the same burdens
on the local exchange as do other IXCs, the FCC "may find it reasonable that
they" become subject to the same regulations, including the requirement to pay
access fees to LECs and to contribute to "universal service" subsidies. See
"BUSINESS -- BUSINESS STRATEGY" and "REGULATION." In addition, a number of state
and local government officials have asserted the right or indicated a
willingness to impose taxes on Internet-related services and commerce, including
sales, use and access taxes. Recently enacted federal legislation placed a
moratorium on the imposition by state and local governments of new taxes on ISPs
or other businesses involved in Internet-related commerce. However, there can be
no assurance that federal taxes will not be imposed upon such services in the
future or that stated and local governments will not be permitted, in the
future, to impose similar taxes. The Company cannot predict whether the
imposition of any such additional taxes would have a material adverse effect on
the Company.

YEAR 2000 RISKS. Currently, many computer systems, hardware and software
products are coded to accept only two digit entries in the date code field and,
consequently, cannot distinguish 21st century dates from 20th century dates.
The interaction between various software and hardware platforms rely upon the
date coding system. As a result, many companies' software and computer systems
may need to be upgraded or

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<PAGE>

replaced in order to function properly after the turn of the century. The
Company, its customers, and suppliers are reliant on computers and related
automated systems for daily business operations.

The Company has begun the process of identifying computer systems that
could be affected by the Year 2000 issue as it relates to the Company's internal
hardware and software, as well as third parties which provide the Company
goods or services. Three categories or general areas have been identified for
review and analysis.

(1) Systems providing customer services. These include hardware and
software systems that are used to provide services to the Company's
customers in the form of Internet connectivity, e-mail servers, news
servers, authentication servers, etc. Hardware in the form of routers
and switches are also included in this area.

(2) Third party vendors providing critical services including circuits,
hardware, long distance and related products. These include telco
providers, suppliers of routers, modems, switches, etc.

(3) Critical internal systems that support the Company's administrative
systems for billing and collecting, general accounting systems,
computer networks, and communication systems.

The Company is in the planning and initial study phase of Year 2000
compliance review and testing. In regards to Item (1) listed above, the
Company's critical existing systems are no more than two and one-half years old
and it is anticipated that many of these systems will not have significant Year
2000 problems. Due to the Company's continued growth, most systems providing
customer services are planned to be relocated to an expanded network operations
center. Concurrently with the relocation, many of the critical systems will be
migrated to new hardware and software platforms to increase reliability and
capacities. All newly acquired hardware systems, operating systems, and
software are required to have vendor certification for Year 2000 compliance.
These systems are in process of being inventoried and a systems testing schedule
is being developed.

In regards to Item (2) above - third party products and services - the
Company's significant vendors are large public companies such as US West
Communications, ICG Telecommunications Group, Cisco Systems, Lucent
Technologies, Ascend Communications, etc., that are all under SEC mandates to
report their compliance in all publicly filed documents. The Company intends to
initiate a compliance review program with these vendors during the first quarter
of 1999 and will continue to track progress of all critical vendors for
compliance.

Item (3) above relates to internal systems for company administrative and
communications requirements. The Company intends to implement new billing and
billing presentment systems during the first half of 1999. These system vendors
are required to certify Year 2000 compliance. Additionally, the Company intends
to test these systems for compliance during the implementation processes. The
Company expects that internal computer networks and communications systems will
be tested in the first quarter of 1999 for compliance.

The costs to address the Year 2000 compliance issues have not been
determined at this time. Based on growth, the Company plans to implement new
hardware platforms and software systems that should be Year 2000 compliant and,
therefore, costs specifically allocated to Year 2000 compliance may not be
significant. However, there can be no assurance that such costs will not be
significant. Systems testing and compliance reviews with third party services
providers will incur manpower and consultant costs.

The nature of the Company's business makes it dependent on computer
hardware, software, and operating systems that are susceptible to Year 2000
issues. Failure to attain at least minimum levels of Year 2000 compliance would
have a material adverse effect on the Company's ability to deliver services and
on the

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Company's business, operating results, financial condition and cash flow.

The Company has not developed a contingency plan for dealing with Year 2000
risks at this time.

VOLATILITY OF STOCK PRICES AND PENNY STOCK RULES. The Company's Common
Stock is qualified for trading on Nasdaq. The prices at which the Company's
Common Stock has been traded have varied considerably since the Common Stock was
qualified for trading on Nasdaq. There can be no assurance that the Company will
continue to be able to satisfy certain specified financial tests and market
related criteria required for continued listing on the Nasdaq. If the Company's
Common Stock were no longer qualified for trading on Nasdaq, trading, if any,
would thereafter be conducted in the over-the-counter market, so called "pink
sheets" or the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. and consequently, an investor could find it more
difficult to dispose of, or to obtain, accurate quotations as to the price of,
the Company's Common Stock. In addition, the Company could become subject to
rules adopted by the Commission regulating broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on Nasdaq, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or Nasdaq system). Unless an exemption from the
definition of a "penny stock" were available, any broker engaging in a
transaction in the Company's Common Stock would be required to provide any
customer with a risk disclosure document, disclosure of market conditions, if
any, disclosure of the compensation of the broker-dealer and its salesperson in
the transaction and monthly accounts showing the market values of the Company's
Common Stock held in the customer's account. The bid and offer quotation and
compensation information must be provided prior to effecting the transaction and
must be contained on the customer's confirmation. It may be anticipated that
many brokers will be unwilling to engage in transactions in the Company's Common
Stock because of the need to comply with the "penny stock" rules, thereby making
it more difficult for purchasers of Common Stock to dispose of their shares or
for the Company to raise additional capital through equity financings.

LACK OF ESTABLISHED TRADING MARKET FOR COMMON STOCK AND IPO WARRANTS.
Trading in the Company's Common Stock and IPO Warrants had been inactive until
March 1998. There can be no assurance that an active market can or will be
maintained for the trading of the Company's Common Stock. Purchasers of the
Company's Common Stock may, therefore, find it difficult to dispose of these
securities.

CONTROL BY MANAGEMENT. As the result of a recent investment in RMI by Mr.
Hanson, RMI issued and sold to Mr. Hanson 1,225,000 shares of Common Stock for a
purchase price of $2,450,000, or $2.00 per share, as more fully described in
"CERTAIN TRANSACTIONS -- CHANGE IN CONTROL." Mr. Hanson also became RMI's
President, Chief Executive Officer and Chairman of the board of directors of the
Company. As a result of these related transactions, Mr. Hanson obtained
effective control of RMI and, as of October 15, 1998, had the authority to vote
52.3% of RMI's Common Stock after giving effect to the exercise of the Hanson
Warrants and the Hanson Options. The officers and directors of the Company as a
group beneficially own as of October 15, 1998 approximately 57.4% of the
Company's Common Stock after giving effect to the exercise of the Hanson
Warrants and Hanson Options. As a result, these stockholders will be able to
exercise significant influence over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. Such concentration of capital stock may also have the effect of
delaying or preventing a change of control of the Company. See "PRINCIPAL
STOCKHOLDERS."

SHARES ELIGIBLE FOR RESALE. As of October 15, 1998, there were outstanding
2,149,646 shares of Common Stock that were issued in connection with various
transactions, all of which are deemed to be "restricted securities," as defined
in Rule 144 under the Securities Act. All but 246,821 of these restricted
securities are currently eligible for resale by the holders thereof in the
public market pursuant to Rule 144. In general, under Rule 144 as currently in
effect, a person (or persons whose shares are aggregated), including an

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<PAGE>

affiliate, who has beneficially owned restricted securities for at least one
year is entitled to sell, within any three-month period, a number of such shares
that does not exceed the greater of (i) one percent of the then outstanding
shares of Common Stock or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of such
sale is filed, provided certain requirements concerning availability of public
information, manner of sale and notice of sale are satisfied. In addition,
affiliates of the Company must comply with the restrictions and requirements of
Rule 144, other than the one-year holding period requirement, in order to sell
shares of Common Stock that are not restricted securities. Also, under Rule
144(k), a person who is not an affiliate and has not been an affiliate for at
least three months prior to the sale and who has beneficially owned restricted
securities for at least two years may resell such securities without compliance
with the foregoing requirements. Sales of substantial amounts of the Common
Stock in the public market, or the perception that such sales might occur, could
adversely affect the then prevailing market price for the Common Stock and could
materially impair the Company's future ability to raise capital through an
offering of equity securities. No predictions can be made as to the effect, if
any, that market sales of such shares or the availability of such shares for
future sale will have on the market price of the Common Stock prevailing from
time to time.

POTENTIAL ADVERSE IMPACT ON MARKET PRICE OF COMMON STOCK IN THE EVENT OF
REDEMPTION OF IPO WARRANTS. The Company has the ability to call the 1,365,000
IPO Warrants for redemption at a price of $0.25 per IPO Warrant, subject to the
approval by securities administrators of various states in which the holders of
the IPO Warrants reside. The exercise price of the Warrants is less than the
market price per share of Common Stock, and the Company believes that the
current owners of those Warrants, may, therefore, have an incentive to exercise
those Warrants and to purchase shares of Common Stock. There can be no
assurance, however, that the securities administrators of all states in which
holders of the IPO Warrants reside will approve the offer by the Company of the
Common Stock underlying the IPO Warrants. In addition, there can be no
assurance that all, or any portion of such IPO Warrants will be exercised in the
event that such approval is obtained. In the event that the Company calls the
IPO Warrants for redemption, holders of the IPO Warrants will have the choice of
exercising their IPO Warrants or selling them to a buyer who could be expected
to exercise such IPO Warrants, or of accepting the redemption price of $0.25 per
IPO Warrant. In the event that a significant number of holders of IPO Warrants
exercise such Warrants, it can be expected that many of the shares of Common
Stock purchased upon such exercise will be sold shortly thereafter. The sale of
a significant number of shares of Common Stock can be expected to have an
adverse impact on the market price for the Company's Common Stock.

NO DIVIDENDS. The Company has not paid any cash dividends and does not
intend to pay cash dividends on the Common Stock in the foreseeable future.

STATE LAW LIMITATIONS ON DIRECTOR LIABILITY FOR MONETARY DAMAGES. The
Company's Certificate of Incorporation, as amended, substantially limits the
liability of the Company's directors to its stockholders for breach of fiduciary
or other duties to the Company. See "LIMITATION ON LIABILITY AND INDEMNIFICATION
MATTERS."

DELAWARE ANTI-TAKEOVER PROVISIONS. Section 203 of the Delaware General
Corporation Law (the "DGCL") prohibits certain transactions between a Delaware
corporation and an "interested stockholder," which is defined as a person who,
together with any affiliate and/or associates of such person, beneficially owns,
directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. This provision prohibits certain "business combinations"
(defined broadly to include mergers, consolidations, sales or other dispositions
of assets having an aggregate value in excess of 10% of the consolidated assets
of the corporation or the aggregate value of all of the outstanding capital
stock of the corporation and certain transactions that would increase the
interested stockholder's proportionate share ownership in the corporation)
between an interested stockholder and a corporation for a period of three years
after the date the interested stockholder acquired its stock, unless (i) the
business combination is approved by

-27-
<PAGE>

the corporation's board of directors prior to the date the interested
stockholder acquired shares, (ii) the interested stockholder acquired at least
85% of the voting stock of the corporation in the transaction in which it became
an interested stockholder or (iii) the business combination is approved by a
majority of the board of directors and by the affirmative vote of two-thirds of
the outstanding voting stock not owned by the interested stockholder. The
application of Section 203 of the DGCL could have the effect of delaying or
preventing a change of control of the Company. See "DESCRIPTION OF CAPITAL STOCK
- -- CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW."

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS. This Prospectus contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act and the Company intends that
such forward-looking statements be subject to the safe harbors for such
statements under such sections. The statements contained in this Prospectus that
are not historical fact are "forward-looking statements" (as such term is
defined in the statutory sections cited above), which can be identified by the
use of forward-looking terminology such as "believes," "expects," "intends,"
"may," "will," "should," "could," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. The Company's forward-looking
statements include the plans and objectives of management for future operations,
including plans and objectives relating to its Internet connection services,
plans and objectives for other businesses that the Company may enter and future
economic performance of the Company. The forward-looking statements and
associated risks set forth in this Prospectus include or relate to: (i) ability
of the Company to obtain additional financing, (ii) ability of the Company to
successfully defend itself in the pending ICC litigation, (iii) ability of the
Company to attract and retain qualified technical, sales, marketing and
administrative personnel relating to the services it currently provides and
intends to provide, (iv) ability of the Company to market its services at
competitive prices, (v) development of brand-name recognition and loyalty for
the Company's services, (vi) development of an effective sales staff, (vii)
market acceptance of the Company's services, (viii) success of the Company's
market initiatives, (ix) expansion of sales in the industries to which the
Company provides its current and intended services, (x) success of the Company
in forecasting demand for its current and intended services, (xi) success of the
Company in diversifying the Company's market to provide services to large and
small businesses, professionals and individuals, (xii) success of the Company in
diversifying the types of services it offers to customers, (xiii) achievement of
forecast operating margins dependent upon price and efficient provision of
services, (xiv) availability of suitable licenses or other intellectual property
access and protection for the Company's services, (xv) the ability of the
Company to implement its acquisition strategy and the success of that strategy,
if and to the extent it is implemented and (xvi) success of the Company in
achieving increases in net sales to reduce the cost of services sold and
decrease general, administrative and development costs as a percentage of net
sales.

The forward-looking statements are based on assumptions and judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Accordingly, although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any such assumption
could prove to be inaccurate and therefore, there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, as disclosed elsewhere in the "Risk Factors" section of this
Prospectus, there are a number of other risks presented by the Company's
business and operations that could cause the Company's net revenues or net loss,
or growth in net revenues or net loss to vary markedly from prior results or the
results contemplated by the forward-looking statements. Management decisions,
including budgeting, are subjective in many respects and periodic revisions must
be made to reflect actual conditions and business developments, the impact of
which may cause the Company to alter its marketing, capital investment and other
expenditures, which may adversely affect the Company's results of operations and
cash flows. In light of significant uncertainties inherent in the forward-
looking information included in this Prospectus, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the Company's objectives or plans will be achieved.

-28-
<PAGE>

PRICE RANGE FOR COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock and the IPO Warrants are traded on Nasdaq under
the symbols RMII and RMIIW, respectively. The table below sets forth for the
periods indicated the high and low closing sales prices for the Company's Common
Stock, as reported by the Nasdaq Stock Market, Inc.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ----
<S> <C> <C>
December 31, 1996 $2.750 $1.375
March 31, 1997 2.750 1.125
June 30, 1997 3.750 1.875
September 30, 1997 2.625 2.000
December 31, 1997 3.125 2.375
March 31, 1998 5.188 1.875
June 30, 1998 11.750 5.313
September 30, 1998 22.500 7.250
</TABLE>

The Company has never paid a cash dividend to Common Stock stockholders,
and the current policy of the Company's board of directors is to retain the
earnings of the Company, if any, for use in the operation and development of its
business. Therefore, the payment of cash dividends on the Common Stock is
unlikely in the foreseeable future. Any future determination concerning the
payment of dividends will depend upon the Company's financial condition, the
Company's results of operations, and any other factors deemed relevant by the
board of directors.

CAPITALIZATION

The following table sets forth as of September 30, 1998 (i) the actual
capitalization of RMI, and (ii) the pro forma capitalization of RMI adjusted for
the proposed acquisition of DataXchange. This information is qualified by the
more detailed information included elsewhere in this Prospectus.

-29-
<PAGE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
HISTORICAL PRO FORMA
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents $ 731 $ 957

Current portion of debt and capital
lease obligations $ 715 $ 715
--------- ---------
--------- ---------

Debt (excluding current maturities) and
Capital Lease Obligations 654 654
--------- ---------

Stockholders' equity (deficit):
Preferred stock, $.001 par value, authorized
750,000 shares, no shares outstanding
Common stock, $.001 par value, authorized
25,000,000 shares, issued 7,989,694
shares, outstanding 7,929,942 (1) 8 8

Additional paid-in capital 17,803 22,805
Treasury Stock (83) (83)
Accumulated deficit (14,075) (14,075)
--------- ---------
Total Stockholders' Equity 3,653 8,655
--------- ---------
Total Capitalization $ 4,307 $ 9,309
--------- ---------
--------- ---------
</TABLE>

(1) Does not include options and warrants to purchase approximately 8,553,069
shares of RMI Common Stock outstanding at September 30, 1998.

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The following selected unaudited pro forma combined financial information
presented below has been derived from the unaudited and audited historical
financial statements of RMI and DataXchange included elsewhere in this
Prospectus and reflect management's present estimate of pro forma adjustments,
including a preliminary estimate of purchase price allocations, which ultimately
may be different. The pro forma financial data give effect to the proposed
acquisition of DataXchange.

The acquisition is being accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed are recorded at
their estimated fair values, which are subject to further adjustment based upon
appraisals and other analyses, with appropriate recognition given to the effect
of RMI's borrowing rates and income tax rates.

The unaudited pro forma combined statement of operations for the year ended
December 31, 1997 gives effect to the acquisition as if it had been consummated
at the beginning of such year. This pro forma statement of operations combines
the historical consolidated statement of operations for the year ended December
31, 1997 for RMI, the historical combined statement of operations for the year
ended December 31, 1997 for Application Methods and historical statement of
operations for the year ended January 31, 1998 of DataXchange.

-30-
<PAGE>

The unaudited pro forma condensed combined statement of operations for the
nine months ended September 30, 1998 gives effect to the acquisitions as if they
had been consummated at January 1, 1998. This pro forma statement of operations
combines the historical operations for RMI and Application Methods for the nine
month period ended September 30, 1998, and for DataXchange for the nine month
period ended July 31, 1998.

The unaudited pro forma condensed combined balance sheet as of September
30, 1998 gives effect to the acquisition as if it had been consummated on
that date. This pro forma balance sheet combines the historical consolidated
balance sheet at that date for RMI and the historical balance sheet at such
date for DataXchange.

The unaudited pro forma condensed combined financial statements may not be
indicative of the results that actually would have occurred if the transactions
described above had been completed and in effect for the periods indicated or
the results that may be obtained in the future. The unaudited pro forma
condensed combined financial data presented below should be read in conjunction
with the audited and unaudited historical financial statements and related notes
thereto of RMI and DataXchange and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," included
elsewhere in this Prospectus.

-31-
<PAGE>

Pro Forma Condensed Combined Balance Sheet
As of September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------------------------------------------------
Rocky DataXchange
Mountain Network, Pro Forma (B) Pro Forma
Internet, Inc. Inc. Subtotal Adjustments Combined
---------------------------------------------------------------------
(Dollars in Thousands)
Assets
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 731 $ 226 $ 957 $ 957
Trade receivables 880 153 1,033 1,033
Inventory 57 40 97 97
Other 174 97 271 271

---------------------------------------------------------------------
Total Current Assets $ 1,842 $ 516 $ 2,358 $ 2,358
---------------------------------------------------------------------

Property and Equipment, net $ 3,020 $ 171 $ 3,191 $ 3,191
Goodwill, net 4,450 4,450 4,766 (1) 9,216
Customer lists, net 384 384 384
Other assets, net 257 6 263 263

---------------------------------------------------------------------
Total Assets $ 9,953 $ 693 $ 10,646 $ 4,766 $ 15,412
---------------------------------------------------------------------
---------------------------------------------------------------------
<CAPTION>
Liabilities and Stockholders Equity
<S> <C> <C> <C> <C> <C>
Current Liabilities:
Current maturities of
long term debt and
Capital lease obligations $ 715 $ - $ 715 $ 715
Accounts payable and
Accrued expenses 4,642 265 4,907 4,907
Unearned income and deposits 289 192 481 481

---------------------------------------------------------------------
Total Current Liabilities $ 5,646 $ 457 $ 6,103 $ 6,103
---------------------------------------------------------------------

Long-term debt and capital ---------------------------------------------------------------------
Lease obligations $ 654 $ - $ 654 $ 654
---------------------------------------------------------------------
-
Stockholders' Equity -

Common Stock and
Additional paid in capital $17,811 $1,890 $ 19,701 $ (1,890)(2) $ 22,813
5,002 (1)

Accumulated deficit (14,075) (1,654) (15,729) 1,654 (2) (14,075)

Treasury stock, at cost
Common (83) (83) (83)
---------------------------------------------------------------------
Total Stockholders Equity $ 3,653 $ 236 $ 3,889 $ 4,766 $ 8,655
---------------------------------------------------------------------

Total liabilities & stockholders'
equity $ 9,953 $ 693 $ 10,646 $ 4,766 $ 15,412
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>

-32-

<PAGE>

Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------------------------------------
Rocky DataXchange
Mountain Network, Pro Forma (B) Pro Forma
Internet, Inc. Inc. Subtotal Adjustments Combined
------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Revenue:
Internet access and services $ 6,241 $ 1,464 $ 7,705 $ 721 (4) $ 8,426
Equipment Sales 266 266 266
------------------------------------------------------------------------
Total sales $ 6,507 $ 1,464 $ 7,971 $ 721 $ 8,692

Cost of sales 2,122 1,280 3,402 3,402
------------------------------------------------------------------------
Gross Margin $ 4,385 $ 184 $ 4,569 $ 721 $ 5,290
------------------------------------------------------------------------

Operating expenses:
Selling, general and administrative $ 5,950 $ 643 $ 6,593 $ 641 (4) $ 7,234
Other operating expense 4,549 4,549 4,549
Depreciation and amortization 1,032 63 1,095 715 (3) 2,143
333 (4)
------------------------------------------------------------------------
Total operating expenses $ 11,531 $ 706 $ 12,237 $1,689 $13,926
------------------------------------------------------------------------
Other income (expense) :
Interest expense, net $ (232) $ (2) $ (234) $ (8)(4) $ (242)
Other income (expense), net 50 (3) 47 (11)(4) 36
------------------------------------------------------------------------
$ (182) $ (5) $ (187) (19) $ (206)
------------------------------------------------------------------------

Net loss $ (7,328) $ (527) $ (7,855) $ (987) $(8,842)
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic and Diluted loss per share $ (0.99) $ (1.09)
------------- ---------
------------- ---------

Average number of common shares 7,402 8,128
Outstanding ------------- ---------
------------- ---------
</TABLE>

-33-

<PAGE>

Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1997
(Unaudited)

<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------------------------------------
Rocky DataXchange
Mountain Network, Pro Forma (B) Pro Forma
Internet, Inc. Inc. Subtotal Adjustments Combined
------------------------------------------------------------------------
(Amount in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Revenue:
Internet access and services $ 5,740 $ 1,941 $ 7,681 $ 984 (5) $ 8,665
Equipment Sales 387 387 387
------------------------------------------------------------------------
Total sales $ 6,127 $ 1,941 $ 8,068 $ 984 $ 9,052

Cost of sales 2,060 1,960 4,020 4,020
------------------------------------------------------------------------
Gross Margin $ 4,067 $ (19) $ 4,048 $ 984 $ 5,032
------------------------------------------------------------------------

Operating expenses:
Selling, general and administrative $ 6,981 $ 722 $ 7,703 $ 1,084 (5) $ 8,787
Depreciation and amortization 887 54 941 953 (3) 2,560
666 (5)
------------------------------------------------------------------------
Total operating expenses $ 7,868 $ 776 $ 8,644 $ 2,703 $11,347
------------------------------------------------------------------------
Other income (expense) :
Interest expense, net $ (347) $ 10 $ (337) $ (12) (5) $ (349)
Other income (expense), net (5) (5) 15 (5) 10
------------------------------------------------------------------------
$ (352) $ 10 $ (342) $ 3 $ (339)
------------------------------------------------------------------------

Net loss $ (4,153) $ (785) $ (4,938) $(1,716) $(6,654)
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic and Diluted loss per share $ (0.79) $ (1.09)
------------ -------
------------ -------

Average number of common shares 5,268 6,089
Outstanding ------------ -------
------------ -------
</TABLE>

NOTES TO THE PRO FORMA CONDENSED
COMBINED FINANCIAL DATA
(UNAUDITED)

(A) BASIS OF PRESENTATION

The accompanying unaudited pro forma condensed combined balance sheet is
presented as of September 30, 1998. The accompanying unaudited pro forma
condensed combined statements of operations are presented for the nine month
period ended September 30, 1998, and the year ended December 31,1997, except
for DataXchange Network, Inc. for which the nine month period ended July
31,1998 and the year ended January 31, 1998, are presented.

(B) PRO FORMA ADJUSTMENTS

The following pro forma adjustments have been made to the unaudited
condensed combined balance

-34-

<PAGE>

sheet as of September 30, 1998 and the unaudited condensed combined
statements of operations for the nine months and year ended September 30,
1998 and December 31, 1997:

(1) To reflect the 535,000 shares of RMI stock valued at $5,002,000 which
is the number of shares anticipated to be issued in connection with
the acquisition of DataXchange. The excess purchase price over the
fair value of the net assets acquired has been allocated to goodwill.
The pro forma adjustment reflects the incremental goodwill in the
amount of $4,766,000. Shares of Common Stock anticipated to be issued
for acquisitions were recorded at fair market value as based on the
current market price of RMI's publicly traded stock. The final
allocation of the purchase price will be made after the appropriate
appraisals or analyses are performed. Upon completion of the
appraisals and in accordance with the terms thereof, the excess
purchase price currently allocated to goodwill will be allocated to
the appropriate asset classifications, including customer list and
goodwill. While the goodwill will be amortized over a period of five
years, customer list or other identified intangibles may be amortized
over shorter periods, which would therefore increase amortization
expense. The acquisition of DataXchange is anticipated to take place
in the fourth quarter 1998; however no assurances can be given that
it will close at that time, if at all.

(2) To eliminate the equity accounts of the acquisitions.

(3) To adjust amortization expense due to increase in the carrying value
of goodwill, using a life of five years, as if such acquisitions had
been completed as of January 1, 1997.

(4) To adjust for revenues and expenses for the acquisition of
Applications Methods, Inc. as if such acquisition had been completed
as of January 1, 1998.

(5) To adjust for revenues and expenses for the acquisition of
Applications Methods, Inc. as if such acquisition had been completed
as of January 1, 1997.

USE OF PROCEEDS

The 4,000,000 Acquisition Shares to be offered and issued by the Company
may be issued from time to time in full or part consideration in connection
with future acquisitions by the Company. 4,061,500 of the Warrants and
approximately an additional 3,135,538 Selling Securityholder Shares subject
of this Prospectus have been previously issued to the Selling Securityholders
and are being offered for sale by the Selling Securityholders, and
approximately an additional 6,209,695 Selling Securityholder Shares that may
be issued upon exercise of Warrants are being offered for sale by the Selling
Securityholders, without giving effect to additional shares of Common Stock
that may be issued pursuant to anti-dilution provisions of various
outstanding warrants and options. Consequently, the Company will not receive
any of the proceeds from the sales of such shares.

The Company will not receive the proceeds of sales of any Securities
offered hereby by the Selling Securityholders. However, if the Selling
Securityholders who hold IPO Warrants determine to exercise their IPO
Warrants, the Company will receive the proceeds of the exercise of those
Warrants. The 1,365,000 IPO Warrants are redeemable by the Company at a cost
of $0.25 per IPO Warrant, subject to prior approval under the securities laws
and regulations of the states in which the holders of the IPO Warrants reside.

-35-

<PAGE>

The Company estimates that it would receive approximately $5,664,000
upon the exercise of all of the 1,365,000 IPO Warrants, net of commissions
due and payable to the representative of the underwriters for the Company's
IPO (but not net of the expenses of this offering). The Company is required
to pay to Neidiger, Tucker, Bruner, Inc. ("NTB"), the representative of the
underwriters of the Company's IPO, a commission equal to 5% of the exercise
price of the IPO Warrants under certain circumstances. The Company estimates
it would receive approximately $5,350,000 upon the exercise of DataXchange
Warrants based on a $10.00 exercise price estimate, which will be set at
closing. See "PLAN OF DISTRIBUTION." The Company plans to use any such net
proceeds for general corporate purposes and working capital. To the extent
such proceeds are not utilized immediately, they will be invested in
instruments that, in the determination of the Company, are low-risk
investment vehicles. There can be no assurance that any of the Warrants will
be exercised.

SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth selected historical financial and other data
of RMI. RMI was formed in October 1993 and has generated operating losses since
inception as well as negative cash flow in 1996 and 1997. The selected data set
forth below as of December 31, 1995 and for the period then ended have been
derived from the financial statements of RMI which have been audited by
McGladrey & Pullen, LLP, independent auditors. The selected consolidated
statements of operations and the balance sheet data set forth below as of
December 31, 1996 and 1997, for the periods then ended have been derived from
the financial statements of RMI which have been audited by Baird, Kurtz &
Dobson, independent auditors. The selected financial data for the nine month
periods ended September 30, 1998 and 1997 are derived from unaudited financial
statements. The unaudited financial statements include all adjustments,
consisting of normal recurring accruals, which RMI considers necessary for a
fair presentation of the financial position and results of operations for these
periods. The operating results for the nine months ended September 30, 1998 are
not necessarily indicative of the results to be expected for any future period.

The selected historical financial data should be read in conjunction with
the Consolidated Financial Statements of RMI and related Notes thereto, and the
information included under "SUMMARY HISTORICAL FINANCIAL DATA" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
included elsewhere in this Prospectus.

-36-

<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- --------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................................... $ 1,179 $ 3,282 $ 6,127 $ 4,432 $ 6,506
Cost of revenues earned.......................................... 320 1,104 2,060 1,485 2,122
Gross profit..................................................... 859 2,178 4,067 2,946 4,385
General, selling and administrative expenses..................... 968 4,459 7,868 5,905 11,531
Operating (loss) income.......................................... (109) (2,281) (3,801) (2,959) (7,146)
Net (loss) income................................................ (129) (2,343) (4,153) (3,215) (7,328)
Net (loss) income per share (1).................................. $ (0.07) $ (1.03) $ (0.79) $ (0.64) $ (0.99)
OTHER DATA:
EBITDA (2)....................................................... (9) (1,956) (2,918) (2,298) (6,149)
BALANCE SHEET DATA:
Cash and Cash Equivalents........................................ 275 $ 349 $ 1,053 $ 287 $ 731
Investments...................................................... 0 1,357 0 277 0
Working Capital (Deficit)........................................ (187) 371 (209) (1,949) (3,803)
Total Assets..................................................... 925 5,540 5,082 4,708 9,953
Long Term Debt and Capital Lease Obligations,
net of current portion......................................... 524 1,134 905 985 654
Total Stockholders' (deficit) equity............................. (169) 2,317 2,083 441 3,653
</TABLE>

(1) Loss per share is computed based on 1,868,000 shares outstanding for
1995, 2,295,000 shares outstanding for 1996 and 5,268,000 shares
outstanding for 1997, and 5,044,000 and 7,402,000 shares outstanding for
the nine months ended September 30, 1997 and 1998, respectively. This
represents the weighted average of common shares outstanding for both basic
and diluted earnings per share for each period. See Note 1 to the Company's
financial statements included elsewhere in this Prospectus

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

THE FOLLOWING DISCUSSION AND ANALYSIS IS QUALIFIED IN ITS ENTIRETY BY, AND
SHOULD BE READ IN CONJUNCTION WITH, THE FINANCIAL STATEMENTS, INCLUDING THE
NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS.

-37-

<PAGE>

OVERVIEW

RMI is a Delaware corporation incorporated in October 1995. It acquired
the assets of Rocky Mountain Internet, Inc., a Colorado corporation
incorporated in 1994 that began doing business in 1993 as an unincorporated
enterprise. RMI is an ISP providing a broad range of Internet-based services
to business and residential customers. RMI offers its services through its
own network in Colorado and through third-party providers nationwide. For the
year ended December 31, 1997 RMI had gross revenues of $6.1 million.

In September 1998, the Company entered into a Software License and
Consulting Services Agreement with Novazen to provide the Company proprietary
billing software tailored to its business. As consideration for the
consulting services to be provided by Novazen, the Company paid $100,000 in
cash and issued to Novazen 25,000 shares of its Common Stock. After the
Company entered into the Novazen Agreement, Kevin R. Loud, an officer of the
Company, purchased 38,000 shares of Novazen common stock for $1.60 per share.

On June 5, 1998, RMI acquired all of the outstanding common stock of
Infohiway pursuant to the terms of a Merger Agreement dated June 5, 1998 by
and among RMI, RMI Subsidiary, Inc., Infohiway and Kenneth Covell,
John-Michael Keyes and Jeremy J. Black, the shareholders of Infohiway (the
"Infohiway Merger Agreement"). Infohiway has developed a search engine that
the Company believes has unique data searching features. For the year ended
December 31, 1997, Infohiway had gross revenues of $31,000. The acquisition
was effectuated by the merger of RMI Subsidiary, Inc., a wholly-owned
subsidiary of RMI, with and into Infohiway. As a result of the merger,
Infohiway became a wholly-owned subsidiary of RMI. Pursuant to the Infohiway
Merger Agreement, the shareholders of Infohiway received an aggregate of
150,000 shares of RMI Common Stock.

In September 1998, the Company entered into non-binding letters of
intent to acquire, among other businesses and assets, all of the issued and
outstanding capital stock of DataXchange Network, Inc. ("DataXchange"), a
Florida-based national internet backbone provider, in exchange for up to
535,000 shares of the Company's Common Stock and, subject to the achievement
of certain financial performance objectives, warrants to purchase up to
535,000 shares of the Company's Common Stock.

The Company offers a broad array of communications products and services
tailored to meet customer needs and provides high quality customer support.
The Company delivers its products and services through two divisions:
Communication Services and Web Services. The Company believes that, based
upon its experience, a growing number of businesses will demand one
point-of-contact for communications solutions for the following reasons: (i)
to ensure proper system/ network integration; (ii) to obtain a single point
of responsibility for products and services that might have numerous
providers; and (iii) to continue to take advantage of evolving communications
technologies. The Company intends to increase the breadth of its products and
services delivered to its customers by adopting new technology, acquiring
complementary businesses and capitalizing on strategic relationships.

-38-

<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998

The Company's revenues grew 47% from $4,431,800 to $6,506,400 for the nine
months ended September 30, 1998 as compared to the comparable period in 1997.
Revenue growth performance is attributable to increasing size of the sales force
and segmenting the sales team by product group.

Dial-Up Service

Revenues increased from $1,735,400 to $2,055,000 or 18% from the nine
months ending September 30, 1997 to the nine months ending September 30, 1998.
Dial-up customer count increased from 9,300 to 15,300 or 64% from the nine
months ending September 30, 1997 to the nine months ending September 30, 1998.
As a result of the re-structure of the dial-up product, the Company experienced
a reduction in revenue growth while making greater gains in its customer base.

Dedicated Access Service

The Company assigned a direct sales team for dedicated access service and
with that focus has received the benefit of higher revenue growth. As a result,
dedicated access service business has grown based principally on ISDN and High
Speed circuit growth. ISDN sales have grown from $436,000 to $669,600 from the
first three quarters of 1997 to the first three quarters of 1998 for an increase
of 54%, while sales of high speed circuits services have increased from $627,700
to $1,153,300 for the same periods for an increase of 84%.

Web Services

Web site hosting accounted for $316,400 of revenue in the nine months
ending September 30 1997 and $455,300 for the same period in 1998 for an
increase of 44%. The increase resulted from increases in the direct sales
force, increased server capacities and speed, and the increasing popularity of
the web as a business tool.

Web site production increased from $437,200 to $770,000 or 76% for the
first nine months of 1997 as compared to the same period in 1998. The growth in
web hosting business demand, plus the focus of the Company's direct sales force
and the acquisition of Applications Methods helped to drive this part of the
business.

Other Services

Other revenue includes training revenue ($20,900 decreased to $10,700),
consulting ($132,900 decreased to $15,100) and sales from the Information
Exchange L.L.C. ($89,000 decreased to $78,500). IP Telephony and long distance
services generated $3,100 and 3,300 respectively in revenue for the nine months
ended September 30, 1998; these services were not available in 1997.

Gross Profit

Gross profit consists of total revenue less the cost of delivering services
and equipment. The gross profit (exclusive of equipment sales) was 65% for the
nine months ended September 30, 1997 and 67% for the

-39-

<PAGE>

same period in 1998. Gross profits on equipment sales were 21% and 22% for
the nine months ending September 30, 1997 and 1998, respectively. Sale of
equipment is provided as an accommodation to the Company's customers.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses ("S G & A") increased from
$5,451,600 in the nine months ended 1997 to $7,030,300 in the nine months ended
1998 or 29%. Exclusive of option compensation expense, discussed in the
following paragraph, S G & A increased 22% from the nine months ended 1997 to
the nine months ended 1998. Significant items are discussed below.

Compensation and related personnel costs and benefits increased 28% from
$3,003,800 to $3,836,600 for the nine months ended 1997 and 1998, respectively.
Payroll costs included a non-cash charge to compensation for the first quarter
of 1998 in the amount of $383,100 for the exercise of employee stock options.
Exclusive of this amount, payroll costs and related benefits increased 15%.

Sales and marketing expenses, consisting of advertising, promotion,
attendance at trade shows, printing, and finders fees, decreased from $195,300
for the nine months ending 1997 to $136,200 for the same period in 1998 for a
decrease of 30%.

Facilities rent expense decreased by 3% from $332,200 to $342,665 for the
nine months ended 1997 to the nine months ended 1998. The Company has
headquarters in downtown Denver, Colorado with additional office facilities in
Colorado Springs, Colorado and Seattle, Washington.

The Company experienced a decrease in communications expenses from $201,200
for the nine months ended 1997 to $192,600 for the nine months ended 1998 or 4%.
These expenses included local telephone service, cellular phones and pager costs
and long distance telephone expenses. The Company uses multiple "800" phone
numbers to provide technical support, customer support, and sales order
processing to its growing base of customers.

Legal and accounting expenses increased from $162,100 in the nine months
ended 1997 to $372,800 in the nine months ended 1998 or an increase of 130%.
This increase resulted from legal and accounting work required in preparation of
the Company's proxy statement for the Shareholder meeting held on March 12,
1998, legal work in the preparation of a registration statement on Form S-1,
which is discussed elsewhere in this document, legal expense incurred in
relation to the lawsuit referenced in Part II, Item 1 of this document, and due
diligence work performed in regards to potential acquisitions.

Other outside services, which includes temporary to hire staff and
professional services, increased 14% from $368,200 to $418,100 from the nine
months ended 1997 to the same period in 1998. The Company hires many of the
technical support call center staff and the Web production staff on a "temp to
hire" program wherein the new employee remains on the temporary employment
agency's payroll for approximately ninety days. This allows the staff to be
fully evaluated prior to becoming a full time Company employee.

-40-

<PAGE>

Other operating expense increased from $453,629 to $4,549,300 from the nine
months ended 1997 to the nine months ended 1998. The increase is due to the
recognition of previous deferred acquisition costs, associated with the ICC
acquisition and the associated financing, which terminated in the nine months
ended September 1998 in the amount of 4,551,800. Of this amount $2,765,200 is a
non-cash item related to warrants issued by the Company for commitment fees.

FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997

RESULTS OF OPERATIONS

REVENUES. Revenues were generated by a variety of Internet-related
activities that included dial-up access services, dedicated access services
primarily for business customers, frame relay services, and web hosting and
production. Other sources of revenue include equipment sales related to
dedicated access accounts, educational courses, and setup charges associated
with RMI's various services.

In 1997, RMI's revenues grew 87% compared to the year ended December 31,
1996. The total number of customers grew from 9,800 at year end 1996 to 13,000
at year end 1997, representing an increase of 33%. Revenues exclusive of
equipment sales grew by 108%. Revenues grew at a faster rate than customer count
due to RMI's continuing focus on commercial customers with higher monthly
billing rates and due to increases in web production and hosting. Customer count
was also adversely affected by approximately 1,050 resulting from the
termination of the contract with Zero Error Network (ZEN). An additional 390
customers from the Hayden, Colorado POP were transferred to ZEN effective
January 1, 1998. The following table provides information regarding amounts of
revenues by category for the years ended December 31, 1996 and 1997.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1996 1997 % CHANGE
------------ ------------ --------
<S> <C> <C> <C>
REVENUE CATEGORY:
Dial-Up Service........... $ 1,465,300 $ 2,359,500 61 %
Dedicated Access Service.. 689,300 2,047,900 197 %
Web Services.............. 413,600 1,051,100 154 %
Equipment Sales........... 519,500 389,300 (25)%
Other..................... 193,900 279,300 45 %
------------ ------------ ----
Total $ 3,281,600 $ 6,127,100 87 %
</TABLE>

DIAL-UP SERVICE. RMI's dial-up service strategy is to provide high
quality service with few busy signals. In the past, RMI was not prepared to
offer flat rate pricing for unlimited access service. However, on November 4,
1997, RMI introduced a flat rate price offering to the Denver and Boulder,
Colorado markets. Subsequently, RMI added flat rate service in Colorado
Springs and Pueblo, Colorado. This offering has become more economically
attractive than in the past due to lower costs for circuits and a lower cost
per port for dial-up access. The new offering includes higher speed modem
access using K56 Flex technology.

The table below shows the composite weighted average billing rate for
full service Internet access by quarter for 1995, 1996, and 1997. The
reduction in the average rate for September 1997 is the result of a change in
the average rates resulting from the termination of dial-up service contracts
with third parties in Alamosa and Leadville, Colorado. RMI has historically
offered billing rates ranging from $8.95 to $29.95. The remaining contracts
with other third parties provide a higher percentage of lower rate services.
Effective with the

-41-

<PAGE>

December 1997 billings, most Denver and Boulder, Colorado area customers who
were on payment plans higher than $19.95 per month were converted to a new
$19.95 flat rate service, resulting in a lower average billing rate.

FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
Mar June Sept. Dec. March June Sept. Dec. March June Sept. Dec.
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997 1997 1997
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$20.52 $20.42 $20.88 $21.02 $20.97 $20.33 $20.41 $20.50 $20.10 $20.04 $19.65 $18.62
</TABLE>

The 61% revenue growth in dial-up service from 1996 to 1997 is
attributable to customer growth. Dial-up service has been approximately even
between commercial and residential customers throughout 1995, 1996 and 1997
based on customer count. Based on revenues, the split between commercial and
residential is 35% to 65%, respectively. Dial-up service revenues increased
from $1,465,300 to $2,359,500 or 61% for the year ended December 31, 1996 as
compared to the year ended December 31, 1997.

Through business alliances with three locally-based unrelated parties
RMI provides Internet services in secondary markets in the State of Colorado.
The services are provided under written contracts that provide for the
locally-based party to provide equipment and marketing services while RMI
provides Internet access and administrative services. Dial-up service
revenues based on these contracts generated $354,100 in revenues in 1996 and
$480,400 in revenues in 1997 for an increase of 36%. RMI expects total
revenues from these third party relationships to decrease in the future as
explained further in this paragraph. The joint POPs established pursuant to
these contracts were established commencing in the second quarter of 1995 and
grew to six locations by the end of 1995 and nine locations by the end of
1996. Effective July 3, 1997, the contract with ZEN was terminated. Under the
termination agreement, RMI will operate the Pueblo, Colorado POP as an
RMI-only location and ZEN will operate the Alamosa, Leadville, and Hayden,
Colorado locations. These three POPs were transitioned to ZEN beginning in
July 1997 and concluding in December 1997 as ZEN was able to implement
facilities. The Pueblo, Colorado POP transitioned 100% to RMI in July 1997.
Due to the timing of the changes there was minimal impact on total RMI
revenues. A similar contract in Grand Junction, Colorado was terminated by
RMI effective April 30, 1997. The marketing efforts by the locally-based
third party in this location were minimal and sales were less than $1,000 per
month. RMI is pursuing options to operate this facility and add dedicated as
well as dial-up customers.

Dedicated business has grown based principally on ISDN and high- speed
circuits (56K, T-1, and T-3) growth. ISDN sales have grown from approximately
$93,000 to $632,000, for an increase of 580% from 1996 to 1997. Dedicated
high-speed circuits and co-location customer billings have increased from
approximately $455,000 to $1,293,200 or 184% from 1996 to 1997. These
increases are the result of a full time sales staff focused on this product
line and the continuing growth in demand for Internet connectivity.

The table below shows the quarterly customer count by each of the
component services offered for dedicated access as of the dates indicated:

-42-

<PAGE>

<TABLE>
<CAPTION>
MAR 31 JUN 30 SEP 30 DEC 31 MAR 31 JUN 30
SERVICE 1995 1995 1995 1995 1996 1996
- -------------------------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Private Port.............. 29 30 36 35 42 47
56 Kbps................... 18 27 27 34 47 69
ISDN...................... 0 0 0 2 3 13
T-1 and T-3............... 7 10 10 11 16 25
Co-location............... 0 1 4 4 6 4
</TABLE>

<TABLE>
<CAPTION>
SEP 30 DEC 31
SERVICE 1996 1996
- --------------------------- ------ ------
<S> <C> <C>
Private Port............... 46 54
56 Kbps.................... 71 72
ISDN....................... 46 80
T-1 and T-3................ 29 30
Co-location................ 5 6
</TABLE>

<TABLE>
<CAPTION>
MAR 31 JUN 30 SEP 30 DEC 31
SERVICE 1997 1997 1997 1997
- --------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Private Port............... 50 41 36 31
56 Kbps.................... 78 72 65 60
ISDN....................... 168 193 211 233
T-1 and T-3................ 65 84 99 123
Co-location................ 11 12 11 21
</TABLE>

WEB SERVICES. Web services revenues are primarily comprised of web site
hosting and web site production. Web site hosting provides ongoing revenue
from customers for whom RMI hosts a web site on web servers in the RMI data
center. All access made to these web sites by the customer and the Internet
community as a whole are processed on the RMI servers. The advantage to
customers is high-speed access to sites by their targeted audiences. The
following is a summary of the number of web hosting customers as of the dates
indicated:

Web site hosting accounted for revenues of $239,700 in 1996 and $478,500
in 1997 for an increase of 100%. The increase resulted primarily from
activity by the direct sales force, increased server capacities and speed,
and the increasing popularity of the Internet as a business tool.

Web site production revenues increased from $173,800 for 1996 to
$563,500 for 1997 for an increase of 224%. The increase in 1997 resulted
primarily from an increase in the size of the web site production department
and the purchase by customers of more complex applications. In addition,
RMI's direct sales force focused in 1997 on selling web production sites with
higher average billings.

-43-

<PAGE>

customers and sales to third party business alliances for POP equipment with
very low margin. 1997 did not have similar large-scale sales. Margins on
equipment sales increased from 11% in 1996 to 23% in 1997. RMI has
established wholesale purchasing relationships with national and regional
vendors in order to provide an attractively priced total Internet solution to
its commercial customers.

GROSS PROFIT. Gross profit on Internet services (exclusive of equipment)
as a percentage of sales was 77% for 1996 and 69% for 1997. In December 1996,
RMI installed a T-3 network connecting Boulder, Colorado Springs and Denver,
Colorado locations utilizing Cascade switches. This is a large capacity
network providing reliable high-speed connections for a wide range of
customer needs, which in 1997 was underutilized. As the network becomes fully
utilized, RMI anticipates that it will realize significant economies of scale
resulting in increased margins.

GENERAL, SELLING AND ADMINISTRATIVE EXPENSES. General, selling and
administrative expenses increased from approximately $3,682,660 in 1996 to
approximately $6,611,000 in 1997, or 81%. General, selling and administrative
costs consist of personnel (excluding sales and marketing personnel),
physical facilities, depreciation, amortization, professional services and
other related administrative expenses. Significant items are discussed below.

Payroll costs increased 41% from $2,138,000 for 1996 to $3,024,000 for
1997 (not including sales and marketing personnel compensation discussed
below). RMI had 55 employees at the end of 1996 and 67 employees at the end
of 1997 in all areas of RMI including administration, technical support,
development, and senior management (excluding sales and marketing). The 1997
total expense includes $127,700 of compensation expense in connection with
options granted to Mr. Douglas H. Hanson as discussed elsewhere in this
Prospectus.

Sales and marketing expenses, consisting of advertising, promotion,
attendance at trade shows, printing, and finders' fees, increased from
$211,500 in 1996 to $286,300 in 1997, or 35%. RMI hired a full time direct
sales staff beginning in December 1995. Compensation for sales and marketing
personnel was approximately $565,000 for 1996 and $969,000 in 1997, for an
increase of 71%, with 16 employees at the end of 1996 and 17 employees at the
end of 1997. The increase resulted primarily from having a fully staffed
sales department throughout 1997 while the department was partially staffed
in 1996.

Facilities rent expense was $172,400 in 1996 and increased 156% to
$441,400 in 1997. This increase was principally the result of a move in late
1996 to new corporate headquarters consisting of leased office space of
approximately 19,500 square feet space including a data center comprised of
1,200 square feet. RMI continues to occupy offices in Colorado Springs,
Colorado for staff performing dial-in technical support, customer service,
and sales functions. RMI's former offices in Denver, Colorado at 1800 Glenarm
have been subleased effective March 1, 1997 for the remainder of the lease
term. A one-time charge of approximately $58,000 has been recorded in 1996
for commission expense on the transaction as well as the difference between
the sublease rate and the existing lease rate.

RMI experienced an increase in communications expense from $196,800 for
the year ended 1996 to $260,500 for the year ended 1997, or 32%. These
expenses included local telephone service, cellular phones and pager costs
and long distance telephone expenses. RMI uses multiple "800" phone numbers
to provide technical support, customer support, and sales order processing to
its growing base of customers.

Legal and accounting expenses increased from $77,400 in 1996 to $218,100
in 1997, or an increase of 182%. This increase resulted from the first full
year of filing SEC quarterly and annual reports, due diligence work performed
in connection with the investments in RMI made by Mr. Hanson in 1997
(discussed elsewhere herein), negotiations in connection with the termination
of employees and preparation of a proxy statement.

-44-

<PAGE>

Outside services expense, which includes temporary to hire staff and
professional services, increased 191% from $150,100 to $437,700 from 1996 to
1997. RMI hires many of the technical support call center staff and the web
production staff on a "temp to hire" program wherein the new employee remains
on the temporary employment agency's payroll for approximately ninety days.
This allows the staff to be fully evaluated prior to becoming a full-time
employee.

During 1997, RMI incurred one time expenses for a write-off of costs
incurred in Grand Junction and Burlington, Colorado for development of
third-party marketing agreements in the amount of $45,100, a write down of
inventory for sale in the amount of $23,000, an expense of $314,600 relating
to termination of employees and $107,200 of legal expenses primarily relating
to the terminations.

FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1996

RESULTS OF OPERATIONS

REVENUES. Revenues were generated by a variety of Internet-related
activities that included dial-up services, dedicated access services
primarily for business customers, frame services, and web site hosting and
production. Other sources of revenue included equipment sales related to
dedicated access accounts, educational courses, and setup charges associated
with RMI's various services.

RMI's revenues grew 178% from the year ended December 31, 1995 as
compared to the year ended December 31, 1996. The total number of customers
grew from 4,000 to 9,800 during the same periods, representing an increase of
145%. Revenues exclusive of equipment sales grew by 167%. Revenues grew at a
faster rate than customer count due to a focus on commercial customers with
higher monthly billing rates and from increases in web site production and
hosting and equipment sales. The following table provides information
regarding amounts of revenues by category for the years ended December 31,
1995 and 1996.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 % CHANGE
------------- ------------ ---------
<S> <C> <C> <C>
REVENUE CATEGORY:
Dial-Up Service.................... $ 621,500 $ 1,465,300 135%
Dedicated Access Service........... 262,300 689,300 163%
Web Services....................... 29,100 413,600 1321%
Equipment Sales.................... 144,500 519,500 259%
Other.............................. 121,900 193,900 59%
------------ ------------ ----
Total.............................. $ 1,179,300 $ 3,281,600 178%
</TABLE>

DIAL-UP SERVICE. RMI's dial-up service strategy is to provide high
quality service with few busy signals. In order to assure this service level,
RMI does not provide any unlimited access service price plans during the
business day, as these plans have a tendency to congest the network. RMI does
provide a range of service offerings based on a set number of hours for a set
rate with additional hours billed as overage. The table below shows the
composite weighted average billing rate for full service Internet access by
quarter for 1995 and 1996.

FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
March June Sept. Dec. March June Sept. Dec.
1995 1995 1995 1995 1996 1996 1996 1996
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
$20.52 $20.42 $20.88 $21.02 $20.97 $20.33 $20.41 $20.50
</TABLE>

-45-

<PAGE>

The 135% revenue growth in dial-up service in 1996 over 1995 is
attributable to a growth in customers while average billing rates remained
stable year over year. Dial-up service has been approximately even between
commercial and residential customers throughout 1995 and 1996, based on
customer count.

RMI has established business alliances through contracts with five
unrelated parties for the purpose of providing Internet services in secondary
markets in Colorado. These contracts provide for the local party to provide
equipment and marketing services while RMI provides Internet access and
administrative services. Dial-up service revenues based on these contracts
generated $67,500 in revenues in 1995 and $354,100 in 1996 for an increase of
425%. The joint POPs pursuant to these contracts were established commencing
in the second quarter of 1995 and grew to six locations by the end of 1995
and eight locations by the end of 1996.

The table below shows the quarterly customer count by each of the
component services offered for dedicated access as of the dates indicated:

<TABLE>
<CAPTION>
MAR 31 JUN 30 SEP 30 DEC 31 MAR 31 JUN 30
SERVICE 1995 1995 1995 1995 1996 1996
- --------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Private Port............... 29 30 36 35 42 47
56 Kbps.................... 18 27 27 34 47 69
ISDN....................... 0 0 0 2 3 13
T-1 and T-3................ 7 10 10 11 16 25
Co-location................ 0 1 4 4 6 4
</TABLE>

WEB SERVICES. Web services revenues are primarily composed of web site
hosting and web site production. Web site hosting provides ongoing revenue
from customers for whom RMI hosts a web site on web servers in the RMI data
center. All access made to these web sites by the customer and the Internet
community as a whole are processed on the RMI servers. The advantage to
customers is high-speed access to sites by their targeted audiences. The
following is a summary of the number of web site hosting customers as of the
dates indicated:

-46-

Web site hosting accounted for $26,200 of revenue in 1995 and $239,700
of 1996 revenue, for an increase of 815%. The increase resulted from
increases in the direct sales force, increased server capacities and speed,
and the increasing popularity of the web as a business tool.

Web site production increased from $3,800 for 1995 to $173,800 for 1996,
for an increase of 4,474%. RMI increased the size of the web site production
department and as provided customers more complex applications. The growth in
the web site hosting business as well as the efforts of RMI's direct sales
force helped to drive this part of the business. RMI did not have a direct
sales force until December 1995.

EQUIPMENT SALES. RMI sells hardware to its customers as an accommodation
and to provide a "one stop shop" for Internet services. Equipment sales can
vary from a single router for an ISDN connection to providing servers and
Internet grade routers for co-locations. Sales grew from $144,600 in 1995 to
$519,600 in 1996, or 259%. The equipment sales for 1996 included some large
dollar sales to key customers and sales to third party business alliances for
POP equipment with low margins. Equipment sales are typically low margin
transactions and can fluctuate dramatically depending on large server orders.
RMI has established wholesale purchasing relationships with national and
regional vendors in an effort to provide an attractively priced total
Internet solution to its commercial customers.

GROSS PROFIT. Gross profit consists of total revenue less the direct
costs of delivering services and the cost of equipment. Gross profit on
Internet services (exclusive of equipment) as a percentage of sales is 81%
for 1995 and 77% for 1996. The reduction in gross profit percentage is
principally the result of increasing capacity for Internet access, ISDN
facilities, and dial-up facilities.

GENERAL, SELLING AND ADMINISTRATIVE EXPENSES. General, selling and
administrative expenses increased from $875,200 in 1995 to $3,682,600 in
1996, or 321%. General, selling and administrative costs consist of personnel
(excluding sales and marketing personnel), physical facilities, depreciation,
amortization, professional services and other related administrative
expenses. Significant items are discussed below.

Payroll costs increased from $459,600 for the year ended December 31,
1995 to $2,178,500 for the year ended December 31, 1996, or 374%. RMI had 29
employees at the end of 1995 and increased staff to 67 at the end of 1996 in
all areas of RMI including administration, technical support, development and
senior management (excluding sales and marketing).

Sales and marketing expenses increased from $92,300 in 1995 to $776,500
in 1996, or 741% inclusive of personnel costs. RMI hired a full time direct
sales staff beginning in December 1995. Of the total 1996 sales and marketing
expense, approximately $565,000 related to personnel expenses. RMI had 6
employees at the end of 1995 and 16 employees at the end of 1996 in sales and
marketing. Extensive efforts were made in 1996 to identify, hire and train
sales personnel with expertise in Internet access and in web applications.
Approximately $211,500 for 1996 was spent on advertising, developing and
printing marketing and sales support materials, and trade show attendance.

Facilities rent expense for 1995 was $82,300 and increased to $172,400
in 1996, or 109%. In late 1995, RMI opened offices on one floor in Denver at
1800 Glenarm. At mid-year, RMI acquired an additional floor at the same
location. In late 1996, RMI moved its corporate headquarters and leased
office space of approximately 19,500 square feet (including a data center
comprised of 1,200 square feet). RMI continues to occupy offices in Colorado
Springs, Colorado for staff performing dial-in technical support, customer
service

-47-

<PAGE>

and sales functions. Additionally, RMI leased two POPs which contain routers,
servers, and modems to provide Internet access for its customers. RMI's
former offices in Denver, Colorado at 1800 Glenarm were sub-leased effective
March 1, 1997 for the remainder of the lease term. A one-time charge of
approximately $58,000 was recorded in 1996 for commission expense on the
transaction as well as the difference between the sublease rate and the
existing lease rate.

RMI experienced an increase in communications expense from $58,400 for
the year ended 1995 to $196,800 for the year ended 1996, or 237%. These
expenses included local telephone service, cellular phones and pager costs
and long distance telephone expenses. RMI uses multiple "800" phone numbers
to provide technical support, customer support, and sales order processing to
its growing base of customers.

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

RMI has incurred losses since its inception in October 1993. RMI's
operations used net cash of approximately $3.3 million for the year ended
December 31, 1997. RMI has operated with a negative cash flow from operations
during 1996, 1997 and 1998. The cash used by operating activities is
primarily attributable to RMI's continued expansion of its facilities and
employee base in anticipation of continued growth in revenues.

RMI has relied on a series of private and public financings to provide
the funds necessary to finance its operations. These financings have included
(a) a convertible debenture offering in late 1995 and early 1996 that
generated $490,000 (the debentures were converted into shares of Common Stock
in October 1996), (b) a preferred stock offering in mid-1996 that generated
$406,000, (c) an initial public offering in September 1996, with proceeds of
$3,777,000 and (d) a private placement of equity from June to September 1997
which raised $1,117,920. During 1997, RMI substantially drew down a line of
credit for $500,000 for working capital purposes. This credit line was
secured by a pledge of a $300,000 treasury bill repurchase agreement and by
RMI's accounts receivable. In October 1997, RMI repaid the line of credit and
transferred the funds from the treasury bill to cash. The line of credit has
been discontinued and the secured position of the bank on the accounts
receivable has ceased. RMI's office lease is also secured by a pledge of a
money market fund of $250,000. On October 1, 1997, Mr. Hanson invested
$2,398,600 by purchasing shares of RMI Common Stock and invested an
additional $503,600 in March 1998 by exercising warrants and options that
were granted at the time of his initial investment in October 1997. The March
1998 investment by Mr. Hanson was made in order to permit RMI to maintain its
qualification for listing on Nasdaq. It is possible that RMI will need
additional cash resources to meet its obligations.

Net cash used by RMI for investing activities in 1996 was $1,511,500.
Net cash used for investing activities in 1996 was primarily due to purchases
of property and equipment, the purchase of investments needed to secure
financing and payment for acquisitions. Net cash provided by investing
activities in 1997 and the first half of 1998 was $921,000 and ($524,916),
respectively (primarily due to proceeds of $1,356,600 from the release and
sale of such investments which were no longer needed to secure such financing
which was offset by purchase of equipment and the acquisition of O.N.E.
customers.)

On July 20, 1998, July 24,1998 and November 6, 1998, the Company filed
with the U.S. Securities and Exchange Commission separate amendments to a
registration statement on Form S-1 (originally filed on May 15,1998) in order
to register the shares underlying the warrants issued during the Company's
initial public offering on September 5, 1996 along with other securities
which the company has committed to register under various agreements. The
Warrants are currently traded on the Nasdaq SmallCap Market under the symbol
"RMIIW." Upon the effectiveness of this registration statement, and related
"Blue Sky" filings with various states, the Company will have the right to
call 1,365,000 warrants for $0.25 each, and the warrant holder will have a
thirty day period to exercise the warrant at a price of $3.07 per underlying
share. 1,942,336 common shares are underlying the warrants. If all of the
shares underlying these Warrants are exercised, the Company

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would realize proceeds of approximately $5,670,000. The Company has not
announced plans to call these Warrants, but may elect to do so upon the
completion of the registration statement and as funds are needed.

The Company intends to make capital expenditures during the next 12
months for expansion of its network, including the acquisition of POPs and
the upgrade of the NOC and other computers and financial and management
information systems.

If the Company's expansion occurs more rapidly than currently anticipated
or if the Company's available cash resources are not sufficient to fund all of
the Company's operating expenses and capital expenditures, the Company will
require additional capital before that time. In addition, depending on market
conditions, the Company may determine to raise additional capital before such
time. The Company may obtain additional funding through the call of the IPO
Warrants, sale of public or private debt and/or equity securities, bank
financings, lease financings, strategic relationships or other arrangements.
There can be no assurance as to the availability or the terms upon which such
financing might be available. See "RISK FACTORS -- FUTURE CAPITAL NEEDS;
UNCERTAINTY OF ADDITIONAL FINANCING."

The Company did not complete a $175 million Rule 144A Offering scheduled to
fund in mid-August. The Company terminated a merger agreement on October 13,
1998 with ICC. Cost, expenses and related fees associated with the terminated
merger and the related proposed financing is estimated to be between $3.8
million and 5.2 million, a portion of which are in dispute and of which $2.7
million relates to a non-cash item related to warrants issued by the Company.
These costs were charged to expense in the third quarter of 1998, which had an
effect of an additional $.58 earning per share loss. The Company does not
currently have the ability to pay all such cost, fees and expenses. The Company
believes that it will be able to agree on a schedule for payment of these cost,
fees and expenses that is satisfactory to all parties; however there can be no
assurance the Company will be able to reach an agreement with all parties
regarding the payment of such cost, fees and expenses. The Company is seeking
additional financing. There can be no assurance that the Company will be able
to obtain the additional financing it currently needs to satisfy its current
obligations and execute its business plan. See "RECENT DEVELOPMENTS." As a
result of the terminated merger agreement, ICC filed a $30 million lawsuit
against the Company. The Company believes the lawsuit is without merit and
intends to assert counterclaims against ICC; however, there can be no assurance
that the Company will prevail in its defense or any counterclaims. The Company
requires additional capital to fund its current operation and execute its
business plan.

In August 1998, Douglas H. Hanson loaned $400,000 to the Company for
various working capital needs and on October 20, 1998 he loaned another $400,000
for working capital needs. Such loans have been consolidated and are evidenced
by one promissory note. The principal amount of the promissory note, together
with interest at the rate of 11% per annum, is payable in full 90 days after
October 20, 1998.

In connection with the investment by Douglas H. Hanson in the Company in
October, 1997, he was granted warrants to purchase shares of stock at $1.90 per
share. Currently, there are 3,950,000 warrants exercisable which would net to
the Company $7.5 million if fully exercised. These warrants expire in
September, 1999. There can be no assurance that these Warrants will be
exercised.

RMI is an Internet Service Provider ("ISP") with a high growth rate (as
discussed elsewhere in this document). The Company's growth is dependent on
continuing to build a strong infrastructure and hiring quality sales, technical,
and administrative personnel. In order to build the infrastructure and acquire
the human resources needed to maintain a high growth rate, the Company has
operated with a negative cash flow from operations during 1996 and 1997. The
Company's cash requirements are relatively fixed for the near term and

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<PAGE>

the Company expects to continue to improve operating cash flow if revenue
continues to increase according to expectations without any significant cost
increases. Should revenues not continue to increase according to
expectations, the Company must seek, and is seeking, additional financing to
fund operating losses or implement reductions in operating expenses.
Reductions in operating expenses, if effected, could adversely affect
revenues and therefore not result in the expected increase in cash flow. The
Company does not currently have access to additional bank financing and
therefore financing would have to result from additional issuances of equity
or other additional debt securities.

YEAR 2000 ISSUES

Currently, many computer systems, hardware and software products are
coded to accept only two digit entries in the date code field and,
consequently, cannot distinguish 21st century dates from 20th century dates.
The interaction between various software and hardware platforms rely upon the
date coding system. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to function properly
after the turn of the century. The Company, its customers, and suppliers are
reliant on computers and related automated systems for daily business
operations.

The Company has begun the process of identifying computer systems that
could be affected by the Year 2000 issue as it relates to the Company's
internal hardware and software, as well as third parties which provide the
Company goods or services. Three categories or general areas have been
identified for review and analysis.

(2) Third party vendors providing critical services including
circuits, hardware, long distance and related products. These include
telco providers, suppliers of routers, modems, switches, etc.

(3) Critical internal systems that support the Company's
administrative systems for billing and collecting, general accounting
systems, computer networks, and communication systems.

The Company is in the planning and initial study phase of Year 2000
compliance review and testing. In regards to Item (1) listed above, the
Company's critical existing systems are no more than two and one-half years
old and it is anticipated that many of these systems will not have
significant Year 2000 problems. Due to the Company's continued growth, most
systems providing customer services are planned to be relocated to an
expanded network operations center. Concurrently with the relocation, many
of the critical systems will be migrated to new hardware and software
platforms to increase reliability and capacities. All newly acquired
hardware systems, operating systems, and software are required to have vendor
certification for Year 2000 compliance. These systems are in process of being
inventoried and a systems testing schedule is being developed.

In regards to Item (2) above - third party products and services - the
Company's significant vendors are large public companies such as US West
Communications, ICG Telecommunications Group, Cisco Systems, Lucent
Technologies, Ascend Communications, etc., that are all under SEC mandates to
report their compliance in all publicly filed documents. The Company intends
to initiate a compliance review program with these vendors during the first
quarter of 1999 and will continue to track progress of all critical vendors
for compliance.

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<PAGE>

Item (3) above relates to internal systems for company administrative
and communications requirements. The Company intends to implement new
billing and billing presentment systems during the first half of 1999. These
system vendors are required to certify Year 2000 compliance. Additionally,
the Company intends to test these systems for compliance during the
implementation processes. The Company expects that internal computer networks
and communications systems will be tested in the first quarter of 1999 for
compliance.

The costs to address the Year 2000 compliance issues have not been
determined at this time. Based on growth, the Company plans to implement new
hardware platforms and software systems that should be Year 2000 compliant
and, therefore, costs specifically allocated to Year 2000 compliance may not
be significant. However, there can be no assurance that such costs will not
be significant. Systems testing and compliance reviews with third party
services providers will incur manpower and consultant costs.

The nature of the Company's business makes it dependent on computer
hardware, software, and operating systems that are susceptible to Year 2000
issues. Failure to attain at least minimum levels of Year 2000 compliance
would have a material adverse effect on the Company's ability to deliver
services and on the Company's business, operating results, financial
condition and cash flow.

The Company has not developed a contingency plan for dealing with Year
2000 risks at this time.

BUSINESS
OVERVIEW

The Company is a full service communications solutions provider of
switched and IP-based communications products and services for small- and
medium-sized business enterprises, as well as dial-up residential customers.
The Company operates 9 Internet POPs in Colorado, and through agreements with
third-party providers, the Company can provide Internet access in 90 of the
100 largest metropolitan statistical areas in the United States. The Company
monitors and controls its network through its NOC located in Denver,
Colorado. The Company intends to provide to its customers on a nationwide
basis comprehensive communications services, including dedicated Internet
access, dial-up Internet access, IP Telephony, point-to-point private line,
frame relay and local and long distance telephone service. In addition, the
Company offers its customers value-added web services, including web site
hosting, web site production and marketing, e-commerce and web training. The
Company had combined pro forma revenues for the year ended December 31, 1997
of $9,052,000 and provided dedicated access and web services to over 1,200
business customers and over 15,300 dial-up customers as of September 30, 1998.

INDUSTRY BACKGROUND

OVERVIEW. The telecommunications industry is rapidly transforming itself
from a segmented multi-technology marketplace to an industry that is
characterized by the convergence of technologies and companies capable of
providing a full array of communication services. Three of the main factors
driving this significant transformation of the industry include (i) the
convergence of voice and data transmission, (ii) the need for broadband
transmission technologies and infrastructure, and (iii) the convergence of
technologies and companies providing what were formerly independent products
and services into one industry. As data and voice transmission converges,
operators continually need higher bandwidth capacity networks. Today the
communications services market can be divided into two basic categories: (i)
traditional, circuit switched and dedicated voice oriented services; and (ii)
packet switched services compatible with Internet standards. Traditional,
circuit switched and dedicated voice oriented services in the United States
can be further divided into long distance services and local exchange
services.

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<PAGE>

TRADITIONAL TELECOMMUNICATIONS SERVICE MARKET. The present structure of
the U.S. telecommunications market resulted largely from the divestiture of
the "Bell System" in 1984 (the "Divestiture"). As a result of the
Divestiture, seven RBOCs were created to offer services in geographically
defined areas called local access transport areas ("LATA's"). The RBOC's were
separated from the long distance provider, AT&T, resulting in the creation of
two distinct industries--local phone service and long distance (also known as
interexchange) phone services. The Divestiture, in and of itself, did not
result in competition in the local exchange market, but it did provide for
direct open competition for long distance. Since the Divestiture, several
factors have served to promote competition in the local exchange market,
including: (i) customer desire for an alternative to the RBOCs (also referred
to as the I-LECs); (ii) technological advances in the transmission of data
and video requiring greater capacity and reliability than I-LEC networks were
able to accommodate; (iii) a monopoly position and regulated pricing
structure, which provided little incentive for the I-LECs to reduce prices,
improve service or upgrade their networks; and (iv) the significant fees,
called "access charges," long distance carriers were required to pay to the
I-LECs to access the I-LECs' networks.

The first competitors in the local exchange market, designated as
"competitive access providers" or "CAPs" by the FCC, were established in the
mid-1980s. Most of the early CAPs were entrepreneurial enterprises that
operated limited networks in the central business districts of major cities
in the United States where the highest concentration of voice and data
traffic is found. Since most states prohibited competition for local switched
services, early CAP services primarily consisted of providing dedicated,
unswitched connections to long distance carriers and large businesses. These
connections allowed high-volume users to avoid the relatively high prices
charged by I-LECs for dedicated, unswitched connections or for switched
access.

As CAPs proliferated during the latter part of the 1980s, certain
regulators issued rulings that favored competition and promised to open local
markets to new entrants. These rulings allowed CAPs to offer a number of new
services, including, in certain states, a broad range of local exchange
services, including switched services. Companies providing a combination of
CAP and switched local services are sometimes referred to as C-LECs. This
pro-competitive trend continued with the passage of the Telecommunications
Act of 1996, which provided a legal framework for introducing competition to
local telecommunications services throughout the United States. As a result
the RBOCs, which previously had an oligopoly in the $92 billion (1997
estimate) local service market, are now facing increased competition from
C-LECs. Conversely, local carriers are being allowed to compete in the $104
billion long distance market (1997 estimate) only after they have "opened"
their local markets to competition.

Over the last three years, several significant transactions have been
announced representing consolidation of the U.S. telecommunications industry
driven by both competitive pressures and the convergence of voice and data
networks. Among the I-LECs, Bell Atlantic Corporation and NYNEX Corporation
merged in August of 1997 and Pacific Telesis Group and SBC Communications
Inc. merged in April 1997. Major long distance providers have sought to
enhance their positions in local markets, through transactions such as AT&T's
acquisition of Teleport Communications Group and WorldCom's mergers with MFS
and Brooks Fiber Properties and to otherwise improve their competitive
positions, through transactions such as WorldCom's merger with MCI. In
addition AT&T, in order to capitalize on the trends of convergence and
consolidation and gain access to the local markets, has announced plans to
merge with the cable company, TCI.

THE INTERNET SERVICES MARKET. The Internet is a global collection of
interconnected computer networks that allows commercial organizations,
educational institutions, government agencies and individuals to communicate
electronically, access and share information and conduct business. The
Internet originated with the ARPAnet, a restricted network that was created
in 1969 by the United States Department of Defense Advanced Research Projects
Agency ("DARPA") to provide efficient and reliable long distance and data
communications among the disparate computer systems used by government-funded
researchers and academic organizations. The networks that comprise the
Internet are connected in a variety of ways, including

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by public switched telephone network and by high speed, dedicated leased
lines. Communications on the Internet are enabled by IP, an inter-networking
standard that enables communication across the Internet regardless of the
hardware and software used.

Over time, as businesses have begun to utilize e-mail, file transfer
and, more recently, intranet and extranet services, commercial usage has
become a major component of Internet traffic. In 1989, the U.S. government
effectively ceased directly funding any part of the Internet backbone. In the
mid-1990s, contemporaneous with the increase in commercial usage of the
Internet, a new type of provider called an ISP became more prevalent. ISPs
offer access, e-mail, customized content and other specialized services and
products aimed at allowing both commercial and residential customers to
obtain information from, transmit information to and utilize resources
available on the Internet.

ISPs generally operate networks comprised of dedicated lines leased from
Internet backbone providers using IP-based switching and routing equipment
and server-based applications and databases. Customers are connected to the
ISP's POP by facilities obtained by the customer or the ISP from either
I-LECs or C-LECs through a dedicated access line or the placement of a
circuit-switched local telephone to call the ISP. The rapidly growing need
for Internet access and technology has resulted in a highly fragmented
industry with the proliferation of over 4,000 ISPs operating within the
United States. These ISPs are primarily made up of a few large national
providers focused on high bandwidth access and a large number of small
providers with limited resources focused on serving local markets. Often the
solutions offered by these companies fail to address certain elements
required to ensure that customers' mission-critical Internet operations are
reliable, scalable and high-performing and that these companies fail to
provide a broad array of efficient, low-cost communications products and
services. The Company believes that customer service has emerged as an
increasingly important element of providing Internet services and that often
the large, national ISPs do not offer individual customers the level of
support desired and that many of the small, regional ISPs do not have the
resources necessary to offer adequate customer support.

According to industry estimates, the number of Internet users in the
United States who access the World Wide Web reached approximately 29.2
million in 1997 and is forecasted to grow to approximately 72.1 million by
the year 2000. In addition, IDC estimates that total ISP revenues in the
United States are projected to grow from $4.6 billion in 1997 to over $18
billion in 2000. In the past, much of the growth in ISP revenues has been
driven by the dial-up or retail sector of the Internet. However, businesses
today represent the largest and fastest growing segment of the Internet
market. IDC predicts that U.S. corporate Internet access revenues will grow
from approximately $1.9 billion in 1996 to over $6.6 billion in 2000. In
addition, IDC predicts that enhanced Internet services, such as web hosting,
security e-commerce, virtual private networks and advanced Internet
applications are expected to grow from approximately $352 million in 1997 to
over $7 billion in 2000. Internet access and enhanced Internet services
represent two of the fastest growing segments of the telecommunications
services marketplace.

IP COMMUNICATIONS TECHNOLOGY. The most significant trend in the Internet
and indeed in the broader telecommunications industry, is the convergence of
voice and data communications to a singular mode of transmission. From the
turn of the century, when Alexander Graham Bell made his historic first
telephone call, traditional copper phone wires carried only voice
information. Typically, circuit-switch based communications systems establish
a dedicated channel for each communication (such as a telephone call for
voice and fax), maintain the channel for the duration of the call and
disconnect the channel at the conclusion of the call. With the inception of
faxes and computer data in the late seventies and early eighties, the
resources of such circuit-switch based networks became taxed. Various
technologies have come to exist to address the need for greater bandwidth.
Today there is a convergence of both voice, data and video transmission to
one high-speed data packaging network. The most widely used solution has been
the advent and rapid adoption of TCP/IP data transmission standard.
Originally constructed as a network of computer networks, the Internet
revolves around the TCP/IP, which moves data in a series of packets. These
packets are disassembled at

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the point of transmission and routed over the Internet backbone in the most
efficient manner and reassembled at the point of receipt. The disadvantage of
these packets is that they are cumbersome and occupy large amounts of space
on telephone wires and as a result data is slow to arrive at its destination.
Various solutions have been created to address this problem, yet to date the
most common and effective is to access a high bandwidth network for
transmission.

Packet-switch based systems offer several advantages over circuit-switch
based systems, particularly the ability to commingle packets from several
communication sources together simultaneously onto a single channel. For most
communications, particularly those with bursts of information followed by
periods of "silence," the ability to commingle packets provides for superior
network utilization and efficiency, resulting in more information being
transmitted through a given communication channel. There are, however,
certain disadvantages to packet-switch based systems as currently
implemented. Rapidly increasing demands for data, in part driven by Internet
traffic volumes, are straining capacity and contributing to latency (delays)
and interruptions in communications transmissions. In addition, there are
concerns about the adequacy of the security and reliability of packet-switch
based systems as currently implemented.

Many initiatives are under way to develop technology to address these
disadvantages of packet-switched based systems. The Company believes that the
IP standard, which is an "open networking standard" broadly adopted in the
Internet and elsewhere, should remain a primary focus of these development
efforts. The Company expects the benefits of these efforts to be improved
communications throughout, reduced latency and declining networking hardware
costs. As IP technology improves, the Company believes that such
packet-switch based networks will become the standard for providing
telecommunication services. Already, IP Telephony, or transmission of voice
calls from a telephone to a telephone using the Internet backbone to haul the
data, is being offered to consumers.

POSITIONING OF THE COMPANY

The Company offers a broad array of communications products and services
tailored to meet customer needs and provides high quality customer support.
The Company delivers its products and services through two divisions:
Communications Services and Web Services. The Company believes that, based
upon its experience, a growing number of businesses will demand one
point-of-contact for communications solutions for the following reasons: (i)
to ensure proper system/network integration; (ii) to obtain a single point of
responsibility for products and services that might have numerous providers;
and (iii) to continue to take advantage of evolving communications
technologies. The Company intends to increase the breadth of its products and
services delivered to its customers by adopting new technology, acquiring
complementary businesses and capitalizing on strategic relationships.

BUSINESS STRATEGY

The Company's objective is to become a leading national provider of a
broad array of communications services distinguished by a state-of-the-art
network and high quality customer service and support. Key elements to the
Company's business strategy include the following.

PROVIDE A BROAD ARRAY OF COMMUNICATIONS SOLUTIONS TO ITS CUSTOMERS. The
Company has built a portfolio of products, services and skill sets to develop
and deliver comprehensive internetworking communications solutions to both
business and residential customers. These products and services are organized
under two divisions: Communication Services and Web Services. The Company
plans to continue to add products and services to its portfolio and believes
that a growing number of businesses and consumers will demand that one
company provide all of their communications needs. The Company believes that
this one point-of-contact service delivery model ensures: (i)
high-performance, cost-effective network

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<PAGE>

planning, design and implementation; (ii) maintenance of a single point of
responsibility; and (iii) an ongoing customer relationship as a technology
partner for communications applications.

PROVIDE SUPERIOR CUSTOMER SERVICE AND TECHNICAL SUPPORT. The Company
believes that highly differentiated customer service and technical support is
a key competitive asset in the communications industry, and the ISP sector in
particular. Because the Internet is an evolving and complex medium, customers
require significant technical support. Consequently, the Company has
developed a comprehensive strategy to attain maximum customer satisfaction.
This strategy consists of the following elements: (i) maintaining a
sufficient number of qualified service and technical support personnel
through proactive recruitment, retention and training programs; (ii)
utilizing the Company's extranet to provide real-time, interactive customer
service; (iii) developing an on-line billing system enabling
customer-controlled account customization and analysis; and (iv) further
deploying and maintaining the Company's service delivery standards and
guarantees. The Company believes that due to its high quality customer
service, it experiences low turnover rates and achieves a significant
percentage of its subscriber growth from customer referrals.

MAXIMIZE NETWORK UTILIZATION. Through its network and agreements with
third-party providers, the Company provides Internet access in 90 of the 100
largest metropolitan statistical areas in the United States. The Company
plans to continue to selectively add POPs where it can add value to its
customers. The Company believes that the ISP industry has historically been
divided between ISPs focused on business customers and ISPs focused on
residential dial-up customers. The Company's business strategy is to maximize
network utilization 24 hours a day by targeting both daytime business and
evening-intensive consumer users.

SELECTIVELY TARGET KEY CITIES TO EXPAND NATIONWIDE. The Company plans to
expand its sales efforts nationally by focusing on targeted areas where there
is a large concentration of businesses and favorable demographics. The
Company will initially target markets where it has existing facilities. In
these locations the Company will actively pursue both business and
residential customers. In markets where the Company is using third-party
provider networks, the Company will initially target dial-up customers
through advertising, promotions, public relations, telemarketing and customer
referrals. Once the Company attains critical mass in these locations, it will
establish its own POPs and begin targeting business and residential customers
with its broad array of communications products and services.

TAKE ADVANTAGE OF SIGNIFICANT CONSOLIDATION OPPORTUNITIES. The Company
believes that the Internet industry is undergoing structural changes with an
increasing use of the Internet for mission-critical applications, which is
creating demand for high quality network operations, customer service and
technical support. The Company also believes that there is a market
opportunity to consolidate ISPs, Internet-based service companies and
Internet technologies. Evidence of this strategy includes the Company's
recent acquisitions of Infohiway and Application Methods. Infohiway is a
company that developed a search engine that gives the Company on-line
advertising opportunities for its customers. Application Methods' e-commerce
solution, e-SELL, enables the Company to provide business customers with
browser-based software to conduct business over the Internet. The Company
believes these acquisitions enhance the Company's position as a full service
provider of communications solutions. The Company will continue to evaluate
opportunities to acquire companies that it believes will enhance its product
and service offerings. In addition, the Company intends to supplement its
organic national growth efforts by acquiring local ISPs in strategic
locations to maximize economies of scale.

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DIVISIONS AND SERVICES

Divisions Services Description
- --------- -------- -----------
<S> <C> <C>
COMMUNICATION SERVICES INTERNET ACCESS

CO-LOCATION T-1 or greater Internet access
provided to customer's server
located at the Company's POP

DEDICATED ACCESS Fractional T-1, T-1 or greater
Internet access provided to a
customer's office

DIAL-UP SERVICE Nationwide Internet access for
consumer and small business
customers using modems to dial
into the Company's network

WIRELESS ACCESS Evolving technology allowing
up to 750 kbps wireless
Internet access currently
available in the Denver metro
area
TELEPHONY SERVICES

e-PHONE Long distance calling using
IPTelephony technology

LONG DISTANCE Traditional long distance
services

LOCAL (C-LEC) Traditional local exchange
telephone service on a resale
or facilities-owned basis
throughout Colorado

DEDICATED
LINE SERVICES Dedicated and frame relay
networks to carry voice and
data for business customers

WEB SERVICES WEB SITE HOSTING A customer's web site is
"hosted" on the Company's
servers and connected to the
Internet via a high-speed
connection

WEB SITE PRODUCTION Design, development and
implementation of customer web
sites
WEB SITE MARKETING

TRAFFIC BUILDER Unique web site marketing
PLUS program whereby customer web
sites are marketed
exclusively to Internet users

INFOHIWAY Search engine that contains a
large and rapidly growing
database of reference
information on the World Wide
Web

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<PAGE>
ELECTRONIC COMMERCE

e-SELL Turnkey solution for setting
up an Internet store

WEB TRAINING Various levels of Internet
training for customers from
basic access training
</TABLE>

COMMUNICATION SERVICES

INTERNET ACCESS

The Company provides Internet services through its 9 Internet POPs in
the state of Colorado and, through agreements with third party providers, in
90 of the 100 largest metropolitan statistical areas in the United States.

CO-LOCATION. As more people use the Internet to shop for products and
services, the demands on shared server resources are increasing. The Company
offers businesses the alternative of co-locating their servers in the
Company's data center, thereby taking cost-effective advantage of the
Company's centralized Internet resources. For example, a web developer who
co-locates a server at the Company can save up to 40% to 60% of the monthly
cost of maintaining that server in-house.

DEDICATED ACCESS SERVICE. Dedicated access services are primarily
provided to commercial customers and include a wide range of connectivity
options tailored to the requirements of the customer. These services include
private port (dedicated modem), ISDN connections, 56 Kbps frame relay
connections, T-1 (1.54 Mbps) connections, and T-3 (45 Mbps) or fractional T-3
connections. This type of connectivity is generally used to connect local
area networks, wide area networks or server applications to the Internet,
ensuring a dedicated connection. This connection requires a dedicated
telecommunications facility, ranging from an analog phone line, ISDN, frame
relay, leased line T-1 or leased line T-3 and a router and a device to
convert digital signal to serial interface, usually referred to as a CSU/DSU.
Dedicated services range in price from $199 per month to over $15,000 per
month depending on the connection type. Installation fees generally range
from $300 to $5,000.

DIAL-UP SERVICE. The Company offers nationwide dial-up service for
unlimited usage, which is available for $19.95 per month plus a one-time $15
set-up fee. This offering includes high-speed modem access using K56 Flex
technology and a high quality connection due to the redundancy that has been
built into the network.

Through its arrangement with PSINet, the Company is able to provide dial-up
access to customers in over 230 locations nationwide.

WIRELESS SERVICE. The Company has recently signed an agreement with
American Telecasting, Inc., to offer high-speed megabit Internet access
technology to 80% of the homes and businesses in the Denver metro area. The
service includes download speeds of about 750 kbps, a microwave receiver, an
external modem, a cable modem and an Ethernet card. Costs include an
installation fee and an approximate $50 per month service charge. The Company
intends to enter into similar agreements with other providers as the Company
expands its geographic presence.

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TELEPHONY SERVICES

The Company provides IP Telephony and local (C-LEC) telephone service in
the state of Colorado and provides traditional long distance service nationwide,
subject to tariff approvals.

IP TELEPHONY. IP Telephony is new technology that enables long distance
calling using Internet technology. Rather than using traditional switched voice
technology the caller dials into a server that converts the voice signal into IP
packets and routes the call to a long distance carrier. This technology enables
the caller to bypass the LEC, thereby removing the local exchange fees at this
time. The Company is now able to deliver "toll quality" long distance calls that
originate in Colorado to anywhere in the contiguous United States using IP
Telephony. IP Telephony service is priced at $.07 per minute to anywhere in the
contiguous United States, 24 hours per day.

TRADITIONAL LONG DISTANCE SERVICE. The Company's recent agreement with
Frontier Communications of the West, Inc. will permit the Company to offer a
full line of traditional long distance services. The Company will be offering
the following services:

- 1+ long distance dialing

- Dedicated long distance

- 1-800 service

- Calling card

- Conference calling

LOCAL (C-LEC). The Company resells local exchange telephone services in
Colorado.

DEDICATED LINE SERVICES. The Company operates extensive dedicated and frame
relay networks to carry voice and data traffic across the country and across
town for its business customers.

WEB SERVICES

WEB SITE HOSTING. Web site hosting provides ongoing revenue from customers
for whom the Company hosts a web site on web servers located in the Company's
data center. All access made to these web sites by the customer and the Internet
community as a whole is processed on the Company's servers. The advantage to
customers is high-speed access to sites by their targeted audiences. Prices for
web site hosting generally consist of $99 per month for virtual hosting service
and $49 per month for static hosting services. There is also a one-time set-up
fee of approximately $99 for virtual hosting and $49 for static hosting.

WEB SITE PRODUCTION. Web site production encompasses the design,
development and implementation of customer web sites. These sites may be public
domain sites or private sites (extranets or intranets). The functionality of
these sites will continue to evolve and require a great deal of graphic design
talent as well as high end programming skills.

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WEB SITE MARKETING

TRAFFIC BUILDER PLUS. This is a web site marketing program whereby customer
web sites are marketed exclusively to Internet users. This service includes
sophisticated search engine submission and management techniques, cross-linking
related web sites, posting to relevant news groups and customizing banner ad
campaigns. The pricing for this service varies dramatically based on a
customer's budget and desired results.

INFOHIWAY. This is a search engine that contains a large and rapidly
growing database of reference information on the World Wide Web. The search
engine also contains certain features, including: PREVIEW buttons, which permit
users to see a site's content without waiting for a full download of all the
site's graphics; FUZZY LINKS, which provide visitors with a handy way to search
for related but perhaps not specifically targeted information; and SITE MAPPING,
which provides a simple and visual way to see a site's structure. The site also
contains banner advertisements, which the Company may sell to its customers as
part of a web marketing package.

ELECTRONIC COMMERCE

e-SELL. The Company provides small- to medium-sized businesses with turnkey
software package solutions for e-commerce that they can use themselves. Rather
than simply offering a web site, it acts as a true Internet store, enabling a
dynamic, interactive shopping experience for the customer, using secure credit
card transactions and "behind the scenes" functionality, like inventory
management and custom reporting. Through e-SELL, the Company will be able to
offer a low-cost, fast implementation of a true, database-driven Internet store.
Competing packages require the involvement of technical experts, consultants or
developers to set up and configure a store. Because of these extra "soft costs",
implementation costs usually reach several times the basic cost of the package
and implementation time can be weeks or months. By contrast, an e-SELL store can
be up and running in hours. e-SELL is scalable and extensible as a business
grows, because it is based on an open architecture--Microsoft Windows NT and
BackOffice. While competing packages often utilize proprietary programming
languages or tools (and many started out as Macintosh or Unix products), e-SELL
is an extension to the industry-standard BackOffice platform, enabling easy
customization. In addition, any industry-standard database can be connected,
furthering the ease of integration with merchants' existing information systems.

WEB TRAINING. The Company's headquarters include a training center with
multiple workstations. Customers can schedule their employees for various levels
of Internet training, ranging from basic access training to HTML programming.
Customized, one-on-one training is also available, either at the Company's
headquarters or at the customer's site.

NETWORK OPERATIONS

The Company operates 9 Internet POPs in Colorado and, through agreements
with third-party providers, the Company can provide Internet access in 90 of the
100 largest metropolitan statistical areas in the United States.

TECHNICAL AND CUSTOMER SUPPORT

The Company's customer service philosophy is to thoroughly understand the
customer's needs so that it may deliver a very high level of value-added
services and after-sales support. The Company believes that highly
differentiated customer support is a key competitive asset in the communications
industry, and the ISP sector in particular. Because the Internet is an evolving
and complex medium, customers require significant technical support.
Consequently, the Company has developed a comprehensive strategy to attain
maximum customer satisfaction. As a result, the Company experiences low turnover
rates and achieves subscriber growth

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from customer referrals. This strategy consists of the following elements:
(i) maintaining a sufficient number of qualified service and technical
support personnel through proactive recruitment, retention and training
programs; (ii) utilizing the Company's extranet to provide real-time,
interactive customer service; (iii) developing an on-line billing system
enabling customer-controlled account customization; and (iv) further
deploying and maintaining the Company's service delivery standards and
guarantees. The Company continually monitors its customer service strategy
through customer satisfaction surveys, which are monitored by a third-party
consulting firm. Over 75 employees, consisting of engineers, technicians,
project managers, account managers and customer service representatives, are
directly responsible for supporting the Company's customers.

MANAGEMENT INFORMATION SYSTEMS. The Company is focusing on management
information systems to achieve a competitive advantage in the marketplace
through the implementation of enabling technologies to deliver and support
IP-based services.

Currently, the Company's administrative office functions are
standardized on Microsoft Office products operating on Microsoft NT Server
Networks. Finance and accounting utilize Great Plains accounting software
products for general ledger, payables processing and receivables collection
and management. Billing and customer management software products are a
combination of custom written software and third party products. The billing
systems are currently under review to determine the optimal billing platform
to handle new product offerings and support expansion.

One goal of implementing automated systems is to move customer support
functions to a web interface which would allow customers to change service
types, review invoicing details, troubleshoot through on-line information and
communicate with the Company's technical support staff. These systems are
expected to provide enhanced customer support and reduce the cost of the
technical support function on a per customer basis. Enhanced billing systems
are expected to permit the Company to offer promotions and marketing programs
to attract new customers. The new billing systems are expected to provide
greater flexibility in offering discounts for selecting a wide range of the
product offerings.

SALES AND MARKETING

COMMERCIAL. The Company's ability to deliver an Internet solution,
coupled with an excellent technical knowledge base and an attention to
providing high quality service, will be the Company's key selling point. The
Company believes it will be capable of designing, implementing and
maintaining a complete enterprise network solution encompassing integrated
voice, data, video and Internet services addressing all facets of internal
and external communications for a business. A number of providers represent
themselves as "one-stop shops" or "turnkey providers" of these services, but
rarely do they have the ability to deliver, manage and support all services
"in-house." Therefore, the Company believes its competitive advantage will be
its ability to effectively package, price, brand and then implement its wide
range of communications services. This competitive advantage is expected to
cultivate financial growth as the Company focuses its sales and marketing
efforts on expanding nationally, focusing on the small- to medium-sized
business market and efficiently delivering a comprehensive set of products
and services.

The Company's sales and marketing efforts focus on the direct sales
approach of its field sales representatives. Although each representative
has a specific product or service focus, each is assigned to an account team
headed up by an account manager. The Company believes that this account team
approach allows the Company to effectively cross-sell, package, and blend all
of the Company's products and services to best meet the needs of the
customers. Marketing elements that will be used to support the sales team
include strategic direct mail campaigns, public relations efforts and
targeted industry advertising. Each marketing activity is designed to
generate Company and brand recognition, provide product/service information
and stimulate referral business from a consumer as well as a commercial
standpoint.

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CONSUMER. The Company believes that its commercial competitive advantage
of packaging, pricing, branding and promoting its wide range of
communications services will also serve as a competitive advantage in the
consumer marketplace as the Company extends its sales and marketing reach
across the nation. The Company's sales efforts will focus on its
"outbound/inbound" telemarketing unit. In addition, the Company plans to
build an extensive vendor network capable of distributing all of its
communication services to the public through co-branding programs, affinity
marketing agreements and cause-related marketing initiatives. The Company
also plans to employ extensive radio and print advertising campaigns, event
marketing opportunities, in-market retail promotions and a nationwide public
relations effort. As of October 15, 1998, the Company had 10 sales
representatives targeting dial-up customers.

CUSTOMERS

DEDICATED COMMUNICATIONS SERVICE CUSTOMERS. The Company's primary
commercial target market is small- to medium-sized businesses with 25-5,000
work-stations, multiple office locations, a dependence on communications
technology and with headquarters located in tier one or tier two cities
ranked in the top thirty high-tech BPI index. The secondary target markets
will be small- and medium-sized businesses with 25-5,000 work-stations,
multiple office locations, a dependence on communications technology and with
headquarters located in tier two and three cities that are close to the
Company's headquarters, or in the top thirty high-tech BPI index.

DIAL-UP INTERNET ACCESS CUSTOMERS. The Company's dial-up customer base
consists mainly of residential consumers and small businesses throughout
Colorado. Through the use of demographic market research data, the Company is
targeting its marketing and sales efforts towards new and current Internet
households and small businesses nationwide. Because the Company has
experienced a significant amount of dial-up sales through word-of-mouth
advertising, the Company operates an in-bound calling center and an out-bound
telemarketing sales unit. As of September 30, 1998, the Company served over
15,300 dial-up customers which include consumers and small businesses.

COMPETITION

The markets in which the Company operates and intends to operate are
extremely competitive and can be significantly influenced by marketing and
pricing decisions of the larger industry principals. The Company believes
that competition will intensify in the future and its ability to successfully
compete depends on a number of factors including market presence, the
capacity, reliability and security of its network infrastructure, its
packaging and pricing of products and services compared to its competitors,
the timing of new product and service roll-outs, its ability to react to
changes in the market and industry and economic trends.

INTERNET ACCESS. The Company expects competition in these markets to
intensify in the future. There are no substantial barriers to entry in the
Internet access markets in which the Company competes. The Company's current
and prospective competitors in the Internet access market include many large
companies that have substantially greater market presence and financial,
technical, operational, marketing and other resources and experience than the
Company. The Company's Internet access business competes or expects to
compete directly or indirectly with the following categories of companies:
(i) other national and regional commercial ISPs, such as Verio Inc. or one or
more of its affiliates and PSINet; (ii) established on-line services
companies that currently offer Internet access, such as AOL, CompuServe and
Prodigy Services Company; (iii) computer hardware and software and other
technology companies, such as Microsoft; (iv) national long-distance
telecommunications carriers, such as AT&T (with AT&T WorldNet), Sprint
(SprintNet) and Qwest Communications International, Inc.; (v) RBOCs; (vi)
cable television system operators, such as Comcast Corporation, TCI and Time
Warner Inc.; (vii) nonprofit or educational ISPs; and (viii) newly-licensed
providers of spectrum-based wireless data services. Modems offered by cable
television companies can transmit

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information at speeds of up to 10 megabits per second, as opposed to the
Company's K56 Flex (enhanced speed modem) service, which can transmit
information at speeds of up to only 56 kilobits per second. In addition, TCI
has recently announced it had reached separate agreements with Sun
Microsystems, Inc. and Microsoft to produce the software necessary to permit
access to the Internet through television set-top boxes beginning in 1999.

TELECOMMUNICATION SERVICES. The Company's intention to provide
traditional long distance service will place it directly in competition with
IXCs, which engage in the provision of long-distance access and other
long-distance resellers and providers, including large carriers such as AT&T,
MCI WorldCom and Sprint and new entrants to the long distance market such as
the RBOCs who have entered or have announced plans to enter the U.S.
intrastate and interstate long-distance market pursuant to recent legislation
authorizing such entry. See "REGULATION." On April 22, 1998, the Public
Utilities Commission of Colorado granted the request of RMB, a wholly-owned
subsidiary of RMI, to become a C-LEC. Likewise, the Company's intention to
provide IP Telephony services and C-LEC services will place it directly in
competition with other providers (either resellers or facilities-based
carriers) that provide the same services. Most of the Company's competitors
are significantly larger and have substantially greater market presence as
well as substantially greater financial, technical, operational, marketing
and other resources and experience than the Company.

LEGAL PROCEEDINGS

In June 1998, the Company announced it had entered into a merger
agreement to acquire Internet Communications Corporation ("ICC"). The
closing of the acquisition was subject to various closing conditions, and the
merger agreement contained certain rights of termination. On October 13,
1998, the Company announced that it terminated the merger agreement due to,
among other things, ICC's failure to satisfy certain obligations under the
merger agreement. On October 14, 1998, ICC filed a complaint against the
Company in Denver District Court claiming $30 million in damages and
alleging, among other things, that the Company had breached the merger
agreement and had made certain misrepresentations to ICC with respect to the
proposed merger transaction. The Company believes ICC's claims to be without
merit and intends to vigorously defend such action and to assert
counterclaims against ICC; however, there can be no assurance that the
Company will prevail in its defense or any counterclaims. The Company is
hopeful that it can resolve the dispute with ICC without the necessity for a
trial; however, there can be no assurance as to the Company's ability in this
regard. In the event that the dispute cannot be resolved expeditiously, the
Company expects that it would incur additional costs and expenses as a result
of the litigation and that the litigation may hamper the Company's ability to
obtain additional financing. As a result of the terminated merger transaction
and the related financing transactions which were not completed, the Company
estimates that it incurred costs, expenses and related fees of between $3.8
million and $5.2 million, a portion of which are in dispute. Of this amount,
approximately $2.7 million relates to a non-cash item relating to warrants
issued by the Company. The Company recorded an expense of $4.5 million in the
third quarter, 1998 relating to these items. The Company does not currently
have the ability to pay all of such costs, fees and expenses. The Company
believes that it will be able to agree on a schedule for the payment of these
costs, fees and expenses that is satisfactory to all parties; however, there
can be no assurance that the Company will be able to reach an agreement with
all parties regarding the payment of such costs, fees and expenses.

The Company is not involved in any other legal proceedings which the
Company believes would, if adversely determined, have a material adverse
effect upon its business, financial condition or results of operations.

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REGULATION

GENERAL REGULATORY ENVIRONMENT

The telecommunications businesses in which the Company operates or
intends to operate, namely, providing traditional long distance service,
providing long distance service by means of IP Telephony and activities as a
C-LEC, are subject to extensive federal and state regulation. In particular,
these services are subject to the provisions of the Communications Act of
1934, as amended, including amendments effected by the 1996
Telecommunications Act and the FCC regulations thereunder, as well as the
applicable laws and regulations of the various states, including regulation
by PUCs and other state agencies. Federal laws and FCC regulations apply to
the facilities of and services offered by, telecommunications common carriers
including regulating the prices charged, to the extent that those facilities
are used to provide, originate, or terminate interstate communications. State
regulatory authorities retain jurisdiction over telecommunications both
originating and terminating within the state. The regulation of the
telecommunications industry is changing rapidly and the regulatory
environment varies substantially from state to state. Moreover, as
deregulation at the federal level occurs, some states are reassessing the
level and scope of regulation that may be applicable to the Company. All of
the Company's operations are also subject to a variety of environmental,
safety, health and other governmental regulations. There can be no assurance
that future regulatory, judicial, or legislative activities will not have a
material adverse effect on the Company, or that regulators, competitors, or
third parties will not raise material issues with regard to the Company's
compliance or noncompliance with applicable regulations.

The 1996 Telecommunications Act effected plenary changes in regulation
at both the federal and state levels that affect virtually every segment of
the communications industry. The stated purpose of the 1996
Telecommunications Act is to promote competition in all areas of
communications and to reduce unnecessary regulation to the greatest extent
possible. While it will take years for the industry to feel the full impact
of the 1996 Telecommunications Act, it is already clear the legislation
provides the Company with both opportunities and challenges. The 1996
Telecommunications Act, among other things, allows the RBOCs to enter the
long distance business and enables other entities, including entities
affiliated with power utilities and ventures between LECs and cable
television companies, to provide an expanded range of telecommunications
services. Entry of such companies into the long distance business would
result in substantial competition to the Company's intended
telecommunications services (i.e., traditional long distance, IP Telephony
and LEC services) and may have a material adverse effect on the Company's
business, financial condition and results of operations and cash flow.

Under the 1996 Telecommunications Act, the RBOCs may immediately
provide long distance service outside those states in which they provide
local exchange service ("out-of-region" service) and long distance service
within the regions in which they provide local exchange service ("in-region"
service) upon meeting certain conditions. The 1996 Telecommunications Act
does, however, impose certain restrictions on, among others, the RBOCs in
connection with their provision of long distance services. Out-of-region
services by RBOCs are subject to receipt of any necessary state and/or
federal regulatory approvals that are otherwise applicable to the provision
of intrastate and/or interstate long distance service. In-region services by
RBOCs are subject to specific FCC approval and satisfaction of other
conditions, including a checklist of pro-competitive requirements. The RBOCs
may provide in-region long distance services only through separate
subsidiaries with separate books and records, financing, management and
employees and all affiliate transactions must be conducted on an arm's length
and nondiscriminatory basis. The RBOCs are also prohibited from jointly
marketing local and long distance services, equipment and certain information
services unless competitors are permitted to offer similar packages of local
and long distance services in their market. Further, the RBOCs must obtain
in-region long distance authority before jointly marketing local and long
distance services in a particular state. Additionally, AT&T and other major
carriers serving more than 5% of

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presubscribed long distance access lines in the United States are also
restricted from packaging other long distance services and local services
provided over RBOC facilities.

FEDERAL REGULATION

The FCC has established different levels of regulation for dominant and
non-dominant carriers. Of domestic common carrier service providers, only
GTE, the RBOCs and other I-LECs are classified as dominant carriers and all
other providers of domestic common carrier services, including the Company,
are classified as non-dominant carriers. The 1996 Telecommunications Act
provides the FCC with the authority to forebear from imposing any regulations
it deems unnecessary, including requiring non-dominant carriers to file
tariffs. On November 1, 1996, in its first major exercise of regulatory
forbearance authority granted by the 1996 Telecommunications Act, the FCC
issued an order detariffing domestic interexchange services. The order
required mandatory detariffing and gave carriers nine months to withdraw
federal tariffs and move to contractual relationships with their customers.
This order subsequently was stayed by a federal appeals court.

Although the FCC does not directly regulate local exchange service,
which is within the jurisdiction of state regulatory authorities, its actions
may impact directly on such service. The 1996 Telecommunications Act greatly
expands the FCC's interconnection requirements on the I-LEC. The 1996
Telecommunications Act requires the I-LEC to: (i) provide physical
co-location, which would allow RMB and other interconnectors to install and
maintain their own network termination equipment in I-LEC central offices,
i.e., offices of US West and virtual co-location only if requested or if
physical co-location is demonstrated to be technically unfeasible, (ii)
unbundle components of their local service networks so other providers of
local service can compete for a wider range of local services customers,
(iii) establish "wholesale" rates for their services to promote resale by
C-LECs and other competitors, (iv) establish number portability, which will
allow a customer to retain its existing phone number if it switches from the
I-LEC to a competitive local service provider, (v) establish dialing parity,
which ensures customers will not detect a quality difference in dialing
telephone numbers or accessing operators or emergency services and (vi)
provide nondiscriminatory access to telephone poles, ducts, conduits and
rights-of-way. In addition, the 1996 Telecommunications Act requires I-LECs
to compensate competitive carriers for traffic originated by the I-LEC and
terminated on the competitive carrier's networks. The FCC is charged with
establishing national guidelines to implement the 1996 Telecommunications
Act. The FCC issued its Interconnection Order on August 8, 1996, which
established detailed rules regarding rates, terms and conditions for
interconnection between C-LECs and I-LECs. The Interconnection Order was
appealed to the U.S. Court of Appeals for the Eighth Circuit. On July 18,
1997, the Court issued a final decision vacating the interconnection pricing
rules and "most favored nation" rules as well as certain other
interconnection rules. The FCC's and other parties' petitions to the Supreme
Court requesting review of these decisions have been granted. It is not
possible at this time to determine how the Supreme Court will respond to
these appeals.

On April 18, 1997, the FCC ordered that the RBOCs and independent LECs
offering domestic interstate inter-LATA services, in-region or out-of-region,
be regulated as non-dominant carriers. However, such services offered
in-region must be offered in compliance with the structural separation
requirements mentioned above. AT&T was classified as a dominant carrier, but
AT&T successfully petitioned the FCC for non-dominant status in the domestic
interstate interexchange market in October 1995 and in the international
market in May 1996. Therefore, certain pricing restrictions that once applied
to AT&T have been eliminated. A number of parties have, however, sought the
FCC's reconsideration of AT&T's status. The Company is unable to predict the
outcome of these proceedings on its operations.

On May 8, 1997, the FCC released an order intended to reform its system
of interstate access charges to make that regime compatible with the
pro-competitive deregulatory framework of the 1996 Telecommunications Act.
Access service is the use of local exchange facilities for the origination
and termination of interexchange communications. The FCC's historic access
charge rules were formulated largely in anticipation of the 1984 divestiture
of AT&T and the emergence of long distance competition and were

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designated to replace piecemeal arrangements for compensating LECs for use of
their networks for access, to ensure that all long distance companies would
be able to originate and terminate long distance traffic at just, reasonable
and non-discriminatory rates and to ensure that access charge revenues would
be sufficient to provide certain levels of subsidy to local exchange service.
While there has been pressure on the FCC historically to revisit its access
pricing rules, the 1996 Telecommunications Act has made access reform timely.
The FCC's recent access reform order adopts various changes to its rules and
policies governing interstate access service pricing designed to move access
charges, over time, to more economically efficient levels and rate
structures. Among other things, the FCC modified rate structures for certain
non-traffic sensitive access rate elements, moving some costs from a
per-minute-of-use basis to flat-rate recovery, including one new flat rate
element; changed its structure for interstate transport services; and
affirmed that ISPs may not be assessed interstate access charges. In response
to claims that existing access charge levels are excessive, the FCC stated
that it would rely on market forces first to drive prices for interstate
access to levels that would be achieved through competition but that a
"prescriptive" approach, specifying the nature and timing of changes to
existing access rate levels, might be adopted in the absence of competition.
The FCC intends to address these and other related matters in subsequent
proceedings.

Though the Company believes that access reform through lowering and/or
eliminating excessive access service charges will have a positive effect on
its service offerings and operations, it cannot predict how or when such
benefits may present themselves, or the outcome of any possible judicial
appeal or petition for FCC reconsideration.

The FCC also released a companion order on universal service reform on
May 8, 1997. The universal availability of basic telecommunications service
at affordable prices has been a fundamental element of U.S.
telecommunications policy since enactment of the Communications Act of 1934.
The current system of universal service is based on the indirect
subsidization of LEC pricing, funded as part of a system of direct charges on
some LEC customers, including IXCs and above-cost charges for certain LEC
services such as local business rates and access charges. In accordance with
the 1996 Telecommunications Act, the FCC adopted plans to implement the
recommendations of a Federal-State Joint Board to preserve universal service,
including a definition of services to be supported and defining carriers
eligible for contributing to and receiving from universal service subsidies.
The FCC ruled, among other things, that: contributions to universal service
funding be based on all IXCs' gross revenues from both interstate and
international telecommunications services; only common carriers providing a
full complement of defined local services be eligible for support; and up to
$2.25 billion in new annual subsidies for discounted telecommunications
services used by schools, libraries and rural health care providers be funded
by an assessment on total interstate and intrastate revenues of all IXCs. The
FCC stated that it intends to study the mechanism for continued support of
universal service in high cost areas in a subsequent proceeding. The Company
is unable to predict the outcome of these proceedings or of any judicial
appeal or petition for FCC reconsideration on its operations.

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STATE REGULATION

Companies conducting intrastate long distance telecommunications
operations are subject to various state laws and regulations including, in
many jurisdictions, certification and tariff filing requirements. Generally,
these providers must obtain and maintain certificates of authority from
regulatory bodies in most states in which it offers intrastate services. In
April 1998, RMB obtained a certificate of authority from the Colorado PUC to
provide local exchange services as a C-LEC. Certificates of authority can
generally be conditioned, modified, canceled, terminated, or revoked by state
regulatory authorities for failure to comply with state law and/or the rules,
regulations and policies of the state regulatory authorities. Fines and other
penalties also may be imposed for such violations.

Those states that permit the offering of intrastate/intra-LATA service
by IXCs generally require that end users desiring to use such services dial
special access codes. This may put the Company at a competitive disadvantage
compared with LECs whose customers can make intrastate/intra-LATA calls
simply by dialing 1 plus the desired number. If a long distance carrier's
customer attempts to make an intra-LATA call by simply dialing 1 plus the
desired number, the call will be routed to and completed by the LEC.
Regulatory agencies in a number of states have issued decisions that would
permit IXCs to provide intra-LATA calling on a 1 + basis. Further, the 1996
Telecommunications Act requires in most cases that the RBOCs provide such
dialing parity coincident to their providing in-region inter-LATA services.
The Company expects to benefit from the ability to offer 1 + intra-LATA
services in states that allow this type of dialing parity.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company as of the
date hereof are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------- --- --------
<S> <C> <C>
Douglas H. Hanson 54 President, Chief Executive Officer and Chairman of the Board of Directors

D. D. Hock 63 Director

Robert W. Grabowski 57 Director

Lewis H. Silverberg 63 Director

Mary Beth Vitale 44 Director

Jeremy J. Black 46 Vice President--Infohiway/Web Services

Ronald M. Stevenson 42 President--Application Methods

Peter J. Kushar 43 Chief Financial Officer, Secretary and Treasurer

Kevin R. Loud 45 Vice President--Communication Services

Michael R. Mara 37 Vice President--Internet Services

Michael D. Schaefer 31 Vice President--Marketing

D. Kirk Roberts 47 Vice President
</TABLE>

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DOUGLAS H. HANSON has been the President, Chief Executive Officer and
Chairman of the board of directors of the Company since October 1, 1997. See
"CERTAIN TRANSACTIONS--CHANGE IN CONTROL." Prior to assuming his positions
with the Company, Mr. Hanson was the President and Chief Executive Officer
and a director of Qwest Communications, Inc., a Colorado-based
telecommunications company, as well as the founder of Qwest's predecessor, SP
Telecom. Mr. Hanson formed SP Telecom in 1987 as a subsidiary of SP Railroad
to install fiber optic cable along the railroad's right-of-way. Before
founding SP Telecom, Mr. Hanson was vice president of FiberTrak, a
telecommunications joint venture among Santa Fe, Norfolk and SP railroads. He
also held various positions at Southern Pacific Transportation Co. Mr. Hanson
currently sits on the board of directors of the Competitive
Telecommunications Association, The Metropolitan State College Foundation
Board, and the Board of Trustees of the Salvation Army, Intermountain
Division, and is engaged in other civic activities.

D. D. HOCK has been a director of the Company since October 1, 1997. See
"CERTAIN TRANSACTIONS--CHANGE IN CONTROL." Prior to becoming a director of
the Company, Mr. Hock was the President, Chief Executive Officer and Chairman
of the board of directors (from February 1989 to July 1994; Chairman and
Chief Executive Officer from July 1994 to January 1996; Chairman from January
1996 to February 1997, when he retired) of Public Service Company of
Colorado.

ROBERT W. GRABOWSKI has been a director of the Company since January 10,
1998. He has been the Vice President, Finance and Administration, Sunny Side,
Inc./Temp Side, a private employment service, since 1988. He has been a
certified public accountant since 1968 and holds a Bachelor of Science degree
from De Paul University.

LEWIS H. SILVERBERG has been a director of the Company since January 10,
1998. Mr. Silverberg has been a business consultant since January 1994,
advising privately held businesses on their formation, sale and financing. In
September 1990, Mr. Silverberg joined Liquor Barn, Inc., which operated a
chain of retail stores and was in a bankruptcy reorganization proceeding at
that time. Mr. Silverberg was the Executive Vice President and a director of
Liquor Barn, Inc. until December 1993. The business was liquidated after Mr.
Silverberg's departure in 1993. Mr. Silverberg is an attorney and has been a
member of the California bar since 1959.

MARY BETH VITALE has been a director of the Company since January 10,
1998. From 1994 to October 1997, she was an executive of AT&T Corporation
(Vice President of In-State Services from 1994 to 1996; Vice President and
Corporate Officer, Local Service Organization, Western Region, from 1994 to
1996; and President--Western States from January to October 1997) in Denver,
Colorado. Prior to joining AT&T, Ms. Vitale was Vice President of Marketing
for U S WEST Communications, Inc. (1994), Region Executive Director for U S
West Cellular (1991 to 1993) and Region General Manager for U S WEST Cellular
(1989 to 1991). She holds a Bachelor of Arts degree from Hillsdale College, a
Master of Science degree from the University of Colorado and an Advanced
Management degree from the Wharton School of Business.

JEREMY J. BLACK is Vice President--Infohiway. Mr. Black was the Chief
Executive Officer of Infohiway from 1996 until joining RMI upon its
acquisition of Infohiway. Prior to joining Infohiway, Mr. Black was the
Executive Vice President of Wilson Associates International. From 1986 to
1992, Mr. Black was the President of Advanced Investment Software, where he
developed the design for RAMCAP software (Risk program). Mr. Black is an
adjunct professor for the College of Financial Planning and a national
professor in investment risk management and asset allocation.

RONALD M. STEVENSON is President--Application Methods. Mr. Stevenson
founded Application Methods and was its President and founder from 1986 until
1997. In 1997, Mr. Stevenson became

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<PAGE>

President of E-Sell Commerce Systems and held that position until its
acquisition by RMI. During 1988-1989, Mr. Stevenson was product manager for
Software Products International and prior to that he acted as a consultant to
IBM.

PETER J. KUSHAR has served as Chief Financial Officer, Secretary and
Treasurer since joining the Company in April 1998. From June 1997 to April
1998 he operated his own consulting practice advising customers in
specialized economic and telecommunication requirements such as C-LEC network
economics and operation. Prior to consulting, Mr. Kushar spent 14 years with
U S WEST Communications (Executive Director--Carrier Division from 1993 to
1997; Executive Director--Network Operations from 1991 to 1993; Chief
Financial Officer--Federal Services from 1988 to 1991; Manager, Director and
Chief Financial Officer for U S WEST Information Systems from 1983 to 1988).
Prior to U S WEST, Mr. Kushar was a system planner, market analyst and
account executive for Southern New England Telephone from 1979 to 1983. Mr.
Kushar received his Bachelor of Science Degree in 1977 and Master of Business
Administration Degree in 1979 from the University of Montana.

KEVIN R. LOUD is Vice President--Communication Services of the Company.
Before joining the Company in July 1995, he served as Vice President of
Marketing for SP Telecom, a national long distance company from 1994 to 1995.
In 1992, he formed Loud & Associates, where he consulted with regional and
national communication organizations on market development and operations
efficiencies until 1994. While operating Loud & Associates, Mr. Loud
undertook a year-long project for Automated Communications, Inc., during
which he was treated as a statutory employee. From 1984 until 1992, he was
employed by Houston Network, Inc. and held positions ranging from Director of
Finance, Vice President of Operations and Carrier Sales, Vice President Sales
and President. The primary business of that organization was switched long
distance communication Services. Mr. Loud holds a Master of Business
Administration degree from William and Mary and a Bachelor of Arts in
Economics from UCLA.

MICHAEL R. MARA is Vice President--Internet Services of the Company.
Prior to joining the Company in November 1995, Mr. Mara was employed by ITC,
a privately held international audio and video conferencing service provider,
from June 1992 until October 1995.

MICHAEL D. SCHAEFER is Vice President--Marketing of the Company. Prior
to joining the Company in April 1998, Mr. Schaefer had been working as an
event producer/promoter in the Denver area for the prior 10 years. Major
events to his credit include: The Denver Museum of Natural History's Imperial
Tombs of China, The Denver International Airshow, World Youth Day and the
Denver Grand Prix. Mr. Schaefer holds a Bachelor of Science degree in
Business Administration from the University of Denver and a Master of
Business Administration degree from Regis University.

D. KIRK ROBERTS has served as Vice President--Management Information
Systems and Administration of the Company since April 1995. From June 1997 to
April 1998 he served as Vice-President--Finance and Management Information
Systems. He also served as Chief Financial Officer of the Company from
January 1995 until June of 1997. He was an accountant employed by Potter,
Littlewood, & Petty, PC, an accounting firm in Houston, Texas from 1991 to
1994. From 1989 to 1990, he worked for a national computer retailer as
National Product Manager--Accounting Solutions. He has a Bachelor of Business
Administration degree from the University of Houston and is a certified
public accountant.

COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE. In November 1997, the Company's board of directors
formed an Audit Committee composed of three directors, a majority of whom
were outside directors. The members of the initial Audit Committee were
Douglas H. Hanson, D. D. Hock and Reynaldo U. Ortiz until the resignation of
Mr. Ortiz as a director effective December 1, 1997. Mr. Robert W. Grabowski,
an outside director, now serves on

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<PAGE>

the Audit Committee with Messrs. Hanson and Hock. Mr. Hanson is also the
President, Chief Executive Officer and the Chairman of the board of directors
of the Company. Members of the Audit Committee are appointed annually by the
full board of directors. The functions of the Audit Committee are to review
the Company's internal controls, accounting policies and financial reporting
practices; to review the financial statements, the arrangements for and scope
of the independent audit, as well as the results of the audit engagement; and
to review the services and fees of the independent auditors, their
independence and recommend to the board of directors for its approval and for
ratification by the stockholders the engagement of the independent auditors
to serve the following year in examining the accounts of the Company.

COMPENSATION COMMITTEE. On March 12, 1998, the Company's board of
directors formed the Compensation Committee. This committee is responsible
for reviewing the salaries, benefits and other compensation of the officers
of the Company and will make recommendations to the board of directors based
on its review. The members of the Compensation Committee are D. D. Hock, Mary
Beth Vitale and Douglas H. Hanson. Mr. Hanson is also the President, Chief
Executive Officer and the Chairman of the Board of Directors of the Company.
Mr. Hanson, as a director, will not vote on any matters affecting his
personal compensation. Mr. Hanson will be responsible for reviewing and
establishing salaries, benefits and other compensation for all other
employees.

From January 1 through December 31, 1997 the board of directors held no
regular meetings and 13 special meetings. During such fiscal year, each
director attended at least 75% of the aggregate of the meetings of the board
of directors. In addition, the board of directors acted by unanimous written
consents pursuant to Delaware law and the Company's By-laws. The Audit
Committee was formed in November 1997 and has not met. The Compensation
Committee was formed in March 1998 and met on March 12, 1998 and June 2,
1998.

16b COMMITTEE. In March 1998, the Company's board of directors formed
the 16b Committee comprised of two outside directors. The members of the 16b
Committee are D. D. Hock and Mary Beth Vitale. The 16b Committee is
responsible for the review of management's recommendations regarding various
compensation issues, including the issuance of stock options to officers and
directors who are subject to the Section 16 reporting requirements under the
Exchange Act.

COMPENSATION OF DIRECTORS

The Company pays cash compensation to each of its non-employee directors
of $12,000 per year for his or her services as a director. The compensation
is to be paid at the end of each year and will be prorated on a monthly basis
for each month (or majority of each month, if the director serves only a
partial month) during which the director served as such. There are no
additional amounts payable to any director for committee participation or
special assignments.

Directors are also eligible to participate in the Company's 1996
Non-Employee Directors' Stock Option Plan (the "1996 Directors' Plan"). Under
the 1996 Directors' Plan, each director who is not an employee of the Company
receives a grant, upon his or her appointment or election to the board of
directors, of an option to purchase 1,500 shares of Common Stock. Thereafter,
on each of the first, second and third anniversary dates of the date of
election or appointment, the director is granted an additional option to
purchase an additional 1,500 shares of Common Stock, up to a maximum of 6,000
shares. The exercise price of the options granted under the 1996 Directors'
Plan is the fair market value (as defined in the 1996 Directors' Plan) on the
date that the option is granted. All such options are exercisable beginning
six months after the date of grant. To date, options under the 1996
Directors' Plan have been issued to the following persons in the following
amounts:

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<PAGE>

<TABLE>
<S> <C>
D.D. Hock 3,000
Robert Grabowski 1,500
Lewis Silverberg 1,500
Mary Beth Vitale 1,500
-----
Total 7,500
</TABLE>

At the RMI Annual Meeting, the stockholders of the Company approved the
adoption of the Rocky Mountain Internet, Inc. 1998 Non-Employee Directors'
Stock Option Plan (the "1998 Directors' Plan"), to be effective January 22,
1998. A total of 68,000 shares of Common Stock have been reserved for
issuance over the three-year term of the 1998 Directors' Plan.

The option exercise price of any option granted under the 1998
Directors' Plan may not be less than the fair market value of the Common
Stock on the date of grant of the option. Upon the effective date of the 1998
Directors' Plan, each non-employee director of the Company was granted
options to purchase 8,500 shares of Common Stock, subject to certain
adjustments. If an eligible director has continued to serve as a director of
the Company from the effective date until December 31, 1998, options to
purchase 1,500 shares of Common Stock will vest; if he or she continues to
serve as a director for the entire calendar year ending December 31, 1999,
options to purchase 3,500 shares of Common Stock will vest; and if he or she
continues to serve as a director for the entire calendar year ending December
31, 2000, options to purchase 3,500 shares of Common Stock will vest.
Notwithstanding the foregoing, in the event of a change in control of the
Company (as defined in the 1998 Directors' Plan), each outstanding option
under the 1998 Directors' Plan vests immediately. In addition, in the event
of a change in control of the Company, the Administrative Committee (or the
board of directors in the absence of such a committee) may: (i) grant a cash
bonus award to any optionee in an amount equal to the exercise price of all
or any portion of the options then held by the optionee; (ii) pay cash to any
or all optionees in exchange for the cancellation of their outstanding
options in an amount equal to the difference between the exercise price and
the greater of the tender offer price for the Common Stock underlying such
options (in the event of a tender offer for the securities of the Company) or
the fair market value of the stock on the date of cancellation; and (iii)
make any other adjustments or amendments to the outstanding options. On
January 22, 1998, the effective date of the 1998 Directors' Plan, the closing
price of the Common Stock was $2.625 and on October 15, 1998 the closing
price was $7.50 per share, according to data obtained from the Nasdaq Stock
Market, Inc.

Each option granted under the 1998 Directors' Plan shall expire not more
than five years from the date of grant. The 1998 Directors' Plan terminates
on December 31, 2000, unless earlier terminated in the discretion of the
Administrative Committee (or the board of directors in the absence of such a
committee).

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires directors, executive officers
and persons who own more than ten percent of the outstanding Common Stock to
file with the Commission an Initial Statement of Beneficial Ownership of
Securities (Form 3) and Statements of Changes of Beneficial Ownership of
Securities (Form 4). Directors, executive officers and greater than ten
percent stockholders are required by Commission regulation to furnish the
Company with copies of all Section 16(a) forms they file.

To the Company's knowledge, based on a review of the copies of such
reports furnished to the Company or representations that no other reports
were required, the Company believes that, during the fiscal year ended
December 31, 1997, all filing requirements applicable to its directors,
executive officers and greater-than-10% beneficial owners were complied with,
except that the Initial Statement of Beneficial Ownership of Securities (Form
3) were filed late for Messrs. Reynaldo U. Ortiz, Richard K. Dingess, Michael
R. Mara and David L. Evans (the then-Chief Financial Officer and Executive
Vice President of the Company) and Statements of Changes of Beneficial
Ownership of Securities (Form 4) were filed late for Messrs. Roy J.

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<PAGE>

Dimoff, Kevin R. Loud, Christopher K. Phillips and D. Kirk Roberts. Since
December 31, 1997, the Initial Statements of Beneficial Ownership of
Securities were filed late for Messrs. Peter Kushar and Michael Schaefer and
a Statement of Changes of Beneficial Ownership of Securities was filed late
for Mr. Hanson.

EXECUTIVE COMPENSATION

Following is information concerning compensation paid to all persons who
served as the Company's Chief Executive Officer during the 1997 fiscal year
and all others who were serving as executive officers during the 1997 fiscal
year and whose annual compensation (salary and bonus) was greater than
$100,000 (the "Named Executive Officers"). The Company's fiscal year ends
December 31.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL BONUS ($)/ OTHER ANNUAL RESTRICTED OPTIONS/ LTIP COMPENSATION
POSITION YEAR SALARY OPTIONS COMPENSATION STOCK AWARDS SAR (#) PAYOUTS ($) (4)
- -------- ---- ------ ---------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas H. 1997 $ 30,000 600,000
Hanson
President, CEO
and Chairman(1)

Roy J. Dimoff, 1997 $ 86,150 $25,500(3)
CEO and 1996 $101,407 $20,250(4)
President(2) 1995 $ 23,322

Kevin R. Loud, 1997 $ 92,300
Vice President - 1996 $ 83,967(4) $16,200
Communication 1995 $ 17,822
Services
</TABLE>

(1) Mr. Hanson was elected President, Chief Executive Officer and Chairman
of the board of directors of the Company as of October 1, 1997. For a
description of securities underlying his options see "CERTAIN TRANSACTIONS
--CHANGE IN CONTROL," above and the table set forth below.

(2) Mr. Dimoff joined the Company in July 1995. Mr. Dimoff resigned as the
President and Chief Executive Officer of the Company as of October 1, 1997.

(3) In connection with the resignation by Mr. Dimoff effective October 1,
1997, the Company and Mr. Dimoff entered into a Waiver and Release pursuant
to which, among other matters, (i) the Company agreed to pay Mr. Dimoff
$102,000 (less all federal and state withholdings on wages) in respect of
the severance of his prior employment relationship with the Company and to
reimburse Mr. Dimoff for his attorney's fees (up to a maximum of $2,000)
for the negotiation of the Waiver and Release. One quarter of the severance
amount ($25,500) was payable and was paid, upon execution of the Waiver and
Release and the remainder is payable in nine equal monthly installments on
the first day of each month commencing on January 1, 1998; (ii) Mr. Dimoff
agreed not to make use of or to divulge to any other person any
confidential information (as defined in the Waiver and Release) relating to
the Company; and (iii) Mr. Dimoff agreed to not compete with the Company,
directly or indirectly, in certain geographic areas specified in the
Waiver and Release until October 1, 1998, except that, at any time after
December 2, 1997, Mr. Dimoff may elect to terminate the agreement to not
compete by giving 30 days' prior written

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<PAGE>

notice to the Company of this election. In the event that Mr. Dimoff
terminates his covenant not to compete, the Company will have no further
obligation to make any remaining severance payments to Mr. Dimoff. On
March 6, 1998, Mr. Dimoff gave notice to the Company that he elected
to terminate the covenant not to compete. As a result, the Company has
avoided the requirement to pay the remaining $58,000 to Mr. Dimoff under
the Waiver and Release.

(4) This bonus was earned in 1996 and paid in 1997. The bonus was based on
achieving 81% of the Company's revenue plan. Mr. Dimoff elected to receive
$3,000 of the bonus in the form of a stock option to acquire 3,000 shares
of Common Stock exercisable in September 1997. Mr. Loud elected to receive
$8,100 of the bonus in the form of a stock option to acquire 8,100 shares
of Common Stock exercisable in September 1997. All employees who received
1996 bonuses had the same choice of receiving their bonus in cash or stock
options. The options were granted pursuant to the Company's 1997 Non-
Qualified Stock Option Plan (the "Bonus Plan"). The Bonus Plan authorizes
the Company to issue options to purchase an aggregate of 50,000 shares of
Common Stock, subject to adjustment in the event of stock splits, stock
dividends and similar extraordinary events. The options were exercisable
immediately upon the grant thereof (September 26, 1997) and can be
exercised for a period of five years thereafter in lots of 100 shares or
multiples thereof. The exercise price is $1.00 per share of Common Stock
purchased. The options may not be transferred by the optionholder otherwise
than by will or pursuant to the laws of descent and distribution. The
options may be exercised during the optionholder's lifetime only by the
optionholder or, in the event of his disability or incapacity, by his
guardian or legal representative. The options become void immediately in
the event that the optionholder's employment with the Company is terminated
for cause but may be exercised for a period of three months following
termination other than for cause.

The Company currently has an employment agreement with Mr. Loud. The
employment agreement provides for a salary of $84,000 per year and is
terminable for cause. The Company may also terminate the agreement without
cause subject to the obligation to pay Mr. Loud a severance equal to five to
eight months' salary based on length of service. The agreement terminates in
December 1999. The employment agreement does not restrict Mr. Loud's ability
to compete with the Company following any termination.

The Company currently has an employment agreement with Mr. Roberts. The
employment agreement provides for a salary of $66,000 per year and is
terminable for cause. The Company may also terminate the agreement without
cause subject to the obligation to pay Mr. Roberts a severance equal to five
to eight months' salary based on length of service. The agreement terminates
in December 1999. The employment agreement does not restrict Mr. Roberts'
ability to compete with the Company following any termination.

In connection with RMI's acquisition of Infohiway, Infohiway, a
wholly-owned subsidiary of RMI, entered into employment agreements with Mr.
Black and Kenneth Covell. Mr. Black's and Mr. Covell's agreements provide for
two-year terms at annual salaries of $80,000 and $70,000, respectively, and
include restrictive covenants binding on the employees with respect to
confidentiality, non-solicitation and non-competition matters. Additionally,
Messrs. Black and Covell are eligible for additional compensation of up to
$40,000 and $30,000, respectively, during each year of the term of their
employment agreement (i.e., two years) based on established performance
criteria.

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<PAGE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS

<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
% OF TOTAL OPTIONS/
NUMBER OF SECURITIES SARS GRANTED TO EXERCISE OR
UNDERLYING OPTIONS/ EMPLOYEES IN FISCAL BASE PRICE MARKET PRICE ON DATE OF
NAME SARS GRANTED (#) YEAR ($/SH) GRANT ($/SH) EXPIRATION DATE
- ---- -------------------- ------------------- ----------- ----------------------- ---------------
<S> <C> <C> <C> <C> <C>
Douglas H. Hanson 191,385 21.7% $2.6125 $2.375 October 1, 2002
Douglas H. Hanson 408,615 46.2% $ 1.00 $2.375 October 1, 2002

</TABLE>

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values

<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS AT FY END MONEY OPTIONS/SARS AT FY-END
SHARES ACQUIRED ON (#) EXERCISABLE/ ($) EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
---- ------------------ -------------- ---------------------- -----------------------------
<S> <C> <C> <C> <C>
Douglas H. Hanson -0- -0- -0-/600,000 -0-/$891,392(1)
</TABLE>

(1) Determined, in accordance with Commission rules, by the difference between
the fair market value of the Common Stock on December 31, 1997 ($3.00) and
the exercise price of the options.

401(K) PLAN

In January 1998, the Company implemented an employee savings and
retirement plan (the "401(k) Plan") covering certain of its employees.
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 15% of such compensation or the
statutorily prescribed annual limit ($10,000 in 1998) and have the amount of
such reduction contributed to the 401(k) Plan. The Company will make
contributions to the 401(k) Plan on behalf of eligible employees in an amount
equal to one-half of the employee's contribution, up to a maximum of 3% of
the employee's salary. The Company's contribution to the 401(k) Plan is in
the form of the Company's Common Stock. The 401(k) Plan is intended to
qualify under Section 401 of the Code, so that contributions by employees or
by the Company to the 401(k) Plan and income earned on the 401(k) Plan
contribution, are not taxable to employees until withdrawn from the 401(k)
Plan and so that contributions by the Company, if any, will be deductible by
the Company when made.

CHANGES IN CONTROL

There are no arrangements or agreements known to the Company that may
result in a change in control of the Company. See "CERTAIN
TRANSACTIONS--CHANGE IN CONTROL."

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<PAGE>

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

The Company's By-laws provide, in general, that the Company shall, to
the fullest extent permitted by the DGCL, as now or hereafter in effect,
indemnify any person who was or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether
criminal, civil, administrative, or investigative (a "Proceeding"), by reason
of the fact that he is or was a director or officer of the Company, or, by
reason of the fact that such officer or director is or was serving at the
request of the Company as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, association, or other
enterprise, against all liability and loss suffered and expenses (including
attorneys' fees), judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement reasonably incurred by him in connection with such
Proceeding, including any Proceeding by or on behalf of the Company and will
advance all reasonable expenses incurred by or on behalf of any such person
in connection with any Proceeding, whether prior to or after final
disposition of such Proceeding. The By-laws also provide that the Company may
also indemnify and advance expenses to employees or agents who are not
officers or directors of the Company.

Article 8 of the Company's Certificate of Incorporation, as amended,
provide that "No director of the corporation shall be personally liable to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except as to liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for violations of Section 174
of the Delaware General Corporation Law (the "DGCL") or (iv) for any
transaction from which the director derived any improper personal benefit. If
the DGCL hereafter is amended to eliminate or limit further the liability of
a director, then, in addition to the elimination and limitation of liability
provided by the preceding sentence, the liability of each director shall be
eliminated or limited to the fullest extent provided or permitted by the
amended DGCL. Any repeal or modification of this Article 8 shall not
adversely affect any right or protection of a director under this Article 8
as in effect immediately prior to such repeal or modification with respect to
any liability that would have accrued, but for this Article 8, prior to such
repeal or modification."

The Company entered into an underwriting agreement with NTB, for itself
and on behalf of all of the underwriters of the IPO, that provides for
indemnification by the underwriters under certain circumstances of directors,
officers and controlling persons of the Company against certain liabilities,
including liabilities under the Securities Act. The Company has entered into
similar agreements with certain security holders of the Company, including
Mr. Hanson.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions contained in the Certificate of
Incorporation and By-laws of the Company, the DGCL, an underwriting
agreement, other agreements that provide for such indemnification, or
otherwise, the Company has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

The Company maintains a directors' and officers' liability insurance
policy that provides, within stated limits, reimbursement either to a
director or officer whose actions in his capacity as such result in
liability, or to the Company in the event it has indemnified the director or
officer.

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<PAGE>

CERTAIN TRANSACTIONS

CHANGE IN CONTROL

As of October 1, 1997, Mr. Douglas H. Hanson obtained effective control
of RMI by entering into a series of agreements, described below, pursuant to
which, among other things: (1) RMI issued and sold to Mr. Hanson 1,225,000
shares of Common Stock for a purchase price of $2,450,000, or $2.00 per
share; (2) Mr. Hanson purchased 275,000 shares of Common Stock from four of
RMI's stockholders, namely, Messrs. Roy J. Dimoff, Christopher K. Phillips,
Jim D. Welch and Kevin R. Loud, for an aggregate purchase price of $550,000,
or $2.00 per share; (3) contemporaneously with the transactions described in
(1) and (2), RMI agreed to issue to Mr. Hanson the Hanson Warrants, which
authorized the holder thereof to purchase 4,000,000 shares of Common Stock
for an exercise price of $1.90 per share, subject to adjustment as described
below; (4) RMI granted Mr. Hanson incentive stock options (to purchase
222,220 shares of Common Stock for an exercise price of $2.25 per share and
non-qualified stock options to purchase 377,780 shares of Common Stock for an
exercise price of $1.00 per share pursuant to the 1997 Plan, which Hanson
Options vest one year from the date of grant (subject to acceleration of the
vesting date by the board of directors or a committee thereof that
administers the 1997 Plan) and on March 12, 1998 a committee of the board of
directors amended the 1997 Plan, retroactively to October 1, 1997, in
accordance with the requirements of the Code, to provide that the number of
incentive stock options was 191,385, the exercise price of those options was
$2.6125 and the number of non-qualified stock options was 408,615, on which
date Mr. Hanson exercised all of the non-qualified stock options and
purchased 408,615 shares of Common Stock pursuant to such exercise; (5) Mr.
Hanson obtained proxies from ten stockholders of RMI to vote their shares of
Common Stock held by such stockholders; and (6) Mr. Hanson was elected as a
director and was elected the President, Chief Executive Officer and Chairman
of the board of directors of RMI. As a result of the purchase by Mr. Hanson
of the shares of Common Stock described herein and the proxies described
herein obtained by Mr. Hanson, the election of all nominees to the board of
directors and the approval by RMI's stockholders of the proposals at the RMI
Annual Meeting was assured. See "PRINCIPAL STOCKHOLDERS."

The ten stockholders from whom Mr. Hanson obtained proxies are Messrs.
Roy J. Dimoff, Christopher K. Phillips, Jim D. Welch, Kevin R. Loud, Brian
Dimoff, Paul B. Davis, Michael R. Mara, Monty Reagan, Tim Scanlon and Owen
Scanlon. Mr. Phillips was, at the time of such transactions, a director of
RMI, Mr. Loud is the Vice President--Communication Services of RMI and Mr.
Roy J. Dimoff was the President, Chief Executive Officer and a director of
RMI. Mr. Mara is the Vice President--Internet Services of RMI and Mr. Brian
Dimoff was the Vice President--Customer Support Operations of RMI.

The Nasdaq Stock Market, Inc. adopted changes to the requirements
applicable to corporations qualifying its common stock for trading on Nasdaq.
Among other changes, the required minimum net tangible assets of such
corporations was increased to $2.0 million. These changes were effective
February 23, 1998. At December 31, 1997, RMI did not meet these increased
requirements. On March 12, 1998, a committee of RMI's board of directors
accelerated the vesting period of the Hanson Options to permit the immediate
exercise thereof and Mr. Hanson exercised all of the 408,615 non-qualified
options that were exercisable for a price of $1.00 per share. On March 23,
1998, Mr. Hanson exercised a portion of the Hanson Warrants and acquired
50,000 shares of Common Stock. The result and purpose of the exercise of
these options and warrants was to increase RMI's net tangible assets to
satisfy the Nasdaq Stock Market, Inc.'s new requirements.

There is no agreement, arrangement, or understanding between Mr. Hanson
and the Company that requires Mr. Hanson to exercise any Hanson Options or
Hanson Warrants or to otherwise make any capital contributions to the
Company.

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<PAGE>

SUMMARY OF TRANSACTIONS.

Following is a summary and description of certain provisions of the
Stock Purchase Agreement between Douglas H. Hanson and RMI, dated as of
October 1, 1997; the Stock Purchase Agreement between Douglas H. Hanson and
Roy J. Dimoff, dated as of October 1, 1997; the Stock Purchase Agreement
among Douglas H. Hanson, Christopher K. Phillips, Jim D. Welch and Kevin R.
Loud, dated as of October 1, 1997; the Warrant Agreement between RMI and
Douglas H. Hanson, dated as of October 1, 1997; the Registration Agreement
between RMI and Douglas H. Hanson, dated as of October 1, 1997; the
Shareholders' Voting Agreement and Irrevocable Proxy among Douglas H. Hanson,
Christopher K. Phillips, Jim D. Welch and Kevin R. Loud, dated as of October
1, 1997; and the Shareholders' Voting Agreement and Irrevocable Proxy among
Douglas H. Hanson, Brian Dimoff, Paul B. Davis, Michael R. Mara, Monty
Reagan, Roy J. Dimoff, Tim Scanlon and Owen Scanlon, dated as of October 1,
1997, pursuant to which Mr. Hanson obtained effective control of RMI. The
following summaries do not purport to be complete and are qualified in their
entireties by the full text of the respective agreements, copies of which are
on file with the Commission.

STOCK PURCHASE AGREEMENT BETWEEN DOUGLAS H. HANSON AND RMI. Pursuant to
a Stock Purchase Agreement between Mr. Hanson and RMI, dated as of October 1,
1997, RMI issued and sold to Mr. Hanson 1,225,000 shares of Common Stock for
a purchase price of $2,450,000, or $2.00 per share. In connection with the
execution of this Stock Purchase Agreement, Roy J. Dimoff resigned as the
President, Chief Executive Officer and a director of RMI and Gerald Van
Eeckhout resigned as the Chairman of the board of directors but remained as a
director of RMI until November 19, 1997. Contemporaneously, the then-existing
board of directors of RMI, in accordance with RMI's By-laws, filled three
vacancies on the board by electing Mr. Hanson, Mr. Reynaldo Ortiz and Mr. D.
D. Hock to be directors of RMI. Mr. Hanson was elected as RMI's President,
Chief Executive Officer and Chairman of the board of directors. Messrs. Ortiz
and Hock were selected by Mr. Hanson, in accordance with the terms of this
Stock Purchase Agreement, to be elected as directors of RMI. Mr. Ortiz
resigned as a director effective December 1, 1997. On January 10, 1998, Ms.
Mary Beth Vitale and Messrs. Robert W. Grabowski and Lewis H. Silverberg were
appointed as directors of RMI.

STOCK PURCHASE AGREEMENT BETWEEN DOUGLAS H. HANSON AND ROY J. DIMOFF.
Pursuant to a Stock Purchase Agreement between Mr. Hanson and Roy J. Dimoff,
dated as of October 1, 1997, Mr. Dimoff sold to Mr. Hanson 150,000 shares of
Common Stock for a purchase price of $300,000, or $2.00 per share.
Contemporaneously with this purchase and sale, Mr. Dimoff resigned as a
director and as President and Chief Executive Officer of RMI. In addition, as
discussed below, Mr. Hanson entered into a Shareholders' Voting Agreement and
Irrevocable Proxy with Mr. Dimoff and six other stockholders pursuant to
which Mr. Hanson obtained the right to vote certain shares of Common Stock
beneficially owned by Mr. Dimoff and such other stockholders.

STOCK PURCHASE AGREEMENT AMONG DOUGLAS H. HANSON, CHRISTOPHER K.
PHILLIPS, JIM D. WELCH AND KEVIN R. LOUD. Pursuant to a Stock Purchase
Agreement among Douglas H. Hanson, Christopher K. Phillips, Jim D. Welch and
Kevin R. Loud, dated as of October 1, 1997, Mr. Hanson purchased 50,000
shares, 50,000 shares and 25,000 shares of Common Stock from Messrs.
Phillips, Welch and Loud, respectively, for an aggregate purchase price of
$250,000, in each case for $2.00 per share. In addition, as discussed below,
Mr. Hanson entered into a Shareholders' Voting Agreement and Irrevocable
Proxy with Messrs. Phillips, Welch and Loud pursuant to which Mr. Hanson
obtained the right to vote certain shares of Common Stock beneficially owned
by them.

The source of all of the consideration for the purchase by Mr. Hanson of
the shares of Common Stock and the Hanson Warrants purchased from the Company
and the shares of Common Stock purchased from Messrs. Dimoff, Phillips, Welch
and Loud was a loan made in the ordinary course of business by a bank. The
loan bears interest at the rate of 192 basis points (i.e., 1.92%) above the
London InterBank Offered Rate and has a term of two years. One-half of the
outstanding principal and accrued interest thereon, was paid in January

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<PAGE>

1998 in accordance with its terms and the remainder of the outstanding
principal amount and accrued interest thereon, is payable in January 1999.
The loan is secured by a pledge of all of the shares of Common Stock that Mr.
Hanson purchased from RMI and from Messrs. Dimoff, Phillips, Welch and Loud
and of income anticipated to be received by Mr. Hanson.

REGISTRATION AGREEMENT. Contemporaneously with the execution of the
agreements described above, RMI entered into an agreement with Mr. Hanson to
register with the SEC all of those shares of Common Stock (and other
securities) purchased in the above-described transactions, i.e., those shares
purchased from RMI and those purchased from Messrs. Dimoff, Phillips, Welch
and Loud, the Hanson Warrants and the shares of Common Stock that may be
issued pursuant to the exercise of the Hanson Warrants. RMI also agreed, not
later than thirty days after the closing of the transactions described above,
to use its commercially reasonable best efforts to file a registration
statement with the Commission for the registration of the shares of Common
Stock purchased by Mr. Hanson (including those shares purchased from RMI and
from the individuals identified above), the Hanson Warrants and the shares of
Common Stock issuable upon exercise of the Hanson Warrants and to maintain
the effectiveness of such registration statement for a period of one year.
The Company believes that, during the period of effectiveness of such
registration statement, Mr. Hanson may sell all or any of the shares of
Common Stock or the Hanson Warrants without restriction. This Prospectus
forms a part of the registration statement on Form S-1 pursuant to which the
Hanson warrants and the shares of Common Stock underlying the Hanson warrants
were registered.

WARRANT AGREEMENT. RMI entered into a Warrant Agreement with Mr. Hanson,
dated as of October 1, 1997, pursuant to which it agreed, subject to
obtaining the approval of RMI's stockholders of an increase in the authorized
capital of RMI, to issue to Mr. Hanson the Hanson Warrants, which entitle the
holder thereof to purchase up to 4,000,000 shares of Common Stock for an
exercise price of $1.90 per share, for a period of eighteen months from the
date of issuance of such warrants. As of the date of the Warrant Agreement,
RMI did not have a sufficient number of shares of its Common Stock authorized
or reserved for issuance upon exercise of the Hanson Warrants. At the RMI
Annual Meeting, the stockholders of RMI approved an amendment to RMI's
Certificate of Incorporation to increase the number of shares of Common Stock
that RMI is authorized to issue from 10,000,000 to 25,000,000. As a result of
the approval of such amendment by RMI's stockholders at the RMI Annual
Meeting, RMI issued the Hanson Warrants to Mr. Hanson effective as of March
23, 1998.

The Hanson Warrants are subject to standard anti-dilution provisions and
adjustments in the number of shares of Common Stock that can be issued (and
the exercise price for which they can be issued) in the event of the payment
by RMI of cash or non-cash dividends, reorganizations and other extraordinary
events. See "DESCRIPTION OF CAPITAL STOCK."

SHAREHOLDERS' VOTING AGREEMENTS AND IRREVOCABLE PROXIES.
Contemporaneously with the agreements described above, Mr. Hanson entered
into a Shareholders' Voting Agreement and Irrevocable Proxy with Messrs.
Phillips, Welch and Loud pursuant to which Messrs. Phillips, Welch and Loud
granted to Mr. Hanson their proxies to vote certain shares of Common Stock
owned by them as of the date of the agreement and acquired subsequent thereto
(including shares of Common Stock of which Messrs. Phillips, Welch and Loud
have the right to acquire beneficial ownership through the exercise of
warrants, options and other rights). The proxies terminate on the earlier of
(i) three years from the date of execution; or (ii) the date upon which any
shares of Common Stock owned by the grantor of a proxy are sold, transferred,
assigned, or otherwise disposed of (except by a pledge thereof) by such
stockholder to a person other than: (A) a member of such stockholder's
"immediate family," as such term is defined in Rule 16a-1(e) promulgated
pursuant to the Exchange Act, 17 C.F.R. Section 240.16a-1(e), or (B) a trust
for the benefit of any member of such stockholder's immediate family;
provided, however, that the termination applies only to such shares of Common
Stock as are sold, transferred, assigned, or otherwise disposed of to persons
other than members of the stockholder's "immediate family."

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<PAGE>

Mr. Hanson also entered into a Shareholders' Voting Agreement and
Irrevocable Proxy with Mr. Brian Dimoff, Mr. Paul B. Davis, Mr. Michael R.
Mara, Mr. Monty Reagan, Mr. Roy J. Dimoff, Mr. Tim Scanlon and Mr. Owen
Scanlon. The terms of such agreement were similar to those of the agreement
with Messrs. Phillips, Welch and Loud, except that the proxies granted
pursuant to the agreement with these seven stockholders expired by their
terms immediately after the RMI Annual Meeting.

PURPOSE OF THE TRANSACTIONS. Mr. Hanson's purpose in entering into the
agreements described above and acquiring the shares of Common Stock and the
Hanson Warrants was to acquire a significant equity position in RMI and to
control the management, policies and activities of RMI. In connection with
such purchases, three of Mr. Hanson's nominees, including Mr. Hanson, were
elected to the five-member board of directors of RMI as contemplated by the
Stock Purchase Agreement between Mr. Hanson and RMI. One of Mr. Hanson's
nominees, Mr. Reynaldo U. Ortiz, resigned from the board of directors in
December 1997. See "--STOCK PURCHASE AGREEMENT BETWEEN DOUGLAS H. HANSON AND
RMI."

RELATED PARTY TRANSACTIONS

In February 1997, the Company entered into a negotiated agreement with
Jim D. Welch, at that time an officer and a stockholder of the Company,
pursuant to which the Company agreed to purchase 90,000 shares of the
Company's Common Stock from him for $119,000. The stock will be purchased
over an eighteen month period. As part of the agreement, Mr. Welch separated
from employment with the Company. Mr. Welch discontinued selling shares of
the Company's Common Stock after March 1, 1998, at which time the Company had
purchased 72,660 shares.

Robert W. Grabowski, an Company director, has an economic interest in
and is Vice President, Finance and Administration, of Sunny Side, Inc./Temp
Side ("Sunny Side"), a private employment service business. The Company has
engaged Sunny Side to provide various services and has created a web site for
Sunny Side.

After the Company entered into the Novazen Agreement, Kevin R. Loud, an
officer of the Company, purchased 38,000 shares of Novazen common stock for
$1.60 per share.

In August 1998, Douglas H. Hanson loaned $400,000 to the Company for
various working capital needs and on October 20, 1998 he loaned another
$400,000 for working capital needs. Such loans have been consolidated and
are evidenced by one promissory note. The principal amount of the promissory
note, together with interest at the rate of 11% per annum, is payable in full
90 days after October 20, 1998.

TRANSACTIONS WITH PROMOTERS

NTB was the principal underwriter of the Company's IPO of the IPO Units,
each IPO Unit consisting of one share of Common Stock and one IPO Warrant to
purchase a share of Common Stock at a price of $4.375 (the "IPO Warrant
Exercise Price"), subject to adjustment, after October 5, 1997 and prior to
September 5, 1999. RMI sold to NTB at the closing of the IPO, for $100,
warrants (the "NTB Warrants") to purchase 136,500 units (the "NTB Units"),
each of which consists of one share of Common Stock and one warrant (the
"Underlying NTB Warrants") to purchase a share of Common Stock. The NTB Units
have an exercise price of $4.20 per unit (120% of the unit offering price to
the public in the IPO) and the Underlying NTB Warrants included in the NTB
Units have an exercise price of $6.5625 per share (150% of the IPO Warrant
Exercise Price) (which price has been decreased by certain anti-dilution
adjustments) and are exercisable until September 5, 2001. The NTB Warrants
may be exercised in a cashless transaction whereby the NTB Warrants, at the
holder's option, may be used, in whole or in part, as a portion of the
purchase price for the underlying Common Stock and NTB Warrants. In addition,
the Underlying NTB Warrants included in the NTB Units may be exercised in a
cashless transaction. See "DESCRIPTION OF CAPITAL STOCK."

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<PAGE>

NTB was the Company's placement agent in connection with the private
offering in 1997 of units of the Company's securities, each unit consisting
of two shares of the Company's Common Stock and a warrant to purchase one
share of Common Stock, for $4.00 per unit. In connection with that offering,
the Company agreed to issue to NTB warrants (the "Private Offering Unit
Warrants") to purchase 31,050 units of securities, each unit consisting of
two shares of Common Stock and a warrant (collectively, the "Private Offering
NTB Warrants") to purchase one share of Common Stock. The Private Offering
Unit Warrants have an exercise price of $4.00 each and may be exercised any
time prior to June 13, 2002. The Private Offering NTB Warrants have an
exercise price of $3.00 each and may be exercised at any time prior to June
13, 2002.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information concerning the
ownership of Common Stock as of October 15, 1998 by (i) each stockholder of
the Company known by the Company to be the beneficial owner of more than 5%
of its outstanding shares of Common Stock, (ii) each current member of the
board of directors of the Company, (iii) each executive officer of the
Company named in the Summary Compensation Table appearing under the caption
"Executive Compensation," and (iv) all current directors and executive
officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)(2)
---------------------------------
NUMBER OF PERCENTAGE OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OUTSTANDING
- ------------------------------------ -------- --------------------
<S> <C> <C>
Current Directors
Douglas H. Hanson..................... 6,727,040(3) 52.3%
1099 Eighteenth Street
30th Floor
Denver, CO 80202

D. D. Hock............................ 1,500(4) *
1099 Eighteenth Street
30th Floor
Denver, CO 80202

Robert W. Grabowski................... 6,300(5) *
1099 Eighteenth Street
30th Floor
Denver, CO 80202

Lewis H. Silverberg................... 6,500(6) *
1099 Eighteenth Street
30th Floor
Denver, CO 80202

Mary Beth Vitale...................... 1,500(7) *
1099 Eighteenth Street
30th Floor
Denver, CO 80202

Named Executive Officers Who Are Not
Directors

Kevin R. Loud(8)...................... 378,800 4.7%

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<PAGE>

1099 Eighteenth Street
30th Floor
Denver, CO 80202

All Directors and Named Executive 6,750,940 53.9%
Officers as a Group (6 persons)........

Over 5% Stockholders and Members of a
"group" Who Are Not Directors or
Executive Officers(1)(2)

Christoper K. Phillips(1)(9).......... 170,000 2.1%
4580 Star Ridge Drive
Colorado Springs, CO 80916

Jim D. Welch(1)(10)................... 86,340 1.1%
1326 Sorrento Road
Colorado Springs, CO 80910

Kennedy Capital Management, Inc.(11).. 375,000 4.6%
10829 Olive Boulevard
St. Louis, MO 63141
</TABLE>

* Less than 1%

(1) As set forth above under the caption "CERTAIN TRANSACTIONS--CHANGE IN
CONTROL," Mr. Hanson entered into a Shareholders' Voting Agreement and
Irrevocable Proxy with Christopher K. Phillips, Jim D. Welch and Kevin R.
Loud, dated as of October 1, 1997 and a separate Shareholders' Voting
Agreement and Irrevocable Proxy with Brian Dimoff, Paul B. Davis, Michael
R. Mara, Monty Reagan, Roy J. Dimoff, Tim Scanlon and Owen Scanlon, dated
as of October 1, 1997. The proxies granted to Mr. Hanson by Messrs. Brian
Dimoff, Paul B. Davis, Michael R. Mara, Monty Reagan, Roy J. Dimoff, Tim
Scanlon and Owen Scanlon expired immediately following the adjournment of
the RMI Annual Meeting. Accordingly, Mr. Hanson and Messrs. Christopher K.
Phillips, Jim D. Welch and Kevin R. Loud may be deemed to be members of a
"group" for reporting beneficial ownership of shares of Common Stock in the
table. Unless otherwise noted, each person has sole voting and dispositive
power over the shares listed opposite his name. For the purposes of the
table, shares of other members of the group have not been attributed to
each member.

(2) Shares of Common Stock that can be acquired by any person pursuant to
any option, warrant, or other right within the next 60 days following the
dates set forth in the paragraph appearing immediately prior to the table
are deemed outstanding for the purpose of computing the percentage of
outstanding shares beneficially owned by such person. A person is also
deemed to be the beneficial owner of any shares as to which he has the
power to vote, or to direct the voting of, such shares. Such shares,
however, are not deemed to be outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by any other person.
All options and warrants described below have vested, except as described
in footnote 3. As of October 15, 1998, there were 8,106,252 shares of
Common Stock outstanding.

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<PAGE>

(3) Includes 1,958,615 shares beneficially owned directly by Mr. Hanson,
3,950,000 shares issuable upon exercise of the Hanson Warrants, 191,385
shares issuable upon exercise of incentive stock options and 627,040 shares
owned by Messrs. Phillips, Welch and Loud as to which Mr. Hanson obtained
the rights to vote pursuant to the remaining Shareholders' Voting Agreement
and Irrevocable Proxy described above in footnote (1) and under the caption
"CERTAIN TRANSACTIONS--CHANGE IN CONTROL."

(4) Includes options to acquire 1,500 shares of Common Stock.

(5) Includes 4,800 shares of Common Stock and options to acquire 1,500
shares of Common Stock.

(6) Includes 5,000 shares of Common Stock and options to acquire 1,500
shares of Common Stock.

(7) Includes options to acquire 1,500 shares of Common Stock.

(8) Includes 370,700 shares owned directly by Mr. Loud and options to
acquire 8,100 additional shares. Mr. Loud has granted to Mr. Hanson an
irrevocable proxy to vote all shares currently owned by him or that may be
acquired by him pursuant to and in accordance with the terms, provisions
and limitations set forth in, a Shareholders' Voting Agreement and
Irrevocable Proxy described above in footnote (1) and under the caption
"CERTAIN TRANSACTIONS--CHANGE IN CONTROL."

(9) All shares are owned directly by Mr. Phillips.

(10) All shares are owned directly by Mr. Welch.

(11) According to a filing made with the Commission on February 10, 1998,
Kennedy Capital Management, Inc. is an investment advisor and had acquired,
as of December 31, 1997, the shares of Common Stock indicated.

SELLING SECURITYHOLDERS

The following table assumes that each Selling Securityholder is offering
for sale securities previously issued or issuable by the Company. The Company
has agreed to pay all expenses in connection therewith (other than brokerage
commissions and fees and expenses of their respective counsel).

The following table sets forth the beneficial ownership of the Selling
Securityholder Shares by each person who is a Selling Securityholder. The
Company will not receive any proceeds from the sale of such Securities by the
Selling Security holders.

<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
SHARES OF COMMON STOCK OR BENEFICIALLY OWNED (1)
NAME OF BENEFICIAL OWNER WARRANTS BEING OFFERED BEFORE OFFERING AFTER OFFERING
- ------------------------ ------------------------- --------------- --------------
<S> <C> <C> <C>
Douglas H. Hanson 5,500,000 Shares 52.3% 34.2%
Douglas H. Hanson 3,950,000 Warrants
Neidiger/Tucker/Bruner, Inc. 4,000 Warrants
Neidiger/Tucker/Bruner, Inc. 8,000 Shares * *

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<PAGE>

Eugene L. Neidiger 12,700 Warrants
Eugene L. Neidiger 38,075 Shares * *
Anthony B. Petrelli 12,300 Warrants
Anthony B. Petrelli 37,050 Shares * *
Charles C. Bruner 11,800 Warrants
Charles C. Bruner 36,050 Shares * *
Robert L. Parrish 6,400 Warrants
Robert L. Parrish 17,300 Shares * *
J. Henry Morgan 7,200 Warrants
J. Henry Morgan 18,900 Shares * *
John J. Turk, Jr. 1,500 Warrants
John J. Turk, Jr. 3,000 Shares * *
Regina L. Neidiger 2,100 Warrants
Regina L. Neidiger 4,200 Shares * *
Carl A. Militello, Jr. 53,500 Warrants
Carl A. Militello, Jr. 107,000 Shares 1.5% *
James E. Tarrillion 37,500 Shares * *
Jeff Kavy 150,000 Shares 2.1% *
John E. Tarrillion 37,500 Shares * *
Jim Clausius 48,750 Shares * *
Roger Marino 75,000 Shares * *
Michael Carney 32,500 Shares * *
David Leider 99,000 Shares 1.4% *
Robert and Patricia Werts 15,000 Shares * *
Paul Davis 163,325 Shares 2.0% *
Burton Levy 82,500 Shares 1.1% *
MBM Young 37,500 Shares * *
Stephen Vento 15,000 Shares * *
Roswell and W. Monroe 15,000 Shares * *
Mark Buntzman 18,750 Shares * *
Kent Searl 7,500 Shares * *
Steven D. Brown 18,750 Shares * *
Elen Brown 9,375 Shares * *
Sarah Brown 9,375 Shares * *
Applied Telecommunications
Technologies, Inc. 67,500 Shares * *
William Preston 18,750 Shares * *
Michael Sanchez 25,125 Shares * *
Gerry and Carolyn Van Eeckhout 500 Shares * *
Kent Hultquist 12,562 Shares * *
Susan Weinkranz 10,000 Shares * *
Donald McElvaney & Migon McElvaney 12,500 Shares * *
Frank Visciano & Lorraine Visciano 12,500 Shares * *
Cambridge Holdings 6,250 Shares * *
Gregory Pusey Investments 6,250 Shares * *
Schield Management Company 12,500 Shares * *

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Caribou Bridge Fund LLC 17,500 Shares * *
Stuart Fullinwider 25,000 Shares * *
Jeremy J. Black 45,000 Shares * *
Kenneth Covell 15,000 Shares * *
John-Michael Keyes 15,000 Shares * *
Ronald Stevenson 95,075 Shares 1.3% *
Gregory A. Brown 2,291 Shares * *
Ronald Nicholl 17,182 Shares * *
Hare & Co. 24,978 Shares * *
Daffodil & Co. 152,487 Shares 2.1% *
Bear Stearns & Co. 11,000 Shares * *
Booth & Co. 9,073 Shares * *
Novazen Inc. 25,000 Shares * *
</TABLE>

(1) Assumes: (i) the issuance of all 4,000,000 of the Acquisition Shares
in one or more mergers with or acquisitions by the Company of other
businesses or assets; and (ii) the exercise of all of the Warrants. Does not
give effect to the exercise of outstanding options granted to employees or
non-employee directors of the Company pursuant to various stock option plans
or shares of Common Stock that can be issued pursuant to anti-dilution
provisions of the Warrants and other derivative securities.

Mr. Douglas H. Hanson is the President, Chief Executive Officer, and
Chairman of the Board of Directors of the Company. NTB acted as managing
underwriter in connection with the Company's IPO in 1996, and a private
placement in 1997, and Eugene L. Neidiger, Anthony B. Petrelli, Charles C.
Bruner, Robert L. Parrish, J. Henry Morgan, John L. Turk, Jr., Regina L.
Neidiger, Carl A. Militello, and Paul Davis are affiliates of, and/or
employed by, NTB. None of the other Selling Securityholders has a position,
office, or other material relationship with the Company, except that Ronald
M. Stevenson and Jeremy J. Black are the shareholders of 237,687 and 90,000
shares of Company stock, respectively, and Advanced Telecommunications
Technologies, Inc. is the lessor of certain switches and other equipment
leased by the Company.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, $0.001 par value and 750,000 shares of Preferred
Stock, $0.001 par value. The following summary of certain provisions of the
Common Stock and Preferred Stock does not purport to be complete and is
subject to and qualified in its entirety by, the provisions of the Company's
Certificate of Incorporation, as amended.

PREFERRED STOCK

Pursuant to the Company's Certificate of Incorporation, as amended, the
board of directors has the authority, without further action by the Company's
stockholders, to issue up to 750,000 shares of Preferred Stock in one or more
series and to fix the designations, powers, preferences, privileges and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any
or all of which may be greater than the rights of the Common Stock. The
Company's board of directors, without the Company's stockholder approval, can
issue Preferred Stock with voting, conversion or other rights that could
adversely affect the voting power and other rights of the holders of the
Common Stock. Preferred Stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of the Company or make
removal of management more difficult. At present, there are no shares of
Preferred Stock outstanding. However, the Company may issue shares of
Preferred Stock in connection with one or more future financings.

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<PAGE>

COMMON STOCK

As of October 15, 1998, there were 8,106,252 shares of Common Stock
outstanding. Another 803,164 Shares of Common Stock were reserved for
issuance pursuant to the Company's stock option plans and other stock options
granted and 6,744,695 shares of Common Stock have been reserved for issuance
upon exercise of various warrants, including the IPO Warrants, the PPO
Warrants, the Hanson Warrants, warrants issued to lenders in connection with
the Bridge Loan commitment, the DataXchange Warrants, and shares issuable
pursuant to various anti-dilution provisions contained in the warrants and
options described above. In addition, there are 333,333 shares (assuming a
$7.50 per share price at the date of calculation) that may be issued based on
performance incentives in the terms of the acquisition of Application
Methods. Accordingly, after giving effect to the shares of Common Stock
issuable pursuant to the options and warrants described above, but not giving
effect to additional shares of Common Stock that may be issued pursuant to
anti-dilution provisions of various outstanding warrants and options, there
are 3,998,754 shares of Common Stock and 750,000 shares of Preferred Stock
that may be issued in the future at the discretion of the Company's board of
directors.

The holders of Common Stock are entitled to one vote for each share held
of record on all matters submitted to a vote of stockholders. Holders of
Common Stock may not cumulate votes in elections of Directors. Subject to
preferences that may be applicable to any outstanding shares of preferred
stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the board of directors out of funds
legally available for the payment of dividends. In the event of a
liquidation, dissolution, or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and liquidation preferences of any outstanding shares of
preferred stock. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of common stock are
fully paid and non-assessable. There are no preemptive, subscription,
conversion, or redemption rights applicable to the Common Stock.

CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW

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

Section 203 defines business combination to include (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer
by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder;
or (v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an

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<PAGE>

interested stockholder as any entity or person beneficially owning 15% or
more of the outstanding voting stock of the corporation and any entity or
person affiliated with or controlling or controlled by such entity or person.

WARRANTS

IPO WARRANTS. The IPO Warrants were issued as a component of the units
of securities offered and sold in connection with the Company's IPO in 1996.
Each IPO Warrant entitles the holder thereof to purchase one share of Common
Stock at a purchase price of $4.375 per share, subject to adjustment in the
event that, at any time after the date of the issuance of the IPO Warrants,
the Company (i) sells shares of Common Stock for a consideration per share
less than the exercise price in effect immediately prior to such issuance (or
sells options, rights, or warrants to subscribe for shares of Common Stock or
issues any securities convertible into or exchangeable for shares of Common
Stock at such lower price); or (ii) issues Common Stock as a dividend to the
holders of Common Stock; or (iii) subdivides or combines the outstanding
Common Stock into a greater or lesser number of shares.

IPO WARRANTS ISSUED TO REPRESENTATIVE OF UNDERWRITERS. In connection
with the Company's IPO, the Company issued to NTB certain Warrants to
purchase units of the Company's securities, each unit consisting of one share
of Common Stock and one additional warrant. The terms and conditions of these
issuances are described above under the caption "CERTAIN TRANSACTIONS --
TRANSACTIONS WITH PROMOTERS."

HANSON WARRANTS. The Company issued warrants to Mr. Hanson entitling him
to purchase 4,000,000 shares of Common Stock. The terms and conditions of
these warrants are described above under the caption "CERTAIN TRANSACTIONS --
CHANGE IN CONTROL."

PRIVATE OFFERING WARRANTS ISSUED TO SALES AGENT. As described above
under the caption "CERTAIN TRANSACTIONS -- TRANSACTIONS WITH PROMOTERS," the
Company conducted a private offering of units of securities in 1997. In
connection with that offering, the Company issued warrants to purchase units
to NTB.

BRIDGE LOAN WARRANTS. In connection with the Bridge Loan commitment, the
Company agreed to issue warrants to the proposed lenders to acquire a total
of 560,000 shares of Common Stock. Warrants to acquire 220,833 shares have an
exercise price of approximately $9.01 per share and warrants to acquire the
remaining 339,167 shares have an exercise price of $.01. A total of 200,288
of the shares of Common Stock underlying these warrants are being offered
pursuant to this Prospectus. See "RECENT DEVELOPMENTS."

DATAXCHANGE WARRANTS. In connection with the acquisition of
DataXchange, the Company agreed to issue to the shareholders of DataXchange
warrants to purchase a minimum of 410,000 shares, and up to 535,000 shares,
of Common Stock. The number of shares of Common Stock issuable upon exercise
of the DataXchange Warrants is dependent upon the revenues attributable to
certain contracts to be obtained by DataXchange prior to the closing of the
acquisition of DataXchange.

The exercise price for all DataXchange Warrants is the average closing
trading price for the Company's Common Stock for the ten days immediately
preceding the date of the definitive merger agreement anticipated to be
executed by the Company, DataXchange, and the shareholders of DataXchange.
DataXchange Warrants to purchase 410,000 shares of Common Stock will be
exercisable beginning 30 days after the closing of the DataXchange
acquisition, and the remainder of the DataXchange Warrants anticipated to be
issued will be exercisable beginning at the later of (i) 30 days after the
closing of the DataXchange of (ii) the date of their issuance. One-half of
the DataXchange Warrants anticipated to be issued are exercisable until the
first anniversary date of the closing of the DataXchange acquisition, and the
remaining half of the DataXchange Warrants are exercisable beginning thirty
days after the first anniversary date of the closing of the DataXchange

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<PAGE>

acquisition and until one year after the first anniversary date of the
DataXchange acquisition. In the event that the revenues of DataXchange's
business during the year following the acquisition are less than $3,000,000,
the number of shares of Common Stock for which any DataXchange Warrants then
outstanding shall be reduced proportionately.

In the event that the Company completes an equity or debt offering (or
series of related offerings) of not less than $20,000,000, all DataXchange
Warrants then outstanding shall be issuable (without reduction for the
failure of the business of DataXchange to achieve $3,000,000 in revenues),
and the Company will have the right to call any outstanding DataXchange
Warrants for redemption by payment of the exercise price of those DataXchange
Warrants. Upon the giving of notice of such financing event by the Company,
the holders of the DataXchange Warrants will have 30 days to exercise their
DataXchange Warrants.

The transfer agent and registrar for the Common Stock and warrant agent
for the IPO Warrants is American Securities Transfer, Inc., 1825 Lawrence
Street, Suite 444, Denver, Colorado 80202-1817.

PLAN OF DISTRIBUTION

The Company may offer and sell, from time to time, the Acquisition
Shares in connection with one or more mergers, acquisitions, or business
combinations. Company anticipates that any Acquisition Shares will be valued
at prices reasonably related to market prices current either at the time that
mergers or acquisitions are agreed upon or at or about the time of delivery
of the shares. No underwriting discounts or commissions will be paid,
although finder's fees may be paid from time to time with respect to specific
mergers or acquisitions. Any person receiving any such fees may be deemed to
be an underwriter within the meaning of the Securities Act.

The Selling Securityholder Shares and Warrants subject hereto are being
offered for sale by the Selling Securityholders. Consequently, the Selling
Securityholders will receive the proceeds from the sale of such Securities by
the Selling Securityholders pursuant to this Prospectus. This Prospectus also
relates to the sale and issuance by the Company of shares of Common Stock to
holders of the Warrants (other than the Selling Securityholders) upon the
exercise of those Warrants. The Selling Securityholder Shares and Warrants
may be sold to purchasers from time to time in privately negotiated
transactions directly by and subject to the discretion of the Selling
Securityholders. The Selling Securityholders may from time to time offer
their respective Securities for sale through underwriters, dealers, or
agents, who may receive compensation in the form of underwriting discounts,
concessions, or commissions from the Selling Securityholders and/or the
purchasers of such securities for whom they may act as agents. The Selling
Securityholders and any underwriter, dealer, or agent who participates in the
distribution of such Selling Securityholders' Securities may be deemed to be
"underwriters" under the Securities Act and any profit on the sale of such
securities by any of them and any discounts, commissions, or concessions
received by any such underwriters, dealers, or agents may be deemed to be
underwriting compensation under the Securities Act. Selling Securityholders
may also sell the Securities owned by them pursuant to Rule 144 under the
Securities Act, if such rule is available for such resales.

With the consent of the Company, this Prospectus may also be used by
persons or entities who have received or will receive from the Company shares
of Common Stock, including the Acquisition Shares, in connection with mergers
or acquisitions and who may wish to sell such shares of Common Stock under
circumstances requiring or making desirable the use of this Prospectus and by
certain transferees of such persons. The Company's consent to such use may be
conditioned upon such persons or entities agreeing not to offer more than a
specified number of shares following amendments to this Prospectus, which the
Company may agree to use its best efforts to prepare and file at certain
intervals. The Company may require that any such offering be effected in an
organized manner through securities dealers.

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<PAGE>

This Prospectus may also be used by donees, pledgees, and other
transferees of up to 3,950,000 shares of Common Stock who receive such shares
as gifts, as security for loans, and similar transactions and who may wish to
sell such shares under circumstances requiring or making desirable the use of
this Prospectus and who may wish to sell such stock under circumstances
requiring or making desirable use of this Prospectus and by certain
transferees of such persons or entities.

This Prospectus also relates to the DataXchange Warrants that may be
offered and issued by the Company in connection with the proposed acquisition
by the Company of all of the issued and outstanding common stock of
DataXchange. This Prospectus also relates to the offer and sale of up to
535,000 shares of Common Stock that can be issued upon the exercise of the
DataXchange Warrants. This Prospectus may also be used by persons or entities
who are anticipated to receive the DataXchange Warrants and the shares of
Common Stock underlying the DataXchange Warrants and who may wish to sell
such warrants and/or shares of Common Stock under circumstances requiring or
making desirable the use of this Prospectus and by certain transferees of
such persons.

At the time a particular offer of the Selling Securityholder Shares and
Warrants is made by or on the behalf of a Selling Securityholder, a
Prospectus and a Prospectus Supplement, to the extent required, will be
distributed which will set forth the number of securities being offered and
the terms of the offering, including the name or names of any underwriters,
dealers, or agents, the purchase price paid by any underwriter for such
securities purchased from the Selling Securityholders, any discounts,
commissions, and other items constituting compensation from the Selling
Securityholders, any discounts, commissions, or concessions allowed,
reallowed or paid to dealers, and the proposed selling price to the public.

In connection with its IPO, the Company agreed with NTB, the
representative of the underwriters for the IPO, that it would pay to NTB a
commission equal to 5% of the gross proceeds of any of the IPO Warrants that
are exercised under certain conditions. See "DESCRIPTION OF CAPITAL STOCK."
The Company also agreed with NTB that it would pay to NTB a commission equal
to 5% of the gross proceeds of any exercise of the Warrants that were issued
in the Company's private offering of units in 1997.

The Selling Securityholder Shares and up to 4,061,500 of the Warrants
may be sold from time to time in one or more transactions: (i) at an offering
price which is fixed or which may vary from transaction to transaction
depending upon the time of sale, or (ii) at prices otherwise negotiated at
the time of sale. Such prices will be determined by the Selling
Securityholders or by agreement between the Selling Securityholders and their
underwriter.

In order to comply with the applicable securities laws, if any, of
certain states, the Securities may be offered or sold in such states through
registered or licensed brokers or dealers in those states. In addition, in
certain states, such securities may not be offered or sold unless they have
been registered or qualified for sale in such states or an exemption from
such registration or qualification requirement is available and is complied
with.

Under applicable rules and regulations promulgated under the Exchange
Act, any person engaged in a distribution of securities may not
simultaneously bid for or purchase securities of the same class for a period
of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Security holders
will be subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder, including without limitation Rules 10b-5 and
Regulation M, in connection with transactions in the Selling Securityholder
Shares and Warrants during effectiveness of the registration statement of
which this Prospectus is a part. All of the foregoing may affect the
marketability of such Securities.

-87-

<PAGE>

The Company has agreed to pay all of the expenses incident to the
registration of the foregoing securities (including registration pursuant to the
securities laws of certain states) other than: (i) any fees or expenses of any
counsel retained by any Selling Securityholder and any out-of-pocket expenses
incurred by any Selling Securityholder or any person retained by any Selling
Securityholder in connection with registration of the Selling Securityholder
Shares and Warrants and (ii) commissions, expenses, reimbursements, and
discounts of underwriters, dealers, or agents, if any.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

On January 21, 1997, the board of directors of RMI resolved to engage
the accounting firm of Baird, Kurtz & Dobson as the Company's independent
accountant for its fiscal year ending December 31, 1996. Effectively, the
Company's former independent accountant, McGladrey & Pullen, LLP,
simultaneously resigned as of January 20, 1997. The Denver office of
McGladrey & Pullen, LLP was acquired by Baird, Kurtz and Dobson on June 17,
1996. Certain former audit engagement members are now with Baird, Kurtz and
Dobson, and will continue to be involved with the Company's audit.

During the two most recent fiscal years and prior to December 31, 1995,
there have been no disagreements with McGladrey & Pullen, LLP on matters of
accounting principles or practices, financial statement disclosure, auditing
scope or procedure, or any reportable events. There have been no
disagreements with Baird, Kurtz and Dobson on matters of accounting
principles or practices, financial statement disclosure, auditing scope or
procedure, or any reportable events.

McGladrey & Pullen, LLP has furnished the Company with a copy of its
letter addressed to the Commission stating that it agrees with the above
statements.

LEGAL MATTERS

Certain legal matters regarding this offering will be passed upon for
the Company by Hall & Evans, L.L.C., Denver, Colorado, special counsel to the
Company.

EXPERTS

The consolidated financial statements of Rocky Mountain Internet, Inc.
as of December 31, 1997 and 1996 and the years then ended, have been included
herein and in the registration statement in reliance upon the report of
Baird, Kurtz & Dobson, independent certified public accountants, appearing
elsewhere herein, given upon the authority of said firm as experts in
accounting and auditing.

The consolidated statements of operations, stockholder's equity
(deficit) and cash flows of Rocky Mountain Internet, Inc. for the year ended
December 31, 1995, have been included herein in reliance upon the report of
McGladrey & Pullen, LLP, independent certified public accountants, appearing
elsewhere herein, given upon the authority of said firm as experts in
accounting and auditing.

The financial statements of DataXchange Network, Inc. as of July 31,
1998 and the year then ended have been included herein in reliance upon the
report of Aidman, Piser & Company, P.A., independent certified public
accountants, appearing elsewhere herein, given upon the authority of said
firm as experts in accounting and auditing.

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<PAGE>

INDEX TO FINANCIAL STATEMENTS

ROCKY MOUNTAIN INTERNET, INC.--CONSOLIDATED FINANCIAL STATEMENTS:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Independent Accountants' Reports:
Baird, Kurtz & Dobson ............................................. F-2
McGladrey & Pullen, LLP ........................................... F-3
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
September 30, 1998 (unaudited) .................................... F-4
Consolidated Statements of Operations for the Years Ended December
31, 1995, 1996 and 1997 and for the Nine Months Ended September
30, 1997 (unaudited) and September 30, 1998 (unaudited) ........... F-6
Consolidated Statements of Stockholders' Equity (Deficit) for the
Years Ended December 31, 1995, 1996 and 1997 and for the Nine
Months Ended September 30, 1998 (unaudited) ....................... F-7
Consolidated Statements of Cash Flows for the Years Ended December
31, 1995, 1996 and 1997 and for the Nine Months Ended September
30, 1997 (unaudited) and September 30, 1998 (unaudited) ........... F-8
Notes to Consolidated Financial Statements .......................... F-9

DATAXCHANGE NETWORK, INC.--FINANCIAL STATEMENTS:

AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report--Aidman, Piser & Company, P.A. ......... F-22
Balance Sheets as of July 31, 1998 and 1997 ......................... F-23
Statements of Operations for the Years Ended July 31, 1998, 1997
and 1996 .......................................................... F-24
Statements of Stockholders' Equity for the Years Ended July 31,
1998, 1997, and 1996 .............................................. F-25
Statements of Cash Flows for the Years Ended July 31, 1998, 1997
and 1996 .......................................................... F-26
Notes to Financial Statements ....................................... F-28
</TABLE>

F-1
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors
Rocky Mountain Internet, Inc.
Denver, Colorado.

We have audited the accompanying consolidated balance sheets OF ROCKY
MOUNTAIN INTERNET, INC. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ROCKY
MOUNTAIN INTERNET, INC. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ BAIRD, KURTZ & DOBSON

Denver, Colorado

February 27, 1998

F-2
<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors
Rocky Mountain Internet, Inc.
Denver, Colorado

We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit), and cash flows of ROCKY MOUNTAIN INTERNET, INC.
for the year ended December 31, 1995. 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 audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of ROCKY MOUNTAIN INTERNET, INC. for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

/s/ MCGLADREY & PULLEN, LLP

Denver, Colorado

February 23, 1996

F-3
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
December 31,
------------------------- September 30,
1996 1997 1998
----------- ---------- -----------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................................ $ 348,978 $1,053,189 $ 730,713
Investments...................................................... 1,356,629 -- --
Trade receivables, less allowance for doubtful accounts;
1996--$115,000, 1997--$176,000, 9/30/1998--$205,248.............. 518,827 672,094 880,190
Inventories...................................................... 91,047 46,945 57,008
Other............................................................ 143,753 112,891 174,534
----------- ---------- -----------

Total Current Assets............................................. 2,459,234 1,885,119 1,842,445
----------- ---------- -----------

PROPERTY AND EQUIPMENT, AT COST
Equipment........................................................ 2,513,944 2,927,016 3,552,539
Computer software................................................ 202,501 218,801 683,445
Leasehold improvements........................................... 127,877 190,235 185,935
Furniture, fixtures, and office equipment........................ 413,678 431,814 431,814
----------- ---------- -----------

3,258,000 3,767,866 4,853,733
Less accumulated depreciation and amortization................... 403,023 1,118,217 1,833,499
----------- ---------- -----------

2,854,977 2,649,649 3,020,234
----------- ---------- -----------

OTHER ASSETS
Goodwill......................................................... -- -- 4,449,735
Customer lists, at amortized cost, less accumulated amortization;
1996--$2,094, 1997--$108,689, 1998--$167,058..................... 145,444 471,096 383,543
Investments...................................................... -- -- 3,000
Deferred Acquisition Costs....................................... -- -- 177,911
Deposits and other............................................... 80,512 76,255 75,688
----------- ---------- -----------
225,956 547,351 5,089,877
----------- ---------- -----------
$5,540,167 $5,082,119 $ 9,952,556
----------- ---------- -----------
----------- ---------- -----------
</TABLE>

See Notes to Consolidated Financial Statements

F-4
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
December 31,
------------------------------ September 30,
1996 1997 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,250 $ -- $ --
Current maturities of long-term debt
and capital lease obligations. . . . . . . . . . . . . . . . 451,823 609,390 714,989
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . 425,160 581,366 2,693,763
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . 218,121 345,857 289,367
Accrued payroll and related taxes . . . . . . . . . . . . . . . 528,160 182,569 161,629
Accrued rent. . . . . . . . . . . . . . . . . . . . . . . . . . 44,659 136,182 109,821
Accrued severance expenses. . . . . . . . . . . . . . . . . . . -- 138,472 8,454
Note payable from shareholder . . . . . . . . . . . . . . . . . -- -- 400,000
Accrued acquisition and financing cost. . . . . . . . . . . . . -- -- 978,000
Accrued bonus . . . . . . . . . . . . . . . . . . . . . . . . . 157,642 -- --
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . 258,535 100,286 289,906
----------- ---------- -----------

Total Current Liabilities . . . . . . . . . . . . . . . . . . . 2,088,350 2,094,122 5,645,929
----------- ---------- -----------

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS . . . . . . . . . . 1,134,380 904,627 653,646
----------- ---------- -----------

STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized 1996--1,000,000,
1997--790,000 shares, 1998--750,000 shares; issued and
outstanding 1996--250,000 shares, 1997--40,000 shares,
9/30/1998--0 shares . . . . . . . . . . . . . . . . . . . . . 250 40 --
Common stock, $.001 par value; authorized 1996 and
1997--10,000,000 shares, 1998--25,000,000 shares; issued
1996--4,540,723 shares, 1997--6,736,889 shares,
9/30/1998--7,989,694 shares; outstanding 1996--4,540,723 shares,
1997--6,677,846 shares, 9/30/1998--7,929,942 shares . . . . . 4,541 6,737 7,990
Additional paid-in capital. . . . . . . . . . . . . . . . . . . 4,879,968 9,284,720 17,803,369
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (2,567,322) (6,747,050) (14,075,408)
Unearned compensation . . . . . . . . . . . . . . . . . . . . . -- (383,077) --
----------- ---------- -----------
2,317,437 2,161,370 3,735,951
Treasury stock, at cost
Common; 1996--0 shares, 1997--59,043 shares,
9/30/1998,--62,752 shares . . . . . . . . . . . . . . . . . . -- (78,000) (82,970)
----------- ---------- -----------
2,317,437 2,083,370 3,652,981
----------- ---------- -----------
$ 5,540,167 $5,082,119 $9,952,556
----------- ---------- -----------
----------- ---------- -----------
</TABLE>

See Notes to Consolidated Financial Statements

F-5
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
-------------------------------------- -----------------------------
1995 1996 1997 1997 1998
------------ ------------ ----------- ------------ -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE
Internet access and services. . . $1,034,774 $ 2,762,028 $ 5,740,044 $ 4,135,344 $ 6,240,786
Equipment sales . . . . . . . . . 144,551 519,551 387,067 296,442 265,580
---------- ----------- ----------- ----------- -----------
1,179,325 3,281,579 6,127,111 4,431,786 6,506,366
---------- ----------- ----------- ----------- -----------

COST OF REVENUE EARNED
Internet access and services . . 193,875 640,880 1,760,262 1,254,838 1,918,775
Equipment sales . . . . . . . . . 126,494 462,787 300,053 230,493 202,888
---------- ----------- ----------- ----------- -----------
320,369 1,103,667 2,060,315 1,485,331 2,121,663
---------- ----------- ----------- ----------- -----------

GROSS PROFIT . . . . . . . . . . . 858,956 2,177,912 4,066,796 2,946,455 4,384,703

GENERAL, SELLING, AND
ADMINISTRATIVE EXPENSES . . . . . 967,478 4,459,106 7,867,502 5,451,553 6,981,741
OTHER OPERATING EXPENSE. . . . . . --- --- --- 453,629 4,549,300
---------- ----------- ----------- ----------- -----------
OPERATING LOSS . . . . . . . . . . (108,522) (2,281,194) (3,800,706) (2,958,727) (7,146,338)
---------- ----------- ----------- ----------- -----------

OTHER INCOME (EXPENSE)
Interest expense. . . . . . . . . (31,818) (157,042) (402,086) (297,838) (232,494)
Interest income . . . . . . . . . 2,397 44,322 54,461 22,297 36,742
Other income (expense), net . . . 9,149 51,343 (4,522) 19,529 13,732
---------- ----------- ----------- ----------- -----------

(20,272) (61,377) (352,147) (256,012) (182,020)
---------- ----------- ----------- ----------- -----------

LOSS BEFORE INCOME TAXES . . . . . (128,794) (2,342,571) (4,152,853) (3,214,739) (7,328,358)

INCOME TAX EXPENSE . . . . . . . . -- -- -- -- --
---------- ----------- ----------- ----------- -----------

NET LOSS . . . . . . . . . . . . . (128,794) (2,342,571) (4,152,853) (3,214,739) (7,328,358)

PREFERRED STOCK DIVIDENDS. . . . . -- 25,000 26,875 26,875 --
---------- ----------- ----------- ----------- -----------

NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS. . . . . . . $ (128,794) $(2,367,571) $(4,179,728) $(3,241,614) $(7,328,358)
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------

BASIC AND DILUTED LOSS PER SHARE
Net loss per share. . . . . . . . $(.07) $(1.03) $(.79) $(0.64) $(0.99)
----- ------ ----- ------ ------
----- ------ ----- ------ ------
</TABLE>

See Notes to Consolidated Financial Statements

F-6
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
---------------------- ----------------------------- Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1994 -- $ -- 1,188,000 $ 1,188 $ 26,626
Purchase of common stock
for Redemption -- -- (180,000) (180) (18,570)
Issuance of common stock -- -- 860,000 860 1,008
Capital contribution -- -- -- -- 19,783
Net loss -- -- -- -- --
------- ------ --------- ------------ -----------
Balance, December 31 1995 -- -- 1,868,000 1,868 28,847
Issuance of preferred
Stock 250,000 250 -- -- 405,750
Issuance of common stock -- -- 1,365,000 1,365 3,775,887
Stock option compensation -- -- -- -- 52,807
Issuance of underwriters'
Warrants -- -- -- -- 100
Conversion of debentures
into common stock -- -- 1,225,000 1,225 488,775
Dividends on preferred
Stock -- -- -- -- --
Issuance of common stock for
the acquisition of
CompuNerd, Inc -- -- 30,000 30 67,470
Issuance of common stock for
the acquisition of The
Information Exchange -- -- 52,723 53 60,332
Net loss -- -- -- -- --
------- ------ --------- ------------ -----------
Balance, December 31, 1996 250,000 250 4,540,723 4,541 4,879,968
Conversion of preferred to
common stock (210,000) (210) 210,136 210 --
Issuance of common stock in
private placement -- -- 621,000 621 1,117,299
Stock option compensation -- -- -- -- 551,194
Issuance of common stock in
stock purchase
agreement -- -- 1,225,000 1,225 2,397,352
Dividends on preferred Stock -- -- -- -- --
Issuance of common stock for
the acquisition of Online
Network Enterprises, Inc. -- -- 116,930 117 306,830
Purchase of treasury stock -- -- -- -- --
Stock options exercised -- -- 23,100 23 32,077
Net loss -- -- -- -- --
------- ------ --------- ------------ -----------
Balance, December 31, 1997 40,000 40 6,736,889 6,737 9,284,720

1998 Transactions are unaudited
Conversion of preferred to
common stock (40,000) (40) 40,150 40 --
Stock option compensation -- -- -- -- --
Stock options and warrants
exercised -- -- 751,286 752 837,742
Issue of Common Stock for the
Acquisition of Infohiway, Inc. -- -- 150,000 150 1,334,850
Issue Common Stock for the
Acquisition of Application
Methods, Inc. -- -- 286,369 286 3,238,714
Issue Common Stock for
Novazen Billing Presentment
Software -- -- 25,000 25 302,725
Issue Bridge Loan Commitment
Warrants -- -- -- -- 2,765,229
Purchase of treasury stock -- -- -- -- --
Common stock contributed to
pension plan -- -- -- -- 39,389
Net loss (unaudited) -- -- -- -- --
------- ------ --------- -------- ----------
Balance, September 30,
1998 - (unaudited) -- $ -- 7,989,694 $ 7,990 $17,803,369
------- ------ --------- ------------ -----------
------- ------ --------- ------------ -----------

<CAPTION>
Accumulated Unearned Treasury
Deficit Compensation Stock Total
------------ ------------ ----- -----
<S> <C> <C> <C> <C>
Balance December 31, 1994 $ (70,957) $ -- $ -- $ (43,143)
Purchase of common stock
for Redemption -- -- -- (18,750)
Issuance of common stock -- -- -- 1,868
Capital contribution -- -- -- 19,783
Net loss (128,794) -- -- (128,794)
------------ ------------ ------------ ------------
Balance, December 31 1995 (199,751) -- -- (169,036)
Issuance of preferred
Stock -- -- -- 406,000
Issuance of common stock -- -- -- 3,777,252
Stock option compensation -- -- -- 52,807
Issuance of underwriters'
Warrants -- -- -- 100
Conversion of debentures
into common stock -- -- -- 490,000
Dividends on preferred
Stock (25,000) -- -- (25,000)
Issuance of common stock for
the acquisition of
CompuNerd, Inc -- -- -- 67,500
Issuance of common stock for
the acquisition of
Information Exchange -- -- -- 60,385
Net loss (2,342,571) -- -- (2,342,571)
------------ ------------ ------------ ------------
Balance, December 31, 1996 (2,567,322) -- -- 2,317,437
Conversion of preferred to
common stock -- -- -- --
Issuance of common stock in
private placement -- -- -- 1,117,920
Stock option compensation -- (383,077) -- 168,117
Issuance of common stock in
stock purchase
agreement -- -- -- 2,398,577
Dividends on preferred Stock (26,875) -- -- (26,875)
Issuance of common stock for
the acquisition of Online
Network Enterprises, Inc. -- -- -- 306,947
Purchase of treasury stock -- -- (78,000) (78,000)
Stock options exercised -- -- -- 32,100
Net loss (4,152,853) -- -- (4,152,853)
------------ ------------ ------------ ------------
Balance, December 31, 1997 (6,747,050) (383,077) (78,000) 2,083,370
1998 Transactions are unaudited
Conversion of preferred to
common stock -- -- -- --
Stock option compensation -- 383,077 -- 383,077
Stock options and warrants
exercised -- -- -- 838,494
Issue of Common Stock for the
Acquisition of Infohiway, Inc. -- -- -- 1,335,000
Issue Common Stock for the
Acquisition of Application
Methods, Inc. -- -- -- 3,239,000
Issue Common Stock for
Novazen Billing Presentment
Software -- -- -- 302,750
Issue Bridge Loan Commitment
Warrants -- -- -- 2,765,229
Purchase of treasury stock -- -- (18,000) (18,000)
Common stock contributed to
pension plan -- -- 13,030 52,419
Net loss (unaudited) (7,328,358) -- -- (7,328,358)
------------ ------------ ------------ ------------
Balance, September 30,
1998 - (unaudited) $(14,075,408) $ -- $ (82,970) $ 3,652,981
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See Notes to Consolidated Financial Statements

F-7
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,
------------------------------------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net loss............................................ $ (128,794) $ (2,342,571) $ (4,152,853)
Items not requiring (providing) cash:
Depreciation........................................ 51,395 88,162 196,491
Amortization........................................ 39,030 186,044 690,794
Warrants issued for commitment fees................. -- -- --
Loss on disposal of fixed assets.................... -- -- 13,128
Stock option compensation........................... -- 52,807 168,117
Common stock contributed to pension plan............ -- -- --
Provision for doubtful accounts..................... (17,369) (112,458) (188,452)
Changes in:
Trade receivables................................. (42,252) (305,541) 48,385
Inventories....................................... (12,185) (78,862) 44,102
Other current assets.............................. (5,153) (138,066) 30,862
Accounts payable.................................. 89,395 224,618 156,206
Deferred revenue.................................. 77,084 41,268 127,736
Accrued payroll and related taxes................. 83,528 443,208 (345,591)
Accrued expenses.................................. 30,550 429,886 (85,896)
-------------- ----------------- -----------------

Net cash provided by (used in) operating
Activities......................................... $ 165,229 $ (1,511,505) $ (3,296,971)
-------------- ----------------- -----------------

Cash Flows From Investing Activities
Purchases of property and equipment................. (177,771) (900,235) (287,931)
Purchase of investments............................. -- (1,756,629) --
Proceeds from Investments........................... -- 400,000 1,356,629
Payment for Deferred Acquisition Cost............... -- -- --
Payment for purchase of acquisitions................ -- (70,478) (150,000)
(Increase) decrease in deposits..................... (60,635) (16,675) 2,257
-------------- ------------------ ------------------

Net cash (used in) provided by investing
Activities......................................... (238,406) (2,344,017) 920,955
-------------- ---------------- -----------------

Cash Flows From Financing Activities
Proceeds from sale of common stock
and warrants...................................... 1,868 3,777,252 3,535,397
Additions to deferred offering cost.................
Proceeds from sale of preferred stock............... -- 406,000 --
Proceeds from notes payable......................... 18,000 6,689 500,000
Proceeds from long-term debt........................ 373,000 135,404 200,000
Sale of stock warrants.............................. -- 100 --
Payment of preferred stock dividend................. -- (25,000) (26,875)
Purchase of common/treasury stock................... (18,750) -- (78,000)
Payments on notes payable........................... (8,217) (26,108) (504,250)
Payments on long-term debt and capital lease
Obligations....................................... (54,533) (344,498) (546,045)
-------------- ----------------- -----------------

Net cash provided by financing activities 311,368 3,929,839 3,080,227
-------------- ----------------- -----------------
Increase (Decrease) In Cash and Cash Equivalents..... 238,191 74,317 704,211

Cash and Cash Equivalents, Beginning
of Period.......................................... 36,470 274,661 348,978
-------------- ----------------- -----------------

Cash and Cash Equivalents, End of Period $ 274,661 $ 348,978 $ 1,053,189
-------------- ----------------- -----------------
-------------- ----------------- -----------------

<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1997 1998
------- ------
(UNAUDITED)
<S> <C> <C>
Cash Flows From Operating Activities
Net loss............................................ $ (3,214,738) $ (7,328,358)
Items not requiring (providing) cash:
Depreciation........................................ 154,844 185,094
Amortization........................................ 487,527 846,706
Warrants issued for commitment fees................. -- 2,765,229
Loss on disposal of fixed assets.................... -- --
Stock option compensation........................... -- 383,077
Common stock contributed to pension plan............ -- 52,419
Provision for doubtful accounts..................... (42,582) 29,248
Changes in:
Trade receivables................................. (101,330) (235,926)
Inventories....................................... 43,489 (10,063)
Other current assets.............................. 128,167 (63,063)
Accounts payable.................................. 889,627 2,112,397
Deferred revenue.................................. 170,429 (56,490)
Accrued payroll and related taxes................. (349,546) (20,940)
Accrued expenses.................................. 163,114 1,004,395
-------------- -----------

Net cash provided by (used in) operating
Activities......................................... $ (1,670,999) $ (336,275)
--------------- -------------

Cash Flows From Investing Activities
Purchases of property and equipment................. (264,471) (567,831)
Purchase of investments............................. -- --
Proceeds from Investments........................... 1,079,712 --
Payment for Deferred Acquisition Cost............... -- (177,911)
Payment for purchase of acquisitions................ (150,000) --
(Increase) decrease in deposits..................... (13,626) (107,131)
---------------- -------------

Net cash (used in) provided by investing
Activities......................................... 651,615 (852,873)
--------------- -------------

Cash Flows From Financing Activities
Proceeds from sale of common stock
and warrants...................................... 1,117,920 843,472
Additions to deferred offering cost................. (43,496) --
Proceeds from sale of preferred stock............... -- --
Proceeds from notes payable......................... 495,000 400,000
Proceeds from long-term debt........................ 329,868 --
Sale of stock warrants.............................. -- 25
Payment of preferred stock dividend................. (26,875) --
Purchase of common/treasury stock................... (60,000) (18,000)
Payments on notes payable........................... (300,000) --
Payments on long-term debt and capital lease
Obligations....................................... (554,814) (358,825)
--------------- -------------

Net cash provided by financing activities 957,603 866,672
--------------- -------------
Increase (Decrease) In Cash and Cash Equivalents..... (61,781) (322,476)

Cash and Cash Equivalents, Beginning
of Period.......................................... 348,978 1,053,189
--------------- -------------

Cash and Cash Equivalents, End of Period $ 287,197 $ 730,713
--------------- -------------
--------------- -------------
</TABLE>

See Notes to Consolidated Financial Statements

F-8
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Rocky Mountain Internet, Inc. (the Company) is a provider of Internet
access services and Web services to businesses, professionals, and individuals
in the state of Colorado. The Company facilitates access to the Internet by
means of a regional telecommunications network comprised of a backbone of
leased, high-speed dedicated phone lines, computer hardware and software, and
local access points known as points of presence. The Company's high-speed,
digital telecommunications network provides subscribers with direct access to
the full range of Internet applications and resources.

UNAUDITED INTERIM INFORMATION

Information with respect to September 30, 1998, and the periods ended
September 30, 1998 and 1997, is unaudited and not covered by the independent
auditors' reports. In the opinion of management, the unaudited financial
statements reflect all adjustments, consisting only of normal adjustments,
necessary to present fairly the financial position of the Company at September
30, 1998, and the results of operations and cash flows for the nine months ended
September 30, 1998 and 1997, in conformity with generally accepted accounting
principles.

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of the Company and its
wholly-owned subsidiary, Rocky Mountain Internet Subsidiary (Colorado) Inc. The
operations of this subsidiary consist solely of the ownership of equipment,
which it leases to the Company. All significant intercompany accounts and
transactions have been eliminated.

USE OF 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 date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH EQUIVALENTS

The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents. At December 31, 1996 and 1997, cash
equivalents consisted primarily of money market accounts.

COST OF REVENUE EARNED

Included in Internet access and services cost of revenue earned is
primarily the cost of high-speed data circuits and telephone lines that allow
customers access to the Company's service plus Internet access fees paid by the
Company to Internet backbone carriers.

F-9
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

PROPERTY AND EQUIPMENT

Depreciation and amortization of property and equipment are computed using the
straight-line method over the estimated useful lives of the assets, ranging from
five to seven years. Certain equipment obtained through capital lease
obligations are amortized over the life of the lease. Improvements to leased
property are amortized over the lesser of the life of the lease or life of the
improvements.

Major additions and improvements to property and equipment are capitalized,
whereas replacements, maintenance, and repairs which do not improve or extend
the lives of the respective assets, are expensed.

REVENUE RECOGNITION

The Company charges customers (subscribers) monthly access fees to the
Internet and recognizes the revenue in the month the access is provided. For
certain subscribers billed in advance, the Company recognizes the revenue over
the period the billing covers. Revenue for other services provided, including
set-up fees charged to customers when their accounts are activated, or equipment
sales, are recognized as the service is performed or the equipment is delivered
to the customer.

ADVERTISING

The Company expenses advertising costs as incurred. During the years ended
December 31, 1995, 1996, and 1997, the Company incurred $24,847, $167,565, and
$274,726, respectively, in advertising costs.

CUSTOMER LISTS

The excess of the purchase price over the fair value of net assets acquired
in business acquisitions is recorded as customer lists or goodwill and is being
amortized on a straight-line basis over five years.

INVENTORIES

Inventories consist of Internet access equipment and are valued at the
lower of cost of market. Cost is determined using the first-in, first-out (FIFO)
method.

LOSS PER COMMON SHARE

For the years ended December 31, 1995, 1996, and 1997, loss per share is
computed based upon approximately 1,868,000, 2,295,000, and 5,268,000,
respectively, weighted average common shares outstanding for both basic and
diluted earnings per share. The net loss for the years ended December 31, 1996
and 1997 used in the calculation was increased by the preferred stock dividends
paid of $25,000 and $26,875, respectively. All stock options and warrants are
excluded from the computation of diluted earnings per share as they would have
an antidilutive effect on earnings per share during the years ended December 31,
1995, 1996 and 1997. During 1997 the Company adopted SFAS No. 128 "Earnings Per
Share." In accordance with that statement the loss per share for the years ended
December 31, 1995 and 1996 have been restated.

F-10
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

INCOME TAXES

Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.

RENT EXPENSE

The Company recognizes rent expense on a straight-line basis over the lease
terms. Differences between expense recognized and payments made are recorded as
accrued expenses.

INVESTMENTS

Debt securities and marketable equity securities for which the Company has
no immediate plans to sell but which may be sold in the future are classified as
available-for-sale and carried at fair value. Any unrealized gains and losses
are recorded, net of related income tax effects, in stockholders' equity. At
December 31, 1996, the Company had one U.S. Treasury Note, and two repurchase
agreements with a bank classified as available-for-sale. The repurchase
agreements were secured by U.S. Treasury Notes. Fair value of the investments
approximated cost as of December 31, 1996, the investments matured in 1997.

NOTE 2: LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations at December 31, 1996 and 1997,
consisted of the following:

<TABLE>
<CAPTION>
1996 1997
------------ -----------
<S> <C> <C>
Capital lease obligations payable to finance companies, due in monthly
installments aggregating $73,562 including interest ranging from 9.5% to 33%
through December 2001, collateralized by equipment.
An officer and shareholder of the Company has guaranteed certain
of the leases and one of the leases restricts the payment of
preferred stock dividends $ 1,586,203 $ 1,375,123
Notes payable to bank, due in monthly installments of $5,555 plus
interest at 2% over the Bank's index rate (10.5% at December 31,
1997) collateralized by furniture and fixtures.......................... -- 138,894
------------- -----------
1,586,203 1,514,017
Less current maturities............... 451,823 609,390
------------- -----------
$ 1,134,380 $ 904,627
------------ -----------
------------ -----------
</TABLE>

F-11
<PAGE>
ROCKY MOUNTAIN INTERNET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2: LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)

Aggregate maturities required on long-term debt and obligations under capital
leases at December 31, 1997, are as follows:

<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Years ending December 31:
1998................................................ $ 609,390
1999................................................ 722,287
2000................................................ 142,138
2001................................................ 40,202
------------
$ 1,514,017
------------
------------
</TABLE>

The following is a schedule by years of the future minimum lease payments
under the capital leases, together with the present value of the minimum lease
payments as of December 31, 1997:

<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Years ending December 31:
1998................................................ $ 813,364
1999................................................ 785,416
2000................................................ 166,707
2001................................................ 43,667
-----------
Future minimum lease payments......................... 1,809,154
Less amount representing interest..................... (434,031)
------------
Present value of minimum lease payments............... $ 1,375,123
------------
------------
</TABLE>

Equipment acquired under capital lease obligations had a cost of $1,976,285
and $2,291,092 and accumulated depreciation of $186,011 and $681,597 at December
31, 1996 and 1997, respectively.

NOTE 3: COMMITMENTS

Lease Commitments

The Company leases operating facilities, and equipment under operating
lease agreements expiring through May 2002. Certain of these lease agreements
require the Company to pay operating expenses and provide for escalation of
annual rentals if the lessor's operating costs increase.

F-12
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3: COMMITMENTS (CONTINUED)

At December 31, 1997, the future minimum payments under these leases,
exclusive of sublease payments, are as follows:

<TABLE>
<CAPTION>
Amount
------
<S> <C>
Years ending December 31:
1998................................... $ 556,072
1999................................... 531,964
2000................................... 454,268
2001................................... 380,036
2002................................... 126,680
-----------
$ 2,049,020
-----------
-----------
</TABLE>

In February 1997, the Company subleased one of its operating facilities.
The Company accrued a loss of $58,073 as of December 31, 1996, as a result of
this sublease. Minimum future rentals receivable under this noncancellable
operating sublease are $148,796, covering the period through January 2001, which
have not been deducted from in the above future minimum payments.

Rent expense was $82,269, $240,720, and $538,625 for 1995, 1996, and 1997,
respectively.

EMPLOYEE CONTRACTS

The Company currently has employment agreements with two of its officers
that provide for salaries ranging from $90,000 per year to $70,000 per year. The
Company may terminate the agreements for cause, or without cause subject to the
obligation to pay the terminated employee a severance payment ranging from five
to eight months salary based on length of service. The employment agreements
terminate in December 1999. The agreements do not significantly restrict such
employee's ability to compete with the Company following any termination.

LETTER OF CREDIT

At December 31, 1997, the Company had an outstanding letter of credit in
the amount of $150,000 to be used in case of default on its main operating
facilities lease. The letter of credit was secured by $170,000 currently
invested in a money market account.

REGISTRATION REQUIREMENTS

The Company has agreed to file a registration statement with the Securities
and Exchange Commission to register the shares issued in its 1997 private
placement and the shares issued/acquired pursuant to the stock purchase
agreement discussed in Note 8, including the shares issuable under the warrant
agreements.

NOTE 4: BUSINESS ALLIANCES

The Company has entered into various contracts with unrelated entities to
enable the Company to provide customers Internet service within certain areas of
Colorado. The unrelated entities own equipment in "points of presence" (POP)
sites which the Company utilizes to provide service to customers. The Company

F-13
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4: BUSINESS ALLIANCES (CONTINUED)

pays a portion of the revenues (generally 50%) generated through the use of
unrelated parties' equipment. The contracts can be canceled with notice and if
cancelled by the other party the Company has the right, but not the obligation,
to acquire the equipment owned by the unrelated parties. The revenues to the
Company related to these arrangements amounted to $67,452, $354,565, and
$480,951 for the years ended December 31, 1995, 1996, and 1997, respectively,
and are included in "Internet access and services" revenues in the accompanying
consolidated statements of operations. The payables to the unrelated entities
for their portion of the aforementioned revenues of $10,069 and $48,089 at
December 31, 1996 and 1997, respectively, are included in accrued expenses in
the accompanying balance sheets.

NOTE 5: INCOME TAXES

Under the provisions of the Internal Revenue Code, the Company has
available for federal income tax purposes, a net operating loss carryforward of
approximately $6,212,000, which expires in the years 2010, 2011, and 2012. The
tax effects of this and other temporary differences related to deferred taxes
were:

<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 850,000 $2,317,000
Allowance for doubtful accounts 44,000 66,000
Tax goodwill 18,000 15,000
Accrued expenses 22,000 108,000
Amortization of customer lists -- 27,000
---------- ----------
934,000 2,533,000

Deferred tax liabilities:
Accumulated depreciation -- (101,000)
---------- ----------
Net deferred tax asset before valuation allowance 934,000 2,432,000
Valuation allowance (934,000) (2,432,000)
---------- ----------
Net deferred tax asset $ -- $ --
---------- ----------
---------- ----------
</TABLE>

The actual provisions (credits) for income taxes varied from the expected
provision (computed by applying the statutory U.S. federal income tax rates to
loss before taxes) because the tax benefits of the net operating losses for the
periods ended December 31, 1995, 1996, and 1997, are offset by the valuation
allowance.

NOTE 6: REORGANIZATION

The Company was originally formed as a sole proprietorship in October
1993, and incorporated as a Colorado corporation in March 1994. A new
Delaware corporation was formed in October 1995. On October 31, 1995, the
Delaware corporation purchased all the assets relating to the Colorado
corporation's business, and assumed all of its liabilities, except for
certain notes payable to shareholders. Since both parties in the transaction
were under common control, the transaction has been accounted for similar to
a pooling of interests, and all assets purchased and liabilities assumed were
recorded by the Delaware corporation at the Colorado corporation's historical
costs. These financial statements reflect the operations

F-14
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: REORGANIZATION (CONTINUED)

of both entities during the years ended December 31, 1995, 1996, and 1997. The
stockholders' equity balances represent shares outstanding as if the transaction
had taken place January 1, 1995.

NOTE 7: SIGNIFICANT ESTIMATES AND CONCENTRATIONS

Generally accepted accounting principles requires disclosures of certain
significant estimates and current vulnerability due to certain concentrations.
Those matters include the following:

DEPENDENCE ON SUPPLIERS

The Company depends upon third-party suppliers for its access to the
Internet through leased telecommunications lines. Although this access is
available from several alternative suppliers, there can be no assurance that the
Company could obtain substitute services from other providers at reasonable or
comparable prices or in a timely manner. The Company is also dependent upon the
regional Bell operating company to provide installations of circuits and to
maintain those circuits.

YEAR 2000

Like all entities, the Company is exposed to risks associated with the Year
2000 issue, which affects computer software and hardware; transactions with
customers, vendors and other entities; and equipment dependent on microchips.
The Company has begun but not yet completed the process of identifying and
remediating potential Year 2000 problems. It is not possible for any entity to
guarantee the results of its own remediation efforts or to accurately predict
the impact of the Year 2000 issue on third parties with which the Company does
business. If remediation efforts of the Company or third parties with which it
does business are not successful, the Year 2000 problem could have negative
effects on the Company's financial condition and results of operations in the
near term.

NOTE 8: PREFERRED STOCK

On April 26, 1996, the Board of Directors designated 250,000 shares of
Preferred Stock as Series A Convertible Preferred Stock (Series A Stock) and set
the terms of the stock. The Series A Stock accrues cumulative dividends at the
rate of 10% per annum. The dividends are payable quarterly to the extent
permitted by applicable law. The Series A Preferred Stock may be converted into
shares of Common Stock at the option of the holder at any time after May 15,
1997. The rate of conversion is the Series A Stock's liquidation value divided
by the conversion price, currently set at $2.00 per share. The Series A Stock's
liquidation value is equal to the price paid for the Series A Stock plus any
cumulative dividends unpaid as of the conversion date. The conversion price is
subject to change due to certain anti-dilution adjustments.

The Company has the authority to issue up to an additional 750,000 shares
of Preferred Stock. The Board of Directors is authorized to determine terms and
preferences of the Preferred Stock prior to issuance.

NOTE 9: COMMON STOCK TRANSACTIONS

PUBLIC OFFERING

On September 5, 1996, the Company completed a public offering of
1,365,000 units at an offering price of $3.50 per unit. Each unit consisted
of one share of common stock and one warrant to purchase one share of common
stock at $4.375 per share for a 23-month period commencing October 5, 1997,
and prior to September 5, 1999. Under certain circumstances, the Company may
redeem the warrants at $.25 per

F-15
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9: COMMON STOCK TRANSACTIONS (CONTINUED)

warrant. Additionally, the Company sold the underwriter for $100 warrants to
purchase 125,000 units. These underwriter warrants to purchase units are
exercisable through September 5, 2000, at an exercise price of $4.20 per unit
(for which the accompanying warrant to purchase a share of common stock is
exercisable at $6.5625). Costs of the offering, including a 10% commission paid
to the underwriters, the underwriter's nonaccountable expense allowance, and
professional fees, amounted to $1,000,248, resulting in net proceeds from the
offering of $3,777,252.

PRIVATE PLACEMENT

On September 14, 1997, the Company completed a private placement of units
consisting of two shares of common stock and a warrant to purchase one share of
common stock. The per unit price was $4.00 and was allocated $1.90 to each share
of common stock and $0.20 to the warrant to purchase a share of common stock.
The warrants entitle the holder to purchase a share of common stock for $3.00
and expire on June 13, 2000. The net proceeds to the Company from the sale of
310,500 units amounted to $1,117,920 after deducting offering expenses of
$124,080. The terms of the offering requires the issuance of additional shares
of common stock in the event the Company sells common stock in the future at a
cash price, net of discounts and commissions of less than $1.80 per share,
exclusive of shares issued upon the exercise of employee stock options. The
number of shares issuable under this provision would equate to the number of
shares by which purchasers would have been diluted if shares are sold at net
price of less than $1.80.

In connection with that offering, the Company agreed to issue to the
placement agent, warrants ("Agent's Private Offering Warrants") to purchase
units of securities, each unit consisting of two shares of Common Stock and one
common stock purchase warrant. The Company anticipates that it will issue to the
placement agent, for nominal consideration, 31,050 Agent's Private Offering
Warrants. The Warrants will be exercisable for $4.00 per unit (consisting of two
shares of common stock and one warrant to purchase one share of common stock for
$3.00) and will be exercisable for five years.

STOCK PURCHASE AGREEMENT

On October 1, 1997, the Current President (Current President) of the
Company acquired directly from the Company 1,225,000 shares of the Company's
Common Stock and a warrant to purchase 4,000,000 shares of the Company's Common
Stock for $2,450,000. The warrant is exercisable, in whole or in part for an 18
month period, at $1.90 per share. At December 31, 1997, the Company lacked
sufficient authorized shares to accommodate the issuance of all of the shares
underlying the warrant. The Company intends to amend its Certificate of
Incorporation to increase the authorized common shares from 10,000,000 to
25,000,000 shares.

In connection with the execution of this Stock Purchase Agreement, the
former president resigned as the President, Chief Executive Officer, and a
director of the Company. Contemporaneously, the Current President was elected as
the Company's President, Chief Executive Officer, and Chairman of the Board of
Directors.

The Current President also purchased 275,000 shares of Common Stock from
the former president and former members of the Board of Directors for $550,000,
or $2.00 per share.

F-16

<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: BENEFIT PLANS

MANAGEMENT BONUS PLAN

The Company had a bonus plan during 1996 which entitled certain employees
to receive a cash bonus based upon achievement of specified levels of revenues
by the Company for the year ended December 31, 1996. The Company accrued
$158,000 in bonuses under the plan in 1996. The Company gave employees the
option of receiving their bonuses in cash or stock options. As a result, 40,425
stock options were issued in 1997 to employees at an exercise price of $1.00 per
share. The Company adopted a similar plan for 1997, however, no bonuses were
earned under the 1997 Plan.

STOCK OPTION PLANS

In July 1996, the Company adopted the 1996 Employee Stock Option Plan (the
Employee Plan) and the Non-Employee Directors' Stock Option Plan (the Directors'
Plan). The Employee Plan provides for an authorization of 471,300 shares of
Common Stock for issuance upon exercise of stock options granted under the Plan.
The Employee Plan is administered by the Board of Directors, which determines
the persons to whom options are granted, the type, number, vesting schedule,
exercise price, and term of options granted. Under this plan both incentive and
nonqualified options can be granted.

An aggregate of 18,000 shares of Common Stock are reserved for issuance
under the Directors' Plan. All nonemployee directors are automatically granted
nonqualified stock options to purchase 1,500 shares initially and additional
1,500 shares for each subsequent year that they serve up to a maximum of 6,000
shares per director.

In September 1997, the Company adopted the 1997 Stock Option Plan (1997
Plan). The 1997 Plan provides for an authorization of 50,000 shares of Common
Stock for issuance upon exercise of stock options granted under the Plan. The
1997 Plan was established to issue the stock options discussed under Management
Bonus Plan.

In October 1997, the Company granted the current president (see Note 8)
incentive stock options to purchase 191,385 shares of Common Stock at $2.6125
per share and nonqualified stock options to purchase 408,615 shares of Common
Stock at $1.00 per share, subject to approval by the stockholders. The options
vest one year from the date of grant. Compensation of $168,117 relating to the
nonqualified stock options was recorded to compensation expense during the year
ended December 31, 1997.

The Board of Directors has approved the 1998 Employees' Stock Option Plan,
subject to approval by the stockholders. This plan reserves 266,544 shares of
Common Stock for issuance over the ten-year term of the plan.

F-17
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: BENEFIT PLANS (CONTINUED)

The following is a summary of the status of the Company's stock option
plans at December 31, 1996 and 1997, and the changes during the years then
ended:

<TABLE>
<CAPTION>
1996 1997
--------------------- -------------------- ------------------------- ------------------------
Employees' Plans Directors' Plan Employees' Plans Directors' Plan
--------------------- -------------------- ------------------------- ----------------------
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Exercise Exercise Exercise
Shares Price Shares Price Shares Price Shares Price
--------- ---------- -------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year -- $ -- -- $ -- 284,230 $ 1.68 1,500 $ 2.00
Options granted 284,230 1.68 1,500 2.00 896,400 1.68 4,500 2.42
Options expired -- -- -- -- (73,860) 1.81 -- --
Options exercised -- -- -- -- (23,100) 1.65 -- --
--------- ---------- -------- ------------------------ --------- --------- ----------
Outstanding, end of year 284,230 $ 1.68 1,500 $ 2.00 1,083,670 $ 1.67 6,000 $ 2.31
--------- ---------- -------- ------------------------ --------- --------- ----------
--------- ---------- -------- ------------------------ --------- --------- ----------
Options exercisable, end of year 25,000 1,500 483,670 6,000
--------- -------- ------- ---------
</TABLE>

The fair value of each option granted is estimated on the date of
the grant using the Black-Sholes method with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Dividend per share....................................... $ 0.00 $ 0.00
Risk-free interest rate.................................. 6.16% 6.0%
Expected life of options................................. 5 years 5 years
Weighted-average fair value of options granted........... $ 1.90 $ 1.29
</TABLE>

The following table summarized information about stock options under
the plans outstanding at December 31, 1997:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------- ------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
------------------ -------------- ----------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
$0.40.......... 25,000 4 years $ 0.40 25,000 $ 0.40
$1.00.......... 437,885 10 years $ 1.00 29,270 $ 1.00
$1.50.......... 104,700 5 years $ 1.50 104,700 $ 1.50
$1.875......... 38,200 5 years $ 1.875 38,200 $ 1.875
$2.00.......... 160,500 4 years $ 2.00 160,500 $ 2.00
$2.25.......... 3,000 5 years $ 2.25 3,000 $ 2.25
$2.50.......... 127,500 5 years $ 2.50 127,500 $ 2.50
$2.61.......... 191,385 5 years $ 2.61 -- $ 2.61
$2.75.......... 1,500 5 years $ 2.75 1,500 $ 2.75
</TABLE>

One nonqualified stock option to purchase 25,000 shares at $.40 per
share was granted under the Employee Plan. This option vested immediately.
Compensation of $40,000 relating to this option was

F-18
<PAGE>
ROCKY MOUNTAIN INTERNET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10: BENEFIT PLANS (CONTINUED)

recorded to compensation expense. The remaining Employee Plan options above have
a five year term and vested fully during 1997 due to a change in control of the
Company (see Note 9).

The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans, and $52,807 and $168,117 in compensation costs have
been recognized in December 31, 1996 and 1997, respectively. Had compensation
cost for the Plans been determined based on the fair value at the grant dates
using Statement of Financial Accounting Standards No. 123, the Company's net
loss would have increased by $74,258 and $768,647 in 1996 and 1997,
respectively. In addition, the Company's loss per share would have increased by
$.02 and $.14 in 1996 and 1997, respectively.

401(k) PLAN

The Board of Directors has approved a 401(k) Savings and Retirement Plan
that will cover substantially all employees effective March 1, 1998. The
Company's contributions to the Plan will be determined annually by the Board of
Directors.

NOTE 11: ACQUISITIONS

On November 1, 1997, the Company acquired the customer base and selected
assets of CompuNerd, Inc. for $70,478 in cash and 30,000 shares of the Company's
common stock valued at $67,500. On December 1, 1996, the Company acquired the
Information Exchange, a related party through common ownership, in exchange for
52,723 shares of the Company's common stock valued at $60,385. On January 22,
1997, the Company acquired the dedicated high speed and dial-up subscribers from
Online Network Enterprises, Inc. (O.N.E). The O.N.E. acquisition netted the
Company approximately 50 dedicated and 725 dial-up subscribers and equipment
valued at approximately $24,700. The Company paid $150,000 cash and issued
116,932 shares of the Company's common stock valued at $306,947. The
acquisitions have been accounted for as purchases by recording the assets
acquired at their estimated market value at the acquisition date. The operations
of the Company include the operations of the acquirees from the acquisition
date. Consolidated operations would not have been significantly different for
the Company had the CompuNerd, Inc. and O.N.E. acquisitions been made at January
1, 1996. Unaudited pro forma consolidated operations for the years ended
December 31, 1995 and 1996, assuming the Information Exchange purchase was made
at the beginning of each year is shown below:

<TABLE>
<CAPTION>
1995 1996
--------------- ---------------
<S> <C> <C>
Net sales................. $ 1,200,645 $ 3,367,720
Net loss.................. $ (214,042) $ (2,377,599)
Net loss per share........ $ (.06) $ (.65)
</TABLE>

The pro forma results are not necessarily indicative of what would have
occurred had the acquisition been on these dates, nor are they necessarily
indicative of future operations.

F-19
<PAGE>
ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11: ACQUISITIONS (CONTINUED)

The purchase price for the above acquisitions were allocated as follows:

<TABLE>
<CAPTION>
CompuNerd, Information
Inc. Exchange O.N.E. Total
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Equipment..................... $ 48,265 $ 2,560 $ 24,700 $ 75,525
Customer lists................ 89,713 57,825 432,247 579,785
----------- ------------ ------------ ------------
$ 137,978 $ 60,385 $ 456,947 $ 655,310
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>

On June 5, 1998, the Company acquired all the outstanding common stock
of Infohiway, Inc. for 150,000 shares of the common stock valued at $1,335,000.
Substantially all of the purchase price was allocated to goodwill. Infohiway,
Inc. and developed a search engine. Consolidated operations of the Company
would not have been significantly different had the acquisition been made on
January 1, 1998.

On July 1, 1998, the Company acquired all of the outstanding
common stock of Application Methods, Inc. and e-Sell Commerce, Inc.,
collectively referred to as Application Methods. The Company paid 286,396
shares of common stock valued at $3,239,000, and the acquisition has been
recorded as a purchase. $3,211,000 of the purchase price will be allocated to
goodwill.

NOTE 12: ADDITIONAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
NONCASH INVESTING AND FINANCING ACTIVITIES 1995 1996 1997
- ------------------------------------------------- --------- ---------- ---------
<S> <C> <C> <C>
Capital lease obligations incurred for equipment........... $ 211,654 $1,672,244 $ 273,859
Capital contributed by reductions of notes payable ........ 19,783 -- --
Long-term debt converted to common stock .................. -- 490,000 --
Preferred stock converted to common stock ................. -- -- 210
Acquisition of CompuNerd, Inc. through issuance of
common stock ............................................ -- 67,500 --
Acquisition of the Information Exchange through
issuance of common stock ................................ -- 60,385 --
Acquisition of the Online Network Exchange, Inc.
through issuance of common stock ........................ -- -- 306,947
Other ..................................................... -- -- 32,100

ADDITIONAL CASH PAYMENTS INFORMATION

Interest paid.............................................. $ 22,043 $ 159,007 $ 396,731
</TABLE>

NOTE 13: CONTINUED OPERATIONS

During the years ended December 31, 1996 and 1997, the Company incurred net
losses of $2,342,571 and $4,152,853, respectively, used $1,511,505 and
$3,296,971, respectively, of net cash from operating activities. The Company's
President has plans to contribute approximately $500,000 in additional capital
in 1998. In addition, the Company's management currently has plans it believes
will increase revenues in order to become profitable and generate positive cash
flows from operations. However, there are no assurances that the Company's plans
for revenue growth and improved operating cash flows will be successful. It
could be

F-20
<PAGE>

ROCKY MOUNTAIN INTERNET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

necessary to raise additional capital or reduce operating costs to meet
liquidity requirements. Reducing operating costs could inhibit the Company's
planned rate of revenue growth.

NOTE 14: RESTATEMENT

The 1996 financial statements have been restated to correct the
recording of a nonqualified stock option. The effect of this change was to
increase additional paid-in capital, accumulated deficit and net loss by
$40,000 and to increase basic and diluted loss per share by $.01.

NOTE 15: FUTURE CHANGES IN ACCOUNTING PRINCIPLE

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This Statement establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. It includes all changes in
equity except those resulting from investments by owners and distributions to
owners. This Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. This Statement is effective for fiscal years
beginning after December 15, 1997. Management believes that the adoption of this
Statement will not have a material effect on the Company's consolidated results
of operations or financial position.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This Statement establishes standards for
reporting information about operating segments in annual financial statements of
public business enterprises and requires disclosure of selected information
about operating segments in interim financial reports. The Statement is
effective for financial statements for periods beginning after December 15,
1997. Management believes that the adoption of this Statement will not have a
material effect on the Company's consolidated results of operations or financial
position.

F-21
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
DataXchange Network, Inc.
Clearwater, Florida

We have audited the accompanying balance sheets of DataXchange Network, Inc.
(the "Company") as of July 31, 1998 and 1997 and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended July 31, 1998. The 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.

In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of the Company, as of July 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
years in the three-year period ended July 31, 1998 in conformity with generally
accepted accounting principles.

/s/ Aidman, Piser & Company, P.A.

September 30, 1998
Tampa, Florida

F-22
<PAGE>

DATAXCHANGE NETWORK, INC.
BALANCE SHEETS
JULY 31, 1998 AND 1997

<TABLE>
<CAPTION>
ASSETS

1998 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 225,911 $ 177,971
Receivables:
Trade, less allowance for doubtful accounts
(1998, $58,000; 1997, $35,000) 152,678 183,031
Other 2,800 6,553
Inventory 39,954 58,122
Contract bid deposits 63,327 --
Prepaid expenses and other current assets 30,995 28,272
----------- -----------
Total current assets 515,665 453,949

Furniture and network equipment, net 171,165 271,439
Deposits 6,109 7,680
----------- -----------
$ 692,939 $ 733,068
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 253,472 $ 195,510
Accrued expenses 11,285 8,354
Customer deposits 192,432 152,540
----------- -----------
Total current liabilities 457,189 356,404
----------- -----------

Commitments and contingencies

Stockholders' equity:
Common stock; $.01 par value; 20,000,000 shares
authorized; shares issued and outstanding,
1,228,464 (1998), 1,153,143 (1997) 12,285 11,530
Additional paid-in capital 1,917,715 1,273,470
Stock subscriptions receivable (40,000) (40,000)
Accumulated deficit (1,654,250) (868,336)
----------- -----------
235,750 376,664
----------- -----------
$ 692,939 $ 733,068
----------- -----------
----------- -----------
</TABLE>

See notes to financial statements.

F-23
<PAGE>

DATAXCHANGE NETWORK, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenue:
Internet access and services $ 1,898,242 $ 1,568,339 $ 1,201,824
Equipment sales 118,270 127,881 208,557
--------------- --------------- ---------------
2,016,512 1,696,220 1,410,381
--------------- --------------- ---------------

Cost of sales:
Internet access and services 1,828,886 1,536,178 855,172
Equipment sales 120,477 139,936 130,135
--------------- --------------- ---------------
1,949,363 1,676,114 985,307
--------------- --------------- ---------------

Gross profit 67,149 20,106 425,074

General and administrative expenses 750,720 663,375 440,347
Depreciation 107,481 158,829 79,944
--------------- --------------- ---------------

Loss from operations (791,052) (802,098) (95,217)

Interest income 6,038 18,388 14,933
--------------- --------------- ---------------

Loss before income taxes (785,014) (783,710) (80,284)

Income tax expense 900 900 800
--------------- --------------- ---------------

Net loss ($ 785,914) ($ 784,610) ($ 81,084)
--------------- --------------- ---------------
--------------- --------------- ---------------

Loss per common shares ($ .67) ($ .68) ($ .07)
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

See notes to financial statements.

F-24
<PAGE>

DATAXCHANGE NETWORK, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JULY 31, 1998, 1997, AND 1996

<TABLE>
<CAPTION>
Common Stock Additional Stock
------------------- Paid-in Accumulated Subscription
Shares Amount Capital Deficit Receivable Total
------ ------ ------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances, August 1, 1995 3,567 $ 357 $ 559,643 ($ 2,642) ($ 460,000) $ 97,358

Common stock split
(300:1) 1,066,433 10,343 (10,343) -- -- --

Issuance of common
stock ($8.72 per share) 83,143 830 724,170 -- -- 725,000

Collection of stock
subscriptions receivable -- -- -- -- 420,000 420,000

Net loss -- -- -- ( 81,084) -- (81,084)
--------- --------- ----------- ----------- ----------- ----------
Balances, July 31, 1996 1,153,143 11,530 1,273,470 ( 83,726) ( 40,000) 1,161,274

Net loss -- -- -- ( 784,610) -- ( 784,610)
--------- --------- ----------- ----------- ----------- ----------

Balances, July 31, 1997 1,153,143 11,530 1,273,470 ( 868,336) ( 40,000) 376,664

Issuance of common stock
(8.72 per share) 22,936 230 199,770 -- -- 200,000

Issuance of common stock
($7.50 per share) 30,000 300 224,700 -- -- 225,000

Notes converted to common
stock 22,385 225 219,775 -- -- 220,000

Net loss -- -- -- ( 785,914) -- ( 785,914)
--------- --------- ----------- ----------- ----------- ----------

Balances, July 31, 1998 1,228,464 $ 12,285 $ 1,917,715 ($1,654,250) ($ 40,000) $ 235,750
--------- --------- ----------- ----------- ----------- ----------
--------- --------- ----------- ----------- ----------- ----------
</TABLE>

See notes to financial statements
F-25

<PAGE>

DATAXCHANGE NETWORK, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1998, 1997, AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($ 785,914) ($ 784,610) ($ 81,084)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 107,481 158,829 79,944
Increase(decrease) in cash due to
changes in:
Accounts receivable 34,106 ( 65,169) ( 31,557)
Inventory 18,168 ( 20,418) ( 37,704)
Prepaid expenses and other
current assets ( 66,050) ( 11,610) ( 16,662)
Deposits 1,571 ( 6,180) ( 1,500)
Accounts payable 57,961 129,863 47,435
Accrued expenses 2,932 4,942 ( 14,099)
Customer deposits 39,892 27,736 65,299
--------------- --------------- ---------------
Net cash provided by (used in)
operating activities ( 589,853) ( 566,617) 10,072
-------------- -------------- ---------------

Cash flows from investing activities:
Acquisition of furniture and equipment ( 7,207) ( 58,008) ( 407,312)
-------------- -------------- --------------

Net cash used in investing activities ( 7,207) ( 58,008) ( 407,312)
-------------- -------------- --------------

Cash flows from financing activities:
Proceeds from sale of common stock
and collection of stock subscriptions
receivable 425,000 -- 1,145,000

Proceeds from issuance of
convertible notes 220,000 -- --
--------------- --------------- ---------------

Net cash provided by financing
activities 645,000 -- 1,145,000
--------------- --------------- ---------------

Net change in cash 47,940 ( 624,625) 747,760

Cash at beginning of year 177,971 802,596 54,836
--------------- --------------- ---------------

Cash at end of year $ 225,911 $ 177,971 $ 802,596
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

(Continued)

F-26
<PAGE>

DATAXCHANGE NETWORK, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JULY 31, 1998, 1997, AND 1996

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION

Income taxes paid were $900, $900 and $800 for the years ended July 31, 1998,
1997 and 1996, respectively.

Interest paid was $5,950 during the year ended July 31, 1998.

Non-cash financing activities:

During the year ended July 31, 1998, $220,000 of convertible notes were
converted to common stock at a conversion rate of approximately $10 per share.

F-27
<PAGE>

DATAXCHANGE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS:

DataXchange Network, Inc. (the "Company") is a national provider of
internet access services to approximately 200 local or regional Internet
Service Providers (ISP's). The Company also directly provides internet
access to approximately 75 corporations. The Company facilitates access to
the Internet by means of a telecommunications network comprised of a
backbone of leased, high-speed dedicated phone lines, computer hardware and
software, and local access points known as points of presence in
approximately 325 locations. The Company's high speed, digital
telecommunications network provides subscribers with direct access to the
full range of internet applications and resources.

CASH EQUIVALENTS:

The Company considers all liquid investments with original maturities of
three months or less to be cash equivalents. At July 31, 1998 and 1997,
cash equivalents consisted principally of money market accounts.

INVENTORY:

Inventory consists primarily of purchased computer network equipment and is
stated at the lower of cost or market. Cost is determined generally on a
first-in, first-out basis.

FURNITURE AND EQUIPMENT:

Furniture and equipment are stated at cost. Depreciation is provided on
accelerated methods over the estimated useful lives of the related assets.

ADVERTISING COST:

The Company charges the costs of advertising to operations as such costs
are incurred. Advertising expense was approximately $13,000, $32,000 and
$8,000 for the years ending July 31, 1998, 1997 and 1996.

F-28
<PAGE>

DATAXCHANGE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED):

INCOME TAXES:

Deferred tax assets and liabilities are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax
assets if it is more likely than not that deferred tax assets will not be
recognized.

DEPENDENCE ON SUPPLIERS:

The Company depends upon third-party suppliers for access to the internet
through leased telecommunication lines. Although this access is available
from several alternate suppliers, there can be no assurance that the
Company could obtain substitute services from other providers at reasonable
or comparable prices or in a timely manner. The Company is also dependent
upon the regional phone companies to provide installations or circuits and
to maintain those circuits.

REVENUE RECOGNITION:

The Company charges customers monthly access fees to the internet and
recognizes the revenue in the month the access is provided. Revenue for
other services provided, including installation fees or equipment sales, is
recognized as the service is performed or the equipment is delivered to the
customer.

COST OF SALES:

Included in cost of sales for internet access and services is principally
the cost of high speed data circuits and telephone lines that allow
customers access to the Company's service.

NEW ACCOUNTING PRONOUNCEMENTS:

In 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information". Both of these standards will be effective for the
Company's 1999 fiscal year. Future adoption of these new accounting
standards are not expected to have a significant effect on the Company's
financial position or results of operations.

F-29
<PAGE>

DATAXCHANGE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED):

USE OF ESTIMATES:

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

Net loss per share:

Basic net loss per common share has been determined by dividing net loss by
the weighted average number of shares outstanding during each period.
Diluted net loss per common share is the same as basic net loss per common
share.

2. LIQUIDITY AND CAPITAL RESOURCES:

Since the Company's inception in 1994, the Company has incurred significant
operating losses that have been funded by proceeds from the sale of common
stock. The Company's continuation as a going concern is dependent upon
additional capital infusions until such time as the Company achieves
revenue levels sufficient to cover its costs, including increased working
capital and infrastructure requirements that may result from any increase
in business volume.

The Company's current net cash loss approximates $50,000 per month
(unaudited). It is the management's intention to fund operations through
additional equity and/or debt offerings.

Insofar as those efforts are insufficient, the Company's two principal
stockholders have agreed to provide funding sufficient to support the
Company's operations through at least December 31, 1999.

F-30
<PAGE>

DATAXCHANGE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

3. FINANCIAL INSTRUMENTS:

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying values of cash and cash equivalents, accounts receivable,
customer deposits and accounts payable approximated fair value due to the
short-term maturates of these instruments.

CONCENTRATION OF CREDIT RISK:

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable and are limited due to the large numbers of customers comprising
the Company's customer base, which is dispersed across the United States.
The Company controls credit risk associated with its receivables through
credit checks and approvals, and monitoring procedures. Generally, the
Company requires deposits equal to one month's recurring charges from its
customers.

The Company maintains its cash and cash equivalents with high quality,
credit worthy financial institutions. The Company has not experienced any
losses on its cash or cash equivalents. Approximately $117,000 of the
Company's $225,911 cash and cash equivalents balance at July 31, 1998 is
insured.

4. FURNITURE AND EQUIPMENT:

Furniture and equipment consists of the following:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Computer equipment $ 501,059 $ 493,853
Furniture and fixtures 27,583 27,582
---------- ----------
528,642 521,435
Less accumulated depreciation 357,477 249,996
---------- ----------
$ 171,165 $ 271,439
---------- ----------
---------- ----------
</TABLE>

5. STOCKHOLDERS' EQUITY:

During July 1994, the founding stockholders executed common stock
subscription agreements for an aggregate of 3,566.67 shares at subscription
prices of from $150 to $300 per share. Collection of those subscriptions
receivable have occurred as the Company required cash to fund operations.

F-31
<PAGE>

DATAXCHANGE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

5. STOCKHOLDERS' EQUITY (CONTINUED):

During 1996, the company effected a 300 for 1 common stock split for all
issued and outstanding shares, including those still subject to
subscriptions receivable agreements. Accordingly, the subscription
receivable price per share was similarly reduced to $.50 to $1.00 per
share.

During 1996 and 1998, the Company completed a private placement of 106,079
shares of common stock at $8.72 per share which generated net proceeds of
$925,000 to the Company.

During 1998, the Company completed a private placement of 30,000 shares of
common stock at $7.50 per share which generated net proceeds of $225,000 to
the Company.

During the year ended July 31, 1998, the Company issued $220,000 unsecured
notes payable to certain shareholders bearing interest at 7% that were
convertible into approximately 22,000 shares of common stock. Interest was
payable quarterly. All of these notes were subsequently converted to
common stock during 1998. Interest expense associated with these converted
notes was $5,950 during the year ended July 31, 1998.

6. INCOME TAXES:

Income tax expense consists of the following

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ -- $ -- $ --
State ( 900) ( 900) ( 800)
--------- --------- ---------
( 900) ( 900) ( 800)
--------- --------- ---------
Deferred:
Tax benefits of net operating loss
carryforward 286,000 291,000 21,000
Allowance for doubtful accounts 9,000 3,000 9,000
Change in valuation allowance ( 295,000) ( 294,000) ( 30,000)
--------- --------- ---------

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

($ 900) ($ 900) ($ 800)
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-32
<PAGE>

DATAXCHANGE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

6. INCOME TAXES (CONTINUED):

The difference between income tax expense as provided in the financial
statements and that as determined by applying the statutory tax rate to
pre-tax accounting income is as follows:

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Benefit at federal statutory rate 34% 34% 34%
State income tax benefit, net 3 3 2
Deferred tax asset valuation allowance ( 37) ( 37) ( 37)
----------- ----------- -----------

( -- %) ( -- %) ( 1%)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

Deferred tax assets at July 31, 1998 and 1997 consist of the following:
<TABLE>
<S> <C> <C>
Tax benefits of net operating $ 598,000 $ 312,000
loss carryforward
Allowance for doubtful accounts 22,000 13,000
---------- ----------
$ 620,000 $ 325,000
Less valuation allowance ( 620,000) ( 325,000)
---------- ----------
$ -- $
---------- ----------
---------- ----------
</TABLE>

At July 31, 1998, the Company had a net operating loss carryforward for tax
purposes of approximately $1,650,000 (expiring from 2009 through 2013)
available to offset future taxable income.

7. COMMITMENTS AND CONTINGENCY:

LEASE ARRANGEMENTS:

The Company leases office space under non-concelable operating leases.
Future minimum lease payments required under these agreements with
remaining terms in excess of one year as of July 31, 1998 are as follows:

Year ending July 31,
------------------
<S> <C>
1999 $ 10,833
2000 3,667
----------
$ 14,500
----------
----------
</TABLE>

F-33
<PAGE>

DATAXCHANGE NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

7. COMMITMENTS AND CONTINGENCY (CONTINUED):

LEASING ARRANGEMENTS (CONTINUED):

Total rent expense from all operating leases was approximately $46,000,
$37,000 and $11,000 during the years ending July 31, 1998, 1997 and 1996,
respectively.

CONTINGENT LIABILITY:

The Company has an unresolved dispute with a vendor who claims the Company
owes them approximately $51,000 more than the Company believes is the case.
Management does not believe that the resolution of this dispute will have a
material impact on the Company's financial position or results of
operations. None of the disputed amount has been recorded in the
accompanying financial statements.

F-34
<PAGE>

DATAXCHANGE NETWORK, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JULY 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
Balance at Charged Balance
beginning to cost or Deductions at end of
of period expense (describe) period
--------- ------- -------- ------
<S> <C> <C> <C> <C>
Year ended July 31, 1998
Allowance for doubtful
accounts $ 35,000 $ 50,500(1) ($ 27,500) $ 58,000

Year ended July 31, 1997
Allowance for doubtful
accounts $ 28,000 $ 33,900(1) ($ 26,900) $ 35,000

Year ended July 31, 1996
Allowance for doubtful
accounts $ 4,000 $ 46,800(1) ($ 22,800) $ 28,000
</TABLE>

(1) Bad Debt write-offs

F-35

<PAGE>

GLOSSARY

Access charges The fees paid by long distance carriers to LECs for
originating and terminating long distance calls on the
LECs' local networks.

ATM (Asynchronous
Transfer Mode) An information transfer standard that is one of a
general class of packet technologies that relay traffic
by way of an address contained within the first five
bytes of a standard fifty-three-byte-long packet or
cell. The ATM format can be used by many different
information systems, including local area networks, to
deliver traffic at varying rates, permitting a mix of
voice, data and video (multimedia).

AT&T AT&T Corp.

Backbone The through-portions of a transmission network, as
opposed to spurs which branch off the through-portions.

Band A range of frequencies between two defined limits.

Bandwidth The relative range of analog frequencies or digital
signals that can be passed through a transmission
medium, such as glass fibers, without distortion. The
greater the bandwidth, the greater the information
carrying capacity. Bandwidth is measured in Hertz
(analog) or Bits Per Second (digital).

Bit Error Rate A measure of transmission quality stated as the
expected probability of error per bit transmitted.

Capacity Refers to transmission.

Carrier A provider of communications transmission services by
fiber, wire or radio.

C-LEC (Competitive Local
Exchange Carrier) A company that competes with LECs in services market.

Common Carrier A government-defined group of private companies
offering telecommunications services or facilities to
the general public on a non-discriminatory basis.

Dark Fiber Fiber that lacks the requisite electronic and optronic
equipment necessary to use the fiber for transmission.

Digital Describes a method of storing, processing and
transmitting information through the use of distinct
electronic or optical pulses that represent the binary
digits 0 and 1. Digital transmission/switching
technologies employ a
</TABLE>

G-1

<PAGE>

sequence of discrete, distinct pulses to represent
information, as opposed to the continuously variable
analog signal.

DWDM (Dense Wave Division
Multiplexing) A technique for transmitting 8 or more different light
wave frequencies on a single fiber to increase the
information carrying capacity.

e-commerce Electronic commerce utilizing the Internet.

Equal access The basis upon which customers of IXCs are able to
obtain access to their Primary Interexchange Carriers'
(PIC) long distance telephone network by dialing "1",
thus eliminating the need to dial additional digits and
an authorization code to obtain such access.

FBCs (Facilities Based
Carriers) Facilities based carriers that own and operate their
own network and equipment.

FCC Federal Communications Commission.

Frame Relay A high-speed, data-packet switching service used to
transmit data between computers. Frame Relay supports
data units of variable lengths at access speeds ranging
from 56 kilobits per second to 1.5 megabits per second.
This service is well-suited for connecting local area
networks, but is not presently well suited for voice
and video applications due to the variable delays which
can occur. Frame Relay was designed to operate at high-
speeds on modern fiber optic networks.

Gbps Gigabits per second, which is a measurement of speed
for digital signal transmission expressed in billions
of bits per second.

GTE GTE Intelligent Network Services Incorporated.

Hertz The unit for measuring the frequency with which an
electromagnetic signal cycles through the zero-value
state between lowest and highest states. One Hz (Hertz)
equals one cycle per second. kHz (kilohertz) stands for
thousands of Hertz; MHZ (megahertz) stands for millions
of Hertz.

IDC International Data Corporation, a market research firm.

IP Internet Protocol.

ISP (Internet Service
Provider) A company that provides businesses and individuals with
access to the Internet.

10XXX Service The ability for a user to access any carrier's long
distance network by dialing the carrier's Carrier
Identification Code (CIC) which is a 1 plus 0 plus
three specifically assigned digits, thereby bypassing
the user's primary interexchange carrier.

</TABLE>

G-2

<PAGE>

<TABLE>
<S> <C>
Interconnect Connection of a telecommunications device or service to
the PSTN.

IXC or Interexchange
carrier A company providing inter-LATA or long distance
services between LATAs on an intrastate or interstate
basis.

Kbps Kilobits per second, which is a measurement of speed
for digital signal transmission expressed in thousands
of bits per second.

LATAs (Local Access
and Transport Areas) The approximately 200 geographic areas that define the
areas between which the RBOCs currently are prohibited
from providing long distance services.

LEC (Local Exchange
Carrier) A company historically providing local telephone
services.

Lit fiber Fiber activated or equipped with the requisite
electronic and optronic equipment necessary to use the
fiber for transmission.

Local loop A circuit that connects an end user to the LECcentral
office within a LATA.

Long-haul circuit A dedicated telecommunications circuit generally
between locations in different LATAs.

Mbps Megabits per second, which is a measurement of speed
for digital signal transmission expressed in millions
of bits per second.

MCI Worldcom MCIWorldCom Inc.

MOU Minutes of use of long distance service.

Multiplexing An electronic or optical process that combines a large
number of lower speed transmission lines into one high-
speed line by splitting the total available bandwidth
into narrower bands (frequency division), or by
allotting a common channel to several different
transmitting devices, one at a time in sequence (time
division).

OC-3, OC-12,
OC-48 and OC-192 OC is a measure of SONET transmission optical carrier
level, which is equal to the corresponding number of
DS-3s (e.g. OC-3 is equal to 3 DS-3s and OC-48 is equal
to 48 DS-3s).

RBOCs (Regional Bell
Operating Companies) The seven local telephone companies (formerly part of
AT&T) established as a result of the AT&T Divestiture
Decree.

Regeneration/amplifier Devices which automatically re-transmit or boost
signals on an out-bound circuit.

Reseller A carrier that does not own transmission facilities,
but obtains

</TABLE>

G-3

<PAGE>

<TABLE>
<S> <C>
communications services from another carrier for resale
to the public.

SONET (Synchronous Optical
Network Technology) An electronics and network architecture for variable-
bandwidth products which enables transmission of voice,
data and video (multimedia) at very high speeds.

SONET ring A network architecture which provides for instantaneous
restoration of service in the event of a fiber cut by
automatically rerouting traffic the other direction
around the ring. This occurs so rapidly (in 50
milliseconds) it is virtually undetectable to the user.

Spectrum A term generally applied to radio frequencies.

Sprint Sprint Corporation

Switch A device that selects the paths or circuits to be used
for transmission of information and establishes a
connection. Switching is the process of interconnecting
circuits to form a transmission path between users and
it also captures information for billing purposes.

Switched service
carriers A carrier that sells switched long distance service and
generally refers to a carrier that owns its switch.

Switchless resellers A carrier that does not own facilities or switches, but
purchases minutes in high volumes from other carriers
and resells those minutes.

T-0, T-1, T-3 Standard telecommunications industry digital signal
formats, which are distinguishable by bit rate (the
number of binary digits (0 and 1) transmitted per
second). T-0 service has a bit rate of 64 kilobits per
second and typically transmits only once voice
conversation at a time. T-1 service has a bit rate of
1.544 megabits per second and typically transmits 24
simultaneous voice conversations. T-3 service has a bit
rate of 45 megabits per second and typically transmits
672 simultaneous voice conversations.

T-3 miles A measure of the total capacity and length of a
transmission path, calculated as the capacity of the
transmission path in T-3's multiplied by the length of
the path in miles.

Terabits A trillion bits of transmission capacity.

Trunk A communications channel between two switches.
"Trunking" calls reduces the likelihood of traffic
blockage due to network congestion. A trunked system
combines multiple channels with unrestricted access in
such a manner that user demands for channels are
automatically "queued" and then allocated to the first
available channel.

WorldCom WorldCom, Inc.

</TABLE>

G-4

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 3
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PRICE RANGE FOR COMMON STOCK AND DIVIDEND POLICY . . . . . . . . . . . . . . 29
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA . . . . . . . . . . . . 30
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SELECTED HISTORICAL FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 37
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE . . . . . . . . . . 70
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
CHANGES IN CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS . . . . . . . . . . . . 74
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SELLING SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 81
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . 83
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . 88
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . F-1
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1

</TABLE>