FRONTLINE COMMUNICATION CORP, SB-2/A, 1998-05-05

FRONTLINE COMMUNICATION CORP
SB-2/A, 1998-05-05
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE>

As filed with the Securities and Exchange Commission on May 5, 1998
Registration No. 333-34115

Washington, DC 20549
----------------

Amendment No. 3

to
Form SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
FRONTLINE COMMUNICATIONS CORPORATION
(Exact name of small business issuer as specified in its charter)

<TABLE>
<CAPTION>
Delaware 7379 13-3950283
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification No.) Identification No.)

</TABLE>

One Blue Hill Plaza, 6th Floor
P.O. Box 1548
Pearl River, New York 10965
(914) 623-8553

(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------
Stephen J. Cole-Hatchard, Chairman
Frontline Communications Corporation
One Blue Hill Plaza, 6th Floor
P.O. Box 1548
Pearl River, New York 10965
(914) 623-8553
(Name, address and telephone number of agent for service)
----------------
Copies of all communications to:

ROBERT J. MITTMAN, ESQ. STEVEN MORSE, ESQ.
Tenzer Greenblatt LLP LESTER MORSE P.C.
The Chrysler Building 111 Great Neck Road
405 Lexington Avenue Great Neck, New York 11021
New York, New York 10174 Telephone: (516) 487-1446
Telephone: (212) 885-5000 Facsimile: (516) 487-1452
Facsimile: (212) 885-5001

Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. /X/

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Secur-ities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------
<PAGE>

CALCULATION OF REGISTRATION FEE

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<TABLE>
<CAPTION>
Proposed Proposed
Maximum Offering Maximum Amount of
Title of Each Class of Amount to Price Per Aggregate Offering Registration
Securities to be Registered be Registered Security (1) Price (1) Fee
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share ............................... 1,840,000(2) $ 4.00 $7,360,000 $ 2,171.20
Warrants, each to purchase one
share of Common Stock ............... 1,840,000(2) $ .10 $ 184,000 $ 54.28
Common Stock, par value $.01 per
share, issuable upon exercise of
the Warrants (3) .................... 1,840,000 $ 4.80 $8,832,000 $ 2,605.44
Underwriter's Warrants, each to
purchase one share of Common
Stock (4) ........................... 160,000 $ .001 $ 160.00 (5)
Common Stock, par value $.01 per
share, issuable upon exercise of
the Underwriter's Warrants (3) ...... 160,000 $ 6.60 $1,056,000 $ 311.52
Underwriter's Warrants, each to
purchase one warrant (4) ............ 160,000 $ .001 $ 160.00 (5)
Warrants issuable upon exercise of
the Underwriter's Warrants .......... 160,000 $ .165 $ 26,400 $ 7.78
Common Stock, par value $.01 per
share, issuable upon exercise of
the warrants underlying the
Underwriter's Warrants (3) .......... 160,000 $ 7.92 $1,267,200 $ 373.82
Total Registration Fee ........................................................................... $ 5,524.04(6)
</TABLE>

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

(1) Estimated solely for the purpose of calculating the registration fee.
(2) Assumes the Underwriter's over-allotment option to purchase up to 240,000
additional shares of Common Stock and/or 240,000 Warrants is exercised in
full.
(3) Pursuant to Rule 416, there are also being registered such indeterminable
additional shares of Common Stock as may become issuable pursuant to
anti-dilution provisions contained in the Warrants, the Underwriter's
Warrants and the warrants underlying the Underwriter's Warrants.
(4) Represents warrants to be issued by the Company to the Underwriter at the
time of delivery and acceptance of the securities to be sold by the
Company to the public hereunder.
(5) None, pursuant to Rule 457(g).
(6) $281.33 paid herewith. $5,242.71 previously paid.

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

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration becomes effective.
This prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction.

PRELIMINARY PROSPECTUS DATED MAY 5, 1998
SUBJECT TO COMPLETION

FRONTLINE COMMUNICATIONS CORPORATION
1,600,000 Shares of Common Stock and
Redeemable Warrants to Purchase
1,600,000 Shares of Common Stock

The Company is offering 1,600,000 shares of Common Stock (the "Common
Stock") and redeemable warrants to purchase 1,600,000 shares of Common Stock
(the "Warrants"). The Common Stock and Warrants may be purchased separately and
will be transferable immediately upon issuance. Each Warrant entitles the
registered holder thereof to purchase one share of Common Stock at a price of
$4.80, subject to adjustment in certain circumstances, at any time commencing
, 1999 through and including , 2003. The Warrants are redeemable by the
Company at any time commencing , 1999, upon notice of not less than 30
days, at a price of $.10 per Warrant, provided that (i) the closing bid
quotation of the Common Stock on all 20 trading days ending on the third day
prior to the day on which the Company gives notice (the "Call Date") has been
at least 150% (currently $7.20, subject to adjustment) of the then effective
exercise price of the Warrants and (ii) the Company obtains the written
approval of Werbel-Roth Securities, Inc. (the "Representative") to such
redemption prior to the Call Date. See "Description of Securities."

Prior to this offering, there has been no public market for the Common
Stock or Warrants and there can be no assurance that any such market will
develop. It is anticipated that the Common Stock and Warrants will be quoted on
the Nasdaq SmallCap Market ("Nasdaq") under the symbols "FCCN" and "FCCNW,"
respectively. For a discussion of the factors considered in determining the
offering prices of the Common Stock and Warrants, see "Underwriting."

------------------
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE SUBSTANTIAL
RISKS AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY
INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" COMMENCING ON PAGE 6 AND "DILUTION."

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

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

Price Underwriting Proceeds
to Discounts and to
Public Commissions(1) Company (2)

Per Share ........... $ 4.00 $ .40 $ 3.60
Per Warrant ......... $ .10 $ .01 $ .09
Total (3) ........... $6,560,000 $656,000 $5,904,000

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

(1) The Company has agreed to pay to the Representative a 3% nonaccountable
expense allowance, to sell to the Representative warrants (the
"Representative's Warrants") to purchase up to 160,000 shares of Common
Stock and/or 160,000 warrants and to retain the Representative as a
financial consultant. The Company has also agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses, including the nonaccountable expense allowance
in the amount of $196,800 ($226,320 if the Underwriters' over-allotment
option is exercised in full), estimated at $746,800, payable by the
Company.
(3) The Company has granted to the Underwriters an option, exercisable within
45 days from the date of this Prospectus, to purchase up to an additional
240,000 shares of Common Stock and/or 240,000 additional Warrants on the
same terms set forth above, solely for the purpose of covering
over-allotments, if any. If the Underwriters' over-allotment option is
exercised in full, the total price to public, underwriting discounts and
commissions and proceeds to Company will be $7,544,000, $754,400 and
$6,789,600, respectively. See "Underwriting."

The shares of Common Stock and Warrants are being offered, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to approval of certain legal matters by counsel and to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
the offering and to reject any order in whole or in part. It is expected that
delivery of certificates representing the Common Stock and Warrants will be
made against payment therefor at the offices of the Representative in Boca
Raton, Florida on or about , 1998.

------------------
WERBEL-ROTH SECURITIES, INC.

The date of this Prospectus is , 1998.

<PAGE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS, ON
NASDAQ, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE, WHICH STABILIZE, MAINTAIN
OR OTHERWISE AFFECT THE PRICES OF THE COMMON STOCK AND WARRANTS. SPECIFICALLY,
THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING AND MAY BID FOR
AND PURCHASE SHARES OF COMMON STOCK AND WARRANTS IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
more detailed information and financial statements appearing elsewhere in this
Prospectus. Each prospective investor is urged to read this Prospectus in its
entirety. Unless otherwise indicated, all information in this Prospectus gives
effect to (i) a Reorganization (as defined below) in May 1997, (ii) a 4- for-5
reverse stock split effected in March 1998 and (iii) the repurchase by the
Company of 231,520 shares of Common Stock (the "Stock Repurchase") from Michael
Char, a former officer and director of the Company upon the consummation of
this offering, and assumes no exercise of the Underwriters' over-allotment
option to purchase an additional 240,000 shares of Common Stock and/or 240,000
additional warrants. See "Certain Transactions" and "Underwriting."

The Company

Frontline Communications Corporation (the "Company") is an Internet
service provider that offers "dial-up" Internet access primarily to individual
subscribers. The Company provides subscribers with direct access to a wide
range of Internet applications and resources, including electronic mail, world
wide web sites and regional and local information and data services. The
Company believes that its low subscriber to modem ratio, its technical and
customer support and ancillary services position the Company to capitalize on
the emerging and expanding markets for Internet services.

In recent years, the Internet has experienced a rapid increase in the
number of users. Industry sources estimate that the number of online households
in the United States was approximately 9.6 million at the end of 1995, 15.2
million at the end of 1996, 19.2 million at the end of 1997, and project that
the number of online households will exceed 40 million by the year 2000. The
Company believes that increasing penetration of computers and modems into
households and businesses, the growth of the informational, entertainment and
commercial resources of the Internet and the increasing availability of
user-friendly navigational tools that enable easier access to the Internet's
resources will continue to contribute favorably to the growth of the Internet.

The Company's telecommunications network is currently comprised of leased
high-speed data lines and ten points-of-presence ("POPs") serving suburban
areas in Rockland, Orange, Dutchess, Sullivan, Putnam, Ulster and Westchester
counties in New York and Bergen county in New Jersey. These POPs permit
subscribers in these areas to access the Internet through a local telephone
call. The Company currently supports 14.4, 28.8 and 36.6 Kbps modems at each of
its POPs and has X2 56K and ISDN technologies at most of its POPs. The Company
has approximately 1,500 individual and 175 business subscribers as of the date
of this Prospectus. Pursuant to its currently proposed plan of operation, the
Company will seek to establish up to twenty-four additional POPs during the
twelve months following the consummation of this offering.

The Company's objective is to expand its network of POPs rapidly into
selected geographic markets. The Company currently anticipates that it will
initially seek to achieve significant penetration in suburban markets in the
greater New York metropolitan area, including Morris and Passaic counties in
New Jersey, and Fairfield and New Haven counties in Connecticut. The Company
intends to target suburban markets with attractive demographic characteristics
similar to the Company's existing POPs. To achieve its goal, the Company will
seek to cluster POPs for operational efficiency and to share certain marketing,
financial, customer service and management personnel. The Company will also
seek to capitalize on demand for Internet access by offering subscriber service
which combines the capabilities typically provided by large companies with the
flexibility and responsiveness of a small Internet service provider.

Since its inception, the Company has engaged in only limited operations
and has not yet generated meaningful revenues. The Company requires the
proceeds of this offering to fully implement its proposed plan of operation.
The Company expects to incur substantial up-front expenses in connection with
establishing additional POPs, engaging in marketing activities and hiring
executive, technical, marketing and other personnel, which will result in
losses for the foreseeable future. There can be no assurance the Company will
be able to successfully implement its business plans. See "Risk Factors."

3
<PAGE>

The Company was incorporated under the laws of the State of Delaware in
February 1997 under the name Easy Street Online, Inc. as successor to the
business of Hobbes & Co., LLC ("Hobbes"), INET Communications Company, LLC
("INET") and Sara Girl & Co., LLC ("Sara Girl") (collectively, the "Predecessor
Companies"), limited liability companies organized in May and August 1995 and
July 1996 to own and operate POPs. In May 1997, the Company effected a
reorganization (the "Reorganization") pursuant to which the Predecessor
Companies transferred all of their assets, subject to all of their liabilities,
to the Company, (ii) Messrs. Nicko Feinberg and Stephen J. Cole-Hatchard,
officers, directors and principal stockholders of the Company, and Mr. Michael
Char, a former officer and director of the Company, exchanged their respective
interests in the Predecessor Companies for promissory notes in the aggregate
principal amount of $372,137 and (iii) each of the Predecessor Companies
dissolved. Unless otherwise indicated, all references in this Prospectus to the
Company include the Predecessor Companies. See "Certain Transactions."

The Company's executive offices are located at One Blue Hill Plaza, 6th
Floor, P.O. Box 1548, Pearl River, New York 10965, and its telephone number is
(914) 623-8553. The Company's home page is located on the World Wide Web at
www.fcc.net.

The Offering

Securities offered....... 1,600,000 shares of Common Stock and Warrants to
purchase 1,600,000 shares of Common Stock. See
"Description of Securities."

Common Stock to be outstanding
after the offering(1)... 2,776,480 shares

Warrants

Number to be outstanding after
the offering(2)......... 1,600,000 Warrants

Exercise terms........... Exercisable for a period of four years commencing
, 1999, each to purchase one share of Common
Stock at a price of $4.80, subject to adjustment in
certain circumstances. See "Description of
Securities -- Redeemable Warrants."

Expiration date........ , 2003.

Redemption............... Redeemable by the Company at any time commencing
, 1999, upon notice of not less than 30 days, at
a price of $.10 per Warrant, provided that (i) the
closing bid quotation of the Common Stock on all 20
trading days ending on the third day prior to the
day on which the Company gives notice has been at
least 150% (currently $7.20, subject to adjustment)
of the then effective exercise price of the Warrants
and (ii) the Company obtains the written consent of
the Underwriter to such redemption prior to the Call
Date. The Warrants will be exercisable until the
close of business on the date fixed for redemption.
See "Description of Securities -- Redeemable
Warrants."

Use of Proceeds.......... The Company intends to use the net proceeds of
this offering for the acquisition of subscriber
bases; the establishment of additional POPs;
marketing and advertising; repayment of
indebtedness; the Stock Repurchase; and the balance
for working capital and general corporate purposes.
See "Use of Proceeds."

Risk Factors............. The securities offered hereby are highly
speculative and involve substantial risks and
immediate substantial dilution and should not be
purchased by investors who cannot afford the loss of
their entire investment. See "Risk Factors" and
"Dilution."

4
<PAGE>

Proposed NASDAQ SmallCap
Market symbols.......... Common Stock -- FCCN
Warrants -- FCCNW

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

(1) Gives effect to the Stock Repurchase. Does not include (i) 1,600,000 shares
of Common Stock reserved for issuance upon exercise of the Warrants; (ii)
an aggregate of 320,000 shares of Common Stock reserved for issuance upon
exercise of the Representative's Warrants and the warrants included
therein; (iii) 165,600 shares of Common Stock reserved for issuance upon
exercise of outstanding options under the Company's 1997 Stock Option Plan
(the "Plan"); (iv) 334,400 shares of Common Stock reserved for issuance
upon exercise of options available for future grant under the Plan; and
(v) 300,000 shares of Common Stock reserved for issuance upon the exercise
of warrants issued in December 1997. See "Management -- 1997 Stock Option
Plan," and "Underwriting."

(2) Does not include any Warrants referred to in clause (ii) and (iii) of Note
1 above.

Summary Financial Information

The summary financial information set forth below is derived from and
should be read in conjunction with the financial statements, including the
notes thereto, appearing elsewhere in this Prospectus.

Statement of Operations Data:

<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1996 1997
------------ ---------------
<S> <C> <C>
Revenues .............................................. $ 98,699 $ 321,706
Cost of revenues ...................................... (67,582) (251,928)
Selling, general and administrative costs ............. (81,220) (540,883)
Non-cash compensation ................................. -- (1,537,000)
Net loss .............................................. (54,206) (2,037,417)
Net loss per share .................................... (.11) (1.67)
Weighted average number of shares outstanding ......... 512,000 1,218,000
</TABLE>

Balance Sheet Data:

December 31, 1997
--------------------------------
Actual As Adjusted(1)
-------------- ---------------
Working capital (deficit) .............. $ (423,369) $4,438,368
Total assets ........................... 486,200 5,018,400
Total liabilities ...................... 931,148 566,148
Accumulated deficit .................... 2,099,548 2,099,548
Stockholders' (deficit) equity ......... (444,948) 4,452,252

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(1) Gives effect to (i) the Stock Repurchase and (ii) the sale of the Common
Stock and Warrants offered hereby and the application of the estimated net
proceeds therefrom. See "Use of Proceeds."

Notice to California Investors. Each purchaser of Common Stock and Warrants in
California must be an "accredited investor" as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act") or satisfy one of the following suitability standards:
(i) minimum annual gross income of $50,000 and a net worth (exclusive of home,
home furnishings and automobiles) of $75,000; or (ii) minimum net worth
(exclusive of home, home furnishings and automobiles) of $150,000.

5
<PAGE>

RISK FACTORS

The securities offered hereby are highly speculative and involve
substantial risks. Prospective investors should carefully consider the
following risk factors before making an investment decision.

Recent Organization; Early Stage Company. The Company was organized in
February 1997 as successor to the business of the Predecessor Companies and is
in an early stage of development. Accordingly, the Company has a limited
operating history upon which an evaluation of its performance and prospects can
be made. The Company is subject to all of the risks, uncertainties, expenses,
delays, problems and difficulties frequently encountered in the establishment
of a new business in a rapidly evolving industry characterized by intense
competition and an increasing and substantial number of new market entrants and
new Internet products and services. See "Business."

Proposed Plan of Operation. The Company's proposed plan of operation and
prospects will be largely dependent upon the Company's ability to successfully
establish and equip additional POPs on a timely and cost effective basis; hire
and retain skilled management, technical, marketing and other personnel; and
attract and retain significant numbers of subscribers. The Company has limited
experience in commercializing new Internet products and services and there is
limited information available concerning the potential performance or market
acceptance of the Company's POPs. There can be no assurance that the Company
will be able to successfully implement its business plan or that unanticipated
expenses, problems or technical difficulties will not occur which would result
in material delays in its implementation. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Limited Revenues; Significant Losses; Explanatory Paragraph in Report of
Independent Public Accountant. The Company has not yet generated any meaningful
revenues, and will not generate any meaningful revenues until after the Company
establishes additional POPs and attracts and retains a significant number of
subscribers, which the Company does not anticipate will occur until several
months following the consummation of this offering, if at all. For the period
from May 1, 1995 (inception) to December 31, 1997, the Company incurred a
cumulative net loss of approximately $2,099,548. Since December 31, 1997, the
Company has incurred losses and anticipates that it will continue to incur
significant losses until, at the earliest, the Company generates sufficient
revenues to offset the substantial up-front expenditures and operating costs
associated with establishing additional POPs and attracting and retaining a
significant subscriber base. There can be no assurance that the Company will be
able to attract and retain a sufficient number of subscribers to generate
meaningful revenues or achieve profitable operations. The Company's independent
public accountants have included an explanatory paragraph in their report on the
Company's financial statements stating that certain factors raise substantial
doubt about the Company's ability to continue as a going concern. At December
31, 1997, the Company had a working capital deficit of $423,369. See Financial
Statements.

Dependence on Offering Proceeds; Possible Need for Additional
Financing. The capital requirements relating to implementation of the Company's
business plan will be significant. The Company is dependent on the proceeds of
this offering or other financing in order to continue in business and fully
implement its proposed plan of operation. Based on currently proposed plans and
assumptions relating to the implementation of its business plans (including the
timetable of, and costs associated with, establishing additional POPs), the
Company believes that the proceeds of this offering will be sufficient to
satisfy its contemplated cash requirements for at least twelve months following
the consummation of this offering. In the event that the Company's plans
change, its assumptions change or prove to be inaccurate or if the proceeds of
this offering prove to be insufficient to implement its business plans, the
Company would be required to seek additional financing sooner than currently
anticipated. There can be no assurance that the proceeds in this offering will
be sufficient to permit the Company to implement its proposed business plan or
that any assumptions relating to the implementation of such plan will prove to
be accurate. To the extent that the proceeds of this offering are not
sufficient to enable the Company to generate meaningful revenues or achieve
profitable operations, the inability to obtain additional financing will have a
material adverse effect on the Company. There can be no assurance that any such
financing will be available to the Company on commercially reasonable terms, or
at all. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operation."

Limited Number of POPs; Geographic Concentration; Uncertainty of Network
Expansion. There are currently ten POPs in operation, only three of which have
been in operation for more than one year, and all of which

6
<PAGE>

are in the greater New York metropolitan area. Consequently, the results
achieved to date by the Company's POPs may not be indicative of the prospects
or market acceptance of a larger number of POPs, particularly in wider and more
geographically dispersed areas with varied demographic characteristics. The
process of identifying suitable sites and establishing additional POPs is
lengthy and network installation typically requires six to eight weeks to
complete from the time a lease for a new POP is entered into. There can be no
assurance that the Company will be successful in identifying suitable sites or
in establishing additional POPs. Unforeseen events, including failure to obtain
and install telephone lines and network equipment on a timely and
cost-effective basis, could materially delay the Company's plans in target
markets. The Company has relatively limited experience in establishing POPs and
has limited financial and other resources. There can be no assurance that the
Company will be able, for financial or other reasons, to successfully expand
its network or that any expansion will not be subject to unforeseen delays and
costs. See "Business -- Network Infrastructure."

Dependence on Sole Suppliers and Manufacturers; Possible Service
Interruptions and Equipment Failures. The Company is currently dependent on a
sole supplier (Tinkleman Enterprises, Inc.) to provide Internet access via
leased telecommunications lines on a cost-effective and continuous basis. The
Company has not entered into an interconnect agreement with such supplier.
Although the Company believes that it currently has sufficient access to
telecommunications networks on favorable terms and believes that its
relationship with such supplier is satisfactory, any increase in rates charged
by such supplier would materially adversely affect the Company's operating
margins. Failure to obtain continuing access to such networks would also have a
material adverse effect on the Company, including possibly requiring the
Company to significantly curtail or cease its operations. The Company also is
dependent on third-party manufacturers of hardware components. Certain
components used by the Company in providing its networking services are
generally acquired from only one source, including high performance routers
manufactured by Cisco Systems, Inc. and remote access servers manufactured by 3
Com (formerly U.S. Robotics, Inc.). The Company has not entered into agreements
with any equipment manufacturer and purchases equipment components pursuant to
purchase orders placed from time to time in the ordinary course of business.
Although the Company believes that network equipment is currently available
from numerous sources, failure by manufacturers to deliver quality products on
a timely basis or the inability to develop alternative sources if and as
required, could result in delays which could materially adversely affect the
Company's business and limit the Company's ability to expand its operations.

In addition, the Company's operations require that its POPs and its
third-party telecommunications networks operate on a continuous basis. It is
possible that the Company's POPs and third-party telecommunications networks
may from time to time experience service interruptions or equipment failures.
Service interruptions and equipment failures resulting in material delays would
adversely affect subscriber confidence as well as the Company's business
operations and reputation. See "Business -- Internet Access Providers and
Suppliers."

New Industry; Uncertainty of Market Acceptance; Limited Marketing, Service
and Support Capabili-ties. The Internet connectivity services industry is
characterized by a limited operating history and a high rate of business
failures. Because the market is relatively new and current and future
competitors are likely to introduce competing Internet connectivity and/or
online services and products, it is difficult to predict the rate at which the
market will grow or at which new or increased competition will result in market
saturation. The novelty of the market for Internet access services may
adversely affect the Company's ability to retain new subscribers who may be
unfamiliar with the Internet and more likely to discontinue the Company's
services after an initial trial period. Any significant decline in demand for
Internet connectivity services or in the computer industry generally or in
particular target markets would have a material adverse effect on the Company's
business and prospects. The Company's success will be largely dependent upon
the Company's ability to continually attract and retain additional subscribers
and replace terminating subscribers. To date, the Company has relied entirely
on the efforts of its executive officers for the marketing of its services.
Full scale marketing of the Company's services to individuals may require
reliance on third party distribution channels, such as retail stores, catalogs,
book publishers and computer hardware and software vendors. There can be no
assurance that the Company will be able to successfully develop or maintain
relationships with these parties. The successful implementation of the
Company's business plans will also require the Company to expand customer
service and support capabilities necessary to satisfy customer requirements.
The Company currently has limited marketing experience and limited marketing,
service, customer support and other resources. There can be no assurance that
the Company will be able to successfully expand its marketing activities or
customer service or support capabilities, or that the Company's efforts will
result in initial or continued market acceptance for the Company's Internet
access services. See "Business -- Marketing and Sales."

7
<PAGE>

Subscriber Attrition. The Company's operating results will be
significantly affected by subscriber attrition rates. Subscribers may
discontinue service without penalty at any time, and there can be no assurance
that subscribers will continue to purchase services from the Company or that
the Company will not be subject to significant subscriber attrition. The
Company has historically experienced a subscriber attrition rate of less than
20%. Significant levels of subscriber attrition in the future would have a
material adverse effect on the Company's operating results. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Competition. The market for Internet access services is highly
competitive. There are no substantial barriers to entry, and the Company
expects that competition will intensify in the future. The Company believes
that its ability to compete successfully will be significantly affected by
numerous factors, including price, ease of use, reliability, customer support,
geographic coverage and industry and general economic trends (particularly
unfavorable economic conditions adversely affecting consumer discretionary
spending). The Company's competitors include many large companies that have
substantially greater market presence and financial, technical, marketing and
other resources than the Company, including (i) international, national and
regional commercial Internet service providers, such as Performance Systems
International, Inc., Bolt Beranek & Newman, Inc. and UUNET Technologies, Inc.;
(ii) established on-line services companies that currently offer Internet
access, such as America Online, Inc., CompuServe Incorporated, Prodigy Services
Company, Earthlink and Delphi Internet Services; (iii) computer hardware and
software and other technology companies, such as IBM and Microsoft Corp.; (iv)
national long distance carriers, such as AT&T Corp., MCI Communications Corp.
and Sprint Corp.; (v) regional telephone companies; and (vi) cable operators,
such as Tele-Communications, Inc. New competitors, including large computer
hardware and software, media, cable and telecommunications companies, have
increased their focus on the Internet access market. Increased competition has
resulted and could continue to result in significant price competition, which
in turn could result in significant price reductions. In addition, increased
competition for new subscribers could result in increased sales and marketing
expenses and related subscriber acquisition costs, which could materially
adversely affect the Company's potential profitability. There can be no
assurance that the Company will be able to offset the effects of any such
competition or resulting price reductions through an increase in the number of
its subscribers, higher revenue from enhanced services or cost reductions or
that the Company will have the financial resources, technical expertise or
marketing and support capabilities to compete successfully. See "Business --
Competition."

Capacity Constraints; System Failure and Security Risks. The Company's
operations will depend upon the capacity, reliability and security of its
network infrastructure. The Company currently has limited network capacity and
will be required to continually expand its network infrastructure to
accommodate significant numbers of users and increasing amounts of information
they may wish to access. Expansion of the Company's network infrastructure will
require significant financial, operational and management resources. There can
be no assurance that the Company will be able to expand its network
infrastructure to meet potential demand on a timely basis, at a commercially
reasonable cost, or at all. Failure by the Company to expand its network
infrastructure on a timely basis would have a material adverse effect on the
Company. The Company's operations will also be dependent on the Company's
ability to protect its computer equipment against damage from fire, power loss,
telecommunications failures and similar events. The Company's network
infrastructure will be vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering with the Company's computer systems.
Computer viruses or problems caused by third parties could lead to material
interruptions, delays or cessation in service to consumers. Inappropriate use
of the Internet by third parties could also potentially jeopardize the security
of confidential information stored in the computer systems of consumers.
Security and privacy concerns of consumers may limit the Company's ability to
develop a significant subscriber base. See "Business -- Network
Infrastructure."

Rapid Technological Change. The market for Internet access is
characterized by rapidly changing technology, evolving industry standards,
emerging competition and frequent new software and service introductions. There
can be no assurance that the Company can successfully identify new product and
service opportunities as they arise and develop and bring new products and
services to market in a timely manner or that software, services or
technologies developed by others will not render the Company's services or
technologies noncompetitive, obsolete or less marketable. The Company currently
does not have any proprietary applications software. The Company's business is
also subject to fundamental changes in the way Internet access services are
delivered. Currently, Internet services are accessed primarily by computers and
are delivered by telephone lines. To

8
<PAGE>

the extent that the Internet becomes increasingly accessible by screen-based
telephones, television or other consumer electronic devices or customer
requirements change the way Internet access is provided, the Company may be
required to acquire or develop new technology or modify its existing technology
to accommodate these developments. Technological advances include compression,
full-motion video, and integration of video, voice, data and graphics. The
pursuit of these technological advances may require substantial time and
expense, and there can be no assurance that the Company will succeed in
adapting its Internet service business to alternate access devices and
conduits. See "Business -- Network Infrastructure."

Risks Associated with Expansion and Acquisitions. The Company intends to
use the proceeds of this offering to expand its operations through internal
growth and acquisition. The Company plans to establish additional POPs, attract
significant numbers of additional subscribers, expand its work force and expand
its presence in selected geographic markets. To successfully manage growth, the
Company will be required to continue to implement and improve its operating
systems, train and manage its employees, monitor operations, control costs and
maintain effective quality controls. The Company has limited experience in
effectuating rapid expansion and in managing operations which are
geographically dispersed, and there can be no assurance that the Company will
be able to successfully expand its operations or manage growth. The Company
intends to pursue opportunities by making selective acquisitions of subscriber
bases. While the Company from time to time evaluates possible acquisition
opportunities, as of the date of this Prospectus, the Company has no plans,
agreements, commitments, understandings or arrangements with respect to any
such acquisition. There can be no assurance that the Company will ultimately
effect any acquisition, that it will be able to successfully integrate into its
operations any subscriber base which it may acquire or that the Company will
not incur significant amortization expense associated with attrition of newly
acquired subscriber bases.

The Company may determine, depending upon the opportunities available to
it, to seek additional debt or equity financing to fund the cost of acquiring
subscriber bases. To the extent that the Company finances an acquisition with
equity securities, any such issuance of equity securities would result in
dilution to the interests of the Company's stockholders. Additionally, to the
extent that the Company incurs indebtedness or issues debt securities in
connection with any acquisition, the Company will be subject to risks
associated with incurring substantial indebtedness, including the risks that
interest rates may fluctuate and cash flow may be insufficient to pay principal
and interest on any such indebtedness. See "Use of Proceeds" and "Business --
Company Strategy."

Broad Discretion in Application of Proceeds; Benefits to Related
Parties. Approximately $687,200 (13.3%) of the estimated net proceeds of this
offering has been allocated to working capital and general corporate purposes.
Accordingly, the Company's management will have broad discretion as to the
application of such proceeds. The Company also intends to use an aggregate of
$435,000 (8.4%) of the net proceeds of this offering to (i) repay $175,000 of
indebtedness owed to Michael Char, a former officer and director of the Company
and (ii) effect the Stock Repurchase, pursuant to which the Company will
repurchase 231,520 shares of Common Stock from Mr. Char for $260,000. The
Company also intends to use $20,000, $20,000, $40,000, $30,000 and $85,000,
respectively, of the net proceeds of this offering to repay outstanding
principal amounts of indebtedness to Messrs. Cole-Hatchard and Feinberg, Mr.
Cole-Hatchard's mother, Provident Bank on behalf of Cole-Hatchard, and The
Rough Group, a partnership of which Ronald C. Signore, a director of the
Company, is a general partner. Additionally, a portion of the proceeds of this
offering allocated to working capital may be used to pay the salaries of
executive officers (which is anticipated to be approximately $225,000 (or 4.4%
of the net proceeds) during the twelve months following this offering) to the
extent operating cash flow is insufficient for such purpose. See "Use of
Proceeds" and "Certain Transactions."

Government Regulation; Potential Liability for Content. Recently enacted
federal, state and local legislation aimed at limiting the use of the Internet
to transmit certain content and materials could result in significant potential
liability to Internet service providers. These types of legislative actions
present the potential for increased focus and attempts to impose liability upon
Internet access providers for information disseminated through their systems.
The adoption or strict enforcement of any such laws or regulations may limit
the growth of the Internet, which could in turn decrease the demand for the
Company's services and increase the Company's cost of doing business. Inasmuch
as the applicability to the Internet of the existing laws governing issues such
as property ownership, libel and personal privacy is uncertain, any such new
legislation or regulation or the

9
<PAGE>

application of existing laws and regulations to the Internet could have an
adverse effect on the Company's business and prospects. Changes in the
regulatory environment relating to the Internet connectivity industry,
including regulatory changes which directly or indirectly affect
telecommunication costs or increase the likelihood or scope of competition from
local and regional telephone companies or others, could also have an adverse
effect on the Company's business and prospects. See "Business."

Lack of Intellectual Property Protection. The Company relies on a
combination of copyright and trademark laws, trade secrets, software security
measures, license agreements and nondisclosure agreements to protect its
proprietary information. The Company currently has no registered copyrights or
patents or patent applications pending. It may be possible for unauthorized
third parties to copy aspects of, or otherwise obtain and use, the Company's
proprietary information without authorization. In addition, there can be no
assurance that any confidentiality agreements between the Company and its
employees or any license agreements with its customers will provide meaningful
protection for the Company's proprietary information in the event of any
unauthorized use or disclosure of such proprietary information. See "Business."

Dependence on Key Personnel; Limited Management; Need for Qualified
Management and Other Personnel. The success of the Company will be dependent on
the personal efforts of Nicko Feinberg, Chief Information Officer and Vice
President of Technology, Stephen J. Cole-Hatchard, Chairman, Chief Executive
Officer and President, and other key personnel. Although the Company has
entered into employment agreements with each of Messrs. Feinberg and
Cole-Hatchard, as well as Mr. Michael Olbermann, Chief Operating Officer, the
loss of the services of such individuals could have a material adverse effect
on the Company's business and prospects. The Company intends to obtain
"key-man" insurance on the life of each of Messrs. Feinberg and Cole-Hatchard
in the amount of $1,000,000. Mr. Cole-Hatchard will devote no less than forty
hours a week to the Company. Mr. Cole-Hatchard is also employed as a detective,
and the Company has only five employees in addition to its executive officers.
The success of the Company is largely dependent upon its ability to hire and
retain additional qualified management, marketing, technical, financial and
other personnel including a Chief Financial Officer. Competition for qualified
personnel is intense, and there can be no assurance that the Company will be
able to hire or retain additional qualified personnel. Any inability to attract
and retain qualified management and other personnel will have a material
adverse effect on the Company. See "Business -- Employees" and "Management."

Control by Current Stockholders. Upon consummation of this offering, the
Company's current stockholders will beneficially own, in the aggregate,
approximately 42.4% of the outstanding shares of Common Stock (assuming no
exercise of the Warrants). Accordingly, such persons, acting together, will be
in a position to control the Company, elect all of the Company's directors,
cause an increase in the authorized capital or the dissolution, merger or sale
of the assets of the Company, and generally to direct the affairs of the
Company. See "Management" and "Principal Stockholders."

No Dividends. To date, the Company has not paid any cash dividends on its
Common Stock and does not expect to declare or pay dividends on the Common
Stock in the foreseeable future. See "Description of Securities -- Dividend
Policy."

Limitation on Liability. The Company's Certificate of Incorporation
includes provisions to limit, to the full extent permitted by Delaware Law, the
personal liability of directors of the Company for monetary damages arising
from a breach of their fiduciary duties as directors. As a result of such
provisions in the Certificate of Incorporation, stockholders may be unable to
recover damages against the directors of the Company for actions taken by them
which constitute negligence, gross negligence or a violation of certain of
their fiduciary duties, which may reduce the likelihood of stockholders
instituting derivative litigation against directors and may discourage or deter
stockholders from suing directors for breaches of their duty of care, even
though such an action, if successful, might otherwise benefit the Company and
its stockholders. See "Management -- Indemnification of Directors and
Officers."

Immediate and Substantial Dilution. This offering involves an immediate
and substantial dilution of $2.40 per share (60.0%) between the net tangible
book value per share after the offering and the initial public offering price
per share. See "Dilution."

Shares Eligible for Future Sale. Upon consummation of this offering, the
Company will have 2,776,480 shares of Common Stock outstanding (assuming no
exercise of the Warrants or outstanding options), of which

10
<PAGE>

the 1,600,000 shares of Common Stock offered hereby will be freely tradable
without restriction or further registration under the Securities Act of 1933,
as amended (the "Securities Act"). All of the remaining 1,176,480 shares of
Common Stock outstanding are "restricted securities," as that term is defined
under Rule 144 promulgated under the Securities Act and will become eligible
for sale, pursuant to Rule 144, on various dates commencing 90 days from the
date of this Prospectus, subject to the contractual restrictions described
below. The holders of all of such shares, other than 160,000 shares issued in
connection with a private placement in May 1997, have agreed not to sell such
shares for a period of at least twelve months from the date of this Prospectus
without the Representative's prior written consent. The holders of 160,000
shares issued in the private placement have agreed not to sell such shares for
a period of six months from the date of this Prospectus. Messrs. Feinberg,
Olbermann, Cole-Hatchard and Char, who hold an aggregate of 624,480 shares of
Common Stock, have agreed not to sell or otherwise dispose of any securities of
the Company beneficially owned by them until the Company achieves $1.9 million
in pre-tax earnings, but in no event sooner than two years from the date of
this Prospectus. The Company has granted certain demand and "piggy-back"
registration rights to the Representative with respect to the securities
issuable upon exercise of the Representative's Warrants. No prediction can be
made as to the effect, if any, that sales of shares of Common Stock or even the
availability of such shares for sale will have on the market prices prevailing
from time to time. The possibility that substantial amounts of Common Stock may
be sold in the public market may adversely affect the prevailing market price
for the Common Stock and could impair the Company's ability to raise capital
through the sale of its equity securities. See "Shares Eligible for Future
Sale" and "Underwriting."

Contractual Obligations to the Representative. The Company will have
certain ongoing contractual obligtions to the Representative following the
consummation of this offering. The Company has agreed to use its best efforts
to elect a designee of the Representative as a non-voting adviser to the
Company's Board of Directors, if requested to do so by the Representative, for
a period of three years from the date of this Prospectus; and subject to
certain limitations and exclusions, to register, at the Company's expense, the
Representative's Warrants and the 320,000 shares of Common Stock underlying
such warrants under the Securities Act on one occasion during their exercise
term and to include such securities in any appropriate registration statement
which is filed by the Company during the seven years following the date of this
Prospectus. In addition, the Company will pay the Representative a consulting
fee upon the consummation of this offering and a 5% Warrant solicitation fee.
See "Underwriting."

Authorized Preferred Stock. The Company's Certificate of Incorporation
authorizes the Company's Board of Directors to issue 1,000,000 shares of "blank
check" Preferred Stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares, without further
stockholder approval. The rights of the holders of Common Stock will be subject
to and may be adversely affected by the rights of holders of any Preferred
Stock that may be issued in the future. The ability to issue Preferred Stock
without stockholder approval could have the effect of making it more difficult
for a third party to acquire a majority of the voting stock of the Company,
thereby delaying, deferring or preventing a change in control of the Company.
See "Description of Securities."

No Assurance of Public Market; Arbitrary Offering Price; Possible
Volatility of Market Price of Common Stock and Warrants; Representative's
Potential Influence on the Market. Prior to this offering, there has been no
public trading market for the Common Stock or Warrants. There can be no
assurance that a regular trading market for the Common Stock or Warrants will
develop after this offering or that, if developed, it will be sustained.
Moreover, the initial public offering prices of the Common Stock and the
Warrants and the exercise price of the Warrants have been determined by
negotiations between the Company and the Representative and, as such, are
arbitrary in that they do not necessarily bear any relationship to the assets,
book value or potential earnings of the Company or any other recognized
criteria of value and may not be indicative of the prices that may prevail in
the public market. The market prices of the Company's securities following this
offering may be highly volatile. Factors such as the Company's operating
results and announcements by the Company or its competitors may have a
significant impact on the market price of the Company's securities. In
addition, in recent years, the stock market has experienced a high level of
price and volume volatility and market prices for the stock of many companies
have experienced wide price fluctuations which have not necessarily been
related to the operating performance of such companies. Although it has no
obligation to do so, the Representative intends to make a market in the Common
Stock and Warrants and may otherwise effect transactions in the Common

11
<PAGE>

Stock and Warrants. If the Representative makes a market in the Common Stock or
Warrants, such activities may exert a dominating influence on the market and
such activity may be discontinued at any time. The prices and liquidity of the
Common Stock and Warrants may be significantly affected to the extent, if any,
that the Representative participates in such market. See "Underwriting."

Possible Delisting of Securities from Nasdaq System; Risks Relating to
Penny Stocks. It is currently anticipated that the Company's Common Stock and
Warrants will be eligible for listing on the Nasdaq SmallCap Market upon the
completion of this offering based upon the Company having at least $4,000,000
in net tangible assets after giving effect to the receipt of the proceeds of
this offering. In order to continue to be listed on Nasdaq, however, the
Company must maintain $2,000,000 in net tangible assets, a $1,000,000 market
value of the public float and have two market makers and a minimum bid price of
$1.00 per share. Although the Company believes that it will be able to satisfy
these maintenance criteria, failure to do so in the future may result in the
delisting of the Company's securities from Nasdaq, and trading, if any, in the
Company's securities would thereafter be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, an investor could find
it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Company's securities. In addition, if the Common Stock
were to become delisted from trading on Nasdaq and the trading price of the
Common Stock were to fall below $5.00 per share on the date the Company's
securities were delisted, trading in such securities would also be subject to
the requirements of certain rules promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which require additional disclosure
by broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules
require the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated therewith,
and impose various sales practice requirements on broker-dealers who sell penny
stocks to persons other than established customers and accredited investors
(generally institutions). For these types of transactions, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in the Company's
securities, which could severely limit the market price and liquidity of such
securities and the ability of purchasers in this offering to sell their
securities of the Company in the secondary market.

Potential Adverse Effect of Warrant Redemption. The Warrants are subject
to redemption by the Company at any time commencing on , 1999, upon notice
of not less than 30 days, at a price of $.10 per Warrant, provided that the
closing bid quotation of the Common Stock on all 20 trading days ending on the
third day prior to the day on which the Company gives notice has been at least
150% (currently $7.20, subject to adjustment) of the then effective exercise
price of the Warrants and the Company obtains the written consent of the
Representative to such redemption prior to the Call Date. Redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for the holders to do so, to
sell the Warrants at the then current market price when they might otherwise
wish to hold the Warrants, or to accept the redemption price, which is likely
to be substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities -- Redeemable Warrants."

Possible Inability to Exercise Warrants. The Company intends to qualify
the sale of the securities offered hereby in a limited number of states.
Although certain exemptions in the securities laws of certain states might
permit the Warrants to be transferred to purchasers in states other that those
in which the Warrants were initially qualified, the Company will be prevented
from issuing Common Stock in such states upon the exercise of the Warrants
unless an exemption from qualification is available or unless the issuance of
Common Stock upon exercise of the Warrants is qualified. The Company may decide
not to seek or may not be able to obtain qualification of the issuance of such
Common Stock in all of the states in which the ultimate purchasers of the
Warrants reside. In such a case, the Warrants held by purchasers will expire
and have no value if such Warrants cannot be sold. Accordingly, the market for
the Warrants may be limited because of these restrictions. Further, a current
prospectus covering the Common Stock issuable upon exercise of the Warrants
must be in effect before the Company may accept Warrant exercises. There can be
no assurance the Company will be able to have a prospectus in effect when this
Prospectus is no longer current, notwithstanding the Company's commitment to
use its best efforts to do so. See "Description of Securities -- Redeemable
Warrants."

Unrelated Bankruptcy. Nicko Feinberg, Chief Information Officer and
director of the Company, owned and operated Creative Images, Inc., which filed
for protection under Chapter 7 of the United States Bankruptcy Code in 1991.
See "Management."

12
<PAGE>

Possible Recission of Private Placement. Because the Company's December
1997 private placement of $150,000 principal amount of promissory notes and
warrants to purchase 300,000 shares of Common Stock was conducted after the
Company filed the registration statement of which this Prospectus is a
part, it is possible that the private placement may be integrated with this
offering. If the two offerings were integrated, the purchasers of
securities in the private placement would have a claim for recission of
their investment. The Company does not believe that the two offerings
should be integrated or that the private placement investors would have a
claim for recission. However, if a claim for recission were upheld, the
Company does not believe it would have an adverse impact on the Company,
since the Company is repaying the entire principal amount of the promissory
notes upon the consummation of this offering. As a result, a successful
claim for recission would have no impact on the Company's financial
condition that has not already been contemplated by the terms of this
offering. See "Use of Proceeds", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Certain Transactions."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the securities offered
hereby are estimated to be $5,157,200 ($6,013,280 if the Underwriter's
over-allotment option is exercised in full). The Company expects to use the net
proceeds during the twelve months following this offering approximately as
follows:

<TABLE>
<CAPTION>
Approximate
Approximate Percentage of
Application of Proceeds Dollar Amount Dollar Amount
- ----------------------------------------------------------- --------------- --------------
<S> <C> <C>
Establishment of additional POPs(1) ....................... 2,200,000 42.3%
Acquisition of subscriber bases(2) ........................ $1,100,000 19.4
Marketing and advertising(3) .............................. 550,000 10.7
Repayment of indebtedness(4) .............................. 460,000 8.9
Stock Repurchase(5) ....................................... 260,000 5.0
Working capital and general corporate purposes(6) ......... 687,200 13.3
---------- -----
Total ......................................... ......... $5,157,200 100.0%
========== =====
</TABLE>

- ------------
(1) Represents anticipated costs associated with the establishment of up to
twenty-four additional POPs, including the cost of equipment, telephone
lines and initial rent, the cost of adding subscriber capacity to existing
POPs and salaries for up to ten additional technical and support
personnel. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Plan of Operation."

(2) Represents anticipated costs to acquire subscriber bases. As of the date of
this Prospectus, the Company has no plans, agreements, commitments,
understandings or arrangements with respect to any such acquisition. See
"Business -- Company Strategy."

(3) Includes costs associated with advertising in local newspapers and trade
publications, fees for independent marketing consultants and the salaries
for up to three marketing and sales personnel. See "Business -- Marketing
and Sales."

(4) Represents amounts to be used for the repayment of (i) $150,000 principal
amount of promissory notes issued in December 1997 together with interest
at the rate of 9% per annum due on the earlier of the consummation of this
offering or December 22, 1999; (ii) $20,000 payable to each of Messrs.
Cole-Hatchard and Feinberg, bearing interest at the rate of 8% per annum;
(iii) $95,000 together with accrued interest at the rate of 9% per annum
payable to Provident Savings Bank; and (iv) $175,000 payable to Mr. Char.
The Company used the proceeds of borrowings for working capital purposes.
See "Certain Transactions."

(5) Gives effect to the Stock Repurchase. See "Certain Transactions."

13
<PAGE>

(6) Working capital may be used, among other things, to pay salaries of the
Company's executive officers (which is anticipated to be approximately
$225,000 during the twelve months following the offering), rent, trade
payables, professional fees and other operating expenses.

If the Underwriter exercises its over-allotment option in full, the
Company will realize additional net proceeds of $856,080, which will be added
to the Company's working capital.

Based on currently proposed plans and assumptions relating to the
implementation of its business plans, the Company believes that the proceeds of
this offering will be sufficient to satisfy its contemplated cash requirements
for at least twelve months following the consummation of this offering. In the
event that the Company's plans change, its assumptions change or prove to be
inaccurate or if the proceeds of this offering otherwise prove to be
insufficient to implement its business plans, the Company may find it necessary
or desirable to reallocate a portion of the proceeds within the above described
categories, use proceeds for other purposes, seek additional financing or
curtail its operations. There can be no assurance that any additional financing
will be available to the Company on acceptable terms, or at all.

Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest
bearing investments.

DILUTION

The difference between the initial public offering price per share of
Common Stock and the net tangible book value per share after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share of Common Stock is determined by dividing the net tangible book value
of the Company (total tangible assets less total liabilities) by the number of
shares of Common Stock outstanding.

As of December 31, 1997, the Company had a negative net tangible book
value of ($676,019) or ($.48) per share of Common Stock. After giving effect to
(i) the Stock Repurchase and (ii) the sale of the securities offered hereby
(less underwriting discounts and commissions and estimated expenses of this
offering), the pro forma net tangible book value of the Company as of December
31, 1997 would have been $4,452,252 or $1.60 per share, representing an
immediate increase in net tangible book value of $2.08 per share of Common
Stock to existing stockholders and an immediate dilution of $2.40 per share
(60.0%) to new investors. The following table illustrates this dilution to new
investors on a per share basis:

<TABLE>
<S> <C> <C>
Initial public offering price ..................................... $ 4.00
Net tangible book value before offering ..................... $ .48)
Increase attributable to investors in this offering ......... 2.08
------
Net tangible book value after offering ............................ 1.60
------
Dilution to new investors ......................................... $ 2.40
======
</TABLE>

The following table sets forth, with respect to existing stockholders and
new investors in this offering, a comparison of the number of shares of Common
Stock issued by the Company, the percentage of ownership of such shares, the
total cash consideration, the percentage of total cash consideration paid and
the average price per share.

Shares Purchased Total Cash Consideration Average
----------------------- ------------------------- Price
Number Percent Amount Percent Per Share
----------- --------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Existing stockholders ......... 1,176,480 42.4% $ 415,600 6.1% $ .35
New Investors ................. 1,600,000 57.6 $6,400,000 93.9 4.00
--------- ----- ---------- -----
Total ............. ......... 2,776,480 100.0% $6,815,600 100.0%
========= ===== ========== =====
</TABLE>

The above tables assume no exercise of the Underwriter's over-allotment
option. If such option is exercised in full, the new investors will have paid
$7,360,000 for 1,840,000 shares of Common Stock, representing approximately
94.7% of the total consideration for 61.0% of the total number of shares of
Common Stock outstanding.

14
<PAGE>

The above tables assume no exercise of outstanding stock options or
warrants. As of the date of this Prospectus, there are outstanding stock
options to purchase an aggregate of 165,600 shares of Common Stock at an
exercise price of $2.00 per share. To the extent that stock options are
exercised, there will be further dilution to new investors. See "Management --
1997 Stock Option Plan," "Description of Securities" and "Underwriting."

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1997, on an actual basis, and as adjusted to give effect to (i)
the Stock Repurchase and (ii) the sale of the securities offered hereby and the
anticipated application of the estimated net proceeds therefrom:

<TABLE>
<CAPTION>
December 1997
---------------------------------
Actual As Adjusted
--------------- ---------------
<S> <C> <C>
Long-term debt ........................................... $ 547,589 $ 182,589
------------ ------------
Stockholders' equity (deficit):
Preferred Stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding ......... $ -- $ --
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,408,000 shares outstanding, 2,776,480
as adjusted(1) ....................................... 14,080 27,765
Additional paid-in-capital ............................ 1,646,520 6,790,035
Stock subscriptions receivable ........................ (6,000) (6,000)
Accumulated deficit ................................... (2,099,548) (2,099,548)
Treasury Stock ........................................ -- (260,000)
------------ ------------
Total stockholders' equity (deficit) ..................... (444,948) 4,452,252
------------ ------------
Total capitalization ..................................... $ 102,641 $ 4,634,841
============ ============
</TABLE>

(1) Does not include (i) 1,600,000 shares of Common Stock reserved for issuance
upon exercise of the Warrants; (ii) an aggregate of 320,000 shares of
Common Stock reserved for issuance upon exercise of the Underwriter's
Warrants and the warrants included therein; (iii) 165,600 shares of Common
Stock reserved for issuance upon exercise of outstanding options under the
Plan; (iv) 334,400 shares of Common Stock reserved for issuance upon
exercise of options available for future grant under the Plan; and (v)
300,000 shares of Common Stock reserved for issuance upon the exercise of
warrants issued in December 1997. See "Management -- 1997 Stock Option
Plan," and "Underwriting."

15
<PAGE>

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

Overview

The Company was organized in February 1997 as successor to the business of
the Predecessor Companies and is in an early stage of development. The
Company's financial statements include the accounts of the Company and the
Predecessor Companies.

The Company's revenues are derived primarily from providing Internet
access services to individuals and to a lesser extent to business subscribers.
Revenues are comprised principally of recurring revenues from the Company's
customer base, non-recurring start-up fees for X2 56K and leased line
connections and from various ancillary services. The Company charges
subscription fees which are billed monthly or quarterly, in advance, typically
pursuant to pre-authorized credit card accounts. For the year ended December
31, 1997, sales to individuals accounted for approximately 80.0% of the
Company's revenues.

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

The Company has not yet generated any meaningful revenues, and will not
generate any meaningful revenues until after the Company establishes additional
POPs and attracts and retains a significant number of subscribers, which the
Company does not anticipate will occur until several months following the
consummation of this offering, if at all. For the period from May 1, 1995
(inception) to December 31, 1997, the Company incurred a cumulative net loss of
approximately $2,099,548 (after giving effect to non-cash compensation expense
of $1,537,000). Since December 31, 1997, the Company has incurred losses and
anticipates that it will continue to incur significant losses until, at the
earliest, the Company generates sufficient revenues to offset the substantial
up-front expenditures and operating costs associated with establishing
additional POPs and attracting and retaining a significant subscriber base. The
Company currently estimates, based on its projected expenses, including the
payment of executive and additional management salaries, that it should achieve
profitability with approximately 10,000 subscribers at its existing POPs. There
can be no assurance that the Company will be able to attract and retain a
sufficient number of subscribers to generate meaningful revenues or achieve
profitable operations.

The Company's operating results will be significantly affected by
subscriber attrition rates. Subscribers may discontinue service without penalty
at any time, and there can be no assurance that subscribers will continue to
purchase services from the Company or that the Company will not be subject to
significant subscriber attrition. The Company has historically experienced a
subscriber attrition rate of less than 20%. Significant levels of subscriber
attrition in the future would have a material adverse effect on the Company's
operating results.

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

Plan of Operation

The Company's proposed plan of operation and prospects will be largely
dependent upon the Company's ability to successfully establish and equip
additional POPs on a timely and cost effective basis; hire and retain skilled
management, technical, marketing and other personnel; and attract and retain
significant numbers of subscribers.

The Company's telecommunications network is currently comprised of leased
high-speed data lines and ten POPs. Pursuant to its currently proposed plan of
operation, the Company will seek to establish up to twenty-four additional POPs
during the twelve months following the consummation of this offering. The
number of POPs

16
<PAGE>

will be dependent upon, among other things, market acceptance and demand in
target geographic markets and the technical effectiveness of alternative
delivery technologies. Certain new network services known as "display virtual
private networks" may permit the Company to establish a presence in particular
geographic markets without establishing additional POPs by permitting the
Company to connect its existing POPs to such networks. See "Business--Network
Infrastructure."

The Company anticipates that the average cost to acquire and install
equipment (consisting of a router, access server and communications hub) and
telephone lines in each POP will be approximately $13,000. The Company expects
to expand the capacity of its network through POP expansion at existing
locations. The Company's POPs, as initially configured, accommodate up to
approximately 160 subscribers. The Company expects that the average cost to
upgrade a POP to accommodate each additional 160 subscribers will be
approximately $8,500. The Company's existing network configuration has capacity
for up to approximately 3,000 subscribers.

The Company currently has five employees in addition to its executive
officers. The Company has entered into employment agreements with its executive
officers which provide for the payment of salaries in the aggregate amount of
$225,000 on an annual basis. Such salary expense could negatively affect future
operating results, and to the extent that the Company uses a portion of the
proceeds of this offering to pay such salaries, the Company will have less
resources available to it for other purposes. Depending upon the level of its
business activity, the Company anticipates that it will use a portion of the
proceeds of this offering to hire up to three additional employees over the
next twelve months to market the Company's access services to potential
subscribers. The Company also intends to hire up to ten additional technical
and support personnel during the twelve months following the offering. The
Company believes that it will be able to hire and retain additional personnel
to meet an expanding customer base.

Results of Operations

The Company commenced operations in late 1995 and established four POPs
during 1996. The Company had approximately 700 subscribers at December 31,
1996. Revenues for the year ended December 31, 1997 were $321,706, compared to
$98,699 for the prior comparable period. The increase was primarily
attributable to "dial-up" customer growth at the Company's Nyack and Goshen,
New York POPs. At December 31, 1997 and December 31, 1996, the Company had ten
and four POPs, respectively. The Company had approximately 1,400 and 700
subscribers, respectively, at December 31, 1997 and 1996. For the year ended
December 31, 1997, the Company's Nyack and Goshen, New York POPs accounted for
approximately 49.0% of the Company's revenues. Six POPs were established in
1997. Such POPs have not yet contributed significantly to revenue growth.

Cost of revenues for 1996 were $67,582, or approximately 68.5% of
revenues, approximately $42,000 of which related to communications expense for
the installation of customer dial-up lines and high speed T-1 line access to
the Internet. Cost of revenues for 1997 were $251,928, or approximately 78.3%
of revenues. The increase in cost of revenues was due to communications
expense, depreciation and personnel costs for maintaining equipment and were
directly related to volume increases in revenue. The Company expects these
costs to increase in absolute dollars as additional POPs are established.

Operating expenses for 1996 were $81,220, or 82.3% of revenues,
approximately $40,400 of which related to advertising and payroll. Operating
expenses for 1997 were $2,077,883, including a non-cash charge of $1,537,000,
and advertising and payroll expenses of $305,000. The non-cash charge consisted
of (i) $1,230,000 incurred in connection with the issuance of 820,000 shares of
Common Stock (valued at a $1.50 per share) to employees of the Company in
February 1997; (ii) $280,000 incured in connection with the issuance of 100,000
shares of Common Stock (valued at $2.00 per share) and options to purchase
80,000 shares of Common Stock (valued at $1.00 per share) to a director of the
Company in December 1997; and (iii) $27,000 incurred in connection with the
issuance of options to purchase 56,000 shares (valued at $.48 per share) to
consultants. The increase in operating expenses was attributable to payroll,
rent and professional fees. Payroll increases were directly related to volume
increases in revenues. Rent increases were attributable to the addition of new
POPs and the establishment of larger administrative space. Management
anticipates future increases in operating expenses for advertising, rent,
payroll, depreciation and professional fees.

17
<PAGE>

Included in operating expenses in 1996 and 1997 were $3,000 and $6,000
respectively, which were recorded as capital contributions. These expenses
related to administrative services performed by Michael Char, a former officer
and director of the Company. The value of these services was determined based
on estimated hours worked and an hourly rate consistent with the services
performed, and considering the amounts paid in cash to Mr. Feinberg during 1996
and 1997. The amount of salary expensed in 1996 and 1997 related to Mr. Char
was $15,233, and $15,378, respectively. During these periods, Mr. Char's
principal responsibilities were administrative and recordkeeping functions.

Interest expense for the year ended December, 1997 was $28,421 or 8.8% of
revenues, as compared to $6,677, or 6.7% of revenues for the prior year.
Interest expense relates primarily to financing the purchase of computer
hardware for the year.

For the years ended December 31, 1996 and 1997, the Company incurred net
losses of $54,206 and $2,037,417, respectively.

Liquidity and Capital Resources

The Company's primary capital requirements have been and will continue to
be to fund the purchase and installation of network equipment at its POPs, as
well as for working capital, including the salaries of executive and other
personnel. To date, the Company has financed its capital requirements through
the issuance of debt and equity securities. At December 31, 1997, the Company
had a working capital deficit of $423,369.

In May 1997, the Company consummated a private placement pursuant to which
it issued 200,000 shares of Common Stock and received proceeds of $400,000. The
proceeds were used primarily for the purchase of network equipment, salaries
and expenses in connection with this offering. See "Certain Transactions."

In May 1997, the Company effected the Reorganization, pursuant to which it
issued promissory notes in the amounts of $141,800, $163,537 and $66,800,
respectively, to Messrs. Feinberg, Char and Cole-Hatchard. Included in such
indebtedness is $21,737 and $35,000, respectively, of advances made to the
Company by Messrs. Char and Cole-Hatchard to establish additional POPs. The
promissory notes were issued to Messrs. Feinberg, Char and Cole-Hatchard in
partial consideration of their effort in founding the Predecessor Companies.
See "Certain Transactions."

In March 1998, the Company entered into a settlement agreement with Mr.
Char pursuant to which Mr. Char agreed to discontinue a lawsuit and release the
Company from all claims (including for monies owed) in consideration of (i) an
up-front payment of $65,000 and (ii) a payment of $435,000 on the consummation
of this offering to satisfy an aggregate of $240,000 of existing obligations
due to Mr. Char (including $15,000 of legal fees), which will be expensed, and
to effect the Stock Repurchase, pursuant to which the Company will repurchase
231,520 shares from Mr. Char for $260,000, which will be recorded as a charge
to stockholders' equity. The Company also agreed to repay $20,000 of
indebtedness to each of Messrs. Cole-Hatchard and Feinberg upon the
consummation of this offering. The balance of the indebtedness owed to Messrs.
Cole-Hatchard and Feinberg bears interest at the rate of 8% per annum and is
repayable at such time as the Company achieves $1.9 million in pre-tax
earnings, but in no event sooner than two years from the date of this
Prospectus. See "Certain Transactions."

In August 1997, the Company borrowed $60,000 from Mr. Cole-Hatchard
bearing interest at the rate of 9.25% per annum. The Company repaid $30,000 of
such indebtedness in December 1997. The balance will be repaid from proceeds of
the offering directly to Mr. Cole-Hatchard's lender, Provident Savings Bank.
See "Certain Transactions."

In December 1997, the Company consummated a private placement pursuant to
which it issued (i) $150,000 principal amount of promissory notes and (ii)
warrants to purchase 300,000 shares of Common Stock at an exercise price of
$5.00 per share. The notes bear interest at the rate of 9% per annum and are
payable on the earlier of the consummation of this offering or December 22,
1999. The Company intends to use a portion of the proceeds of this offering to
repay such indebtedness. See "Certain Transactions."

In March 1998, the Company borrowed an aggregate of $65,000 from Provident
Savings Bank. The loan bears interest at the rate of 9% per annum and is
repayable on the earlier of (i) the consummation of this offering or (ii) June
1998. The Company intends to use a portion of the proceeds of this offering to
repay such indebtedness, and an additional $30,000 to Provident Bank on behalf
of Mr. Cole-Hatchard. See "Certain Transactions."

18
<PAGE>

The capital requirements relating to implementation of the Company's
business plan will be significant. During the twelve months following the
consummation of this offering, the Company intends to purchase computer
equipment in connection with the establishment of additional POPs, upgrade its
existing POPs and hire additional technical and support personnel. Other than
as described above, as of the date of this Prospectus, the Company has no
material commitments for capital expenditures.

The Company's independent public accountants have included an explanatory
paragraph in their report on the Company's financial statements stating that
certain factors raise substantial doubt about the Company's ability to continue
as a going concern. This offering is an integral part of the Company's plan to
continue as a going concern. See Note 1 to Notes to Financial Statements.

The Company is dependent on the proceeds of this offering or other
financing in order to continue in business and to fully implement its proposed
plan of operation. Based on currently proposed plans and assumptions relating
to the implementation of its business plans (including the timetable of, and
costs associated with, establishing additional POPs), the Company believes that
the proceeds of this offering will be sufficient to satisfy its contemplated
cash requirements for at least twelve months following the consummation of this
offering. In the event that the Company's plans change, its assumptions change
or prove to be inaccurate or if the proceeds of this offering prove to be
insufficient to implement its business plans, the Company would be required to
seek additional financing sooner than currently anticipated. There can be no
assurance that the proceeds in this offering will be sufficient to permit the
Company to implement its proposed business plan or that any assumptions
relating to the implementation of such plan will prove to be accurate. To the
extent that the proceeds of this offering are not sufficient to enable the
Company to generate meaningful revenues or achieve profitable operations, the
inability to obtain additional financing will have a material adverse effect on
the Company. There can be no assurance that any such financing will be
available to the Company on commercially reasonable terms, or at all.

Recent Accounting Pronouncements

During June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income", which establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that all items that are required to
be recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.

During June, 1997, the Financial Accounting Standards Board issued SFAS
No. 131 "Disclosures about Segments of an Enterprise and Related Information",
which supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise" establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographical areas and major
customers. SFAS No. 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by Management in deciding how to allocate resources and in
assessing performance.

Both SFAS Nos. 130 and 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. The adoption of SFAS No. 130 is not expected
to have a material effect on the Company's financial position or results of
operations. The Company is currently reviewing the effect of SFAS No. 131 but
has yet been unable to fully evaluate the impact, if any, it may have on future
financial statement disclosures.

Year 2000

The Company utilizes software and related technologies throughout its
business that will be affected by the date change in year 2000. System
modifications or replacements are underway or planned which should make all
significant computer systems at the Company compliant with the year 2000
requirement. Anticipated spending for these modifications will be expensed as
incurred and are not expected to have a material impact on the Company's
ongoing results of operations.

19
<PAGE>

BUSINESS

The Company is an Internet service provider that offers "dial-up" Internet
access primarily to individual subscribers. The Company provides subscribers
with direct access to a wide range of Internet applications and resources,
including electronic mail, world wide web sites and regional and local
information and data services. The Company believes that its low subscriber to
modem ratio, its technical and customer support and ancillary services position
the Company to capitalize on the emerging and expanding markets for Internet
services.

The Company was incorporated under the laws of the State of Delaware in
February 1997 as successor to the business of the Predecessor Companies,
Hobbes, INET and Sara Girl, limited liability companies organized in May and
August 1995 and July 1996, respectively, to own and operate POPs. In May 1997,
the Company effected the Reorganization, pursuant to which: (i) each of the
Predecessor Companies transferred all of its assets, subject to all of its
liabilities, to the Company; (ii) the members of the Predecessor Companies
exchanged their interests in the Predecessor Companies for promissory notes;
and (iii) each of the Predecessor Companies was dissolved. At the time of the
Reorganization, the Predecessor Companies operated an aggregate of four POPs.
See "Certain Transactions."

Market Trends

o Continuing Penetration of Computers and Modems in the Home: An increasing
percentage of computer owners also own modems, which are now pre-installed
in a growing number of new computers. According to Software Publishers
Association, more than 33.9 million or 34% of households in the United
States owned a personal computer at the end of 1995, of which
approximately 70% also owned a modem. The Company believes that this
growth is accompanied by increasing use of computers for communications
such as facsimile transmissions and electronic mail.

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

o Increasing Availability of User-friendly Navigational Tools: Internet use
is also being promoted by the development of software tools that simplify
access to the Internet's applications and resources. As users become more
familiar with the Internet and the Internet increasingly becomes a medium
for entertainment and personal communication, the Company believes that
demand by individuals for competitively priced, direct, high speed access
to personal home pages, interactive multimedia games and entertainment
will continue to grow.

Company Strategy

The Company's objective is to expand its network of POPs rapidly in
selected geographic markets. The Company's strategy is to aggressively build
its subscriber base by:

Providing Internet Access to Individuals. The Company is primarily focused
on providing access services to individual subscribers, one of the fastest
growing segments of the Internet market. The Company seeks to establish
brand identity by offering high speed access service and highly responsive
customer support.

20
<PAGE>

The Company believes that its low subscriber to modem ratio helps prevent
busy signals which is attractive to subscribers. The Company also offers
Internet access to business and other commercial users, many of which often
require access to a dedicated Internet connection to maintain a competitive
position.

Offering Competitive Pricing. The Company has established a simple pricing
structure of charging subscribers a flat monthly fee of $19.95 for
unlimited access. The Company believes that this structure encourages usage
by eliminating subscribers' concern about incurring significant hourly
charges, which may increase subscriber retention rates. The Company
believes that its pricing structure will help attract new subscribers and
facilitate continued market penetration. The Company also intends to
implement alternative price plans, permitting subscribers and customers to
select hourly or other special billing features.

Continuing Network Expansion. The Company is aggressively expanding its
high speed, digital network. The Company believes that rapid expansion is
necessary to build its subscriber base and to promote regional brand name
recognition. The Company plans to augment the capacity of existing POPs to
satisfy increased subscriber demand. The Company currently supports 14.4,
28.8 and 36.6 Kbps modems at each of its POPs and has introduced X2 56K and
ISDN technologies into its network for dial-up accounts. The Company
continually evaluates alternative technologies, including satellite
television delivery systems and cable modems.

Targeting Suburban Markets. The Company intends to target suburban markets
with attractive demographic characteristics similar to the Company's
existing POPs. To achieve its goal, the Company will seek to cluster POPs
for operational efficiency and to share certain marketing, financial,
customer service and management personnel. By targeting suburban markets
which will initially be subject to less intensive competition than in large
metropolitan areas, the Company believes it will be able to reduce
competition from large Internet service providers. The Company will also
seek to capitalize a demand for Internet access by offering subscriber
service which combines the capabilities typically provided by large
companies with the flexibility and responsiveness of a small Internet
service provider.

Pursuing Selective Acquisitions. Consistent with its strategy, the Company
intends to pursue opportunities by making selective acquisitions of
subscriber bases which the Company believes will enhance its prospects and
maximize revenues. The Company believes that it operates in a highly
fragmented segment of the Internet connectivity industry and that selective
acquisitions will enhance penetration in new and existing markets.

The Company's strategy and future marketing plans are subject to change as
a result of a number of factors, including progress or delays in the Company's
expansion efforts, changes in market conditions, the nature of possible
acquisitions which may become available to it in the future and technological
and competitive factors. There can be no assurance that the Company will be
able to successfully implement its business strategy or otherwise successfully
expand its operations.

Internet Services

The Company provides a variety of competitively priced Internet access
services. The Company's primary focus is on individuals who connect to the
Internet via a modem (referred to as "dial-up" accounts). Dial-up subscribers
can access the Internet by calling the Company's local POPs. The Company bills
its subscribers on a monthly or quarterly basis, in advance, typically through
pre-authorized credit card accounts.

Dial-Up Accounts: The Company believes that dial-up accounts present an
attractive opportunity for growth. A user can quickly activate an account
with the Company, obtain two Internet E-mail addresses, web space and
establish automatic billing to the user's credit card. Subscriber accounts
are priced from $19.95 per month for unlimited connections and $48 per
month for an unlimited ISDN use account to $6.95 per month for limited use
customers. There is no connect fee, except for a $20 start-up fee for X2
56K connections. Connections for ISDN services require the customer to
obtain an ISDN line from the local telephone company. The Company's network
supports connectivity software which utilizes standard communication
protocols such as TCP/IP, which enable a user's computer to communicate
with other computers over the Internet. As of the date of this Prospectus,
the Company had 1,500 individual and 175 business accounts.

21
<PAGE>

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

Web Design and Hosting Services: Without incurring the expense of setting
up and maintaining a web server, including in-house technical support to
design and maintain a web site, a subscriber can rent space on a server for
an Internet presence. The Company offers web site hosting services for a
24-hour interactive presence on the Internet. The Company's web servers
connect directly to the Internet via high speed T-1 lines providing maximum
bandwidth. This service includes domain name registration, 24-hour access,
file upload and/or download capability, and statistical logs. The Company
also offers web page design and development services and will seek to
expand the scope of such services in the future.

Co-Location Space: The Company provides a physical location at its facility
for a customer to install equipment and connect directly to the Internet.
This service provides customers with a low cost direct connection to the
Company's router. The Company provides this service under maintenance
agreements with pricing determined by the amount of space occupied and
bandwidth needed.

Subscriber Applications

The Company provides its subscribers with access to the full range of
available Internet applications, including:

Electronic Mail: E-mail is an Internet application by which an Internet
user can exchange messages with any other user who has an E-mail address.
Messages can be sent almost instantly to designated individuals or groups
on a mailing list.

World Wide Web: The World Wide Web is a browsing and searching system
comprised of thousands of computer servers, referred to as home pages, each
linked by a special communications protocol. This open protocol allows
Internet users to view and access text, graphics, digital video and audio
resident on a home page or to connect instantaneously to related and linked
information on the same server or other home pages. Since the Internet is
an open system, any company can create a home page on the World Wide Web in
order to provide users with product or service information. Users can then
solicit more information and, in some cases, make purchases electronically.
Browsers such as Netscape, Mosaic and Microsoft Explorer, which
incorporates its own World Wide Web browser, have helped contribute to the
rapid growth of the World Wide Web. The Company expects the World Wide Web
to continue to grow rapidly as more businesses and consumers become aware
of the advantages of communications on the Internet. As part of its
service, the Company provides each subscriber with one megabyte of web
space on the Company's World Wide Web servers.

USENET News Groups: USENET is a network of thousands of computers attached
to the Internet that provide forums, or news groups, that allow users to
exchange information on a variety of topics of shared interest. Internet
users can seek or provide information on diverse topics ranging from sports
or other hobbies, to job opportunities, to restaurant and travel
suggestions.

Databases and Public Domain Software: An increasing number of host
computers are being connected to the Internet, which make available growing
amounts of text, graphics, audio and video information and public domain
software. For example, with an Internet connection, a user can access
commercial, educational and government databases, newspapers, magazines,
library card catalogs, industry newsletters, weather updates, and other
information.

File Transfer Protocol: The Internet can be easily used to move electronic
files (including data, programs or text) from one computer to another. This
can be very useful for parties in separate locations that collaborate on
data files. Data transferred over the Internet remains in digital format
and does not need to be re-entered by a receiving party; it can be
manipulated and then re-transmitted to other Internet users.

22
<PAGE>

Network Infrastructure

The Company's operations will depend upon the capacity, reliability and
security of its network infrastructure. The Company currently has limited
network capacity and will be required to continually expand its network
infrastructure to accommodate significant numbers of users and increasing
amounts of information they may wish to access. Expansion of the Company's
network infrastructure will require significant financial, operational and
management resources.

The Company maintains a telecommunications infrastructure that enables it
to provide digital Internet connectivity services to its subscribers. The
Company's network of POPs gives subscribers access to the Internet by means of
a local telephone call. The Company's network is currently comprised of
multiple T-1 lines which are connected directly to seven of the Company's POPs
(three of the Company's POPs are connected via T-1 to the Company's Nyack, New
York facility).

The Company closely monitors data traffic on its network and expects to
expand the capacity of its network by the addition of POPs and POP expansion at
existing locations as demand increases. POPs are monitored by management
software at the Company's computer facilities in Nyack and Pearl River, New
York. In order to build its subscriber base, the Company intends to continue to
expand the number of its POPs. As of the date of this Prospectus, the Company
had a total of ten POP locations in suburban areas servicing Rockland, Orange,
Dutchess, Sullivan, Putnam, Ulster and Westchester counties in New York and
Bergen County in New Jersey. The Company intends to continue its expansion of
POPs in the greater New York metropolitan area, including in Morris and Passaic
counties in New Jersey and New Haven and Fairfield counties in Connecticut.

The number of POPs will be dependent upon, among other things, market
acceptance and demand in target geographic markets and the technical
effectiveness of alternative delivery technologies. Certain new network
services known as "display virtual private networks" may permit the Company to
establish a presence in particular geographic markets without establishing
additional POPs by permitting the Company to connect its existing POPs to such
networks.

The Company maintains a telecommunications center at its Nyack facility
and Pearl River headquarters. Through these centers, the Company's technical
staff constantly monitors network utilization and security, including equipment
at individual POPs to ensure reliable Internet connectivity service. The
Company is subject to significant risks from a natural disaster or other
unanticipated event at these sites, and any damage or failure that causes
interruptions in the Company's operations could have a material adverse effect
on the Company. The Company currently maintains $1,000,000 of general liability
insurance which includes coverage for business interruption and property
damage. The Company plans to connect all of its POPs to its Pearl River
facility in the future.

Internet Access Providers and Suppliers

The Company currently relies on a sole supplier to provide Internet access
via leased telecommunications lines on a cost-effective and continuous basis.
The Company has not entered into an interconnect agreement with such supplier.
Although the Company believes that it currently has sufficient access to
telecommunications networks on favorable terms and believes that its
relationship with such supplier is satisfactory, any increase in rates charged
by such supplier would materially adversely affect the Company's operating
margins. Failure to obtain continuing access to such networks would also have a
material adverse effect on the Company, including possibly requiring the
Company to significantly curtail or cease its operations.

The Company also is dependent on third-party manufacturers of hardware
components. Certain components used by the Company in providing its networking
services are acquired from only one source, including high performance routers
manufactured by Cisco Systems, Inc. and remote access servers manufactured by
3Com (formerly U.S. Robotics, Inc). The Company has not entered into agreements
with any equipment manufacturer and purchases equipment components pursuant to
purchase orders placed from time to time in the ordinary course of business.
Although the Company believes that network equipment is currently available
from numerous sources, failure by manufacturers to deliver quality products on
a timely basis or the inability to develop alternative sources if and as
required, could result in delays which could materially adversely affect the
Company's business and limit the Company's ability to expand its operations.

23
<PAGE>

Marketing and Sales

The Company's primary focus is on providing Internet services to
individuals who subscribe to the Company's dial-up service. The Company
currently sells its Internet access services through its executive officers
responding to inbound calls and E-mail, largely generated by referrals from
other subscribers. The Company anticipates that it will hire up to three sales
personnel during the twelve months following this offering to market the
Company's services and respond to subscription inquiries.

The Company is seeking to build its regional brand identity. The Company
engages in marketing and advertising activities, including advertising of its
services in specialty and regional publications, and participates in computer
trade shows. The Company also engages in various local promotional programs,
primarily to support newly opened POPs. The Company recently retained the
services of a marketing and advertising firm in order to develop a sales and
marketing program to complement the Company's planned expansion activities. The
agreement provides for payments of $1,500 per month and may be terminated upon
90 days' notice.

Customer Support

The Company believes that it is important to provide prompt and effective
assistance to its subscribers and customers. The Company provides network
monitoring and emergency subscriber assistance services 24 hours a day, seven
days a week. The Company provides regular support and technical assistance 16
hours per day, 7 days per week. In house technical personnel respond to
telephone inquiries, and are dedicated to responding to E-mail inquiries. There
can be no assurance, however, that the Company's customer support resources
will be sufficient to manage any expansion in the Company's subscriber base.
Any failure to adequately match customer support resources to projected
increases in subscribers could adversely affect the Company.

Competition

The market for Internet access services is highly competitive. There are
no substantial barriers to entry, and the Company expects that competition will
intensify in the future. The Company believes that its ability to compete
successfully will be significantly affected by numerous factors, including
price, ease of use, reliability, customer support, geographic coverage and
industry and general economic trends (particularly unfavorable economic
conditions adversely affecting consumer discretionary spending). The Company's
competitors include many large companies that have substantially greater market
presence and financial, technical, marketing and other resources than the
Company, including (i) international, national and regional commercial Internet
service providers, such as Performance Systems International, Inc., Bolt
Beranek & Newman, Inc. and UUNET Technologies, Inc. ("UUNET"); (ii) established
on-line services companies that currently offer Internet access, such as
America Online, Inc. ("AOL"), CompuServe Incorporated, Prodigy Services
Company, Earthlink, and Delphi Internet Services; (iii) computer hardware and
software and other technology companies, such as IBM and Microsoft Corp.
("Microsoft"); (iv) national long distance carriers, such as AT&T Corp., MCI
Communications Corp. and Sprint Corp.; (v) regional telephone companies; and
(vi) cable operators, such as Tele-Communications, Inc.

New competitors, including large computer hardware and software, media,
cable and telecommunications companies, have increased their focus on the
Internet access market, resulting in even greater competition for the Company.
Increased competition has resulted and could continue to result in significant
price competition, which in turn could result in significant reductions in the
average selling price of the Company's services. In addition, increased
competition for new subscribers could result in increased sales and marketing
expenses and related subscriber acquisition costs, which could materially
adversely affect the Company's potential profitability. There can be no
assurance that the Company will be able to offset the effects of any such
competition or resulting price reductions through an increase in the number of
its subscribers, higher revenue from enhanced services or cost reductions or
that the Company will have the financial resources, technical expertise or
marketing and support capabilities to compete successfully.

Most of the established on-line services companies and telecommunications
companies currently offer Internet access. In addition, new competitors,
including large computer hardware and software, media and telecommunications
companies, have increased their focus on the Internet access market, resulting
in even greater

24
<PAGE>

competition for the Company. In particular, Microsoft has introduced an
Internet access solution, including front-end software and an on-line service,
called "Microsoft Network." The application software for this on-line service
is bundled with Microsoft's Windows 95 operating system, which may give the
service a significant advantage over other on-line and Internet services.
Microsoft has undertaken a strategic alliance with UUNET that provides
Microsoft customers access to the Internet through UUNET's POPs. Microsoft has
also purchased an interest in Comcast, a leading cable operator, to converge
software and cable networks to deliver Internet access. In addition, IBM's most
recent version of its OS/2 operating system software includes Internet
utilities, and IBM offers Internet access through its own private
communications network. AOL is offering direct Internet access. The ability of
these competitors or others to bundle services and products with Internet
connectivity services could place the Company at a significant competitive
disadvantage.

The market for Internet access is characterized by rapidly changing
technology, evolving industry standards, emerging competition and frequent new
software and service introductions. There can be no assurance that the Company
can successfully identify new product and service opportunities as they arise
and develop and bring new products and services to market in a timely manner or
that software, services or technologies developed by others will not render the
Company's services or technologies noncompetitive, obsolete or less marketable.
The Company currently does not have any proprietary applications software.

Employees

As of December 31, 1997, the Company had five employees in addition to its
executive officers. Of such employees, two are engaged in customer support, two
in accounting and one in administration. The Company engages part-time
employees from time to time. None of the Company's employees is represented by
a union. The Company considers its employee relations to be good.

Properties

The Company's executive offices are located in Pearl River, New York,
where the Company leases approximately 5,525 square feet under a lease that
expires in June 2002. The annual rental is $96,000. The Company also leases
space (typically, less than 100 square feet) in various geographic locations to
house the telecommunications equipment for each of its POPs. Leased facilities
for POPs have various expiration dates ranging from November 1997 through April
2002. Aggregate annual rentals for POPs are approximately $20,000 over the next
twelve months. The Company does not anticipate difficulties in obtaining future
leased space for its POPs.

Legal Proceedings

The Company is not a party to any legal proceedings.

25
<PAGE>

MANAGEMENT

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

<TABLE>
<CAPTION>
Name Age Position
- ----------------------------------- ----- --------------------------------------------------------
<S> <C> <C>
Stephen J. Cole-Hatchard .......... 40 Chairman of the Board, Chief Executive Officer and
President
Nicko Feinberg .................... 26 Chief Information Officer, Vice President of Technology
and Director
Michael Olbermann ................. 41 Chief Operating Officer, Vice President and Director
Ronald C. Signore ................. 37 Director
Ronald Shapss ..................... 51 Director
</TABLE>

Stephen J. Cole-Hatchard has been Chairman, Chief Executive Officer and
President of the Company since August 1997. Mr. Cole-Hatchard was Vice
President of Finance of the Company from February 1997 to August 1997 and has
been a director of the Company since February 1997. Mr. Cole-Hatchard will
devote approximately forty hours a week of his business time to the Company's
affairs. Mr. Cole-Hatchard has been a director and executive officer of Hudson
Technologies, Inc., a publicly-traded company engaged in providing refrigerant
management services, since January 1993. Mr. Cole-Hatchard is a member of the
bar of the State of New York and is employed as a detective with the
Clarkstown, New York Police Department, Legal Division.

Nicko Feinberg has been a director and Vice President of Technology of the
Company since November 1996 and Chief Information Officer since August 1997.
From April 1994 to October 1996, Mr. Feinberg was a Sales Manager and, from
April 1991 to April 1994, a Sales Account Executive for Microage Computer
Outlet, Inc., a company engaged in computer sales and training. From September
1989 to March 1991, Mr. Feinberg owned and operated Creative Images, Inc., a
pre-press service bureau. Creative Images, Inc. filed for protection under
Chapter 7 of the United States Bankruptcy Code in 1991.

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

Ronald C. Signore has been a director of the Company since December 1997.
Mr. Signore has been a partner in the accounting firm of Robert Gray & Co.,
LLP, for more than the past five years.

Ronald Shapss has been a director of the Company since December 1997. Mr.
Shapss is the founder of Ronald Shapss Corporate Services, Inc., ("RSCS") a
company engaged in consolidating fragmented industries since 1992. RSCS
concepts have been implemented by several companies including U.S. Delivery,
Inc., Consolidated Delivery & Logistics, Inc. and Corestaff, Inc. Mr. Shapss
was also the founder of Coach USA, Inc. and is presently on the advisory boards
of Consolidated Partners Founding Fund, L.L.C., and 1+ USA, Inc., which founded
Advanced Communications Group, Inc. (ADG), a CLEC which trades on the New York
Stock Exchange.

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

The Company has agreed, for a period of three years from the effective
date of this Prospectus, if so requested by the Representative, to recommend
and use its best efforts to elect a designee of the Representative as a
non-voting advisor to the Company's Board of Directors. The Representative has
not yet exercised its right to designate such a person.

The Company intends to obtain "key man" life insurance on the life of each
of Nicko Feinberg and Stephen J. Cole-Hatchard in the amount of $1,000,000.

26
<PAGE>

Executive Compensation

The following table sets forth the compensation paid to the Company's
Chief Executive Officer for the fiscal year ended December 31, 1997. No
executive officer of the Company received aggregate compensation which exceeded
$100,000 during such year.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards($)
--------------------------------------------- --------------------------
Securities
Restricted Underlying
Other Annual Stock Options/
Name and Principal Position Year Salary($) Bonus ($) Compensation($) Award SARs(#)
- ------------------------------- ------ ----------- ----------- ----------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Cole-Hatchard, Chief
Executive Officer ............ 1997 $-- $-- $-- -- --
</TABLE>
.
Employment Agreements

The Company has entered into three-year employment agreements with each of
Messrs. Feinberg, Cole-Hatchard and Olbermann which provide for an annual base
compensation of $88,000, $45,000, and $88,000, respectively, and such bonuses
as the Board of Directors may, in its sole discretion, from time to time
determine. The employment agreements provide for employment on a full-time
basis (except for the Company's agreement with Mr. Cole-Hatchard) and contain a
provision that the employee will not compete or engage in a business
competitive with the current or anticipated business of the Company during the
term of the employment agreement and for a period of two years thereafter. A
state court may determine not to enforce such provision or to partially enforce
such provision.

Director Compensation

The Company does not currently pay its directors any fees for attending
Board meetings. The Company anticipates that following this offering it will
pay non-employee directors $3,000 per annum for attending Board Meetings.

In December 1997, the Company entered into a consulting agreement with Mr.
Shapss which provides for Mr. Shapss to assist the Company with mergers and
acquisitions. In consideration of such services, the Company issued to Mr.
Shapss 100,000 shares of Common Stock and non-plan options to purchase 80,000
shares of Common Stock at an exercise price of $2.00 per share. The Company
also agreed to pay to Mr. Shapss $2,000 per month during a one year period
following the consummation of this offering.

Indemnification of Directors and Officers

The Company's Certificate of Incorporation provides for the Company to
indemnify each director and officer of the Company to the fullest extent
permitted by the Delaware General Corporation Law. The foregoing provision may
reduce the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from suing directors for
breaches of their duty of care, even though such an action, if successful,
might otherwise benefit the Company and its stockholders.

Liability Insurance

The Company intends to procure and maintain a policy of insurance under
which the directors and officers of the Company will be insured, subject to the
limits of the policy, against certain losses arising from claims made against
such directors and officers by reason of any acts or omissions covered under
such policy in their respective capacities as directors or officers, including
liabilities under the Securities Act.

27
<PAGE>

1997 Stock Option Plan

In February 1997, the Board of Directors and stockholders of the Company
adopted the 1997 Stock Option Plan (the Plan ), pursuant to which 500,000
shares of Common Stock are reserved for issuance upon exercise of options. The
Plan is designed to serve as an incentive for retaining qualified and competent
employees, directors and consultants.

The Company's Board of Directors, or a committee thereof, administers the
Plan and is authorized, in its discretion, to grant options thereunder to all
eligible employees of the Company, including officers and directors (whether or
not employees) of, and consultants to, the Company. The Plan provides for the
granting of both "incentive stock options" (as defined in Section 422 of the
Internal Revenue Code of 1986, as amended) and non-qualified stock options.
Options can be granted under the Plan on such terms and at such prices as
determined by the Board of Directors, or a committee thereof, except that the
per share exercise price of options will not be less than the fair market value
of the Common Stock on the date of grant. In the case of an incentive stock
option granted to a stockholder who owns stock of the Company possessing more
than 10% of the total combined voting power of all classes of stock ("10%
stockholder"), the per share exercise price will not be less than 110% of such
fair market value. The aggregate fair market value (determined on the date of
grant) of the shares covered by incentive stock options granted under the Plan
that become exercisable by a grantee for the first time in any calendar year is
subject to a $100,000 limit.

Options granted under the Plan will be exercisable during the period or
periods specified in each option agreement. Options granted under the Plan are
not exercisable after the expiration of ten years from the date of grant (five
years in the case of incentive stock options granted to a 10% stockholder) and
are not transferable other than by will or by the laws of descent and
distribution.

As of the date of this Prospectus, the Company has granted options to
purchase an aggregate of 165,600 shares of Common Stock (net of forfeitures)
under the Plan at an exercise price of $2.00 per share. The Company has agreed
not to file a registration statement relating to the Plan for a period of two
years from the date of this Prospectus without the prior consent of the
Representative.

28
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information, as of the date of this
Prospectus, after giving effect to the Stock Repurchase (based on information
obtained from the persons named below), relating to the beneficial ownership of
shares of Common Stock by: (i) each person or entity who is known by the
Company to own beneficially five percent or more of the outstanding Common
Stock; (ii) each of the Company's directors; and (iii) all directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned
----------------------------
Number of Shares
Name of Beneficially Before
Beneficial Owner Owned(1) Offering After Offering
- ------------------------------------ ----------------- ---------- ---------------
<S> <C> <C> <C>
Nicko Feinberg ..................... 256,000 21.7% 9.2%
Stephen J. Cole-Hatchard ........... 256,000(2) 21.7 9.2
Michael Olbermann .................. 188,000 16.0 6.8
Ronald Shapss ...................... 180,000(3) 14.3 6.5
Ronald Signore ..................... 62,400(4) 5.0 2.2
Michael Char (5) ................... 24,480 * *
All directors and executive officers
as a group (five persons) ......... 942,400(6) 71.6% 33.9%
</TABLE>

- ------------
* Less than 1%

(1) The Company believes that all persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
beneficially owned by them.

(2) Includes 144,000 shares held by the Cole-Hatchard Family Limited
Partnership, of which Mr. Cole-Hatchard is the general partner. Does not
include 20,000 shares held by Mr. Cole-Hatchard's mother and brother and
warrants to purchase 64,000 shares held by Mr. Cole-Hatchard's mother.

(3) Includes options to purchase 80,000 shares of Common Stock.

(4) Includes (i) warrants to purchase 39,200 shares of Common Stock held by The
Rough Group, of which Mr. Signore is a general partner, (ii) 3,200 shares
of Common Stock held by The Rough Group and (iii) options to purchase
20,000 shares of Common Stock held by Mr. Signore. Mr. Signore disclaims
beneficial ownership of other securities held by The Rough Group.

(5) Gives effect to the Stock Repurchase.

(6) Includes options and warrants to purchase 139,200 shares of Common Stock.

Messrs. Feinberg and Cole-Hatchard may be deemed to be "promoters" of the
Company as such term is defined in federal securities laws.

29
<PAGE>
CERTAIN TRANSACTIONS

In February 1997, the Company issued 256,000 shares to each of Messrs.
Char, Feinberg and Cole-Hatchard, and issued 188,000 to Mr. Olbermann in
consideration of $.01 per share. In December 1997, the Company issued 100,000
shares of Common Stock to Ronald Shapss, a director of the Company, in
consideration of $.01 per share. The Company agreed to repurchase 231,520
shares held by Mr. Char upon the consummation of this offering.

During the year ended December 31, 1996, the Company borrowed $37,000 and
$15,000, respectively, from Messrs. Char and Cole-Hatchard. In January 1997,
the Company borrowed an additional $20,000 from Mr. Cole-Hatchard. Pursuant to
the Reorganization, Messrs. Feinberg, Char and Cole-Hatchard exchanged their
respective interests in the Predecessor Companies for promissory notes in the
principal amounts of $141,800 $163,537 and $66,800, respectively (inclusive of
previously outstanding indebtedness of $21,737 and $35,000, respectively, to
Messrs. Char and Cole-Hatchard described above). The Company has agreed to
repay all outstanding indebtedness to Mr. Char and $20,000 of indebtedness to
each of Messrs. Cole-Hatchard and Feinberg upon the consummation of this
offering. The balance of indebtedness owed to Messrs. Cole-Hatchard and
Feinberg bears interest at the rate of 8% per annum and is due at such time as
the Company achieves $1.9 million in pre-tax earnings, but in no event sooner
than two years from the date of this Prospectus.

Mr. Cole-Hatchard's mother and brother purchased 12,000 shares and 8,000
shares, respectively, at $2.00 per share, pursuant to the Company's private
placement in May 1997. The Rough Group, a general partnership of which Mr.
Signore, a director of the Company, is a general partner, purchased 16,000
shares pursuant to the Company's private placement in May 1997. In addition,
Mr. Cole-Hatchard's mother and The Rough Group purchased $40,000 and $85,000,
respectively, principal amount of promissory notes pursuant to the Company's
December 1997 private placement, and received warrants to purchase 64,000 and
196,000 shares, respectively, at an exercise price of $5.00 per share.

In August 1997, the Company borrowed $60,000 from Mr. Cole-Hatchard
bearing interest at the rate of 9.25% per annum (the rate at which Mr.
Cole-Hatchard borrowed such funds from an institutional lender). The Company
repaid $30,000 of such indebtedness in December 1997. The balance will be
repaid directly to the institutional lender from the proceeds of this offering.

The Company believes that each of the foregoing transactions were on terms
no less favorable than those which could have been obtained from unaffiliated
third parties. All future transactions between the Company and its affiliates
will be on terms no less favorable than would be obtained from unaffiliated
third parties.

30
<PAGE>

DESCRIPTION OF SECURITIES

General

The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $.01 per share, and 1,000,000 shares of Preferred Stock, par value $.01
per share. As of the date of this Prospectus, and after giving effect to the
Stock Repurchase, there are 1,176,480 shares of Common Stock outstanding held
of record by 31 persons, and no shares of Preferred Stock outstanding.

Common Stock

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

Preferred Stock

The Company is authorized to issue 1,000,000 shares of Preferred Stock
from time to time in one or more series, in all cases ranking senior to the
Common Stock with respect to payment of dividends and in the event of the
liquidation, dissolution or winding-up of the Company. There are currently no
shares of Preferred Stock outstanding. The Board has the power, without
stockholder approval, to issue shares of one or more series of Preferred Stock,
at any time, for such consideration and with such relative rights, privileges,
preferences and other terms as the Board may determine (including, but not
limited to, terms relating to dividend rates, redemption rates, liquidation
preferences and voting, sinking fund and conversion or other rights). The
rights and terms relating to any new series of Preferred Stock could adversely
affect the voting power or other rights of the holders of the Common Stock or
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company.

Redeemable Warrants

Each Warrant offered hereby entitles the registered holder thereof (the
"Warrant Holders") to purchase one share of Common Stock at a price of $4.80,
subject to adjustment in certain circumstances, at any time between , 1999
and 5:00 p.m., Eastern Time, on , 2003.

The Warrants are redeemable by the Company at any time commencing ,
1999, upon notice of not less than 30 days, at a price of $.10 per Warrant,
provided that the closing bid quotation of the Common Stock on all 20 trading
days ending on the third day prior to the day on which the Company gives notice
has been at least 150% (currently $7.20, subject to adjustment) of the then
effective exercise price of the Warrants and the Company obtains the written
approval of the Representative to such redemption prior to the Call Date. The
Warrant Holders shall have the right to exercise their Warrants until the close
of business on the date fixed for redemption. The Warrants will be issued in
registered form under a warrant agreement by and among the Company, American
Securities and Transfer & Trust Company, Inc., as warrant agent, and the
Representative (the "Warrant Agreement"). The exercise price and number of
shares of Common Stock or other securities issuable on exercise of the Warrants
are subject to adjustment in certain circumstances, including in the event of a
stock dividend, recapitalization, reorganization, merger or consolidation of
the Company. However, the Warrants are not subject to adjustment for issuances
of Common Stock at prices below the exercise price of the Warrants.

31
<PAGE>

Reference is made to the Warrant Agreement (which has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part) for a
complete description of the terms and conditions therein (the description
herein contained being qualified by reference thereto).

The Warrants may be exercised upon surrender of the Warrant certificate
during the exercise period at the offices of the warrant agent, with the
exercise form on the reverse side of the Warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check or bank draft payable to the Company) to the warrant agent for
the number of Warrants being exercised. The Warrant Holders do not have the
rights or privileges of holders of Common Stock.

No Warrant will be exercisable unless at the time of exercise the Company
has filed a current registration statement with the Commission covering the
shares of Common Stock issuable upon exercise of such Warrant and such shares
have been registered or qualified or deemed to be exempt from registration or
qualification under the securities laws of the state of residence of the holder
of such Warrant. The Company will use its best efforts to have all such shares
so registered or qualified on or before the exercise date and to maintain a
current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement. While it is the Company's
intention to do so, there can be no assurance that it will be able to do so.

No fractional shares will be issued upon exercise of the Warrants.
However, if a Warrant Holder exercises all Warrants then owned of record by
him, the Company will pay to such Warrant Holder, in lieu of the issuance of
any fractional share which is otherwise issuable, an amount in cash based on
the market value of the Common Stock on the last trading day prior to the
exercise date.

Dividend Policy

To date, the Company has not declared or paid any dividends on its Common
Stock. The payment by the Company of dividends, if any, is within the
discretion of the Board of Directors and will depend on the Company's earnings,
if any, its capital requirements and financial condition, as well as other
relevant factors. The Board of Directors does not intend to declare any
dividends in the foreseeable future, but instead intends to retain earnings, if
any, for use in the Company's business operations.

Delaware Anti-Takeover Law

Upon the consummation of this offering, the Company will be governed by
the provisions of Section 203 of the DGCL. In general, the law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. "Business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock.

Transfer Agent and Warrant Agent

The transfer agent for the Common Stock and the warrant agent for the
Warrants is American Securities and Transfer & Trust Company, Inc., 1825
Lawrence St., Denver, Colorado, 80202.

Reports to Stockholders

The Company intends to file a registration statement with the Securities
and Exchange Commission to register its Common Stock and Warrants under the
provisions of Section 12(g) of the Exchange Act prior to the date of this
Prospectus and has agreed with the Representative that it will use its best
efforts to continue to maintain such registration. Such registration will
require the Company to comply with periodic reporting, proxy solicitation and
certain other requirements of the Exchange Act.

32
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of this offering, the Company will have 2,776,480
shares of Common Stock outstanding (assuming no exercise of Warrants). All
1,600,000 shares of Common Stock being offered hereby will be immediately
tradable without restriction or further registration under the Securities Act.
The remaining 1,176,480 shares of Common Stock outstanding are deemed to be
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act, in that such shares were acquired by the stockholders
of the Company in transactions not involving a public offering, and, as such,
may only be sold pursuant to a registration statement under the Securities Act,
in compliance with the exemption provisions of Rule 144, or pursuant to another
exemption under the Securities Act. The 1,176,480 restricted shares of Common
Stock will become eligible for sale under Rule 144, subject to the volume
limitations prescribed by the Rule and the contractual restrictions described
below on various dates commencing 90 days following the date of this
Prospectus.

In general, under Rule 144 a person (or persons who may be deemed to be
"affiliates" of the Company as that term is defined under the Securities Act),
is entitled to sell within any three-month period a number of restricted shares
beneficially owned for at least one year that does not exceed the greater of
(i) 1% of the then outstanding Common Stock, or (ii) an amount equal to the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
requirements as to the manner of sale, notice and the availability of current
public information about the Company. However, a person who is not deemed an
affiliate and has beneficially owned such shares for at least two years is
entitled to sell such shares without regard to the volume or other resale
requirements.

Under Rule 701 of the Securities Act, persons who purchase shares upon
exercise of options granted prior to the date of this Prospectus are entitled
to sell such shares after the 90th day following the date of this Prospectus in
reliance on Rule 144, without having to comply with the holding period
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. Affiliates are subject to all Rule 144 restrictions after this 90-day
period, but without a holding period.

The Company's officers, directors and all of the Company's
securityholders, other than the holders of 160,000 shares purchased pursuant to
the Company's private placement in May 1997, have agreed not to sell or
otherwise dispose of any securities of the Company beneficially owned by them
for a period of at least twelve months from the date of this Prospectus,
without the prior written consent of the Representative. The holders of 160,000
shares issued in the private placement have agreed not to sell such shares for
a period of six months from the date of this Prospectus. Messrs. Feinberg,
Olbermann, Cole-Hatchard and Char, who hold an aggregate of 624,480 shares of
Common Stock, have agreed not to sell or otherwise dispose of any securities of
the Company beneficially owned by them until the Company achieves $1.9 million
in pre-tax earnings, but in no event sooner than two years from the date of
this Prospectus.

Prior to this offering, there has been no market for the Common Stock and
no prediction can be made as to the effect, if any, that public sales of shares
of Common Stock or the availability of such shares for sale will have on the
market prices of the Common Stock and the Warrants prevailing from time to
time. Nevertheless, the possibility that substantial amounts of Common Stock
may be sold in the public market may adversely affect prevailing market prices
for the Common Stock and the Warrants and could impair the Company's ability in
the future to raise additional capital through the sale of its equity
securities.

33
<PAGE>

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, for whom Werbel-Roth Securities, Inc. is acting as Representative, and
each of the Underwriters has agreed to purchase from the Company the respective
number of shares of Common Stock and Warrants set forth opposite its name
below.

Number of Shares
Underwriter of Common Stock and Warrants
- -------------------------------------------- -----------------------------
Werbel-Roth Securities, Inc .........

Total ............................ 1,600,000
=========

The Underwriters are committed to purchase and pay for all of the Common
Stock and Warrants offered hereby if any of such securities are purchased. The
Common Stock and Warrants are being offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to approval of certain legal matters by counsel and to certain other
conditions.

The Underwriters have advised the Company that they propose to offer the
Common Stock and Warrants to the public at the public offering prices set forth
on the cover page of this Prospectus. The Underwriters may allow to certain
dealers who are members of the National Association of Securities Dealers, Inc.
(the "NASD") concessions, not in excess of $ per share of Common Stock and
$ per Warrant, of which not in excess of $ per share of Common Stock and
$ per Warrant may be reallowed to other dealers who are members of the NASD.
The offering prices, reallowances and concessions will not be changed until
after this offering has been completed.

The Company has granted to the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 240,000 additional
shares of Common Stock and/or 240,000 additional Warrants at the public
offering prices set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions. The Underwriters may exercise this
option in whole or, from time to time, in part, solely for the purpose of
covering over-allotments, if any, made in connection with the sale of the
shares of Common Stock and/or Warrants offered hereby.

The Company has agreed to pay the Representative a nonaccountable expense
allowance of 3% of the gross proceeds of this offering, of which $15,000 has
been paid as of the date of this Prospectus. Additional amounts of $10,000 and
$15,000 were paid to Adams Stevens, Inc. and Parker Bromley, Ltd.,
respectively. The Company has also agreed to pay all expenses in connection
with qualifying the shares of Common Stock and Warrants offered hereby for sale
under the laws of such states as the Representative may designate, including
expenses of counsel retained for such purpose by the Representative.

The Company has agreed to sell to the Representative and its designees for
an aggregate of $100, warrants (the "Representative's Warrants") to purchase up
to 160,000 shares of Common Stock at an exercise price of $6.60 per share (165%
of the public offering price per share) and up to 160,000 Warrants (each
exercisable to purchase one share of Common Stock at a price of $7.92 per
share) at an exercise price of $.165 per Warrant (165% of the public offering
price per Warrant). The Representative's Warrants may not be sold, transferred,
assigned or hypothecated for one year from the date of this Prospectus, except
to the officers and partners of the Representative and members of the
underwriting syndicate and selling group and are exercisable at any time and
from time to time, in whole or in part, during the five-year period commencing
on the date of this Prospectus (the "Warrant Exercise Term"). During the
Warrant Exercise Term, the holders of the Representative's Warrants are given,
at nominal cost, the opportunity to profit from a rise in the market price of
the Common Stock. To the extent that the Representative's Warrants are
exercised, dilution to the interests of the Company's stockholders will occur.
Further, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of the
Representative's Warrants can be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
more favorable

34
<PAGE>

to the Company than those provided in the Representative's Warrants. Any profit
realized by the Underwriter on the sale of the Representative's Warrants, the
underlying shares of Common Stock or the underlying warrants, or the shares of
Common Stock issuable upon exercise of such underlying warrants may be deemed
additional underwriting compensation. The Company has agreed, at the request of
the holders of a majority of the Representative's Warrants, at the Company's
expense, to register the Representative's Warrants, the shares of Common Stock
and warrants underlying the Representative's Warrants, and the shares of Common
Stock issuable upon exercise of the underlying warrants under the Securities
Act on one occasion during the Warrant Exercise Term and to include the
Representative's Warrants and all such underlying securities in any appropriate
registration statement which is filed by the Company during the seven years
following the date of this Prospectus.

The Company has also agreed, for a period of three years from the date of
this Prospectus, if so requested by the Representative, to elect a designee of
the Representative as a non-voting advisor to the Company's Board of Directors.
The Representative has not yet exercised its right to designate such a person.

In addition, the Company has agreed to enter into a consulting agreement
to retain the Representative as a financial consultant for a period of two
years from the consummation of this offering at a fee equal to 2% of the gross
proceeds of this offering (including the over-allotment option) payable in
full, in advance. The consulting agreement will not require the consultant to
devote a specific amount of time to the performance of its duties thereunder.

The Company has agreed, in connection with the exercise of the Warrants
pursuant to solicitation (commencing one year from the date of this
Prospectus), to pay to the Representative a fee of 5% of the exercise price for
each Warrant exercised; provided, however, that the Representative will not be
entitled to receive such compensation in Warrant exercise transactions in which
(i) the market price of Common Stock at the time of exercise is lower than the
exercise price of the Warrants; (ii) the Warrants are held in any discretionary
account; (iii) disclosure of compensation arrangements is not made, in addition
to the disclosure provided in this Prospectus, in documents provided to holders
of Warrants at the time of exercise; (iv) the exercise of the Warrants is
unsolicited by the Representative; or (v) the solicitation of exercise of the
Warrants was in violation of Regulation M promulgated under the Exchange Act.

The Underwriters have advised the Company that they do not expect sales
made to discretionary accounts to exceed 1% of the securities offered hereby.

The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or controlling persons of the Company, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.

Prior to this offering, there has been no public trading market for the
Common Stock or Warrants. Consequently, the initial public offering price of
the Common Stock and Warrants and the exercise price of the Warrants have been
determined by negotiations between the Company and the Representative. Among
the factors considered in determining these prices were the Company's financial
condition and prospects, market prices of similar securities of comparable
publicly-traded companies and the general condition of the securities market.

In order to facilitate the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the prices of the
Common Stock and Warrants. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock
and/or Warrants for their own account. In addition, to cover over-allotments or
to stabilize the price of the Common Stock and Warrants, the Underwriters may
bid for, and purchase, shares of Common Stock and Warrants in the open market.
The Underwriters may also reclaim selling concessions allowed to a dealer for
distributing the Common Stock and Warrants in the offering, if the Underwriters
repurchase previously distributed Common Stock and Warrants in transactions to
cover short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Common Stock and
Warrants above independent market levels. The Underwriters have not required to
engage in these activities, and may end any of these activities at any time.

35
<PAGE>

EXPERTS

The financial statements of the Company included in this Prospectus have
been audited by BDO Seidman LLP, independent certified public accountants, to
the extent and for the periods set forth in their report (which contains an
explanatory paragraph regarding the Company's ability to continue as a going
concern) appearing elsewhere herein and is included in reliance upon such
report given upon the authority of said firm as experts in accounting and
auditing.

LEGAL MATTERS

The legality of the securities offered by this Prospectus will be passed
upon for the Company by Tenzer Greenblatt LLP, New York, New York. Lester
Morse, P.C., Great Neck, New York, has acted as counsel to the Underwriters in
connection with this offering.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (the "Registration
Statement") under the Securities Act with respect to the securities offered by
this Prospectus. This Prospectus, filed as a part of such Registration
Statement, does not contain all of the information set forth in, or annexed as
exhibits to, the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and this offering, reference is made to
the Registration Statement, including the exhibits filed therewith, which may
be inspected without charge at the Office of the Commission, 450 Fifth Street,
N.W., Washington D.C. 20549; and at the following regional offices: Midwest
Regional Office, Northwestern Atrium Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661-2511, and the Northeast Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Commission at its principal office upon
payment of prescribed fees. This Prospectus contains a complete summary of the
material terms of the contracts or other documents filed as exhibits to the
Registration Statement.

As of the date of this Prospectus, the Company will become subject to the
reporting requirements of the Exchange Act and, in accordance therewith, will
file reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the Commission set forth above, and copies
of such materials can be obtained from the Commission's Public Reference
Section at prescribed rates. The Company intends to furnish its stockholders
with annual reports containing audited financial statements and such other
periodic reports as the Company deems appropriate or as may be required by law.
The Registration Statement, including all exhibits, and such reports and other
information may also be accessed electronically by means of the Commission's
site on the World Wide Web at http://www.sec.gov.

36
<PAGE>

GLOSSARY

<TABLE>
<S> <C>
Dial-up Accounts .................. Accounts with an Internet connectivity provider that utilize
a telephone call to a modem rather than a dedicated data
line.
E-mail ............................ Electronic mail. An application that allows a user to send
or receive text messages to or from any other user with an
Internet address, commonly termed an E-mail address.
FTP ............................... File Transfer Protocol. A protocol that allows file transfer
between a host and a remote computer.
ISDN .............................. Integrated Services Digital Network. An information transfer
standard for transmitting digital voice and data over
telephone lines at speeds up to 128 Kbps.
Internet .......................... A worldwide network of computer networks that are
interconnected at certain points and utilize a common
communications protocol, TCP/IP.
Kbps .............................. Kilobits per second. A measure of digital information
transmission rates. One kilobit equals 1,000 bits of digital
information.
Mbps .............................. Megabits per second. A measure of digital information
transmission rates. One megabit equals 1,000 Kbps.
On-line Service Providers ......... Commercial information services that offer a computer user
access through a modem to a specified slate of information,
entertainment and communications menus. These services
are generally closed systems and many offer limited, if any,
Internet access.
OEM ............................... Original Equipment Manufacturer.
POP ............................... Point-of-Presence. An interlinked group of modems, routers
and other computer equipment, located in a particular
city or metropolitan area, that allows a nearby subscriber to
access the Internet through a local telephone call.
T-1 ............................... A data communications line capable of transmission speeds
of 1.54 Mbps.
TCP/IP ............................ Transmission Control Protocol/Internet Protocol. A compilation
of network- and transport-level protocols that allow computers
with different architectures and operating system software
to communicate with other computers on the Internet.
World Wide Web .................... A network of servers that uses a special communications
protocol to link different servers throughout the Internet
and permits communication of graphics, video and sound.
X2 56K ............................ A new transmission technique which supplies 56 Kbps
"downstream" for transmissions from service providers.
</TABLE>

37
<PAGE>

Frontline Communications Corporation

Contents

<TABLE>
<CAPTION>
Page
-----------
<S> <C>
Report of independent certified public accountants .......... F-2
Financial statements:
Balance sheets ........................................... F-3
Statements of operations ................................. F-4
Statements of stockholders' deficit ...................... F-5
Statements of cash flows ................................. F-6
Notes to financial statements ............................ F-7 - F-13
</TABLE>

F-1
<PAGE>

Report of Independent Certified Public Accountants

To the Board of Directors of
Frontline Communications Corporation

We have audited the accompanying balance sheets of Frontline Communications
Corporation (the "Company") as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' 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 audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

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

The financial statements referred to above have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements. the Company has suffered losses. has a capital deficit
and has negative working capital. These conditions raise substantial doubt as
to the Company's ability to continue as a going concern. While the Company
plans to raise additional capital, there can be no assurance that such efforts
will be successful. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

BDO Seidman, LLP

Valhalla, New York
March 16, 1998

F-2
<PAGE>

Frontline Communications Corporation

Balance Sheets

<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
-------------- ---------------
<S> <C> <C>
Assets
Current:
Cash ............................................................ $ 2,303 $ 39,725
Accounts receivable, less allowance for doubtful accounts of
$16,666 in 1997 ................................................ 506 10,404
Prepaid expenses and other ...................................... 3,048 8,527
Deferred registration costs ..................................... -- 231,071
--------- ------------
Total current assets ......................................... 5,857 289,727
Equipment, net (Note 4) ............................................ 46,760 178,506
Deposits ........................................................... 1,613 17,967
--------- ------------
$ 54,230 $ 486,200
========= ============
Liabilities and Stockholders' Deficit
Current:
Notes payable (Note 5) .......................................... $ 15,266 $ 329,537
Accounts payable and accrued expenses (Note 3) .................. 58,358 359,174
Deferred revenue ................................................ 24,385
------------
Total current liabilities .................................... 73,624 713,096
Notes payable--long term portion (Note 5) .......................... 36,737 218,052
--------- ------------
Total liabilities ............................................ 110,361 931,148
--------- ------------
Commitments and contingencies (Notes 6, 7 and 10)
Stockholders' deficit
Preferred stock, $.01 par value, 1,000,000 authorized, 0 issued
and outstanding ................................................ -- --
Common stock, $.01 par value, 10,000,000 shares authorized,
1,408,000 issued and outstanding ............................... -- 14,080
Additional paid-in capital ...................................... 6,000 1,646,520
Accumulated deficit ............................................. (62,131) (2,099,548)
Stock subscriptions receivable .................................. -- (6,000)
--------- ------------
Total stockholders' deficit .................................. (56,131) (444,948)
--------- ------------
$ 54,230 $ 486,200
========= ============
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE>

Frontline Communications Corporation

Statements of Operations

<TABLE>
<CAPTION>
Year ended Year ended
December December
31, 1996 31, 1997
------------ ---------------
<S> <C> <C>
Revenues .............................................. $ 98,699 $ 321,706
Cost of revenues ...................................... 67,582 251,928
--------- ------------
Gross profit ........................................ 31,117 69,778
Operating expenses:
Selling, general and administrative .................. 81,220 540,883
Non-cash compensation charge (Notes 1 and 8) ......... -- 1,537,000
--------- ------------
Loss from operations .................................. (50,103) (2,008,105)
Other income (expense):
Interest ............................................. (6,677) (28,421)
Other ................................................ 2,574 (891)
--------- ------------
Net loss .............................................. $ (54,206) $ (2,037,417)
========= ============
Loss per share of common stock -- basic ............... (.11) (1.67)
========= ============
Weighted average number of shares outstanding ......... 512,000 1,218,000
========= ============
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

Frontline Communications Corporation

Statements of Stockholders' Deficit

<TABLE>
<CAPTION>
Additional
Common Stock
-------------------------- Paid-in
Shares Amount Capital
------------- ----------- --------------
<S> <C> <C> <C>
Balance, January 1, 1996 ........... -- $ -- $ --
Officer salary contributed to
capital ........................... -- -- 6,000
Net loss ........................... -- -- --
-- -------- ----------
Balance, December 31, 1996 ......... -- -- 6,000
Frontline reorganization
(See Note 2) ...................... 640,000 6,400 (325,000)
Shares issued as compensation
(See Note 8) ...................... 100,000 1,000 199,000
Shares issued as compensation
(See Note 1) ...................... 820,000 8,200 1,230,000
Officer salary contributed to
capital ........................... -- -- 3,000
Private placement sale of shares
at $2 per share.................... 200,000 2,000 398,000
Common stock options issued
for services (See Note 8) ......... -- -- 108,000
Warrants issued to debtholders
(See Note 5) ...................... -- -- 24,000
Recapitalization (4 for 5
reverse split) .................... (352,000) (3,520) 3,520
Net loss ........................... -- -- --
-------- -------- ----------
Balance, December 31
1997 .............................. 1,408,000 $ 14,080 $1,646,520
========= ======== ==========

<CAPTION>
Stock Total
Accumulated Subscriptions Stockholders'
Deficit Receivable Deficit
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance, January 1, 1996 ........... $ (7,925) $ -- $ (7,925)
Officer salary contributed to
capital ........................... -- -- 6,000
Net loss ........................... (54,206) -- (54,206)
------------ -------- -------------
Balance, December 31, 1996 ......... (62,131) -- (56,131)
Frontline reorganization
(See Note 2) ...................... -- -- (318,600)
Shares issued as compensation
(See Note 8) ...................... -- -- 200,000
Shares issued as compensation
(See Note 1) ...................... -- (6,000) 1,232,200
Officer salary contributed to
capital ........................... -- -- 3,000
Private placement sale of shares
at $2 per share.................... -- -- 400,000
Common stock options issued
for services (See Note 8) ......... -- -- 108,000
Warrants issued to debtholders
(See Note 5) ...................... -- -- 24,000
Recapitalization (4 for 5
reverse split) .................... -- -- --
Net loss ........................... (2,037,417) -- (2,037,417)
------------ -------- -------------
Balance, December 31
1997 .............................. $ (2,099,548) $ (6,000) $ (444,948)
============ ======== =============
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

Frontline Communications Corporation

Statements of Cash Flows

Increase (Decrease) in Cash

<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31.
1996 1997
-------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................................... $ (54,206) $ (2,037,417)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization .................................. 9,962 44,558
Officer salary contributed to capital .......................... 6,000 3,000
Non cash compensation charge ................................... -- 1,537,000
Allowance for doubtful accounts ................................ -- 16,666
Accounts receivable write-off .................................. -- 8,605
Changes in assets and liabilities:
Accounts receivable ........................................... 175 (35,169)
Prepaid expenses and other .................................... (1,661) (5,479)
Other assets .................................................. (3,000) (16,354)
Accounts payable and accrued expenses ......................... 55,249 300,816
Interest due on stockholders loans ............................ -- 19,452
Deferred revenue .............................................. -- 24,385
--------- ------------
Net cash provided by (used in) operating activities ......... 12,519 (139,937)
--------- ------------
Cash flows from investing activities:
Acquisitions of equipment ........................................ (55,114) (176,304)
--------- ------------
Cash flows from financing activities:
Deferred registration costs ...................................... -- (231,071)
Repayments of stockholder loans .................................. (4,400) (45,266)
Proceeds from stockholder loans, net ............................. 37,470 230,000
Proceeds from sale of common stock ............................... -- 400,000
--------- ------------
Net cash provided by financing activities ................... 33,070 353,663
--------- ------------
Net increase (decrease) in cash ................................... (9,525) 37,422
Cash, beginning of period ......................................... 11,828 2,303
--------- ------------
Cash, end of period ............................................... $ 2,303 $ 39,725
========= ============
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................... $ 6,600 $ 10,451
Non-cash investing and financing activities:
Common stock issued for reduction of stockholder loans ........... $ -- $ 9,600
Notes payable to stockholders issued as distributions ............ $ -- $ 325,000
Common stock subscriptions ....................................... $ -- $ 6,000
========= ============
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE>

Frontline Communications Corporation

Notes to Financial Statements

December 31, 1997 and 1996

1. Summary of Significant Accounting Policies

Business

Frontline Communications Corporation ("Frontline" or the "Company") is an
internet service provider that provides subscribers with direct access to a
wide range of internet applications and resources including electronic mail,
world wide web sites and regional and local information and data services.

Going Concern

The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. The company has suffered losses since
inception, and has a negative working capital. The Company has relied on its
capital and related party advances to sustain its working capital needs. The
predominant use of cash has been for the expansion of its internet service
network. Management believes that the proceeds of the contemplated initial
public offering (See Note 11) will be sufficient to meet its cash flow needs
for the coming year. However, there can be no assurance that the offering will
be completed. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Reorganization

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

Equipment and Depreciation

Equipment is stated at cost, less accumulated depreciation. Depreciation
is computed over the estimated useful lives of the assets using the
straight-line method for book purposes and accelerated methods for income tax
purposes.

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

Years
-----
Computer equipment ............................ 3-5
===

Upon retirement or sale, the cost and related accumulated depreciation are
removed from the accounts and any resulting gains or losses are included in the
statement of operations.

Revenue Recognition

Online service revenues (including monthly subscription and dedicated
access service) are recognized on a straight-line basis over the period the
services are provided. Other revenues, consisting principally of data network
services are recognized as services are rendered.

F-7
<PAGE>

Frontline Communications Corporation
Notes to Financial Statements -- (Continued)
December 31, 1997 and 1996

1. Summary of Significant Accounting Policies -- (Continued)
Income Taxes

Deferred income taxes are provided on differences between the financial
reporting and income tax bases of assets and liabilities based upon statutory
tax rates enacted for future periods.

Credit Risk

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

Cash and cash equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

Use of Estimates

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

Financial Instruments

The carrying amounts of financial instruments including cash, accounts
receivable, due to stockholders and accounts payable approximated fair value as
of December 31, 1996 and 1997, because of the relatively short maturity of
these instruments. The carrying value of notes payable to stockholders cannot
be determined because of the nature of their terms.

Loss Per Share of Common Stock

During February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earning
Per Share," which replaces the presentation of primary earnings per share
("EPS"), with basic EPS. It also requires dual presentation of basic and
diluted EPS. The Company adopted SFAS 128 as of January 1, 1997. The 1996 loss
per share has been restated, giving retroactive effect to the 4 to 5 reverse
stock split (See Note 11) and to conform to SFAS No. 128. Loss per common share
is computed on the weighted average number of shares, less treasury stock. If
dilutive, common equivalent shares (common shares assuming exercise of options
and warrants) utilizing the treasury stock method are considered in presenting
diluted earnings per share. Options to purchase 165,600 shares of common stock
at $2.00 per share and warrants to purchase 300,000 shares of common stock were
not included in the computation of diluted loss per share because the effect
was anti-dilutive due to the net loss. The options and warrants, were
outstanding at the end of 1997.

Deferred Registration Costs

Costs incurred in connection with the Company's anticipated public
offering are deferred and will be charged against stockholders' equity upon
successful completion of the offering. If the offering is not consummated,
deferred costs will be charged to expense.

Recent Accounting Pronouncements

F-8
<PAGE>

Frontline Communications Corporation
Notes to Financial Statements -- (Continued)
December 31, 1997 and 1996

1. Summary of Significant Accounting Policies -- (Continued)

resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 121 "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"). SFAS No. 121 requires, among other things, impairment losses on assets
to be held and gains or losses from assets that are expected to be disposed of
be included as a component of income from continuing operations before taxes on
income. The Company adopted SFAS No. 121 as of January 1, 1996 and its
implementation did not have a material effect on the financial statements.

Stock-Based Compensation

In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value method for accounting for
stock-based compensation plans either through recognition or disclosure. The
Company adopted the employee stock-based compensation provisions of SFAS No.
123 by disclosing the pro forma net income and pro forma net income per share
amounts assuming the fair value method as of January 1, 1995. The adoption of
this standard did not impact the Company's results of operations, financial
position or cash flows. Stock arrangements with non-employees, if applicable,
are recorded at fair value.

Advertising

All costs associated with advertising services are expensed in the period
incurred. Advertising expense was approximately $19,000 and $28,000 for the
years ended December 31, 1996 and 1997, respectively.

2. Reorganization

On May 30, 1997, the Predecessor Companies were acquired by the Company by
issuing three notes aggregating $325,000 (excluding $47,137 of certain
advances) (See Note 5) for all the membership interest in the

F-9
<PAGE>

Frontline Communications Corporation
Notes to Financial Statements -- (Continued)
December 31, 1997 and 1996

2. Reorganization -- (Continued)
Predecessor Companies. For accounting purposes Hobbes has been considered to be
the acquirer. As a result, the business combination of Hobbes and INET has been
accounted for as a combination of entities under common control in a manner
similar to a pooling of interests. The business combination with Sara Girl and
Frontline have been accounted for as purchases. The net assets and operations
of Sara Girl and Frontline are not material to the Company's financial
statements. Notes payable to the members of the Predecessor Companies are
accounted for as distributions in the accompanying statement of stockholders'
equity.

3. Accounts Payable and Accrued Expenses

Accrued expenses were approximately $13,000 and $192,000 at December 31,
1996 and December 31, 1997, respectively. Accrued expenses consisted of various
items including telephone charges, professional fees, rent and supplies.

4. Equipment

Equipment consist of the following:

December 31, December 31,
1996 1997
-------------- -------------
Computer equipment .................... $56,722 $233,026
------- --------
Less accumulated depreciation ......... 9,962 54,520
------- --------
Equipment, net ........................ $46,760 $178,506
======= ========

5. Notes Payable

Notes payable consists of the following:

<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1997
--------- -----------
<S> <C> <C>
Notes payable issued in connection with the reorganization (a) ......... $ -- $372,137
Bridge loan financing (b) .............................................. -- 126,000
Working capital loan (c) ............................................... 52,003 30,000
Accrued interest ....................................................... -- 19,452
------- --------
52,003 547,589
less: current portion .................................................. 15,266 329,537
------- --------
$36,737 $218,052
======= ========
</TABLE>

a) On May 30, 1997, the Company issued notes aggregating $372,137 to three of
its stockholders related to the reorganization discussed in Note 2, and
certain advances made to the Company since inception. The notes bear
interest at 8%. A portion of the notes ($163,537) is due on the earlier of
the initial public offering or May 1, 1998. Of the remaining portion
($208,600), $40,000 is payable at the initial public offering and $168,600
will be deferred until such time as the Company achieves $1.9 million in
pre-tax earnings, but in no event sooner than two years from the date of
this Prospectus.

b) In December 1997, the Company issued notes aggregating $150,000 and 300,000
warrants in connection with a bridge loan financing. The warrants are
exercisable at $5.00 per share and have a five year term. The notes bear
interest at 9% and are payable at the earlier of the initial public
offering or December 22, 1999. Related parties of an affiliate were issued
26.6% of the notes. The notes were discounted for the value of the warrants
($24,000) which was included as a component of stockholder's equity and is
being amortized as additional interest.

c) Working capital loans from stockholders bear interest at 9.25% and are
payable at such time as the Company achieves $1.9 million in pre-tax
earnings, but in no event sooner than two years from the date of this
Prospectus.

F-10
<PAGE>

Frontline Communications Corporation
Notes to Financial Statements -- (Continued)
December 31, 1997 and 1996

6. Commitments and Contingencies

Leases

The Company rents office space and equipment under operating leases.

Future minimum rental payments required under operating leases as of
December 31, 1997 are as follows:

1998 ................................................ $113,917
1999 ................................................ 120,603
2000 ................................................ 119,200
2001 ................................................ 117,587
2002 ................................................ 57,421
--------
Total ............................................... $528,728
========

Rental expense was $17,475 and $69,981 for the years ended December 31,
1996 and 1997, respectively.

7. Stock Options

Effective March 1, 1997, the Board of Directors (the "Board") approved the
1997 stock option plan (the "Plan"), which authorized the issuance of incentive
options and non-qualified options to purchase up to 500,000 shares of common
stock. The plan has a ten year term. The Board retained the authority to
determine the individuals to whom, and the times at which, stock options would
be made, along with the number of shares, vesting schedule and other provisions
related to the stock options.

For the year ended December 31, 1997, the Company issued 29,600 incentive
stock options (net of forfeitures of 114,400 options) to employees and
non-qualified options to purchase 136,000 shares of common stock to certain
non-employees. These options have a five year term and are exercisable at any
time on or after March 1, 1998 at $2 per share.

The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" and related interpretations by recording
compensation expense for the excess of fair market value over the exercise
price per share as of the date of the grant in accounting for its stock
options. Accordingly, no compensation costs have been recognized for its
issuance of 29,600 options to employees since the exercise price exceeded the
then fair market value on the date of the grant. In accordance with SFAS No.
123, the Company has recognized $108,000 as the fair value of services received
for the 136,000 options granted to non-employees.

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

Risk-free interest rate ......................... 6.51%
Expected life ................................... 5 Years
Expected volatility ............................. 15.00%
Dividend yield .................................. None

F-11
<PAGE>

Frontline Communications Corporation
Notes to Financial Statements -- (Continued)
December 31, 1997 and 1996

7. Stock Options -- (Continued)

Had compensation cost for the issuance of options been determined based on
the fair value at the grant dates consistent with the fair value method of SFAS
No. 123, the Company's net loss would not have changed since employee options
at the grant date were considered to have minimal value.

<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Remaining Exercise
Life Shares Price
------------ ---------- ---------
<S> <C> <C> <C>
Outstanding, January 1, 1997 ............................ -- $ --
Granted ................................................. 165,600 2.00
------- -------
Outstanding, December 31, 1997 .......................... 4.17 years 165,600 2.00
======= =======
Options exercisable at end of period .................... -- --
Weighted average fair value of options granted during the
period ................................................. $ --
=======
</TABLE>

During the initial phase-in period of SFAS No. 123, the effects on pro
forma results are not likely to be representative of the effects on pro forma
results in future years since additional awards could be made each year.

8. Common Stock

On May 30, 1997, the Company received $400,000 in connection with a
private placement of shares at $2.00 per share. Related parties of an affiliate
purchased 12.50% of the shares.

In 1997, the Company issued 100,000 shares of common stock valued at $2.00
per share, and 80,000 options valued at $1.00 per option to Ronald Shapss. The
options and shares were issued for current and future services as a consultant
and director of the Company. In addition, the Company issued 56,000 options
valued at $.48 per option to various consultants in 1997 for current and future
services.

9. Income Taxes

The Company had net operating loss carryforwards of approximately $59,000
and $620,000 at December 31, 1996 and 1997, respectively, which expire in 2111
and 2112. A valuation allowance has been provided for these loss carryforwards
since their realization is not considered to be more likely than not.

10. Litigation

In June 1997, Michael Char, a former officer and director of the Company,
had disagreements with other members of management with respect to various
business matters.

In March 1998, the Company settled all disputes with Char. In addition to
payment of $65,000 in March, 1998, the Company will make a payment to Char in
the amount of $435,000 from the proceeds of the initial public offering in
exchange for all debts, notes and claims of Char, which aggregated $240,000,
and the balance will be charged against equity for the 231,520 shares owned by
Char. Char will retain 24,480 shares, subject to a lock-up agreement with the
underwriter.

11. Subsequent Events

The Company has a letter of intent with Werbel-Roth Securities, Inc. in
connection with a proposed offering and sale to the public of one million six
hundred thousand shares of common stock of the Company at a price of $4 per
share and one million six hundred thousand warrants at a price of $.10 per
warrant. Each warrant will be exercisable to purchase one share of common stock
at $4.80 per share.

F-12
<PAGE>

Frontline Communications Corporation
Notes to Financial Statements -- (Continued)
December 31, 1997 and 1996

11. Subsequent Events -- (Continued)
On March 19, 1998, the Board of Directors of the Company declared a 4 for
5 reverse stock split (the "stock split"), effective December 31, 1997
affecting all shareholders of record at the close of business on December 31,
1997. The stock split is applicable to all common stock and common stock
options. The Company has restated all per share amounts and numbers of shares
to reflect the stock split.

On March 19, 1998, Mesrs. Feinberg, Cole-Hatchard and Olbermann forfeited
32,000, 32,000, and 50,400 common stock options, respectively, also effective
December 31, 1997.

F-13
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, sales person or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the securities offered by this Prospectus,
or an offer to sell or a solicitation of an offer to buy any securities by
anyone in any jurisdiction in which such offer or solicitation is not
authorized or is unlawful. The delivery of this Prospectus shall not, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
--------------------------
TABLE OF CONTENTS

Page
-----
Prospectus Summary ....................... 3
Risk Factors ............................. 6
Use of Proceeds .......................... 13
Dilution ................................. 14
Capitalization ........................... 15
Management's Discussion and Analysis of
Financial Conditions and Results of
Operations ............................ 16
Business ................................. 20
Management ............................... 26
Principal Stockholders ................... 29
Certain Transactions ..................... 30
Description of Securities ................ 31
Shares Eligible for Future Sale .......... 33
Underwriting ............................. 34
Experts .................................. 36
Legal Matters ............................ 36
Additional Information ................... 36
Glossary ................................. 37
Index to Financial Statements ............ F-1

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

Until , 1998 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities offered hereby,
whether or not participating in this distribution may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

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

<PAGE>

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

FRONTLINE

COMMUNICATIONS
CORPORATION

1,600,000 Shares of Common Stock
and
Redeemable Warrants to Purchase
1,600,000 Shares of Common Stock

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

WERBEL-ROTH
SECURITIES, INC.

, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

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

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

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any charter provision, by-law, contract, arrangement,
statute or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. See Item 28.

Item 25. Other Expenses of Issuance and Distribution.

The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered (other than
underwriting discounts and commissions and the Representative's non-accountable
expense allowance) are as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee ................... $ 5,524.04
NASD filing fee ....................................................... 2,372.59
Nasdaq listing fee .................................................... 10,000.00
Underwriter's consulting fee .......................................... 123,000.00
Printing and engraving expenses ....................................... 75,000.00
Legal fees and expenses ............................................... 150,000.00
Accounting fees and expenses .......................................... 124,000.00
Blue sky fees and expenses (including legal fees) ..................... 50,000.00
Transfer agent, warrant agent and registrar fees and expenses ......... 3,500.00
Miscellaneous ......................................................... 6,603.37
-----------
Total ..................................................... ......... $550,000.00
</TABLE>

II-1

<PAGE>

Item 26. Recent Sales of Unregistered Securities

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

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

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

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

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

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

Item 27. Exhibits

<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Agreement Among Underwriters
1.3 Form of Selected Dealer Agreement
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Bylaws of the Registrant, as amended.
4.1 Form of Underwriter's Warrant Agreement, including Form of Warrant Certificate.
4.2 Form of Public Warrant Agreement.
4.3 Form of Registrant's Public Warrant Certificate.
5.1 Opinion of Tenzer Greenblatt LLP.
10.1 Exchange Agreement.
10.2 Promissory Note issued by Registrant to Mr. Feinberg, amended.
10.3 Promissory Note issued by Registrant to Mr. Cole-Hatchard, as amended.
10.4 Promissory Note issued by Registrant to Mr. Char.
10.5 1997 Stock Option Plan.
10.6 Office Lease between Registrant and Glorious Sun Robert Martin LLC.
10.7 Employment Agreements with Messrs. Morris, Cole-Hatchard, Feinberg and Olbermann.
10.8 Promissory Note issued to Mr. Cole-Hatchard.
10.9 Form of Lock-up Agreement.
10.10 Consulting Agreement with Representative.
10.11 Consulting Agreement with Mr. Schapss.
10.12 Settlement Agreement with Mr. Char.
23.1 Consent of BDO Seidman LLP, Independent Certified Public Accountants.*
23.2 Consent of Tenzer Greenblatt LLP (filed as Exhibit 5.1).
24.1 A power of attorney relating to the signing of amendments hereto is incorporated in the signa-
ture pages of this Registration Statement.
27 Financial Data Schedule (SEC use only).
</TABLE>

- ------------
* Filed herewith.

II-2
<PAGE>

Item 28. Undertakings.

The undersigned registrant hereby undertakes to:

(1) file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

(i) include any prospectus required by section 10(a)(3) of the
Securities Act.

(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information set forth in
the Registration Statement;

(iii) include any additional or changed material information on the plan
of distribution;

(2) for determining liability under the Securities Act, treat each such
post-effective amendment as a new registration of the securities offered, and
the offering of such securities at that time to be initial bona fide offering;
and

(3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the termination of the offering.

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

The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the standby under writing agreement
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for the
purpose of determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this Registration Statement as of the time
the Securities and Exchange Commission declares it effective; and (3) that for
the purpose of determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of Prospectus as a new
Registration Statement for the securities offered in the Registration Statement
therein, and treat the offering of the securities at that time as the initial
bona fide offering of those securities.

II-3
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized Amendment No. 3
to this Registration Statement to be signed on its behalf by the undersigned,
in the city of Pearl River, State of New York on May 4, 1998.

FRONTLINE COMMUNICATIONS CORPORATION

By: /s/ Stephen J. Cole-Hatchard
------------------------------------
Stephen J. Cole-Hatchard, Chairman

In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------- ---------------------------------------------- -------------
<S> <C> <C>
/s/ Stephen J.Cole-Hatchard Chairman of the Board, President, Chief May 4, 1998
- --------------------------- Executive Officer, and Secretary (Principal
Stephen J. Cole-Hatchard Executive, Financial and Accounting Officer)

/s/ Nicko Feinberg Chief Information Officer, Vice President of May 4, 1998
- --------------------------- Technology and Director
Nicko Feinberg

/s/ Michael Olbermann Chief Operating Officer, Vice President and May 4, 1998
- --------------------------- Director
Michael Olbermann

/s/ Ronald Shapss Director May 4, 1998
- ---------------------------
Ronald Shapss

/s/ Ronald C. Signore Director May 4, 1998
- ---------------------------
Ronald C. Signore
</TABLE>

II-4

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No. Description
- ---------- -----------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
1.2 Form of Agreement Among Underwriters
1.3 Form of Selected Dealer Agreement
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Bylaws of the Registrant, as amended.
4.1 Form of Underwriter's Warrant Agreement, including Form of Warrant Certificate.
4.2 Form of Public Warrant Agreement.
4.3 Form of Registrant's Public Warrant Certificate.
5.1 Opinion of Tenzer Greenblatt LLP.
10.1 Exchange Agreement.
10.2 Promissory Note issued by Registrant to Mr. Feinberg, amended.
10.3 Promissory Note issued by Registrant to Mr. Cole-Hatchard, as amended.
10.4 Promissory Note issued by Registrant to Mr. Char.
10.5 1997 Stock Option Plan.
10.6 Office Lease between Registrant and Glorious Sun Robert Martin LLC.
10.7 Employment Agreements with Messrs. Morris, Cole-Hatchard, Feinberg and Olbermann.
10.8 Promissory Note issued to Mr. Cole-Hatchard.
10.9 Form of Lock-up Agreement.
10.10 Consulting Agreement with Representative
10.11 Consulting Agreement with Mr. Schapss
10.12 Settlement Agreement with Mr. Char
23.1 Consent of BDO Seidman LLP, Independent Certified Public Accountants.*
23.2 Consent of Tenzer Greenblatt LLP (filed as Exhibit 5.1).
24.1 A power of attorney relating to the signing of amendments hereto is incorporated in the signa-
ture pages of this Registration Statement.
27 Financial Data Schedule (SEC use only).
</TABLE>

- ------------
* Filed herewith.

<PAGE>

EXHIBIT 23.1

Consent of Independent
Certified Public Accountants

Frontline Communications, Corp.
Pearl River, New York

We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 16, 1998, relating to the
financial statements of Frontline Communications Corp., which is contained in
the Prospectus. Our report contains an explanatory paragraph regarding the
Company's ability to continue as a going concern.

We also consent to the reference to us under the caption "Experts" in the
Prospectus.

/s/ BDO Seidman, LLP
- ------------------
Valhalla, New York

April 30, 1998