VERIO INC, 424B4, 1998-05-12

VERIO INC
424B4, 1998-05-12
COMPUTER PROCESSING & DATA PREPARATION

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<PAGE> 1

Filed pursuant to Rule 424(b)(4)
Registration No. 333-47099

PROSPECTUS

5,500,000 SHARES

[VERIO LOGO]

COMMON STOCK
------------------

All of the shares of Common Stock (the "Shares") offered hereby (the
"Offering") are being sold by Verio Inc. (the "Company" or "Verio"). Prior to
the Offering, there has been no public market for the Common Stock of the
Company. See "Underwriting" for information relating to the factors considered
in determining the initial public offering price. The Common Stock has been
approved for listing on the Nasdaq National Market under the symbol "VRIO."

Nippon Telegraph and Telephone Corporation ("NTT") has agreed to purchase
directly from the Company shares of Common Stock (the "NTT Shares") concurrently
with and conditioned upon the consummation of the Offering in an aggregate
amount equal to the lesser of (i) 12.5% of the total number of outstanding
shares of Common Stock, on a fully diluted and fully converted basis (taking
into account the Offering and the NTT Investment (as defined)) or (ii) the
quotient of $100.0 million divided by 96.75% of the Price to Public in the
Offering. See "Business -- NTT Strategic Relationship."

The Company has filed a registration statement on Form S-4 with the
Securities and Exchange Commission with respect to exchange offers for its 1997
Notes (as defined) and its 1998 Notes (as defined). See "Additional
Information."

PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS DISCUSSED UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 9.
------------------
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.

<TABLE>
<CAPTION>
=========================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $23.00 $1.50 $21.50
- ---------------------------------------------------------------------------------------------------------
Total(3) $126,500,000 $8,250,000 $118,250,000
=========================================================================================================
</TABLE>

(1) For information regarding indemnification of the Underwriters see
"Underwriting."

(2) Before deducting expenses payable by the Company, estimated at
$1,250,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase
up to an aggregate of 825,000 additional shares of Common Stock solely to
cover over-allotments, if any. See "Underwriting." If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $145,475,000, $9,487,500 and
$135,987,500, respectively.

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

The Shares are being offered by the several Underwriters named herein,
subject to prior sale, when, as and if accepted by them and subject to certain
conditions. It is expected that certificates for the Shares offered hereby will
be available for delivery on or about May 15, 1998 at the offices of Smith
Barney Inc., 333 West 34th Street, New York, New York 10001.

SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

May 11, 1998

<PAGE> 2

[NETWORK MAP]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SHARES, INCLUDING
ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE> 3

PROSPECTUS SUMMARY

The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information, including the Company's Consolidated
Financial Statements and notes thereto and the Unaudited Pro Forma Condensed
Combined Financial Statements and notes thereto, each as contained herein.
Unless otherwise indicated, the information in this Prospectus (i) reflects an
initial public offering price of $23.00 per share, (ii) assumes that the
Underwriters' over-allotment option will not be exercised, (iii) gives effect to
the conversion of the Company's Series A, Series B, Series C and Series D-1
Preferred Stock, (iv) gives effect to provisions of the Company's amended
Certificate of Incorporation, which automatically will take effect upon the
consummation of the Offering, and (v) gives effect to the NTT Investment (as
defined). Unless the context otherwise requires, references herein to (i)
"Verio" or the "Company" are to Verio Inc., a Delaware corporation (formerly
known as World-Net Access, Inc.), and its subsidiaries, and (ii) the "Verio
ISPs" are to those Internet service providers in which Verio has a direct or
indirect equity investment, including subsidiaries and minority investments.
Information concerning those entities in which the Company does not have a
majority interest has been provided by those entities and is believed by the
Company to be accurate. Verio and the Verio logo are trademarks of the Company.
This Prospectus may contain trademarks, trade names and service marks of other
parties. Capitalized terms used in this Prospectus, which are not otherwise
defined herein, have the respective meanings ascribed to them in "Glossary of
Terms." See "Risk Factors -- Forward-Looking Statements" for certain information
relating to statements contained in this Prospectus that are not historical
facts.

THE COMPANY

Verio is a leading national provider of Internet connectivity and enhanced
Internet services to small and medium sized businesses. Since its inception in
March 1996, the Company has rapidly established a national presence through the
acquisition, integration, and growth of local Internet service providers
("ISPs") with a business customer focus. Verio believes that small and medium
sized businesses represent an attractive target market for the provision of
Internet services due to this market's low current penetration levels and
customer churn rates, and the expanding Internet needs of these businesses.
Because of their limited internal technical resources, small and medium sized
businesses also typically require hands-on local support and highly reliable
turnkey solutions for mission critical applications. Verio further believes that
these needs currently are underserved by both the national and local ISPs. While
national ISPs lack the local presence to provide customized, hands-on service,
local ISPs typically lack the scale and resources required to provide dedicated,
high-capacity Internet access, around-the-clock support and tailored product
offerings at competitive prices.

The Company believes it has a unique competitive advantage in serving small
and medium sized business customers through the combination of the technical
competency, hands-on support and entrepreneurial culture of locally based ISPs
with the quality and economic efficiency of Verio's national network,
operational infrastructure and financial strength. Verio has quickly built
critical mass by acquiring the stock or assets of, or making significant
investments in, over 35 ISPs that provide a comprehensive range of Internet
connectivity and enhanced products and services to over 100,000 customer
accounts in 36 of the top 50 Metropolitan Statistical Areas ("MSAs") in the
country, with combined revenues of approximately $25.0 million for the three
months ended December 31, 1997. The Company integrates and optimizes the
operations of its ISPs by consolidating their operations into regional operating
units with centralized regional management, connecting their local networks to
Verio's high-speed, highly reliable national backbone, and providing them with
Verio's integrated national support services.

Total ISP revenues in the United States are projected to grow from $3.3
billion in 1996 to $18.3 billion in 2000, according to International Data
Corporation ("IDC"). Industry analysts have reported that small and medium sized
businesses represent a potential market of over seven million customers in the
United States, and use of the Internet by this market segment is expected to
grow substantially from its current low level of market penetration. IDC
predicts that dedicated connections to the Internet for small and medium sized
businesses will grow from approximately 90,000 in 1996 to just under 800,000 in
2000, representing a 73% compounded annual growth rate. Small and medium sized
businesses generally seek an ISP with locally based personnel who are readily
available to respond in-person to technical issues, who can assist in developing
and implementing the customer's effective use of the Internet, and with whom
they can establish a stable and
3
<PAGE> 4

long-term relationship. In addition, they are increasingly reliant on enhanced
product offerings that address their specific business needs on a cost-effective
basis, allowing them to compete with larger companies. For example, IDC
estimates Web hosting revenues from small and medium sized businesses will grow
from $84 million in 1996 to over $3.4 billion in 2000, representing 95% of the
total Web hosting market.

The rapid development and growth of the Internet has resulted in a highly
fragmented industry of over 4,000 national and local ISPs in the United States,
with no dominant ISP serving the needs of small and medium sized businesses.
Independent regional and local ISPs have successfully captured approximately
one-half of this market, despite the substantially greater resources of the
national providers. However, rising costs and increasing demands from business
customers have made it more difficult for the small ISP to meet its customer's
demands on a cost-effective basis. Facing these competitive pressures, Verio
believes that independent regional and local ISPs will continue to be attracted
to and benefit from the consolidation opportunity provided by Verio.

The goal of the Company is to be the premier, full-service national
provider of Internet connectivity and enhanced Internet services to small and
medium sized businesses. Key elements of the Company's strategy in accomplishing
this goal are to: (a) continue its role as the leading consolidator of
independent ISPs by acquiring additional local and regional ISPs focused on the
Company's target market; (b) integrate the operations of its ISPs and capture
operational economies of scale by leveraging its national infrastructure and
support services; (c) develop and offer additional high-margin enhanced services
to increase revenues from existing and future customers; and (d) build customer
loyalty and gain market share by expanding the Company's local technical,
distribution and service capabilities and establishing national Verio brand name
recognition.

Verio owns and operates a national network, providing a high bandwidth,
highly reliable data transmission path connecting Verio's customers to the
Internet. The Company's national network architecture is based on a combination
of Asynchronous Transfer Mode ("ATM") and clear channel circuits operating at
DS-3 and OC-3 speeds. The network interconnects more than 15 national nodes and
over 180 local points of presence ("POPs") across the United States. The Company
believes that aggregating the bandwidth and capacity requirements of each Verio
ISP onto one national network provides operational control and efficiency,
reduces costs, provides redundancy, and results in a higher quality service,
thereby addressing some of the most significant challenges that an ISP faces in
supporting its customers. The reliability of the national network is the result
of many factors, including redundant routers and other critical hardware,
carrier class facilities at POP locations (such as back up power, fire
suppression and climate control), and redundant telecommunications lines.
Verio's national infrastructure incorporates several other elements critical to
maintaining the highest quality Internet service, such as peering relationships
with other national ISPs, sophisticated network management tools, and a
comprehensive range of national services to support its regional operations.
These services include 7-day X 24-hour customer technical support, financial
information management through a central, standardized accounting system, a
sophisticated billing and collections system, and national marketing and product
development programs. The Company continues to rollout its national
infrastructure and support services to its ISPs. Of the over 35 ISPs acquired as
of April 1998, 16 invoiced their customers through Verio's national billing
service, 23 took advantage of Verio's customer technical support, 27 were linked
to Verio's national backbone, 19 utilized Verio's national accounting system,
and the network operations of 18 of these ISPs were monitored by Verio's
national Network Operations Center ("NOC").

Verio believes that a critical factor in the successful implementation of
its business strategy is the quality of its management team and Board of
Directors. The Company's senior management team and Board of Directors have
previously successfully executed similar consolidation strategies and have
considerable experience in the management and growth of recurring revenue-based
telecommunications businesses. Management believes that its experience in the
deployment of similar systems and services in other emerging telecommunications
industries can be leveraged to significantly improve the quality of services
currently available in the Internet service industry.

4
<PAGE> 5

RECENT DEVELOPMENTS

Since December 31, 1997, the Company has completed the acquisition of all
of the remaining equity (each, a "Buyout") of 10 of the ISPs in which Verio did
not initially acquire 100% ownership. Verio is in the process of integrating the
ISPs it has acquired in each region into regional operating units to capture and
promote operational and management efficiencies and economies of scale. On March
12, 1998, the Company announced the consolidation of the Verio ISPs' operations
and marketing efforts under the Verio brand name.

The Company continues to evaluate additional ISPs for investment or
acquisition. Since December 31, 1997, the Company has acquired six ISPs, of
which two expand the Company's Midwest presence, one joined the Northern
California region, two joined the Northeast operations, and one is located in
Florida and is the Company's first acquisition in the Southeast region. As a
result of these further acquisitions, the Company now serves 36 of the top 50
MSAs in the U.S. In addition, the Company has executed non-binding letters of
intent to acquire three additional ISPs which, if acquired, would further
enhance the Company's market presence in the Midwest, Northeast and Southeast
regions, and is continuing to aggressively seek and evaluate further acquisition
candidates. While the Company expects that, from time to time in the future, it
will enter into additional acquisition agreements, there can be no assurance as
to the number, timing or size of future acquisitions, if any, or the effect any
such acquisitions would have on the Company's operating or financial results.

Mark D. Johnson, who served as the Company's President, Chief Operating
Officer and a director of the Company, died on March 9, 1998. While Mr. Johnson
played an important role in overseeing the Company's operations, the Company
does not expect that his death will adversely affect the Company's operations,
growth or financial prospects because of the strength of the Company's core
management team. Justin L. Jaschke, Verio's Chief Executive Officer, has been
appointed to serve as President of the Company and has assumed Mr. Johnson's
responsibilities on behalf of the Company while Verio conducts an executive
search to fill the positions that were held by Mr. Johnson.

On March 25, 1998, the Company consummated the sale of $175.0 million
principal amount of 10 3/8% Senior Notes due 2005 (the "1998 Notes"). In
connection with the sale of the 1998 Notes, the Company repurchased the $50.0
million principal amount of the Company's 13 1/2% Senior Notes due 2004 (the
"1997 Notes") held by Brooks Fiber Properties, Inc. ("Brooks") (the
"Refinancing") for an aggregate net purchase price of approximately $54.5
million, plus accrued interest. See "Certain Transactions."

On March 31, 1998, the Company signed a long-term agreement with Qwest
Communications Corporation ("Qwest") to purchase long haul capacity and
ancillary services on Qwest's planned 16,285 mile MacroCapacity(SM) Fiber
Network. Over the first seven years of the agreement, Verio has committed to
purchase, and Qwest has committed to provide, not less than $100.0 million of
capacity and services at agreed upon prices. See "Management's Discussion and
Analysis of Financial Condition and Result of Operations -- Costs and Expenses"
and "Business -- Verio National Network." The Company will have the right to
prepay its commitment under the agreement. The Company also may order capacity
and services in excess of the commitment level, and after the seven-year
commitment term, at the agreed upon prices.

On April 6, 1998, Verio signed a credit agreement providing for a $57.5
million revolving credit facility (the "Bank Facility"). The Chase Manhattan
Bank serves as agent for the lenders in the Bank Facility. The Company has drawn
no funds to date under the Bank Facility.

On April 7, 1998, the Company executed agreements establishing a strategic
relationship with NTT. These agreements provide for an investment by NTT or one
of its affiliates in the Company (the "NTT Investment"), concurrent with and
conditioned upon the consummation of the Offering in an aggregate amount equal
to the lesser of (i) 12.5% of the total number of outstanding shares of Common
Stock, on a fully diluted and fully converted basis (taking into account the
Offering and the NTT Investment) or (ii) the quotient of $100.0 million divided
by 96.75% of the Price to Public in the Offering. Verio also executed a
commercial services agreement with NTT's U.S. affiliate, NTT America, Inc. ("NTT
America"), under which Verio will be designated as the preferred provider of
Internet access and related services to customers of NTT America on a reseller
basis. Verio and NTT will connect their backbones and establish a peering and
transit relationship. In conjunction with its equity investment, NTT will be
entitled to designate one member to serve on the Company's Board of Directors.
See "Business -- NTT Strategic Relationship" and "Principal Stockholders -- NTT
Investment."

5
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PRELIMINARY RECENT QUARTERLY RESULTS

The Company expects to report revenue of approximately $21.2 million, loss
from operations of approximately $14.7 million, and a net loss attributable to
Common Stock of approximately $28.4 million for the quarter ended March 31,
1998, compared to total revenue of $13.4 million, loss from operations of $15.1
million, and a net loss attributable to Common Stock of $20.8 million for the
quarter ended December 31, 1997. These March 31, 1998 quarterly results have
been estimated based on preliminary information, and may vary from the final
results to be reported by the Company. The Company's estimated revenue growth of
approximately $7.8 million during the first quarter of 1998 is attributable
primarily to acquisitions completed at the end of 1997, Buyouts and acquisitions
completed during the first quarter of 1998, and internal growth. The Company's
expected net loss attributable to Common Stock for the quarter ended March 31,
1998, includes an extraordinary charge of approximately $10.1 million incurred
in connection with the Refinancing, as well as depreciation and amortization
expenses of approximately $6.4 million (an increase of approximately $2.5
million over the quarter ended December 31, 1997), as a result of the Company's
additional acquisitions and investments in capital assets.

The Company's headquarters is located at 8005 South Chester Street, Suite
200, Englewood, Colorado 80112. The Company's phone number is (303) 645-1900.

THE OFFERING

Common Stock offered by the
Company............................. 5,500,000 shares.

Common Stock to be outstanding after
the Offering........................ 32,064,323 shares(1).

Use of Proceeds..................... The Company will receive approximately
$117.0 million of net proceeds (after
deducting the Underwriters' discounts
and commissions and estimated expenses
related to the Offering) from the
Offering. The Company also will receive
approximately $100.0 million in cash
from the sale of the NTT Shares. The
net combined proceeds received by the
Company are expected to be used to
further the Company's acquisition and
investment strategy, to continue the
development and implementation of the
national backbone, customer care
center, network operations center and
billing and accounting services, and to
fund the Company's general working
capital requirements. See "Use of
Proceeds."

Nasdaq National Market Symbol....... VRIO

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

(1) Includes: (i) 1,294,266 shares of Common Stock outstanding at April 24,
1998; (ii) 18,561,667 shares of Common Stock issuable upon conversion of the
Series A, B and C Preferred Stock outstanding at April 24, 1998; (iii)
2,214,513 shares of Common Stock issuable upon conversion of the Series D-1
Preferred Stock issued in connection with acquisitions and Buyouts completed
as of April 24, 1998; and (iv) 4,493,877 shares of Common Stock to be sold
by the Company to NTT for approximately $100.0 million concurrently with the
Offering. Excludes: (i) up to 9,200,000 shares of Common Stock that,
effective upon the consummation of the Offering, will be reserved for
issuance under the Company's employee stock option plans, of which 4,063,340
shares were issuable upon exercise of outstanding options as of April 24,
1998 at a weighted average exercise price of $10.05 per share; (ii)
2,112,480 shares of Common Stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $.01 per share; (iii)
3,000,000 shares of Common Stock reserved for issuance under the Company's
1998 Employee Stock Purchase Plan; and (iv) 300,000 shares of Common Stock
reserved for issuance under the Company's 1998 Non-Employee Director Stock
Incentive Plan. See Notes to Consolidated Financial Statements.

6
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share amounts)

The summary historical consolidated financial data as of and for the period
from inception (March 1, 1996) to December 31, 1996 and as of and for the year
ended December 31, 1997 have been derived from the audited Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.

The information set forth below should be read in conjunction with the
Unaudited Pro Forma Condensed Combined Financial Statements and the historical
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this Prospectus. Results of operations for the year ended December
31, 1997 are not necessarily indicative of results of operations for future
periods. The Company's development and expansion activities, including
acquisitions, during the periods shown below may significantly affect the
comparability of this data from one period to another. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)(2)
----------------------------------- ---------------
PERIOD FROM
INCEPTION YEAR ENDED YEAR ENDED
(MARCH 1, 1996) TO DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 1997 1997
------------------ ------------ ---------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue............................... $ 2,365 $ 35,692 $ 88,265
Total costs and expenses.................... 8,645 75,981 146,126
-------- ---------- -----------
Loss from operations........................ $ (6,280) $ (40,289) $ (57,861)
======== ========== ===========
Net loss attributable to common
stockholders.............................. $ (5,145) $ (46,329) $ (64,131)
======== ========== ===========
Loss per common share -- basic and
diluted................................... $ (5.29) $ (40.47) $ (2.90)
======== ========== ===========
Weighted average common shares
outstanding -- basic and diluted.......... 971,748 1,144,685 22,090,352
OTHER DATA:
EBITDA(3)................................... $ (5,611) $ (29,665) $ (31,950)
Capital expenditures(4)..................... 3,430 14,547
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
<S> <C> <C> <C> <C>
QUARTERLY STATEMENT OF OPERATIONS DATA:
Total revenue........................................... $ 4,414 $ 8,249 $ 9,624 $ 13,405
Total costs and expenses................................ 10,006 17,103 20,365 28,507
------- ------- -------- ----------
Loss from operations.................................... $(5,592) $(8,854) $(10,741) $ (15,102)
======= ======= ======== ==========
Net loss attributable to common stockholders............ $(4,677) $(8,120) $(12,762) $ (20,770)
======= ======= ======== ==========
OTHER DATA:
EBITDA(3)............................................... $(4,346) $(6,306) $ (7,798) $ (11,215)
======= ======= ======== ==========
</TABLE>

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<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(1) AS ADJUSTED(5)
---------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 72,586 $155,304 $372,304
Restricted cash and securities.......................... 40,554 27,822 27,822
Goodwill, net........................................... 83,216 152,241 152,241
Total assets............................................ 246,471 394,997 611,997
Long-term debt and capital lease obligations, net of
current portions...................................... 142,321 272,694 272,694
Redeemable preferred stock.............................. 97,249 -- --
Stockholders' equity (deficit).......................... (27,001) 85,704 302,704
</TABLE>

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

(1) Pro forma for the Completed Acquisitions (as defined in the Company's
Unaudited Pro Forma Condensed Combined Financial Statements) as if they had
occurred on December 31, 1997 for balance sheet purposes and on January 1,
1997 for statement of operations data purposes, for the conversion of the
Preferred Stock into Common Stock upon completion of the Offering, and for
the proceeds from the sale of the 1998 Notes and the application of the
proceeds therefrom to effect the Refinancing and to reflect the
extraordinary charge of approximately $10.1 million for the loss on early
extinguishment of $50.0 million of the 1997 Notes. See "Unaudited Pro Forma
Condensed Combined Financial Statements."

(2) Pro forma interest expense, including amortization of debt issuance costs,
assuming that the 1998 Notes had been issued on January 1, 1997 and after
giving effect to the Refinancing, totaled $27.5 million for the year ended
December 31, 1997.

(3) EBITDA represents earnings (loss) from operations before interest, taxes,
depreciation, amortization and provision for loss on write-offs of
investments in ISPs and fixed assets. The primary measure of operating
performance is net earnings (loss). Although EBITDA is a measure commonly
used in the Company's industry, it should not be construed as an alternative
to net earnings (loss), determined in accordance with generally accepted
accounting principles ("GAAP"), as an indicator of operating performance or
as an alternative to cash flows from operating activities, determined in
accordance with GAAP. In addition, the measure of EBITDA presented herein by
the Company may not be comparable to other similarly titled measures of
other companies.

(4) Excludes equipment and leasehold improvements acquired in business
acquisitions.

(5) As adjusted to give effect to (i) the Offering after deducting the
Underwriters' discounts and commissions and estimated expenses, and (ii) the
sale of 4,493,877 shares of Common Stock to NTT for approximately $100.0
million concurrently with the Offering.

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<PAGE> 9

RISK FACTORS

Prospective purchasers of the Shares should carefully consider the
following risk factors, as well as the other information contained in this
Prospectus before making an investment in the Shares. This Prospectus contains
statements which constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The safe
harbor provisions provided in Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), do not apply to forward-looking
statements made in connection with an initial public offering. These statements
appear in a number of places in this Prospectus and include statements regarding
the intent, belief or current expectations of the Company, its directors or its
officers primarily with respect to the future operating performance of the
Company. Prospective purchasers of the Shares are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those in the forward-looking statements as a result of various factors. The
accompanying information contained in this Prospectus, including the information
set forth below, identifies important factors that could cause such differences.
See "-- Forward-Looking Statements" below.

HISTORY OF LOSSES; NO ASSURANCE OF PROFITABILITY

The Company was formed in March 1996. The Company has incurred net losses
since its inception, and management expects to incur significant additional
losses as the Company continues its investment and acquisition program as well
as the building of its national network operations. Prospective investors have
limited operating and financial data about the Company upon which to base an
evaluation of the Company's performance and an investment in the Shares offered
hereby. For the period from inception to December 31, 1996 and the year ended
December 31, 1997, the Company reported net losses of $5.1 million and $46.3
million, respectively. From inception through December 31, 1997, the Company
reported cumulative cash used by operating activities of $37.6 million. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company expects to generate negative operating cash flow for at
least the next several years while it continues to acquire and invest in ISPs.
The extent to which the Company experiences negative cash flow will depend upon
a number of factors including the number and size of its acquisitions and
investments, the ability to generate increasing revenues and cash flow, the
amount of expenditures incurred at the corporate and national level, and any
potential adverse regulatory developments. The Company will be dependent on
various financing sources to fund its growth as well as continued losses from
operations. There can be no assurance that the Company will achieve or sustain
positive operating cash flow or generate net income in the future. To achieve
profitability, the Company must, among other things, develop and market products
and services which are accepted on a broad commercial basis. Given the Company's
limited operating history, there can be no assurance that the Company will ever
achieve broad commercial acceptance or profitability. See "-- Competition;
Pricing Fluctuation," "-- Dependence on the Internet; Uncertain Adoption of
Internet as Medium of Commerce and Communications" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." The Company's profitability also will be affected as a
result of the Company's recording of compensation expense in an aggregate amount
of approximately $10.6 million in connection with the granting of options
subsequent to February 28, 1998, which compensation expense will be recorded
over the forty-eight month vesting period of those options. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Stock-Based Compensation."

SUBSTANTIAL INDEBTEDNESS; EFFECT OF FINANCIAL LEVERAGE

The Company has indebtedness that is substantial in relation to its
stockholders' equity and cash flow. As of December 31, 1997, the Company had an
aggregate of approximately $142.3 million of long-term indebtedness outstanding,
representing 67% of total capitalization. After giving effect to the recent sale
of $175.0 million of the Company's 1998 Notes, the Offering and the NTT
Investment, long-term indebtedness would represent 47% of total capitalization.
In addition, the Company recently signed the Bank Facility providing for $57.5
million of revolving credit. See "-- Requirements for Additional Capital." As a
result of

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the substantial indebtedness of the Company, fixed charges of the Company are
expected to exceed its earnings for the foreseeable future. Substantial leverage
poses the risk that the Company may not be able to generate sufficient cash flow
to service its indebtedness, or to adequately fund its operations. The Company
has experienced a substantial decrease in EBITDA, from negative $5.6 million in
the 1996 Period (as defined) to negative $29.7 million in 1997. EBITDA as a
percentage of revenue improved from negative 237% to negative 83% from the 1996
Period to the year ended December 31, 1997. However, there can be no assurance
that this trend will continue, or that the Company will be able to increase its
revenue and leverage the investments it has made in national services and
systems, the national network, and the operating overhead of the Verio ISPs, to
achieve sufficient cash flow to meet its debt service obligations. In
particular, there can be no assurance that the Company's operating cash flow
will be sufficient to pay the $13.5 million in annual interest (beginning in
June 2000 following the termination of the interest escrow arrangement for the
1997 Notes) on the $100.0 million principal amount of 1997 Notes outstanding
after the Refinancing, to pay the $18.2 million in annual interest on the 1998
Notes, or to meet its debt service obligations under the Bank Facility, if drawn
upon. The leveraged nature of the Company also could limit the ability of the
Company to effect future financings or may otherwise restrict the Company's
operations and growth.

REQUIREMENTS FOR ADDITIONAL CAPITAL

The Company's operations have required and will continue to require
substantial capital for investments in ISP operations, including the acquisition
of or investments in additional ISPs, the deployment of the Company's national
network and infrastructure and the funding of capital expenditures for expansion
of services and operating losses. The Company may need additional amounts to
fund its operating losses and those of the Verio ISPs, which amounts cannot be
determined. Over the longer term, it is likely that the Company will require
substantial additional funds to continue to fund the Company's investment and
acquisition program as well as product development, marketing, sales and
customer support capabilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

The Company expects to meet its additional capital needs with the proceeds
from sales or issuance of equity securities, credit facilities and other
borrowings, lease financings, and sales of additional debt securities. The
failure to raise and generate sufficient funds may require the Company to delay
or abandon some of its planned future expansion or expenditures, which could
have a material adverse effect on the Company's growth and its ability to
compete in the Internet industry. No assurance can be given that the Company
will have sufficient cash flow available to maintain its current or future
growth plans or operations.

FLUCTUATIONS IN OPERATING RESULTS

The Company's operating results have fluctuated in the past and may in the
future fluctuate significantly depending upon a variety of factors, including
the incurrence of capital costs and the introduction of value-added enhanced
services and new services by the Company. Additional factors that may contribute
to variability of operating results include: the pricing and mix of services
offered by the Company; the Company's customer retention rate; changes in
pricing policies and product offerings by the Company's competitors; growth in
demand for network and Internet access services; the incurrence of one-time
costs associated with regional consolidation; and general telecommunications
services' performance and availability. The Company has also experienced
seasonal variation in Internet use and, therefore, revenue streams may fluctuate
accordingly. In response to competitive pressures, the Company may take certain
pricing or marketing actions that could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"-- Competition; Pricing Fluctuation." As a result, variations in the timing and
amounts of revenues could have a material adverse effect on the Company's
quarterly operating results. Due to the foregoing factors, the Company believes
that period-to-period comparisons of its operating results are not necessarily
meaningful and that such comparisons cannot be relied upon as indicators of
future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

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COMPETITION; PRICING FLUCTUATION

The market for Internet connectivity and related services is extremely
competitive. The Company anticipates that competition will continue to intensify
as the use of the Internet grows. The tremendous growth and potential market
size of the Internet access market has attracted many new start-ups as well as
existing businesses from different industries. Current and prospective
competitors include, in addition to other national, regional and local ISPs,
long distance and local exchange telecommunications companies, cable television
companies, direct broadcast satellite and wireless communications providers, and
on-line service providers. The Company believes that a reliable national
network, knowledgeable salespeople and the quality of technical support
currently are the primary competitive factors in the Company's targeted market,
and that price is usually secondary to these factors.

The Company's current primary competitors include other ISPs with a
significant national presence which focus on business customers, such as UUNet,
GTE Internetworking (formerly BBN), PSINet, Concentric Network and DIGEX. While
the Company believes that its level of local service and support and target
market focus distinguish it from these competitors, some of these competitors
have a significantly greater market presence, brand recognition, and financial,
technical and personnel resources than the Company, and have extensive
coast-to-coast Internet backbones. The Company also competes with unaffiliated
regional and local ISPs in its targeted geographic regions.

All of the major long distance companies (also known as interexchange
carriers or IXCs), including AT&T, MCI, and Sprint, offer Internet access
services and compete with the Company. The recent sweeping reforms in the
federal regulation of the telecommunications industry have created greater
opportunities for local exchange carriers ("LECs"), including the Regional Bell
Operating Companies ("RBOCs"), to enter the Internet connectivity market. In
order to address the Internet connectivity requirements of the current business
customers of long distance and local carriers, the Company believes that there
is a move toward horizontal integration through acquisitions of, joint ventures
with, and the wholesale purchase of connectivity from, ISPs. The
WorldCom/MFS/UUNet consolidation, the NETCOM/ICG merger, the Intermedia/DIGEX
merger and GTE's acquisition of BBN are indicative of this trend. Accordingly,
Verio expects that it will experience increased competition from the traditional
telecommunications carriers. Many of these telecommunications carriers, in
addition to their substantially greater network coverage, market presence, and
financial, technical and personnel resources, also have large existing
commercial customer bases. Furthermore, telecommunications providers may have
the ability to bundle Internet access with basic local and long distance
telecommunications services. Such bundling of services may have an adverse
effect on the Company's ability to compete effectively with the
telecommunications providers and may result in pricing pressure on the Company
that would have an adverse effect on the Company's business, financial condition
and results of operations.

Many of the major cable companies have announced that they are exploring
the possibility of offering Internet connectivity, relying on the viability of
cable modems and economical upgrades to their networks. MediaOne Group and TCI
have recently announced trials to provide Internet cable service to their
residential customers in select areas. Several announcements also have recently
been made by other alternative service companies approaching the Internet
connectivity market with various wireless terrestrial and satellite-based
service technologies. These include Hughes Network System's DirecPC that
provides high-speed data through direct broadcast satellite technology; CAI
Wireless System's announcement of an MMDS wireless cable operator launching data
services via 2.5 to 2.7 GHz and high-speed wireless modem technology;
Cellularvision's announcement that it is offering Internet access via high-speed
wireless LMDS technology; and Winstar, which currently offers high-speed
Internet access to business customers over the 38 GHz spectrum.

The predominant on-line service providers, including America Online,
CompuServe, Microsoft Network, and Prodigy, have all entered the Internet access
business by engineering their current proprietary networks to include Internet
access capabilities. The Company competes to a lesser extent with these on-line
service providers.

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<PAGE> 12

Recently, there have been several announcements regarding the planned
deployment of broadband services for high speed Internet access by cable and
telephone companies through new technologies such as cable modems and xDSL.
While these providers have initially targeted the residential consumer, it is
likely that their target markets will expand to encompass the Company's target
markets, which may significantly affect the pricing of the Company's service
offerings.

As a result of an increase in the number of competitors, and vertical and
horizontal integration in the industry, the Company currently encounters and
expects to encounter significant pricing pressure and other competition in the
future. Advances in technology as well as changes in the marketplace and the
regulatory environment are constantly occurring, and the Company cannot predict
the effect that ongoing or future developments may have on the Company or the
pricing of its products and services. See "-- Fluctuations in Operating
Results," "-- Dependence on the Internet; Uncertain Adoption of Internet as a
Medium of Commerce and Communications" and "-- Potential Liability for
Information Disseminated Over Network; Regulatory Matters."

In connection with the OSP Agreement (as defined) between the Company and
NTT, NTT will be entitled to "most favored customer" status and pricing
concessions, though the specific terms of such arrangement have not yet been
negotiated. See "Business -- NTT Strategic Relationship," "Certain
Transactions -- Other Transactions" and "Principal Stockholders -- NTT
Investment."

MANAGEMENT OF GROWTH; INTEGRATION OF ACQUISITIONS AND INVESTMENTS

The Company is currently experiencing a period of rapid expansion with the
acquisition and integration of its ISPs. The rapid growth of the Company's
business and its product and service offerings has placed, and is likely to
continue to place, a significant strain on the Company's managerial, operating,
financial and other resources. The Company's future performance will depend, in
part, upon its ability to manage its growth effectively, which will require that
the Company implement additional management information systems capabilities,
further develop its operating, administrative and financial and accounting
systems and controls, improve coordination between engineering, accounting,
finance, marketing and operations, and hire and train additional personnel.
Failure by the Company to develop adequate operational and control systems or to
attract and retain highly qualified management, financial, technical, sales and
marketing and customer care personnel could materially adversely affect the
Company's ability to integrate the ISPs it has acquired and continues to
acquire. While the Company anticipates that it will recognize various economies
and efficiencies of scale as a result of the Buyouts and the integration of the
businesses of the ISPs it has acquired, the process of consolidating the
businesses and implementing the strategic integration of the Company and its
ISPs, even if successful, may take a significant period of time, will place a
significant strain on the Company's resources, and could subject the Company to
additional expenses during the integration process. Furthermore, the Company's
performance will depend on the internal growth generated through ISP operations.
As a result, there can be no assurance that the Company will be able to
integrate the ISPs it has acquired successfully or in a timely manner in
accordance with its strategic objectives. Failure to integrate its ISPs or to
manage effectively the growth of the Company would have a material adverse
effect on the Company's business, financial condition and results of operations.

DEPENDENCE UPON IMPLEMENTATION OF NETWORK INFRASTRUCTURE; ESTABLISHMENT AND
MAINTENANCE OF PEERING RELATIONSHIPS

The Company's success will depend upon its ability to complete the
implementation of and to continue to expand its national network infrastructure
and support services in order to supply sufficient geographic reach, capacity,
reliability and security at an acceptable cost. The continued development and
expansion of the Company's national network will require that it enter into
additional agreements, on acceptable terms and conditions, with the various
providers of infrastructure capacity and equipment and support services. No
assurance can be given that any or all of the requisite agreements can be
obtained on satisfactory terms and conditions. See "Business -- Verio National
Network -- Peering Relationships."

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In addition, the establishment and maintenance of peering relationships
with other ISPs is necessary in order to exchange traffic with other ISPs
without having to pay transit costs. The basis on which the large national ISPs
make peering available or impose settlement charges is evolving as the provision
of Internet access and related services has expanded and the dominance of a
small group of national ISPs has driven corporate peering policies. Recently,
companies that have previously offered peering have cut back or eliminated
peering relationships and are establishing new, more restrictive criteria for
peering. Furthermore, if increasing requirements associated with maintaining
peering with the major national ISPs develop, the Company may have to comply
with those additional requirements in order to continue to maintain its peering
relationships. The Company also anticipates that future expansions and
adaptations of its network infrastructure may be necessary in order to respond
to growth in the number of customers served, increased demands to transmit
larger amounts of data and changes to its customers' product and service
requirements. The expansion and adaptation of the Company's network
infrastructure will require substantial financial, operational and managerial
resources. There can be no assurance that the Company will be able to expand or
adapt its network infrastructure to meet the industry's evolving standards or
its customers' growing demands and changing requirements on a timely basis, at a
commercially reasonable cost, or at all, or that the Company will be able to
deploy successfully any expanded and adapted network infrastructure. Failure to
maintain peering relationships or establish new ones, if necessary, would cause
the Company to incur additional operating expenditures which would have a
material adverse effect on the Company's business, financial condition and
results of operations.

CHALLENGES OF GROWTH BY ACQUISITIONS

The Company's business strategy is dependent, in part, upon its ability to
continue to successfully identify and acquire ISPs that meet the Company's
investment criteria. The Company is continuing to seek and evaluate qualified
ISP candidates in order to optimize its market presence in the regions it
currently serves, and to expand its focus to encompass the remaining top 50 MSAs
not currently served by Verio. In pursuing these opportunities, the Company may
compete with other communications companies with similar acquisition strategies,
many of which may be larger and have greater financial and other resources than
the Company. Competition for independent ISPs is based on a number of factors,
including price, terms and conditions, size and access to capital, ability to
offer cash, stock, or other forms of consideration and other matters. No
assurance can be given that the Company will be able to successfully identify
suitable ISPs or, once identified, will be able to consummate an acquisition of
or an investment in those targeted ISPs on terms and conditions acceptable to
the Company. See "Business -- The Verio Strategy" and "-- Competition; Pricing
Fluctuation." Further, the Company's ability to consummate transactions with
ISPs that it identifies will require significant financial resources. Failure to
raise and generate sufficient funds may require the Company to delay or abandon
some of its planned future expansion or expenditures, which could have a
material adverse effect on the Company's growth. See "-- Requirements for
Additional Capital."

DEPENDENCE ON KEY PERSONNEL

The Company is highly dependent upon the efforts of its senior management
team, the loss of any of whom could impede the achievement of product
development and marketing objectives and could have a material adverse effect on
the Company. The Company currently is conducting an executive search to fill the
President and Chief Operating Officer roles previously held by Mr. Johnson. The
Company believes that its future success will depend in large part on its
ability to attract and retain qualified technical and marketing personnel for
whom there is intense competition in the areas of the Company's activities.
There can be no assurance that the Company will be able to attract and retain
the personnel necessary for the development and integration of its business.
Delays in hiring such personnel could delay the achievement of development and
marketing objectives. The loss of the services of key personnel or the failure
to attract additional personnel as required could have a material adverse effect
on the Company's business, financial condition and results of operations.

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RISK OF SYSTEM FAILURE

The Company's operations are dependent upon its ability to protect its
network infrastructure against damage from fire, earthquakes, floods, power
loss, telecommunications failures and similar events or to construct networks
that are not vulnerable to the effects of such events. Significant portions of
the Company's computer equipment, including components critical to the operation
of its Internet backbone, are located at the Company's facility in Englewood,
Colorado and the Company's NOC located in Dallas, Texas. Despite precautions
taken by and planned by the Company, the occurrence of a natural disaster or
other unanticipated problem at the Company's NOC or at a number of the Company's
national nodes could cause interruptions in the services provided by the
Company. The failure of a local POP would result in interruption of service to
the customers served by such POP until necessary repairs were effected or
replacement equipment were installed. Additionally, failure of the Company's
telecommunications providers to provide the data communications capacity
required by the Company as a result of natural disaster, operational disruption
or for any other reason could cause interruptions in the services provided by
the Company. Any damage or failure that causes interruptions in the Company's
operations could have a material adverse effect on the Company's business,
financial condition and results of operations.

SECURITY RISKS

Despite the implementation of security measures by the Company, networks
are vulnerable to unauthorized access, computer viruses and other disruptive
problems. ISPs have in the past experienced, and may in the future experience,
interruptions in service as a result of the accidental or intentional actions of
Internet users, current and former employees or others. Unauthorized access
could also potentially jeopardize the security of confidential information
stored in the computer systems of the Company and its customers, which may
result in liability of the Company to its customers and also may deter potential
subscribers. Although the Company intends generally to continue to implement
industry-standard security measures, such measures have been circumvented in the
past, and there can be no assurance that measures implemented by the Company
will not be circumvented in the future. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to the Company's customers which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

DEPENDENCE ON THE INTERNET; UNCERTAIN ADOPTION OF INTERNET AS A MEDIUM OF
COMMERCE AND COMMUNICATIONS

The Company's products and services are targeted toward users of the
Internet, which has experienced rapid growth. As is typical in the case of a new
and rapidly evolving industry characterized by rapidly changing technology,
evolving industry standards and frequent new product and service introductions,
demand and market acceptance for recently introduced products and services are
subject to a high level of uncertainty. In addition, critical issues concerning
the commercial use of the Internet remain unresolved and may impact the growth
of Internet use, especially in the business market targeted by the Company.
Despite growing interest in the many commercial uses of the Internet, many
businesses have been deterred from purchasing Internet access services for a
number of reasons, including, among others, inconsistent quality of service,
lack of availability of cost-effective, high-speed options, a limited number of
local access points for corporate users, inability to integrate business
applications on the Internet, the need to deal with multiple and frequently
incompatible vendors, inadequate protection of the confidentiality of stored
data and information moving across the Internet, and a lack of tools to simplify
Internet access and use. In particular, numerous published reports have
indicated that a perceived lack of security of commercial data, such as credit
card numbers, has significantly impeded commercial exploitation of the Internet
to date, and there can be no assurance that encryption or other technologies
will be developed that satisfactorily address these security concerns. Published
reports have also indicated that capacity constraints caused by growth in the
use of the Internet may, unless resolved, impede further development of the
Internet to the extent that users experience delays, transmission errors and
other difficulties. Further, the adoption of the Internet for commerce and
communications, particularly by those individuals and enterprises which have
historically relied upon alternative means of commerce and communication,
generally requires the understanding and acceptance of a new way of

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conducting business and exchanging information. In particular, enterprises that
have already invested substantial resources in other means of conducting
commerce and exchanging information may be particularly reluctant or slow to
adopt a new strategy that may make their existing personnel and infrastructure
obsolete.

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

In addition, new technologies or industry standards have the potential to
replace or provide lower cost alternatives to the Company's existing products
and services. The adoption of such new technologies or industry standards could
render the Company's existing products and services obsolete and unmarketable.
For example, the Company's services rely on the continued widespread commercial
use of Transmission Control Protocol/Internet Protocol ("TCP/IP"). Alternative
open and proprietary protocol standards that compete with TCP/IP, including
proprietary protocols developed by IBM and Novell, Inc., have been or are being
developed. If the market for Internet access services fails to develop, develops
more slowly than expected, or becomes saturated with competitors, or if the
Internet access and services offered by the Company and its ISPs are not broadly
accepted, the Company's business, operating results and financial condition will
be materially adversely affected.

POTENTIAL LIABILITY FOR INFORMATION DISSEMINATED OVER NETWORK; REGULATORY
MATTERS

The law relating to liability of on-line service providers and ISPs for
information carried on or disseminated through their networks is currently
unsettled. A number of lawsuits have sought to impose such liability for
defamatory speech and infringement of copyrighted materials. Although some
courts have ruled that the 1996 Telecommunications Act immunizes ISPs from
liability for defamatory material carried on their facilities, there can be no
assurance that other courts will take a similar approach. In one case, a state
court held that an on-line service provider could be found liable for defamatory
materials provided through its service, on the ground that the service provider
exercised active editorial control over postings to its service. Other courts
have held that on-line service providers and ISPs may, under certain
circumstances, be subject to damages for copying or distributing copyrighted
materials. Although the Supreme Court has declared the Communications Decency
Act ("CDA") to be unconstitutional as it applies to the transmission of indecent
on-line communications to minors, state and federal statutes continue to
prohibit the on-line distribution of obscene materials. The imposition upon ISPs
or Web server hosts of potential liability for materials carried on or
disseminated through their systems could require the Company to implement
measures to reduce its exposure to such liability. Such measures may require the
expenditure of substantial resources or the discontinuation of certain product
or service offerings, any of which could have a material adverse effect on the
Company's business, operating results and financial condition.

Although the Company is not currently subject to direct regulation by the
Federal Communications Commission (the "FCC") or any other federal or state
agency, changes in the regulatory environment relating to the Internet
connectivity market, including regulatory changes which directly or indirectly
affect telecommunications costs or increase the likelihood or scope of
competition from the RBOCs or other telecommunications companies, could affect
the prices at which the Company may sell its services. For example, proposed
regulations at the FCC would require discounted Internet connectivity rates for
schools and libraries. Also, the FCC is considering whether ISPs should be
required to pay access charges to local telephone companies for each minute that
dial up users spend connected to ISPs through telephone company switches, and
some telephone companies have requested similar relief from state regulatory
commissions. The imposition of access charges would affect the Company's costs
of serving dial up customers and could have a material adverse effect on the
Company's business, operating results and financial condition.
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DEPENDENCE UPON SUPPLIERS; LIMITED SOURCES OF SUPPLY

The Company relies on other companies to supply certain key components of
its network infrastructure, including telecommunications services and networking
equipment which, in the quantities and quality demanded by the Company, are
available only from limited sources. For example, the Company currently relies
on Cisco Systems to supply routers critical to the Company's network, and the
Company could be adversely affected if routers from Cisco were to become
unavailable on commercially reasonable terms. Qwest, Sprint, MCI and MFS, which
are competitors of the Company, are the Company's primary providers of data
communications facilities and network capacity. The Company also is dependent
upon LECs, which often are competitors of the Company, to provide
telecommunications services and lease physical space to the Company for routers,
modems and other equipment. The Company has from time to time experienced delays
in receiving telecommunications services, which can lead to the loss of
customers or prospective customers. There can be no assurance that, on an
ongoing basis, the Company will be able to obtain such services on the scale and
within the time frames required by the Company at a commercially reasonable
cost, or at all. Failure to obtain or to continue to make use of such services
would have a material adverse effect on the Company's business, operating
results and financial condition.

FINANCIAL INFORMATION CONCERNING ACQUISITIONS

The regional ISPs targeted by the Company for acquisition typically do not
have audited financial statements and have varying degrees of internal controls
and detailed financial information. The pro forma financial information in this
Prospectus includes financial information concerning certain recently completed
acquisitions for which audited financial statements are not presently available.
These companies are included in the "Unaudited Pro Forma Condensed Combined
Financial Statements." While the Company believes such information to be
reliable, the Company has only recently acquired certain of these companies.
There can be no assurance that a subsequent audit by the Company will not reveal
matters of significance, including with respect to liabilities, contingent or
otherwise, of these companies. The Company's business strategy involves the
continued and potentially rapid acquisition of additional ISPs. While the
Company is not currently party to any probable acquisition agreements, the
Company currently has entered into non-binding letters of intent to acquire
three ISPs, and is seeking additional acquisition candidates. Accordingly, the
Company expects that, from time to time in the future, it will enter into
additional acquisition agreements, the pro forma effect of which is not known,
cannot be predicted and has not been included herein. The Company's completion
of additional acquisitions may have a material impact on the financial
information set forth herein. There can be no assurance as to the number, timing
or size of future acquisitions, if any, or the effect any such acquisitions
would have on the Company's operating or financial results.

ANTI-TAKEOVER PROVISIONS

Certain provisions of Delaware law and the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), and Bylaws (the
"Bylaws") may have the effect of delaying, deterring or preventing a future
takeover or change in control of the Company unless such takeover or change in
control is approved by the Company's Board of Directors. Such provisions also
may render the removal of directors and management more difficult. Such
provisions could limit the price that certain investors might be willing to pay
in the future for shares of the Company's Common Stock. These provisions of
Delaware law and the Company's Certificate of Incorporation and Bylaws may also
have the effect of discouraging or preventing certain types of transactions
involving an actual or threatened change of control of the Company (including
unsolicited takeover attempts), even though such a transaction may offer the
Company's stockholders the opportunity to sell their stock at a price above the
prevailing market price. The Company's Certificate of Incorporation places
certain restrictions on who may call a special meeting of stockholders. In
addition, the Company's Board of Directors has the authority to issue up to
12,500,000 shares of undesignated preferred stock (the "Undesignated Preferred
Stock") and to determine the price, rights, preferences, and privileges of those
shares without any further vote or actions by the stockholders. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Undesignated Preferred Stock that may be
issued in the future. The issuance of such shares of Undesignated Preferred

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Stock, while potentially providing desirable flexibility in connection with
possible acquisitions and serving other corporate purposes, could have the
effect of making it more difficult for a third party to acquire, or may
discourage a third party from attempting to acquire, a majority of the
outstanding voting stock of the Company. In addition, the Company is subject to
the anti-takeover provisions of Section 203 of the Delaware General Corporation
Law (the "DGCL"), which will prohibit the Company 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. The
application of Section 203 of the DGCL also could have the effect of delaying or
preventing a change of control of the Company. In addition, the Company's
Certificate of Incorporation provides that upon consummation of the Offering the
Board of Directors will be divided into three classes of directors serving
staggered terms and all stockholder actions must be effected at a duly called
meeting and not by a consent in writing. The classification provision and the
prohibition on stockholder action by written consent could have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
gain control of the Company. Additionally, certain federal regulations require
prior approval of certain transfers of control which could also have the effect
of delaying, deferring or preventing a change of control. See "Description of
Capital Stock -- Anti-Takeover Provisions."

In addition, the NTT Investment Agreement (as defined) provides NTT with
the right to designate a member of the Board of Directors, and imposes certain
standstill and other limitations on its ability to make further acquisitions of
the Company's stock, that could have the effect of delaying, deferring or
preventing a change of control. See "Principal Stockholders -- NTT Investment."

DIVIDEND POLICY; RESTRICTION ON PAYMENT OF DIVIDENDS

The Company does not anticipate paying cash dividends in the foreseeable
future. See "Dividend Policy." The Company's ability to pay dividends is limited
by covenants imposed under the indenture, dated June 24, 1997, under which the
1997 Notes were issued (the "1997 Indenture"), the indenture, dated March 25,
1998, under which the 1998 Notes were issued (the "1998 Indenture"), and the
Bank Facility. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

DILUTION

The public offering price may be substantially higher than the tangible
book value of the outstanding Common Stock. Purchasers of Shares in the Offering
will therefore experience immediate and substantial dilution in tangible book
value per share, and the existing stockholders will receive a material increase
in the tangible book value per share of their shares of Common Stock. The
dilution to new investors will be $16.63 per share after giving effect to the
NTT Investment.

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that an active trading market will develop or
be sustained. The offering price has been determined by negotiations between the
Company and the Underwriters and there can be no assurance that the prices at
which the Common Stock will sell in the public market after the Offering will
not be lower than the price at which the Common Stock is sold in the Offering.
See "Underwriting." Historically, the market prices for securities of emerging
companies in the telecommunications industry have been highly volatile. The
trading price of the Common Stock after the Offering could be subject to wide
fluctuations in response to numerous factors, including, but not limited to,
quarterly variations in operating results, competition, announcements of
technological innovations or new products by the Company or its competitors,
product enhancements by the Company or its competitors, regulatory changes, any
differences in actual results and results expected by investors and analysts,
changes in financial estimates by securities analysts and other events or
factors. In addition, the stock market has experienced volatility that has
affected the market prices of equity securities of many companies and that often
has been unrelated to the operating performance of such companies. These broad
market fluctuations may adversely affect the market price of the Common Stock.

17
<PAGE> 18

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering and the NTT Investment, there will be
outstanding 32,064,323 shares of Common Stock (or 32,889,323 shares if the
Underwriters' over-allotment option is exercised in full) of which 26,564,323
will be "restricted shares." The 5,500,000 shares (or up to 6,325,000 shares if
the Underwriters' over-allotment option is exercised in full) of Common Stock
sold in the Offering will be freely tradeable without further restriction or
further registration under the Securities Act, except for shares purchased by an
affiliate (as such term is defined in the Securities Act) of the Company, which
will be subject to the limitations of Rule 144 ("Rule 144") under the Securities
Act. Subject to certain contractual limitations, holders of restricted shares
generally will be entitled to sell these shares in the public securities market
without registration either pursuant to Rule 144 (or Rule 145, as applicable) or
any other applicable exemption under the Securities Act.

Within 90 days of the date of this Prospectus, the Company intends to file
one or more registration statements under the Securities Act to register shares
of Common Stock reserved for issuance under its equity incentive plans. As of
April 24, 1998, options to purchase approximately 4,063,340 shares were
outstanding under the Company's stock option plans.

The Company, its directors and its executive officers, and certain
stockholders, who held, as of April 24, 1998, approximately 20,661,978 shares of
Common Stock (or options to purchase Common Stock that are currently exercisable
or exercisable within 60 days), have agreed not to offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce an offering
of, any shares of Common Stock or any securities convertible into, or
exchangeable for shares of Common Stock for a period of six months from the date
of this Prospectus, without the prior written consent of Smith Barney Inc.,
except under limited circumstances. An additional 12,000 shares of Common Stock
issuable upon exercise of outstanding options, will become saleable after the
six-month lock-up period.

In addition, NTT has agreed not to offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce an offering of, any
NTT Shares for a period of six months from the date of this Prospectus without
the prior written consent of Smith Barney Inc.

In connection with the Buyouts and acquisitions that involved the issuance
of shares of Series D-1 Preferred Stock, the Company has entered into market
standoff agreements with the holders of the Series D-1 Preferred Stock so
issued, which restrictions expire in one-third increments on the six, twelve,
and eighteen month anniversaries of the date of this Prospectus. Following the
six-month, twelve-month and eighteen-month lock-up periods, approximately
738,171, 738,171 and 738,171 additional shares of Common Stock, respectively,
will become immediately saleable, subject to the limitations imposed by Rule 144
which could be applicable to certain holders of such Common Stock.

Sales of a substantial amount of Common Stock in the public market, or the
perception that such sales may occur, could adversely affect the market price of
the Common Stock prevailing from time to time in the public market and could
impair the Company's ability to raise additional capital through the sale of its
equity securities. See "Shares Eligible for Future Sale."

YEAR 2000 COMPLIANCE

Currently, many computer systems and software products are coded to accept
only two digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, many companies' software and computer systems may need to be
upgraded or replaced in order to comply with such "Year 2000" requirements. The
Company and third parties with which the Company does business rely on numerous
computer programs in their day to day operations. The Company is evaluating the
Year 2000 issue as it relates to the Company's internal computer systems and
third party computer systems with which the Company interacts. The Company
expects to incur internal staff costs as well as consulting and other expenses
related to these issues; these costs will be expensed as incurred. In addition,
the appropriate course of action may include replacement or an upgrade of
certain systems or equipment at a substantial cost to the Company. There can be
no assurance that the Year 2000 issues will be

18
<PAGE> 19

resolved in 1998 or 1999. The Company may incur significant costs in resolving
its Year 2000 issues. If not resolved, this issue could have a significant
adverse impact on the Company's business, operating results and financial
condition.

DISCRETIONARY AUTHORITY OVER USE OF NET PROCEEDS

FORWARD-LOOKING STATEMENTS

The statements contained in this Prospectus that are not historical fact
are "forward-looking statements" (as such term is defined in the Reform Act),
which can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," or "anticipates" or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy that involve risks and uncertainties. The safe harbor provisions
provided in Section 27A of the Securities Act and Section 21E of the Exchange
Act do not apply to forward-looking statements made in connection with an
initial public offering. Management wishes to caution the reader that these
forward-looking statements such as the timing, costs and scope of its
acquisition of, or investments in, existing ISPs, the revenue and profitability
levels of the ISPs in which it invests, the anticipated reduction in operating
costs resulting from the integration and optimization of those ISPs, and other
matters contained above and herein in this Prospectus regarding matters that are
not historical facts, are only predictions. No assurance can be given that the
future results indicated, whether expressed or implied, will be achieved. While
sometimes presented with numerical specificity, these projections and other
forward-looking statements are based upon a variety of assumptions relating to
the business of the Company, which, although considered reasonable by the
Company, may not be realized. Because of the number and range of the assumptions
underlying the Company's projections and forward-looking statements, many of
which are subject to significant uncertainties and contingencies that are beyond
the reasonable control of the Company, some of the assumptions inevitably will
not materialize and unanticipated events and circumstances may occur subsequent
to the date of this Prospectus. These forward-looking statements are based on
current expectations, and the Company assumes no obligation to update this
information. Therefore, the actual experience of the Company and results
achieved during the period covered by any particular projections or
forward-looking statements may differ substantially from those projected.
Consequently, the inclusion of projections and other forward-looking statements
should not be regarded as a representation by the Company or any other person
that these estimates and projections will be realized, and actual results may
vary materially. There can be no assurance that any of these expectations will
be realized or that any of the forward-looking statements contained herein will
prove to be accurate.

19
<PAGE> 20

USE OF PROCEEDS

The Company will receive approximately $117.0 million of net proceeds
(after deducting the Underwriters' discounts and commissions and estimated
expenses related to the Offering) from the Offering. The Company also will
receive approximately $100.0 million in cash from the sale of the NTT Shares.
The combined net proceeds are expected to be used to further the Company's
acquisition, Buyout and investment strategy, to continue the development and
implementation of the national backbone, customer care center, network
operations center and billing and accounting services, and to fund the Company's
general working capital requirements. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for a discussion of the
Company's anticipated funding requirements.

Management will retain a significant amount of discretion over the
application of the net proceeds of the Offering. Because of the number and
variability of factors that determine the Company's use of the net proceeds of
the Offering, there can be no assurance that such applications will not vary
substantially from the Company's current intentions. Pending such utilization,
the Company intends to invest the net proceeds of the Offering in investment
grade obligations of corporations, financial institutions and U.S. Government
Securities. See "Risk Factors -- Discretionary Authority Over Use of Net
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

DIVIDEND POLICY

The Company has never declared or paid any dividends on its Common Stock
and does not expect to pay dividends in the foreseeable future. The Company's
current policy is to retain all of its earnings to finance future growth and
acquisitions. Furthermore, the terms of the 1997 Indenture, the 1998 Indenture
and the Bank Facility place limitations on the Company's ability to pay
dividends. Future dividends, if any, will be at the discretion of the Company's
Board of Directors and will depend upon, among other things, the Company's
operations, capital requirements and surplus, general financial condition,
contractual restrictions and such other factors as the Board of Directors may
deem relevant. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

20
<PAGE> 21

CAPITALIZATION
(dollars in thousands)

The following table sets forth at December 31, 1997 (i) the actual
capitalization of the Company, (ii) the pro forma capitalization adjusted for
the Completed Acquisitions and Buyouts, and the conversion of all the
outstanding Preferred Stock into Common Stock upon the completion of the
Offering, and (iii) the pro forma capitalization adjusted to reflect the
Offering, the proceeds from the 1998 Notes, the Refinancing, and the NTT
Investment. This table should be read in conjunction with the Selected
Consolidated Financial Data, the Unaudited Pro Forma Condensed Combined
Financial Statements and the Historical Consolidated Financial Statements and
notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(1) AS ADJUSTED(2)
---------- ------------ --------------
<S> <C> <C> <C>
Cash and cash equivalents................................ $ 72,586 $155,304 $372,304
Restricted cash and securities........................... 40,554 27,822 27,822
======== ======== ========
Long-term debt and capital lease obligations, net of
current portions....................................... 142,321 272,694 272,694
-------- -------- --------
Redeemable preferred stock(3):
Series A, par value $0.001 per share; 6,100,000 shares
authorized: 6,033,333 shares outstanding............ 18,080 -- --
Series B, par value $0.001 per share; 10,117,000 shares
authorized: 10,028,334 shares outstanding........... 59,193 -- --
Series C, par value $0.001 per share; 2,500,000 shares
authorized and outstanding.......................... 19,976 -- --
-------- -------- --------
97,249 -- --
-------- -------- --------
Stockholders equity (deficit):
Preferred stock, Series D-1, par value $0.001 per
share; 3,000,000 shares authorized: 680,000 shares
outstanding (2,384,000 shares pro forma)(3)......... 10,200 -- --
Common stock, par value $0.001 per share; 35,133,000
shares authorized; 1,254,533 shares outstanding
historical; 22,200,200 shares pro forma; 32,194,077
shares pro forma -- as adjusted and additional paid
in capital(4)....................................... 1,598 134,607 351,607
Warrants............................................... 12,675 12,675 12,675
Accumulated deficit.................................... (51,474) (61,578) (61,578)
-------- -------- --------
Total stockholders' equity (deficit)........... (27,001) 85,704 302,704
-------- -------- --------
Total capitalization........................... $212,569 $358,398 $575,398
======== ======== ========
</TABLE>

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

(1) Pro forma for (i) the Completed Acquisitions as if they had occurred on
December 31, 1997, (ii) the conversion of the Preferred Stock into Common
Stock upon completion of the Offering, (iii) 1,704,000 shares of Series D-1
Preferred Stock that as of December 31, 1997 were proposed and assumed to be
issued in connection with acquisitions and Buyouts completed subsequent to
December 31, 1997 as if they had occurred on December 31, 1997 and (iv) the
proceeds from the 1998 Notes and the application of the proceeds therefrom
to effect the Refinancing and to reflect the extraordinary charge of
approximately $10.1 million for the loss on early extinguishment of $50.0
million of the 1997 Notes. See "Unaudited Pro Forma Condensed Combined
Financial Statements."

(2) As adjusted to give effect to (i) the Offering after deducting the
Underwriter's discounts and commissions and estimated expenses, and (ii) the
sale of 4,493,877 shares of Common Stock to NTT for approximately $100.0
million concurrently with the Offering.

(3) All of the shares of the Company's Preferred Stock are convertible into
Common Stock on a one-for-one basis, subject to certain anti-dilution
adjustments. The shares of Series A, B and C Preferred Stock are subject to
mandatory redemption beginning on October 10, 2004, and are subject to
mandatory conversion into Common Stock upon consummation of the Offering.

(4) Includes 1,704,000 shares of Series D-1 Preferred Stock that as of December
31, 1997 were proposed and assumed to be issued in connection with
acquisitions and Buyouts, all of which have been assumed to have been
converted to Common Stock for pro forma and pro forma as adjusted purposes.
Does not include 2,237,050 shares of Common Stock reserved for issuance
pursuant to outstanding stock options, or 2,112,480 shares of Common Stock
issuable upon exercise of outstanding warrants as of December 31, 1997.

21
<PAGE> 22

DILUTION

The net tangible book value (deficit) of the Company at December 31, 1997,
after giving effect to the conversion of the Preferred Stock into Common Stock
which will occur upon completion of the Offering, was ($22.6) million or ($1.11)
per share of Common Stock. "Net tangible book value" per share represents total
tangible assets of the Company less total liabilities, divided by the total
number of shares of Common Stock outstanding. After giving effect to (i) the
sale of 5,500,000 shares of Common Stock offered hereby at a Price to Public of
$23.00 per share, after deducting the underwriting discounts and commissions and
estimated offering expenses, and (ii) the sale of 4,493,877 shares of Common
Stock pursuant to the NTT Investment, the pro forma net tangible book value of
the Company as of December 31, 1997 would be $194.4 million or $6.37 per share.
This represents an immediate increase in net tangible book value of $7.48 per
share to existing stockholders and an immediate dilution of $16.63 per share to
purchasers of Common Stock in the Offering.

<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price per share..................... $23.00
Net tangible book value (deficit) per share before the
Offering(1)............................................ $(1.11)
Increase per share attributable to new investors in the
Offering and the NTT Investment........................ 7.48
------
Net tangible book value per share after the Offering........ 6.37
------
Dilution per share to investors in the Offering............. $16.63
======
</TABLE>

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

(1) Based on 20,496,200 shares of Common Stock outstanding as of December 31,
1997 after giving effect to the conversion of all outstanding Preferred
Stock.

The following table summarizes, on a pro forma basis as of December 31,
1997, the actual number of shares of Common Stock purchased from the Company,
the actual total consideration paid and the average price paid per share by the
existing stockholders (assuming conversion of the Preferred Stock into Common
Stock upon completion of the Offering), by NTT and by new investors purchasing
shares of Common Stock in the Offering (at $23.00 per share before deducting
underwriting discounts and commissions and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 20,496,200 67.2% $121,722,385 35.0% $ 5.94
New investors in the
Offering.................... 5,500,000 18.0 126,500,000 36.3 23.00
NTT(2)........................ 4,493,877 14.8 $100,000,000 28.7 22.25
---------- ------ ------------ ------
Total............... 30,490,077 100.0% $348,222,385 100.0%
========== ====== ============ ======
</TABLE>

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

(1) Excludes (i) up to 9,200,000 shares of Common Stock that, effective upon
consummation of the Offering, will be reserved for issuance under the
Company's employee stock option plans, of which 4,063,340 shares were
issuable upon exercise of outstanding options as of April 24, 1998 at a
weighted average exercise price of $10.05 per share, (ii) 2,112,480 shares
of Common Stock issuable upon exercise of outstanding warrants at a weighted
average exercise price of $.01 per share, (iii) 3,000,000 shares of Common
Stock reserved for issuance under the Company's 1998 Employee Stock Purchase
Plan, and (iv) 300,000 shares of Common Stock reserved for issuance under
the Company's 1998 Non-Employee Director Stock Incentive Plan. See Notes to
Consolidated Financial Statements.

(2) Because the percentage of shares purchased reflected in this table is based
on outstanding (not fully diluted) shares, the ownership percentage shown
for NTT is higher than the maximum percentage of fully diluted shares that
NTT is permitted to purchase in the NTT Investment.

22
<PAGE> 23

SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share amounts)

The selected historical consolidated financial data as of and for the
period from inception (March 1, 1996) to December 31, 1996 and as of and for the
year ended December 31, 1997 have been derived from the audited Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.

The information set forth below should be read in conjunction with the
Unaudited Pro Forma Condensed Combined Financial Statements and the historical
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this Prospectus. Results of operations for the year ended December
31, 1997 are not necessarily indicative of results of operations for future
periods. The Company's development and expansion activities, including
acquisitions, during the periods shown below significantly affect the
comparability of this data from one period to another. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)(2)
-------------------------------- ---------------
PERIOD FROM
INCEPTION
(MARCH 1, 1996) YEAR ENDED YEAR ENDED
TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1997
--------------- ------------ ---------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Dedicated connectivity........................ $ 1,100 $ 16,383 $ 46,330
Dial-up connectivity.......................... 1,139 7,093 16,725
Enhanced services and other................... 126 12,216 25,210
-------- ---------- -----------
Total revenue......................... 2,365 35,692 88,265
Costs and expenses:
Internet services operating costs............. 974 15,974 38,145
Selling, general and administrative and
other...................................... 7,002 49,383 82,070
Depreciation and amortization................. 669 10,624 25,911
-------- ---------- -----------
Total costs and expenses................... 8,645 75,981 146,126
-------- ---------- -----------
Loss from operations....................... (6,280) (40,289) (57,861)
Other income (expense):
Interest income............................... 593 6,080 6,147
Interest expense.............................. (115) (11,826) (12,417)
Equity in losses of affiliates................ -- (1,958) --
Minority interests.............................. 680 1,924 --
-------- ---------- -----------
Net loss.............................. (5,122) (46,069) (64,131)
Accretion of redeemable preferred stock to
liquidation value............................. (23) (260) --
-------- ---------- -----------
Net loss attributable to common
stockholders........................ $ (5,145) $ (46,329) $ (64,131)
======== ========== ===========
Loss per common share -- basic and diluted(3)... $ (5.29) $ (40.47) $ (2.90)
======== ========== ===========
Weighted average common shares
outstanding -- basic and diluted.............. 971,748 1,144,685 22,090,352
======== ========== ===========
OTHER DATA:
EBITDA(4)....................................... $ (5,611) $ (29,665) $ (31,950)
Capital expenditures(5)......................... 3,430 14,547
Cash flows information:
Net cash used by operating activities......... (2,326) (35,323)
Net cash used by investing activities......... (9,123) (120,330)
Net cash provided by financing activities..... 77,916 161,772
</TABLE>

23
<PAGE> 24

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
AS OF ----------------------------------------
DECEMBER 31, PRO FORMA
1996 ACTUAL PRO FORMA(1) AS ADJUSTED(6)
------------ -------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $66,467 $ 72,586 $155,304 $372,304
Restricted cash and securities.............. -- 40,554 27,822 27,822
Goodwill, net............................... 8,736 83,216 152,241 152,241
Total assets................................ 82,628 246,471 394,997 611,997
Long-term debt and capital lease
obligations, net of discount.............. 106 142,321 272,694 272,694
Redeemable preferred stock.................. 76,877 97,249 -- --
Stockholders' equity (deficit).............. (4,055) (27,001) 85,704 302,704
</TABLE>

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

(1) Pro forma for the Completed Acquisitions as if they had occurred on December
31, 1997 for balance sheet purposes and on January 1, 1997 for statement of
operations data purposes, for the conversion of the Preferred Stock into
Common Stock upon completion of the Offering, and for the proceeds from the
sale of the 1998 Notes and the application of the proceeds therefrom to
effect the Refinancing and to reflect the extraordinary charge of
approximately $10.1 million for the loss on early extinguishment of $50.0
million of the 1997 Notes. See "Unaudited Pro Forma Condensed Combined
Financial Statements."

(3) The Company paid no cash dividends on its Common Stock during the period
from inception (March 1, 1996) to December 31, 1996 and the year ended
December 31, 1997.

(4) EBITDA represents earnings (loss) from operations before interest, taxes,
depreciation, amortization and provision for loss on write-offs of
investments in ISPs and fixed assets. The primary measure of operating
performance is net earnings (loss). Although EBITDA is a measure commonly
used in the Company's industry, it should not be construed as an alternative
to net earnings (loss), determined in accordance with generally accepted
accounting principles ("GAAP"), as an indicator of operating performance or
as an alternative to cash flows from operating activities, determined in
accordance with GAAP. In addition, the measure of EBITDA presented herein by
the Company may not be comparable to other similarly titled measures of
other companies.

(5) Excludes equipment and leasehold improvements acquired in business
acquisitions.

(6) As adjusted to give effect to (i) the Offering after deducting the
Underwriters' discounts and commissions and estimated expenses, and (ii) the
sale of 4,493,877 shares of Common Stock to NTT for approximately $100.0
million concurrently with the Offering.

24
<PAGE> 25

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

The following discussion and analysis is based on the historical and pro
forma results of the Company and includes a number of ISPs acquired at various
times. See "Unaudited Pro Forma Condensed Combined Financial Statements" for the
basis of presentation and those business acquisitions included therein.
Investments in ISP affiliates in which Verio acquires a minority interest are
accounted for at cost. Investments in ISP affiliates in which Verio acquires a
majority interest through the acquisition of net assets, common stock or
convertible preferred stock, and exercises significant control over the
operations are accounted for using the purchase method of accounting and,
accordingly, the financial results of these ISPs have been consolidated with
those of the Company. Certain statements set forth below constitute
"forward-looking statements" within the meaning of the Reform Act. The safe
harbor provisions provided in Section 27A of the Securities Act and Section 21E
of the Exchange Act do not apply to forward-looking statements made in
connection with an initial public offering. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. See "Risk Factors -- Forward-
Looking Statements."

OVERVIEW

Verio is a leading national provider of Internet connectivity and enhanced
Internet services to small and medium sized businesses. Since its inception in
March 1996, the Company has rapidly established a national presence through the
acquisition, integration, and growth of local ISPs with a business customer
focus. Verio believes that small and medium sized businesses represent an
attractive target market for the provision of Internet services due to this
market's low current penetration levels and customer churn, and the expanding
Internet needs of these businesses. The Company believes it has a unique
competitive advantage in serving small and medium sized business customers
through the combination of the technical competency, hands-on support and
entrepreneurial culture of locally based ISPs with the quality and economic
efficiency of Verio's national network, operational infrastructure and financial
strength. Verio has quickly built critical mass by acquiring the stock or assets
of, or making significant investments in, over 35 ISPs that provide a
comprehensive range of Internet connectivity and enhanced products and services
to over 100,000 customer accounts in 36 of the top 50 MSAs in the country, with
combined revenues of approximately $25.0 million for the three months ended
December 31, 1997.

From March 1996 through September 1997, Verio's strategy was to acquire 51%
to 100% of a large regional ISP, and a minority interest in smaller ISPs within
each region. Verio now seeks to acquire 100% of new ISPs, and is in the process
of bringing its ownership interest in its existing ISPs to 100%. Upon achieving
100% ownership of its ISPs in a region, Verio then consolidates the management
teams, network operations, and marketing efforts within that region. While some
one-time costs are incurred in these consolidation efforts, Verio believes that
the combined organizations will be able to increase revenues faster and more
cost effectively. In addition, 100% ownership facilitates the introduction of
the Verio brand name, a suite of nationwide product offerings, and the
transition of all ISPs onto Verio's national network and financial systems.

In conjunction with the consolidation of its regional operations, as of
December 31, 1997, the Company had completed the Buyout of four of its initially
non-wholly owned ISPs. Since then, the Company has completed ten additional
Buyouts and currently expects to complete the Buyouts of the two remaining ISPs
in which it did not initially acquire 100% ownership during the remainder of
1998. Verio has incurred costs of approximately $43.5 million, in the aggregate,
in 1998 in connection with the Buyouts, which were paid with a combination of
cash, preferred stock and options to acquire preferred stock of Verio. As a
result of its acquisitions, and the limited amount of fixed assets required to
operate an ISP, Verio has recorded significant amounts of goodwill, and expects
goodwill to increase significantly during 1998.

25
<PAGE> 26

To fund its acquisitions and operations, Verio has raised approximately
$100.0 million of equity capital primarily from venture capital funds and Brooks
(recently acquired by WorldCom, Inc.). It also issued $150.0 million principal
amount of 1997 Notes to a group of institutional investors and Brooks, $100.0
million of which remain outstanding following the Refinancing. On March 25,
1998, the Company consummated the sale of $175.0 million principal amount of
1998 Notes, a portion of the proceeds of which was used to effect the
Refinancing. See "-- Liquidity and Capital Resources" and "Certain
Transactions."

RESULTS OF OPERATIONS

REVENUE

The Company derives the majority of its revenues from business customers
who purchase Internet connections and enhanced services such as Web hosting.
Verio's ISP affiliates offer a broad range of connectivity options to their
customers including dedicated, dial-up, ISDN, frame relay and point-to-point
connections. Dedicated customers typically sign a contract for one to three
years of service that provides for fixed, recurring monthly service charges, and
pay a one-time setup fee. These charges vary depending on the type of service,
the length of the contract, and local market conditions. Dial-up customers also
typically pay a one-time setup fee and recurring monthly service charges. Fees
and service charges for enhanced services vary from product to product. For
example, Web hosting customers pay a one-time setup fee and fixed monthly
service charges that vary depending on the amount of disk space and bandwidth
required. Additional sources of revenue include e-commerce, virtual private
networks, security services, co-location services, consulting and the sales of
equipment and customer circuits. Revenues related to Internet connectivity and
enhanced services is recognized as the services are provided. Amounts billed
relating to future periods are recorded as deferred revenue and amortized
monthly as services are rendered.

Currently, connectivity services provide a majority of total revenues.
However, revenues from enhanced services, especially Web hosting, are expected
to represent an increasing percentage of total revenues in future periods.
Revenue from business customers currently represents more than 80% of total
revenues and is projected to increase as a percent of total revenues. In
addition to the growth that the Company is achieving through acquisitions,
revenues are also expected to increase due to the internal growth of
consolidated ISPs. For ISPs consolidated for the entire fiscal year of 1997,
revenue increased an average of 16% quarter-over-quarter for the three quarters
ended December 31, 1997.

Period from Inception to December 31, 1996 compared to the Year Ended December
31, 1997

Total consolidated revenues were $2.4 million for the period from inception
(March 1, 1996) to December 31, 1996 (the "1996 Period"), compared to $35.7
million for the year ended December 31, 1997. Internet connectivity represented
95% and 66% of total revenue for the 1996 Period and the year ended December 31,
1997, respectively, with the balance derived from enhanced services and other,
which include Web hosting, consulting, sales of equipment and customer circuits.
The increase in enhanced services and other revenues as a percentage of total
revenues is because of a change in the revenue mix resulting from acquisitions
and increased sales of enhanced services. The increase in dedicated and dial-up
revenues and enhanced services and other revenues for the 1996 Period compared
to the year ended December 31, 1997 was primarily due to the acquisitions of
ISPs subsequent to December 31, 1996 and the longer period covered. Revenues
attributable to acquisitions completed in 1996 accounted for $2.4 million or
100% of total revenues for the 1996 Period. Of these acquisitions, revenues from
material acquisitions were $1.8 million from On-Ramp Technologies, Inc. and $.5
million from RAINet, Inc. Revenues attributable to material acquisitions
completed in 1997 accounted for $23.8 million or 67% of total revenues for the
year ended December 31, 1997. Of these acquisitions, revenues from material
acquisitions were $7.7 million from NorthWestNet, Inc. ($4.4 million in
connectivity revenue and $3.3 million in enhanced services and other revenue),
and $3.6 million from Global Enterprise Services ($2.3 million in connectivity
revenue and $1.3 million in enhanced services and other revenue). Revenues
attributable to ISPs consolidated for the entire year were 31% of total revenues
for the year ended December 31, 1997.

Three ISPs were included in the consolidated financial statements at
December 31, 1996. Twenty-two ISPs were included in the consolidated financial
statements at December 31, 1997, three of which were included in the
consolidated financial statements for the entire year ended December 31, 1997.

26
<PAGE> 27

COSTS AND EXPENSES

Internet services operating costs consist primarily of local
telecommunication expense, Internet access expense and the cost of equipment and
customer circuits sold. Local telecommunications expense represents the cost of
transporting data between the Company's POPs and a transit provider, or various
Internet access points. Internet access expense includes the cost incurred by
the Company to transport its Internet traffic and for its national network. In
some instances the Company also will pay for the local telecommunications
line(s) from the customer's location to one of the POPs. As of December 31,
1997, 25 ISP affiliates were utilizing the Verio national network for their
Internet access and paying Verio for these network services based on their
bandwidth requirements. The Company recently signed a long-term long haul
capacity agreement with Qwest in order to reduce the per unit costs of such
services. There will not be a significant effect on the results for 1998 from
this agreement because of the time required to convert from existing circuits;
however, the Company expects that the pricing advantages provided by this
agreement will substantially reduce the cost of these services in future years.
Additionally, the Company has the right to fund its minimum commitment, which
would allow the capitalization of costs (to the extent prepaid) under this
contract. Such capitalized costs would be amortized to operations over the term
of the agreement. The amount of the prepayment currently would be approximately
$60.0 million.

Selling, general and administrative and other expenses consist primarily of
salaries and related employment expenses, consulting, travel and entertainment,
rent, and utilities. Depreciation is provided over the estimated useful lives of
the assets ranging from three to five years using the straight-line method. The
excess of cost over the fair value of net assets acquired, or goodwill, is
amortized using the straight-line method over a ten-year period.

Period from Inception to December 31, 1996 compared to the Year Ended December
31, 1997

Internet services operating costs were 41% and 45% of total revenues for
the 1996 Period and the year ended December 31, 1997, respectively. Internet
services operating costs attributable to acquisitions completed in 1996
accounted for $.7 million, or 69%, of total Internet services operating costs
for the 1996 Period. Of these acquisitions, the costs from material acquisitions
were $.4 million from On-Ramp Technologies, Inc. and $.2 million from RAINet,
Inc. Internet services operating costs attributable to acquisitions completed in
1997 accounted for $8.3 million, or 52%, of total Internet services operating
costs for the year ended December 31, 1997. Of these acquisitions, the costs
from material acquisitions were $2.5 million from Global Enterprise Services,
$1.2 million from NorthWestNet, Inc. and $1.1 million from Compute Intensive
Inc. Internet services operating costs attributable to ISPs consolidated for the
entire year were 26% of total Internet services operating costs for the year
ended December 31, 1997. Internet services operating costs attributable to
corporate were 33% of total Internet services operating costs for the 1996
Period, compared to 22% of total Internet services operating costs for the year
ended December 31, 1997. This decrease is primarily the result of acquisitions
in late 1997 that had not yet converted to Verio's national network. The Company
expects Internet services operating costs to increase in absolute dollars but to
decrease as a percentage of total revenues over time as additional ISP
affiliates are added onto Verio's national network, as enhanced services become
a larger percentage of total revenues, and as the Capacity Agreement (as
defined) with Qwest is implemented.

Selling, general and administrative and other expenses were 296% and 138%
of revenues for the 1996 Period and the year ended December 31, 1997,
respectively. Selling, general and administrative and other expenses
attributable to acquisitions completed in 1996 accounted for $3.1 million or 44%
of total selling, general and administrative and other expenses for the 1996
Period. Corporate expenses accounted for 56% of total selling, general and
administrative and other expenses for the 1996 Period. Selling, general and
administrative and other expenses attributable to acquisitions completed in 1997
accounted for $19.7 million or 40% of total selling, general and administrative
and other expenses for the year ended December 31, 1997. Of these acquisitions,
the expenses from material acquisitions were $4.9 million from NorthWestNet,
Inc., $4.3 million from Compute Intensive Inc., and $3.2 million from Global
Enterprise Services. Selling, general and administrative and other expenses
attributable to ISPs consolidated for the entire year, and to corporate
expenses, were 22% and 38% of total selling, general and administrative and
other expenses for the year ended December 31, 1997, respectively. For the 1996
Period, selling, general and administrative and other expenses

27
<PAGE> 28

relating to operations, engineering and customer care were 63% of total selling,
general and administrative and other expenses compared to 66% for the year ended
December 31, 1997, as a result of the Company's decision to emphasize the
quality of its engineering and technical support for its customers. Sales and
marketing expenses were 23% of total selling, general and administrative and
other expenses compared to 17% for the 1996 Period, primarily as a result of the
Company's hiring and training of additional sales personnel during the year
ended December 31, 1997. Executive and finance expenses were 12% of total
selling, general and administrative and other expenses compared to 20% for the
1996 Period.

The Company expects selling, general and administrative expenses to
continue to increase in absolute dollars but to decrease as a percentage of
total revenues as the Company acquires additional ISPs, allowing it to spread
its corporate overhead over a larger revenue base, as its scaleable systems
reduce the incremental costs of additional revenues, as sales force productivity
increases with experience, and as indirect selling channels are expanded. The
anticipated increases in absolute dollar terms will be primarily due to
increased personnel resulting from acquisitions, and additional expenditures in
sales and marketing. Depreciation and goodwill amortization are expected to
continue to increase significantly as a result of the Company's acquisition and
investment strategies. Also, the Company will continue to have non-recurring
expenses related to its strategy of acquiring and regionalizing groups of ISPs.

OTHER EXPENSES

During the year ended December 31, 1997, the Company recognized equity in
losses of affiliates in the amount of $1,958,000, representing losses of those
affiliates in excess of the equity of the common shareholders of the affiliates.
See Note 1 to the Consolidated Financial Statements of the Company.

Interest expense increased from $115,000 in the 1996 Period to $11.8
million for the year ended December 31, 1997 primarily as a result of the
completion of the $150.0 million placement of the 1997 Notes on June 24, 1997.
Interest expense is expected to increase in 1998, reflecting a full year's
interest on the 1997 Notes that remain outstanding and interest on the 1998
Notes.

INCOME TAXES

As of December 31, 1997, the Company had a net operating loss carryforward
for federal income tax purposes of approximately $49.9 million which is
available to offset future federal taxable income, if any, through 2011. The
utilization of a portion of the net operating loss carryforwards may be limited
under Section 382 of the Internal Revenue Code. No tax benefit for such losses
has been recorded by the Company in 1996 or 1997 due to uncertainties regarding
the utilization of the loss carryforward.

STOCK-BASED COMPENSATION

As discussed in Note 1(j) to the Consolidated Financial Statements, the
Company accounts for its stock-based compensation plans in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and Related Interpretations. Since inception, the Company has granted
stock options with exercise prices equal to the fair value of the underlying
Common Stock, as determined by the Company's Board of Directors and based on the
Company's other equity transactions. Accordingly, the Company has not recorded
compensation expense related to the granting of stock options in 1996, 1997 and
through February 28, 1998. Subsequent to February 28, 1998, the Company granted
options to employees with exercise prices less than the fair value per share
based upon the Company's estimated price per share in the Offering. Accordingly
the Company will record compensation expense totaling approximately $10.6
million. Such compensation expense will be recognized pro rata over the
forty-eight month vesting period of the options. This compensation expense will
total approximately $2.0 million for the year ended December 31, 1998. It is the
intention of the Company to generally grant future stock options with exercise
prices equal to the fair value of the underlying Common Stock at the date of
grant.

28
<PAGE> 29

QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue:
Dedicated connectivity..................... $ 1,954 $ 3,852 $ 4,314 $ 6,263
Dial-up connectivity....................... 1,106 1,564 1,644 2,779
Enhanced services and other................ 1,354 2,833 3,666 4,363
------- ------- -------- --------
Total revenue...................... 4,414 8,249 9,624 13,405
Costs and expenses:
Internet services operating costs.......... 2,042 3,433 4,029 6,470
Selling, general and administrative and
other................................... 6,718 11,122 13,393 18,150
Depreciation and amortization.............. 1,246 2,548 2,943 3,887
------- ------- -------- --------
Total costs and expenses................ 10,006 17,103 20,365 28,507
------- ------- -------- --------
Loss from operations.................... $(5,592) $(8,854) $(10,741) $(15,102)
======= ======= ======== ========
EBITDA....................................... $(4,346) $(6,306) $ (7,798) $(11,215)
======= ======= ======== ========
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C>
Total revenue................................ 100% 100% 100% 100%
Costs and expenses:
Internet services operating costs.......... 46% 42% 42% 48%
Selling, general and administrative and
other................................... 152% 135% 139% 135%
Depreciation and amortization.............. 28% 31% 31% 29%
Total costs and expenses................ 227% 207% 212% 213%
Loss from operations.................... (127%) (107%) (112%) (113%)

EBITDA....................................... (98%) (76%) (81%) (84%)
</TABLE>

The Company's operating results have fluctuated in the past and may in the
future fluctuate significantly depending upon a variety of factors, including
the incurrence of capital costs and costs associated with the Buyouts and the
introduction of value-added enhanced services and new services by the Company.
Additional factors that may contribute to variability of operating results
include: the pricing and mix of services offered by the Company; customer
retention rate; changes in pricing policies and product offerings by the
Company's competitors; growth in demand for network and Internet access
services; one-time costs associated with regional consolidation; and general
telecommunications services' performance and availability. The Company also has
experienced seasonal variation in Internet use and, therefore, revenue streams
may fluctuate accordingly. As a result, variations in the timing and amounts of
revenues could have a material adverse effect on the Company's quarterly
operating results. Due to the foregoing factors, the Company believes that
period-to-period comparisons of its operating results are not necessarily
meaningful and that such comparisons cannot be relied upon as indicators of
future performance.

LIQUIDITY AND CAPITAL RESOURCES

The Company's business and acquisition strategy has required and will
continue to require substantial capital for investments in ISPs, capital
expenditures for expansion of services, operating losses and working capital.

29
<PAGE> 30

Net cash used by operating activities was $35.3 million during the year
ended December 31, 1997, which includes a decrease of $.1 million in working
capital. Net cash used by investing activities was $120.3 million during the
year ended December 31, 1997, which includes the investment of restricted cash
totalling $46.6 million from the proceeds of the 1997 Notes, and approximately
$64.0 million for acquisitions. Net cash provided by financing activities was
$161.8 million during the year ended December 31, 1997, primarily from the sale
of 2,500,000 shares of Series C Preferred Stock for gross proceeds of
approximately $20.0 million and issuance of the 1997 Notes for gross proceeds of
approximately $150.0 million.

Since inception, the Company has financed itself primarily through the
private sale of Preferred Stock and debt and, to a lesser extent, Common Stock.
In 1996, the Company raised approximately $79.2 million (gross) through the
issuance of Common Stock, Series A Preferred Stock and Series B Preferred Stock.
In June 1996, the Company sold 6,033,333 shares of Series A Preferred Stock and
in December 1996, the Company sold 10,000,000 shares of Series B Preferred Stock
for gross proceeds of approximately $18.1 million and approximately $60.0
million, respectively. During the course of 1996, 1,090,000 shares of Common
Stock were sold for gross proceeds of approximately $1.1 million. In 1997, an
additional 164,533 shares of Common Stock were issued for approximately
$508,000. In May 1997, the Company completed the sale of 2,500,000 shares of
Series C Preferred Stock for gross proceeds of approximately $20.0 million. In
December 1997, the Company issued 680,000 shares of Series D-1 Preferred Stock
to fund a portion of the acquisition cost of one ISP. Each share of Preferred
Stock is convertible into Common Stock on a one-for-one basis.

On June 24, 1997, the Company completed the placement of $150.0 million
principal amount of the 1997 Notes and attached warrants (the "Warrants"). One
hundred fifty thousand units were issued, each consisting of $1,000 principal
amount of the 1997 Notes and eight Warrants, with each Warrant entitling the
holder thereof to purchase 1.76 shares of the Company's Common Stock at a price
of $.01 per share, for a total of 2,112,480 shares of Common Stock. The Warrants
and the 1997 Notes were separated on December 15, 1997. The 1997 Notes mature on
June 15, 2004. Interest on the 1997 Notes, at the annual rate of 13 1/2%, is
payable semi-annually in arrears on June 15 and December 15 of each year.
Concurrent with the completion of the sale of the 1997 Notes, the Company was
required to deposit funds into an escrow account in an amount that together with
interest would be sufficient to fund the first five interest payments on the
1997 Notes. Upon consummation of the sale of the 1998 Notes and the Refinancing,
that portion of the escrowed amount attributable to the principal amount of the
1997 Notes refinanced was released to the Company. The 1997 Notes are redeemable
at the option of the Company commencing June 15, 2002. The 1997 Notes are senior
unsecured obligations of the Company ranking pari passu in right of payment with
all existing and future unsecured and senior indebtedness. The 1997 Notes impose
significant limitations on the Company's ability to incur additional
indebtedness unless the Company's Consolidated Pro Forma Interest Coverage Ratio
(as defined) is greater than or equal to 1.8 to 1.0 prior to June 30, 1999, or
2.5 to 1.0 on or after that date. The Company is also limited in its ability to
pay dividends or make Restricted Payments (as defined), to engage in businesses
other than the Internet service business, and to place liens on its assets for
the benefit of persons other than the noteholders, among other restrictions. If
a Change of Control (as defined in the 1997 Indenture) occurs, the Company is
required to make an offer to purchase all of the Notes then outstanding at a
price equal to 101% of the principal amount, plus accrued and unpaid interest.

On March 25, 1998, the Company completed the placement of $175.0 million
principal amount of the 1998 Notes. The 1998 Notes mature on April 1, 2005.
Interest on the 1998 Notes, at the annual rate of 10 3/8%, is payable
semi-annually in arrears on April 1 and October 1 of each year, commencing
October 1, 1998. The 1998 Notes are redeemable at the option of the Company
commencing April 1, 2002. The 1998 Notes are senior unsecured obligations of the
Company ranking pari passu in right of payment with all existing and future
unsecured and senior indebtedness. The 1998 Notes contain terms that are
substantially similar to the 1997 Notes. The Company used approximately $54.5
million of the proceeds plus accrued interest to effect the Refinancing. As a
result of the Refinancing, the Company was refunded approximately $13.3 million
from the escrow account for the 1997 Notes, of which approximately $1.9 million
was used to pay accrued and unpaid interest on the $50.0 million principal
amount of 1997 Notes repurchased from Brooks.

On April 6, 1998, Verio entered into the Bank Facility with a group of
commercial lending institutions that committed to provide a $57.5 million
revolving credit facility secured by the stock of the ISPs that Verio
30
<PAGE> 31

owns currently or may own in the future and the Capacity Agreement. The Chase
Manhattan Bank serves as agent for the Bank Facility. The Bank Facility requires
no payments of principal until its maturity on December 31, 1999. The terms of
the Bank Facility provide for borrowings at LIBOR + 3%, with a 1% decrease in
that rate if the Company has completed a public equity offering of $50.0 million
or more. If the Company has not completed such an offering by December 31, 1998,
or by June 30, 1999, there will be a 2% increase in the rate on each such date.
There is a commitment fee of 1/2% per annum on the undrawn amount of the Bank
Facility and a one-time fee of 1/2% on any amounts drawn. The last $3.0 million
of the Bank Facility cannot be drawn except for the payment of interest.

The Bank Facility sets forth covenants restricting, among other things, the
Company's ability to borrow, to guarantee the debt of others, and to make
borrowings at the subsidiary level. The Company is also limited in its ability
to enter into transactions with affiliates, create liens on its assets, and make
certain investments. In particular, Indebtedness (less cash) may not exceed 2.35
times annualized pro forma revenues for the most recent fiscal quarter.
Dividends and certain types of investments are prohibited, as are liens incurred
for borrowed money. Borrowings under the Bank Facility would be required to be
paid down with the proceeds of new Indebtedness (as defined), certain asset
sales, Excess Cash Flow (as defined), or the net proceeds from insurance claims.

On April 7, 1998, the Company entered into agreements establishing a
strategic relationship with NTT pursuant to which the Company agreed to sell to
NTT, concurrently with and conditioned upon consummation of the Offering, a
number of shares of Common Stock equal to the lesser of (i) 12.5% of the total
number of outstanding shares of Common Stock, on a fully diluted and fully
converted basis (taking into account the Offering and the NTT Investment) or
(ii) the quotient of $100.0 million divided by 96.75% of the Price to Public in
the Offering. See "Business -- NTT Strategic Relationship" and "Principal
Stockholders -- NTT Investment."

As of December 31, 1997, the Company had approximately $72.6 million in
cash and cash equivalents (excluding restricted cash). The Company's business
plan currently anticipates investments of approximately $175.0 million in 1998
for capital expenditures, ISP acquisitions, operating losses and working
capital. The Company's anticipated expenditures are inherently uncertain and
will vary widely based on many factors including the operating performance and
working capital requirements of the Company and its existing ISP affiliates, the
number and size of additional ISPs acquired or invested in by the Company, the
cost of such additional acquisitions and investments, the operating performance
and working capital requirements of the Company's ISP affiliates including any
additional ISP affiliates and capital expenditure requirements of the Company
and any existing or additional ISPs. Accordingly, the Company may need
significant amounts in excess of its plan, and no assurance can be given as to
the actual amounts of the Company's expenditures and additional capital
requirements.

The Company expects to meet its capital needs with cash on hand, proceeds
from the sale, or issuance of capital stock, credit facilities (including the
Bank Facility), and lease financing. There can be no assurance that the Company
will have sufficient resources to fund its investment programs, particularly if
operating losses continue to increase. EBITDA decreased from negative $5.6
million in the 1996 Period to negative $29.7 million in 1997 despite an increase
in revenues from $2.4 million in the 1996 Period to $35.7 million for the year
ended December 31, 1997. EBITDA as a percentage of revenues improved from
negative 233% to negative 83% from the 1996 Period to the year ended December
31, 1997. The Company incurred $49.4 million in selling, general and
administrative expenses in 1997 as it invested in scaleable systems, hiring and
sales training, and network improvements, that it expects will result in
incremental revenue at reduced incremental costs. As a result, the Company
expects EBITDA as a percentage of revenue to improve during 1998. Although the
Company is seeking to reduce EBITDA losses as a percentage of revenues over
time, there can be no assurance that the Company will be able to do so, or that
the rate of any reduction in EBITDA losses will be as rapid as is being sought
by the Company. At December 31, 1997, on a pro forma as adjusted basis, the
Company had $57.5 million more in unrestricted cash than in long term debt and
capital leases. See "Summary Consolidated Financial Data." However, the Company
intends to use a significant portion of its cash for acquisitions, and will have
to increase revenues without a commensurate increase in costs to generate
sufficient cash to enable it to meet its debt service obligations as described
above. In the near term, the Company intends to use its excess cash and the Bank
Facility which provides for up to $57.5 million in credit
31
<PAGE> 32

until it matures on December 31, 1999. Over the longer term, the Company will be
dependent on increased operating cash flows, and, to the extent cash flow is not
sufficient, the availability of additional financing, to meet its debt service
obligations. There can be no assurance that the Company will be able to service
its indebtedness. Insufficient funding may require the Company to delay or
abandon some of its planned future expansion or expenditures, which could have a
material adverse effect on the Company's growth and its ability to compete. In
addition, the Company's operating flexibility with respect to certain business
activities is limited by covenants associated with its indebtedness. There can
be no assurance that such covenants will not adversely affect the Company's
ability to finance its future operations or capital needs or to engage in
business activities that may be in the interest of the Company.

FORWARD-LOOKING STATEMENTS

The statements included in the discussion and analysis above that are not
historical fact are "forward-looking statements" (as such term is defined in the
Reform Act), which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. The safe harbor
provisions provided in Section 27A of the Securities Act and Section 21E of the
Exchange Act do not apply to forward-looking statements made in connection with
an initial public offering. Management cautions the reader that these
forward-looking statements addressing the timing, costs and scope of its
acquisition of, or investments in, existing ISPs, the revenue and profitability
levels of the ISPs in which it invests, the anticipated reduction in operating
costs resulting from the integration and optimization of those ISPs, and other
statements regarding matters that are not historical facts, are only
predictions. No assurance can be given that future results indicated, whether
expressed or implied, will be achieved. While sometimes presented with numerical
specificity, these projections and other forward-looking statements are based
upon a variety of assumptions relating to the business of the Company, which,
although considered reasonable by the Company, may not be realized. Because of
the number and range of the assumptions underlying the Company's projections and
forward-looking statements, many of which are subject to significant
uncertainties and contingencies that are beyond the reasonable control of the
Company, some of the assumptions will not materialize and unanticipated events
and circumstances may occur subsequent to the date of this report. These
forward-looking statements are based on current expectations, and the Company
assumes no obligation to update this information. Therefore, the actual
experience of the Company and results achieved during the period covered by any
particular projections or forward-looking statements may differ substantially
from those projected. Consequently, the inclusion of projections and other
forward-looking statements should not be regarded as a representation by the
Company, or any other person, that these estimates and projections will be
realized and actual results may vary materially. There can be no assurance that
any of these expectations will be realized or that any of the forward-looking
statements contained herein will prove to be accurate.

32
<PAGE> 33

BUSINESS

OVERVIEW

Verio is a leading national provider of Internet connectivity and enhanced
Internet services to small and medium sized businesses. Since its inception in
March 1996, the Company has rapidly established a national presence through the
acquisition, integration, and growth of local ISPs with a business customer
focus. Verio believes that small and medium sized businesses represent an
attractive target market for the provision of Internet services due to this
market's low current penetration levels and customer churn rates, and the
expanding Internet needs of these businesses. Because of their limited internal
technical resources, small and medium sized businesses also typically require
hands-on local support and highly reliable turnkey solutions for mission
critical applications. Verio further believes that these needs currently are
underserved by both the national and local ISPs. While national ISPs lack the
local presence to provide customized, hands-on service, local ISPs typically
lack the scale and resources required to provide dedicated, high-capacity
Internet access, around-the-clock support and tailored product offerings at
competitive prices.

The Company believes it has a unique competitive advantage in serving small
and medium sized business customers through the combination of the technical
competency, hands-on support and entrepreneurial culture of locally based ISPs
with the quality and economic efficiency of Verio's national network,
operational infrastructure and financial strength. Verio has quickly built
critical mass by acquiring the stock or assets of, or making significant
investments in, over 35 ISPs that provide a comprehensive range of Internet
connectivity and enhanced products and services to over 100,000 customer
accounts in 36 of the top 50 MSAs in the country, with combined revenues of
approximately $25.0 million for the three months ended December 31, 1997. The
Company integrates and optimizes the operations of its ISPs by consolidating
their operations into regional operating units with centralized regional
management, connecting their local networks to Verio's high-speed, highly
reliable national backbone, and providing them with Verio's integrated national
support services.

INDUSTRY BACKGROUND

Internet connectivity and enhanced Internet services represent two of the
fastest growing segments of the telecommunications services market. Total ISP
revenues in the United States are projected to grow from $3.3 billion in 1996 to
$18.3 billion in 2000, according to IDC, an independent company that prepares
market studies relating to the Internet. The availability of Internet
connectivity, advancements in technologies required to navigate the Internet,
and the proliferation of content and applications available over the Internet
have attracted a rapidly growing number of users. Businesses are increasingly
recognizing that the Internet can significantly enhance communications among
geographically distributed offices and employees as well as with customers and
suppliers. In addition, the Internet presents a compelling profit opportunity
for businesses as it enables them to reduce operating costs, access valuable
information and reach new markets. As a result, businesses increasingly are
utilizing the Internet for mission critical applications such as sales, customer
service and project coordination. IDC estimates that U.S. corporate dedicated
access revenues will grow from $1.1 billion in 1996 to $5.6 billion in 2000,
representing a 50% compounded annual growth rate. There can be no assurance that
the bases for these projections or the results generated thereby will be
realized.

In addition to Internet connectivity, business customers increasingly are
seeking a variety of enhanced products and applications to take full advantage
of the Internet. For example, a growing number of businesses are implementing
secured virtual private networks ("VPNs") over the Internet as a more economical
option

33
<PAGE> 34

than dedicated private networks. Technological advances such as increases in
microprocessor speeds, the introduction of innovative software tools and the
development of higher bandwidth data networking technology have led to rapid
innovation and development of enhanced Internet services. The principal enhanced
services being offered by business-oriented ISPs today include Web hosting,
security, e-commerce, virtual private networks (sometimes called "intranets" and
"extranets"), and advanced Internet applications such as voice and fax, video
conferencing and data storage and retrieval solutions. According to IDC,
enhanced services is the fastest growing segment of the Internet services market
and is expected to grow from $126 million in 1996 to over $7 billion in 2000. As
business users of the Internet adopt enhanced services, they also require
additional bandwidth to support their expanded use of the Internet. The Company
expects this trend to continue as high-bandwidth enhanced services continue to
be developed, improve and proliferate and as Internet usage continues to expand.

Industry analysts have reported that small and medium sized businesses
represent a potential market of over seven million customers in the U.S., and
use of the Internet by this market segment is expected to grow substantially
from its current low level of market penetration. IDC predicts that dedicated
connections to the Internet for small and medium sized businesses will grow from
approximately 90,000 in 1996 to just under 800,000 in 2000, representing a 73%
compounded annual growth rate. Small and medium sized businesses generally seek
an ISP with locally based personnel who are readily available to respond
in-person to technical issues, who can assist in developing and implementing the
customer's effective use of the Internet, and with whom they can establish a
stable and long-term relationship. In addition, they are increasingly reliant on
enhanced product offerings that address their specific business needs on a
cost-effective basis, allowing them to compete with larger companies. For
example, IDC estimates Web hosting revenues from small and medium sized
businesses will grow from $84 million in 1996 to over $3.4 billion in 2000,
representing 95% of the total Web hosting market.

The rapid development and growth of the Internet has resulted in a highly
fragmented industry of over 4,000 national and local ISPs in the United States,
with no dominant ISP serving the needs of small and medium sized businesses. The
large national ISPs have primarily focused on the large business or consumer
markets and lack the local presence to provide the customized, hands-on service
required by small and medium sized businesses. The Company believes that
independent local and regional ISPs generally have been more adept at serving
small and medium sized businesses, and that these ISPs are often the source of
innovative Internet products and services. As a result, independent regional and
local ISPs have successfully captured approximately one-half of this market,
despite the substantially greater resources of the national providers. However,
rising costs and increasing demands from business customers are making it more
difficult for the small ISP to meet its customer's demands on a cost-effective
basis. Facing these competitive pressures, Verio believes that independent
regional and local ISPs will continue to be attracted to and benefit from the
consolidation opportunity provided by Verio.

THE VERIO SOLUTION

Verio is a leading provider of Internet connectivity and enhanced Internet
services to small and medium sized businesses. The Company's business strategy
of combining national scale with local presence was specifically developed to
serve the needs of this market sector. Verio has taken a leading role in
consolidating the fragmented, independent ISP industry, rapidly establishing its
national presence through the acquisition, integration, and growth of
established, well-regarded regional and local ISPs with a business customer
focus. The Company believes it has a unique competitive advantage in serving
small and medium sized business customers. Verio's combination of national scale
with local presence provides distinct and significant value to these customers,
which the Company expects will result in long-term customer loyalty and an
expanding customer base. Verio intends to enhance this value as it continues to
develop, both internally and through strategic vendor relationships, an
expanding array of enhanced, higher margin product and service offerings to
continue to address the business needs of its customers. The Company further
believes that the small and medium sized business market is more attractive than
the consumer or large business market segments for Internet services, in large
part due to the stability of the customer relationship resulting from the
customer's reliance on its service provider's hands-on technical support and
ability to provide a turnkey Internet solution based on customized products and
services designed for the customer's particular business needs. The

34
<PAGE> 35

Company's market research indicates that Verio's local presence, providing
around-the-clock, hands-on technical support and tailored Internet service
solutions combined with its high speed, highly reliable national backbone, will
be significant factors in the purchase decision for the small and medium sized
business customer, as well as being a critical factor driving customer loyalty.

THE VERIO STRATEGY

Continue Consolidation Through Acquisitions. Verio has rapidly established
a national presence and critical customer mass by acquiring the stock or assets
of, or making significant investments in, established, well-regarded independent
ISPs in selected regions throughout the U.S. The Company intends to continue its
consolidation strategy, acquiring additional business-focused ISPs to deepen and
broaden its market presence and to expand its strength in targeted product areas
such as Web hosting. Given the increasing competitive pressures facing the
independent local and regional ISPs, Verio believes that these ISPs will
continue to be attracted to and benefit from the consolidation opportunity
provided by Verio. As part of its integration strategy, the Company now seeks to
acquire 100% of new ISP affiliates and has effected the Buyouts of all but two
of the ISPs in which it did not initially acquire 100% ownership. See "-- ISP
Ownership Structure." The Company's decentralized regional management structure
and equity incentive programs that are tied to regional performance foster
continued entrepreneurial culture, local responsiveness and internal growth.

Integrate Operations and Capture Economies of Scale. The Company integrates
and optimizes the operations of the ISPs it acquires by consolidating their
operations into regional operating units with centralized regional management,
connecting their local networks to Verio's high-speed, highly reliable national
backbone, and providing them with Verio's integrated national support services.
These services include national network transit, 7-day X 24-hour network
monitoring and management, customer technical support, a sophisticated billing
and collections system, financial information management through a central,
standardized accounting system, and national marketing and product development
programs. Through this integration of its national infrastructure with its local
ISP operations, the Company believes that it has achieved a significant degree
of operational control and efficiency and has improved the quality, consistency,
and scalability of its services. The Company also has leveraged its national
scale to establish peering relationships, to obtain favorable national
purchasing contracts and to establish strategic relationships with key hardware,
software and telecommunications providers. These providers view Verio as a
powerful distribution channel. For example, Verio has entered into an agreement
with Microsoft whereby Verio is offered as an "in the box" Web hosting program
for Microsoft's FrontPage product and for Microsoft's Small Business Server
Referral program, which facilitates small businesses' entry to the Internet
using Verio's network. In addition, Verio has negotiated advantageous volume
purchase agreements with key vendors such as Cisco and Raptor. In addition,
Verio has established public or private peering relationships with nearly all of
the major national ISPs, as well as with over 90 smaller domestic and
international networks. Furthermore, the Company's scale also allows it to
support a high quality national network and invest in leading edge systems for
network management, billing, customer service, and financial information.

Develop and Offer Enhanced Products and Services to Increase
Revenues. Small and medium sized businesses are purchasing an increasing number
of enhanced products and services as these businesses deploy mission critical
applications on the Internet. As a result, the Company believes that it will be
able to derive incremental revenue from these customers by selling an expanding
array of enhanced services and additional bandwidth to support these services.
The Company accelerated its ability to provide sophisticated Web hosting on a
national scale through its acquisition of Internet Servers, Inc. ("iServer").
While Internet connectivity
35
<PAGE> 36

and Web hosting constitute the predominant services offered by Verio today, a
number of additional high-margin enhanced services are being offered by the
Company. These additional services include VPN, security services, electronic
commerce, intranet services and other advanced Internet applications. Verio
encourages continued innovation within its regional operations, and supports the
identification and transfer of products, services and "best practices" among its
regional operations. In addition, the Company's product development groups are
focused on additional services to be developed both internally, through
acquisition, and in conjunction with strategic partners. Verio has entered into,
and expects to continue to enter into, relationships with selected Internet
hardware, software, service and distribution companies to enhance the Company's
ability to deliver cost-effective solutions to its customers, to gain early
access to new technology, to cooperatively market and sell these new products,
and to gain access to their distribution channels for the purpose of lead
generation and customer acquisition.

Build Customer Loyalty and Brand Name Recognition. The Company's goal is to
achieve national recognition as the leading provider of Internet services to
small and medium sized businesses by rebranding its ISPs under the Verio name.
The Company intends to leverage its local presence by continuing to expand and
enhance local technical, distribution and customer support capabilities. By
combining the quality of local service offered through the Company's regional
operations with the Company's national backbone and support services, the
Company expects to generate increased customer loyalty and expanding market
share at the local level while enhancing its national brand. In conjunction with
the consolidation of its ISPs into integrated regional operating units, the
Company has branded these regional operations under the Verio name, with a
regional or local geographical identifier to emphasize its local presence. As
the Company continues to expand, its acquisition strategy will be to continue to
identify and select ISPs that have developed a strong local presence through
quality service, hands-on customer support, local market knowledge and an
entrepreneurial culture.

THE VERIO ORGANIZATION

To date, the Company has pursued a regional acquisition strategy, acquiring
independent, locally based ISPs in selected geographic regions. In each region,
the Company typically sought a larger regional ISP to serve as the focal point
for the region and as the vehicle for integrating and optimizing the networks
and operations in that region. The Company also has invested in smaller ISPs to
increase its local presence and market share. Having established a presence in
each of its initially targeted regions, the Company has expanded its target
markets to encompass all of the top 50 MSAs and is continuing to add
incrementally to its presence within its existing regions. It is also in the
process of consolidating most of the Verio ISP operations within each region
into single, integrated operating units.

The Company conducts its operations with both a national and regional
approach. As of April 24, 1998, the Company had acquired the stock or assets of,
or invested in, ISPs in nine regions of the country, and now has operations in:
the Pacific Northwest, serving the primary MSAs in Washington, Oregon and Idaho;
Northern California, serving the greater Bay Area, Stockton and Sacramento;
Southern California, serving the Los Angeles area, Orange County and San Diego;
Texas and Louisiana, serving all of the major cities in Texas as well as New
Orleans; the Mid-Atlantic, serving the Washington, D.C., Baltimore and Richmond
areas, and the I-95 corridor; the Northeast, serving the major MSAs from New
Jersey to Boston and Upstate New York; the Midwest, serving Chicago, Detroit,
Ann Arbor, Kansas City, St. Louis, Milwaukee, Omaha, Tulsa and Des Moines; and
the Southeast, where the Company has recently completed its first acquisition of
an ISP, serving the Miami and Fort Lauderdale areas. In addition, the Company
has funded a start-up operation in the Rocky Mountain region, which is in the
early stages of establishing a presence in the Denver area and along the Front
Range. Verio also has substantially increased its national Web hosting presence
with its acquisition of iServer, based on which Verio has established a national
operating division through which it can offer Web hosting services to ISP
customers throughout its regions. The Company is now focusing its efforts on
seeking greater coverage in the Midwest and establishing its presence in the
Southeast. In addition, the Company has executed non-binding letters of intent
to acquire three additional ISPs which, if consummated, would further enhance
the Company's market presence in the Midwest, Northeast and Southeast regions.

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<PAGE> 37

The following chart identifies, by operating region, the 37 ISPs acquired
or invested in by Verio, or from which Verio has acquired significant assets, as
of April 24, 1998. The chart provides certain summary information concerning
Verio's revenues for the three months ended December 31, 1997 as if all such
ISPs (other than one ISP in which the Company holds a minority interest) had
been owned by the Company at such date.

<TABLE>
<CAPTION>
REVENUE FOR THE
THREE MONTHS ENDED
OPERATING REGION TOP 50 MSAS SERVED ACQUISITIONS DECEMBER 31, 1997(1)
---------------- ------------------ ------------ --------------------
(IN THOUSANDS)
<S> <C> <C> <C>
VERIO NORTHWEST $ 5,667
- Seattle, WA - NorthWestNet, Inc.
- Portland, OR - Access One, Inc.
- RAINet, Inc.
- Internet Engineering
Associates, Inc.
- Pacific Rim Network, Inc.
- Structured Network
Systems, Inc.
VERIO NORTHERN CALIFORNIA 2,411
- San Francisco - Aimnet Corporation
- Sacramento - CCnet Inc.
- San Jose - West Coast Online, Inc.
- Oakland - NSNet, Inc.
VERIO SOUTHERN CALIFORNIA 2,892
- Los Angeles - Compute Intensive Inc.
- San Diego - ATMnet
- Riverside/San
Bernardino
- Orange County
VERIO TEXAS/GULF SOUTH 4,283
- Houston, TX - On-Ramp Technologies, Inc.
- Dallas, TX - Signet Partners, Inc.
- San Antonio, TX - National Knowledge
- Ft. Worth, TX Networks, Inc.
- New Orleans, LA - Communique, Inc.
- Sesquinet
VERIO MID-ATLANTIC 1,800
- Washington, DC - Clark Internet Services,
- Baltimore, MD Inc.
- Monumental Network
Systems, Inc.
- Internet Online, Inc.(2)
VERIO NORTHEAST 3,282
- New York, NY - Global Enterprise Services
- Boston, MA - Pioneer Global
- Philadelphia, PA Telecommunications, Inc.
- Pittsburgh, PA - ServiceTech, Inc.
- Hartford, CT - Surf Network, Inc.
- Newark, NJ - PREPnet
- Buffalo/Niagara, NY - Wingnet
- Providence, RI - LI Net, Inc.
- Nassau/Suffolk, NY - Matrix Online Media Inc.
- Bergen/Passaic, NJ (d/b/a SpaceLab)
VERIO MIDWEST 3,071
- Chicago, IL - Verio Chicago(3)
- St. Louis, MO - Global Internet Network
- Detroit, MI Services, Inc.
- Kansas City, MO - RustNet, Inc.
- Milwaukee/Waukesha, WI - Branch Information
Services, Inc.
- STARnet, L.L.C.
- Computing Engineers Inc.
(d/b/a Worldwide Access)
VERIO ROCKY MOUNTAIN 49
- Denver, CO - Verio Colorado(4)
- Salt Lake City, UT
</TABLE>

37
<PAGE> 38

<TABLE>
<CAPTION>
REVENUE FOR THE
THREE MONTHS ENDED
OPERATING REGION TOP 50 MSAS SERVED ACQUISITIONS DECEMBER 31, 1997(1)
---------------- ------------------ ------------ --------------------
(IN THOUSANDS)
<S> <C> <C> <C>
VERIO SOUTHEAST 393
- Miami, FL - Florida Internet
- Fort Lauderdale, FL Corporation
VERIO WEB HOSTING 1,155
- National Product - Internet Servers, Inc.
Offering
Total: $25,003
=======
</TABLE>

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

(1) These amounts reflect the revenues of all of the Verio ISPs in each region
(other than Internet Online, Inc., in which the Company holds a minority
interest) for the three months ended December 31, 1997.

(2) Verio currently owns approximately 36% of the fully diluted equity of this
ISP. The revenue of this ISP for the three months ended December 31, 1997,
which was approximately $459,000, is not included in the revenue
information provided above.

(3) Funded as a start up to oversee Midwest operations and initiate operations
in Chicago.

(4) Funded as a start up to oversee Rocky Mountain operations and initiate
operations in the primary Colorado business centers. Verio Rocky Mountain
(d/b/a Verio Colorado) is owned 69% by Verio, and therefore is consolidated
for financial reporting purposes.

PRODUCTS AND SERVICES

The Company currently offers, through its regional ISP operations, a
comprehensive range of Internet connectivity and enhanced products and services.
The specific products offered in each market are determined by the needs of the
market and local telco tariffs. The Company intends to continue to develop a
broad range of enhanced products and services independently, through
acquisition, and through strategic relationships with key vendors.

Connectivity Services. Verio offers a variety of connectivity solutions,
which include Internet access and third-party software and hardware
implementations and configuration services, which are offered in bundled and
unbundled packages. Internet access currently includes ISDN, frame relay, leased
line access, dial-up and xDSL connectivity. The Company is participating in
trials for the deployment of new access technologies, such as wireless access.
The Company also offers a full range of customer premise equipment ("CPE")
hardware required to connect to the Internet, including routers, CSU/DSUs,
servers and other products as needed. Verio's regional operating units are able
to take advantage of the Company's national purchasing and leasing relationships
with a variety of partners in order to realize improved hardware pricing, lower
cost leasing arrangements and bundled service offerings. Verio also offers a
selection of software products including browsers, electronic mail, news and
other solutions that permit customers to navigate and utilize the Internet.
Additionally, Verio provides turnkey configuration solutions encompassing such
services as domain name server ("DNS") support, telco line provisioning, IP
address space assignment, router set-up, e-mail configuration, router security
configuration and other set-up services.

Enhanced Services. The Company believes that its small and medium sized
business customers will continue to increase their use of the Internet as a
business tool and, as a result, will require an expanding range of enhanced
services. The Company currently offers a variety of enhanced services. In
addition, the Company's national marketing group is focused on developing new
enhanced services through both internal development, acquisition and strategic
relationships with software, hardware and content providers. The Company's
current and planned enhanced services offerings include the following:

- Web Hosting and Co-location. Web hosting offers business customers a
presence on the Internet, enabling them to take advantage of the
marketing, customer service, internal company information dissemination
("intranets") and other benefits offered by such presence. Verio offers
its customers Web hosting services on a national basis as well as through
local data centers. The services include the full range of Web hosting,
Web design, Web site maintenance and ongoing consulting services through
a combination of internal efforts and the use of independent partners.
The Company also offers Web site co-location, where a customer-owned Web
server is located at a Verio POP for higher reliability.
38
<PAGE> 39

This solution allows the customer to own its own Web server without
having to maintain and manage the data center environment. The Company's
acquisition of Utah-based iServer gives the Company access to proprietary
Web server technology, an extensive network of Web hosting resellers and
over 25,000 hosted Web sites. The Company believes it will be able to
leverage iServer's proprietary "virtual server" technology across its
regional operations to accelerate the growth and increase the
profitability of its Web hosting product line. In addition to offering
Web hosting services, the Company has established national Web hosting
and co-location services by operating high-end, highly reliable data
centers positioned close to major network access points. The Company is
consolidating the majority of its Web hosting capability into its
regional data centers across the country, strategically located near the
Company's public and private peering points. The Company also intends to
implement emerging content distribution technologies such as content
replication ("mirroring") and caching for enhanced end user performance.
Currently, the Company supports over 35,000 domains and provides hosting
services to over 1,600 resellers.

- Security. Security solutions are a vital component for most businesses
connected to the Internet. These solutions, which include firewalls,
packet filter and proxy servers, give the customer (i) an ability to
prevent intruders from accessing its corporate network, (ii)
authentication of users attempting to gain access, and (iii) encryption
services, providing secured transmission of company data through the
Internet. The Company currently offers a comprehensive set of firewall
products from Raptor, including the sophisticated Eagle Firewall(TM) and
the more simplified products known as The Wall(TM). The Company also
offers proxy server solutions such as the Microsoft Proxy Server.
Additionally, the Company offers a "managed" security solution that
provides ongoing detection and prevention of intrusions. The Company
plans to expand its security product line with new solutions that
simplify, reduce cost, or offer greater functionality as they become
commercially available.

- Virtual Private Network ("VPN"). Many companies today have private data
communication networks, which are often referred to as wide area networks
("WANs") and built on expensive leased lines, to transfer proprietary
data between office locations. The Internet offers companies a cost-
effective replacement alternative to WANs through VPNs, which are meant
to provide secure transmission of private Internet Protocol ("IP")
traffic through the Internet. Additionally, many companies require that
their employees have remote access to these private networks from home or
while traveling. VPN products are available in hardware, software, and
firewall formats. VPN products are also the basis for offering intranet
and extranet services. Intranets are corporate/organizational networks
that rely on Internet-based technologies to provide secure links between
corporate offices. Extranets expand the network to selected business
partners through secured links on the Internet. Increasingly, companies
are finding that intranets and extranets can enhance corporate
productivity more easily and less expensively than proprietary systems.
The Company currently offers its customers a number of VPN solutions,
including Raptor's VPN products, and is in the process of evaluating
additional products to meet the needs of customers.

- National Roaming. Employees of small and medium businesses are
increasingly dependent on accessing their e-mail while on the road.
Currently, many users either cannot do so because of the limitations of
their local ISP, or they are required to pay expensive long distance
access charges. The Company is in the process of implementing a national
dial-up access roaming product to enable dial-up business customers to
access the Internet locally as they travel throughout the country and
abroad.

- Electronic Commerce Solutions. Electronic commerce provides users the
ability to sell products and services on the Internet. The Company
currently provides e-commerce capability to over 500 customers by
providing the three principle functions of electronic commerce: secure
socket layer, shopping cart support, and transaction processing
capability. Secure socket layer ("SSL") is provided through its Premier
Business Partner relationship with Verisign for digital certificates. The
Company supports a large variety of shopping carts, including Shop Site
by Icentral, and provides support for third party transaction processing
through Cybercash and AuthorizeNet. The e-commerce solutions are packaged
according to the complexity of the individual customer's needs. The
Company also intends to provide

39
<PAGE> 40

enhanced e-commerce hosting environments, as well as to make use of third
party software development partners to provide certain turnkey e-commerce
applications, such as an on-line catalogs.

- Professional Services. The Company's target customers typically do not
have the internal resources or personnel to design and maintain Internet
services. As more businesses utilize the Internet for mission critical
applications, the Company expects its customers to rely on their ISP for
support of many of their information technology applications. As a
result, the Company believes it will be increasingly important for ISPs
to offer onsite, technical consulting to customers. The Company currently
offers a full complement of professional services to its customers,
including network and system design, Web content creation, security
system needs analysis and implementation, virtual private network design
and implementation, and other Internet-related consulting projects. The
Company intends to invest in additional professional services
capabilities as they are required to provide customers with turnkey
Internet solutions.

- Enhanced Products and Services. Customers are increasingly seeking to
tailor the use of the Internet to their business. Verio intends to serve
these needs through the packaging and configuration of third party
applications, such as IP telephony (which permits users to make voice
calls on the Internet), Internet faxing, Internet audio and video
conferencing solutions, and other applications that may be developed. As
businesses commit to using the Internet, the Company believes that the
advanced applications product category will continue to expand, offering
additional revenue opportunities. For example, the Company currently
provides mail list services to customers that have a need to send out
hundreds of thousands of e-mail messages to their customers, suppliers
and prospects.

Verio has and intends to continue to enter into agreements with Internet
companies to leverage their products, brand names, distribution channels and
other assets. Verio believes that its existing Internet product and service
partners have been attracted to the Company because of its broad geographic
coverage, ability to influence purchase decisions of its business customers, and
the ability of the Verio sales forces to sell complex Internet solutions. The
Company has established strategic relationships with software providers such as
Microsoft, Oracle and Raptor, and equipment providers such as Cisco and
Farallon, and intends to expand its strategic relationships with additional
providers of key products and services. These relationships provide the Company
with benefits including preferred pricing, access to the latest products,
co-marketing with the vendors, tailored product training and access to the
vendor's distribution channels to generate leads for new customers.

SALES AND MARKETING

Verio offers its products and services through a consultative sales
approach which makes use of local technical talent to understand customer
applications and provide bundled Internet applications solutions consisting of
hardware, software, access and value-added services. Verio believes that this
localized approach will allow it to provide end-to-end customer solutions and
ongoing support. Verio has significant distribution capabilities both through a
direct sales force and indirect channels. The direct sales forces offer a core
base of technically competent, locally based and experienced Internet sales
representatives. Verio is focusing efforts on expanding the direct sales force,
further developing indirect channels and optimizing lead generation techniques
to reduce the cost of new customer acquisitions.

The Company currently provides Internet services to over 100,000 customer
accounts. Over 6,000 of these customer accounts receive dedicated connectivity
services from Verio, and over 14,000 represent Web hosting or Web site server
co-location services provided by Verio. Through the Company's Web services, over
35,000 domains (e.g. yourcompany.com) are hosted. The over 80,000 remaining
accounts are provided dial-up connectivity services, the majority of which are
used for business purposes.

Direct Sales. Verio has a direct sales force of more than 150 individuals.
These local sales representatives have a strong Internet technical background
and understand the local telecommunications tariffs as well as the needs of
their local business community. Additionally, these representatives are familiar
with local companies to assist in implementing customized solutions such as Web
page content development. Because they are

40
<PAGE> 41

locally based, these sales representatives are able to meet face-to-face with
prospective customers to discuss their Internet needs and technical requirements
and develop tailored solutions. The Company has developed programs at the
national level to attract and train high quality, motivated sales
representatives that have the necessary technical skills, consultative sales
experience and knowledge of their local markets. These programs include
technical sales training, consultative selling techniques, sales compensation
plan development, and sales representative recruiting profile identification.
Through the effective use of these initiatives, Verio plans to continue to
expand its direct sales force. At the local level, direct marketing techniques
are being employed to target customer segments that would achieve substantial
benefit from the business applications afforded by the Internet. Some direct
marketing tactics include direct mail, telemarketing, seminars and trade show
participation. The Company works with key vendors to assist in these direct
marketing efforts. Verio co-markets with these vendors through direct mail
programs, joint seminar development and joint trade show involvement.

Resellers and Indirect Sales. The Company has an authorized reseller and
referral program that permits the regional operating units to adapt a formal
indirect distribution program to their markets. The Company believes indirect
channels are a significant contributor to its growth. The Company already has
over 1,700 formal and informal reseller arrangements established. The authorized
reseller program offers reseller partners the ability to share in the on-going
revenue stream of customers they bring to Verio. Reseller partners include
system integrators, value-added resellers and other companies that have an
established relationship with the prospective customer base, and have a sales
force capable of selling Internet services as a part of the reseller's suite of
services. Referral partners, including organizations such as Web designers,
advertising agencies or property managers, are another source of customer leads.
The referral program targets organizations that are less capable of or
interested in selling Internet services or where Internet services fall outside
their core business interests. The benefits of these programs to Verio include
greater market reach without fixed overhead costs and the ability to use the
partners to assist in the delivery of complete solutions to meet customer needs.
In addition to local resellers, Verio is working with several national companies
to expand its indirect sales capability.

Branding. The Company has recently announced the consolidation of the
operations and marketing efforts of all of its ISPs under the Verio brand name,
with a regional or local geographical identifier to emphasize its local
presence. The Company has undertaken national public relations efforts to raise
the awareness and visibility of Verio in its target market.

VERIO NATIONAL NETWORK

Overview. Verio owns and operates a national network, providing a high
bandwidth, highly reliable data transmission path connecting Verio's customers
to the Internet, which the Company believes is adequate for the provision of
current and future planned access and enhanced services needs. The Company's
national network interconnects more than 15 national nodes and over 180 local
POPs across the United States. The Company believes that aggregating the
bandwidth and capacity requirements of its regional operations onto one national
network provides operational control and efficiency, reduces costs, provides
redundancy, and results in a higher quality service, thereby addressing some of
the most significant challenges that an ISP faces in supporting its customers.
Verio's national infrastructure also incorporates several other elements
critical to maintaining the highest quality Internet service, including a high
capacity and reliable national network, peering relationships with other
national ISPs, sophisticated network management tools and engineering support
services. The reliability of the national network is the result of many factors,
including redundant routers and other critical hardware, carrier class
facilities at POP locations (such as back up power, fire suppression and climate
control), and redundant telecommunications lines.

Network Infrastructure. As of April 1998, the national network carried
traffic for 27 of the ISPs acquired to date. The remaining ISPs' traffic will be
added as growth drives the need for additional capacity, as private and public
peering is implemented and as their current transit contracts expire.

41
<PAGE> 42

Following is a diagram of the Company's national network as of April 1998:

[MAP]

Currently, the national network architecture includes a presence at
selected national exchange points and redundant network nodes to link the
Company's regional networks to the national network. As of April 1998, Verio's
network included connectivity at MAE West, MAE East and the NY NAP, each of
which is a major national exchange point for ISPs. The Company also has a
presence at the Palo Alto Internet Exchange (PAIX), NASA Ames and a number of
other regional connecting points, including Seattle, Washington; Portland,
Oregon; Sacramento and San Diego, California; Denver, Colorado; Dallas and
Houston, Texas; Chicago, Illinois; Ann Arbor, Michigan; Philadelphia,
Pennsylvania; and Boston, Massachusetts. Each of these Verio locations features
leading router technology. The equipment is located in facilities leased from a
variety of telecommunications providers, including MCI, Sprint, MFS, Brooks and
others. These access points are linked, using a nationwide, high-speed DS-3 (45
Mbps) and OC-3 (155 Mbps) ATM, and DS-3 and OC-3 clear line network
infrastructure, utilizing capacity leased from a variety of national telco
providers, including Sprint, MCI, WorldCom and Qwest. The ATM portion of the
network relies on Sprint's 4-fiber ring SONET network. Sprint's SONET
architecture is designed to survive multiple failures with near instant
restoration to full capacity, thereby providing highly reliable performance.
This combination of clear channel circuits, ATM and router architecture provides
reliability to the network through path diversity and redundancy. Verio's
regional operating units either co-locate at these access nodes or lease
connectivity from a local service provider such as an RBOC or other LEC to
connect to the Verio equipment.

Work has begun to add national access nodes to serve additional parts of
the Midwest, Southern California, Texas, the Northeast and the Southeast which
the Company currently plans to put on-line during the remainder of 1998.
Multiple national access nodes facilitate connection to Verio's national network
by its regional operations. The Company plans to add additional private peering
points and access nodes as it

42
<PAGE> 43

acquires more ISPs and expands operations, and to further increase network
capacity as the need for additional bandwidth arises.

The national network is planned to allow for rapid expansion of bandwidth
through scaleable design supported by multiple local access and interexchange
carriers to provide the required bandwidth. The Company has begun the migration
of selected links from ATM to clear line. It is anticipated that the Company
will require nationwide OC-3 capacity in late 1998 to handle its projected
traffic requirements. The Company anticipates the potential need to exceed OC-3
speeds in 1999.

On March 31, 1998, the Company entered into a 15-year Capacity and Services
Agreement (the "Capacity Agreement") with Qwest, under which the Company will
have access to long haul capacity and ancillary services on Qwest's planned
16,285 mile MacroCapacity(SM) Fiber Network. Over the first seven years of the
term of the Capacity Agreement (the "Commitment Term"), the Company must
purchase, and Qwest must provide, not less than $100.0 million, in the
aggregate, of such capacity and services (the "Commitment"), at agreed upon
prices. The amount of capacity represented by the minimum Commitment would
satisfy less than 50% of the Company's currently projected long haul capacity
requirements over the Commitment Term. However, the Company has the right to
order capacity and services in excess of the Commitment level, and after the
expiration of the Commitment Term, at the same agreed upon prices. The Company
also currently is party to a number of other long haul capacity agreements with
additional telecommunication providers. These agreements are for various terms
(of up to 5 years), and have varied pricing. Verio anticipates that it will
satisfy a substantial portion of its capacity and ancillary services needs under
the Capacity Agreement, because it believes that the agreed upon pricing levels
will significantly reduce the per unit costs that it otherwise would pay under
its other existing long haul capacity agreements.

The Company believes that the currently installed Cisco routers will be
sufficient to support its traffic routing needs up to and including OC-3 speeds.
To handle the routing at speeds higher than OC-3, new technology will be
required. The Company is investigating and testing various options to support
these higher speeds and bandwidth requirements. Verio's options include
switching, higher capacity and faster routers, or hybrid routing and switching
solutions.

Peering Relationships. By implementing its own national network and
establishing peering relationships with other national ISPs, the Company
believes it can lower the cost of its Internet transit and increase the
performance and reliability of its network operations. Peering is the Internet
practice under which ISPs exchange each other's traffic without the payment of
settlement charges. The basis on which the large national ISPs make peering
available or impose settlement charges is evolving as the provision of Internet
access and related services has expanded and the dominance of a small group of
national ISPs has driven industry peering practice. Recently, companies that
have previously offered peering have cut back or eliminated peering
relationships and are establishing new, more restrictive criteria for peering.
The Company believes that substantial traffic volume and national scale will
continue to be the focal criteria necessary to establish and maintain peering
relationships. As a result, it has become increasingly important for companies
seeking to take advantage of peering to have significant traffic, a national
network and monitoring capability.

The Company has established public or private peering relationships with
nearly all of the major national ISPs, as well as with over 90 smaller domestic
and international networks. Some large network providers now prefer to peer at
private exchange points rather than at national exchange points. This preference
represents the desire to accomplish the exchange of high bandwidth traffic in a
more efficient manner rather than to risk congestion and equipment failure at
public exchange points. The Company has moved its GTE Internetworking and DIGEX
public peering points to private peering locations and is in the process of
moving its MCI public peering points to private peering locations. Verio also is
evaluating additional private peering proposals from other national ISPs. The
Company currently anticipates that, as Verio's traffic grows, more peering
relationships can be obtained. However, no assurance can be given that peering
relationships will continue to be made available to the Company. Even if these
relationships are not maintained or established, Verio believes that it will be
more economical for Verio to maintain an exchange point transit agreement than
to pay other national ISPs for transit. See "Risk Factors -- Dependence upon
Implementation of Network Infrastructure; Establishment and Maintenance of
Peering Relationships."

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National Network Management. The Company considers world-class network
management an essential capability for network monitoring and expansion,
maintaining high customer satisfaction and improving network quality. The
Company has established a 7-day X 24-hour NOC to allow continuous monitoring of
the network and to provide a single point of contact for real-time network
status information and customer technical problem resolution. The NOC is
designed to provide real-time alarming, event correlation, traffic management
and forecasting, and distributed notification of the network events and network
status. The Company utilizes many leading edge systems to provide the NOC
capabilities. As of April 1998, the Company monitored the national network and
the local networks of approximately 18 of the ISPs it had acquired as of such
time. The Company plans to provide network and customer monitoring throughout
its regional operations by the end of 1998.

Engineering Support Services. The Company has negotiated national level
telecommunications contracts with LECs, such as MFS/WorldCom, providing
favorable terms for local transport. The Company plans to expand national
purchasing and leasing benefits as well as technical planning and support to
improve the performance, reliability and economics of its regional networks.
National level purchasing benefits include both cost and vendor performance
issues as well as the provisioning of spare equipment and additional technical
support from the suppliers. National level distribution agreements have been
negotiated with a number of additional national-scope suppliers. The Company's
relationships with Sprint and MCI provide discounted services including leased
line, local access and long distance. Co-location agreements have also been
established with companies such as Sprint, MCI, Brooks, MFS/WorldCom and Digital
Equipment Corporation. The Company is pursuing additional vendor and
telecommunication relationships in an effort to reduce the cost of equipment and
improve network quality.

Technical Planning and Support. The national engineering team provides
engineering support for routing configurations, telecommunications management
and pricing, development of local networks and purchasing and contract
negotiation. The national engineering team also works with the regional
engineering teams to nationalize certain network elements, improve performance
and reduce network costs. Support includes Internet protocol addressing support,
training and technology. This effort of sharing ideas and best practices among
the national team and the regions is intended to enhance the engineering talent
available locally and to share best practices nationally.

NATIONAL SUPPORT SERVICES

In addition to its national network and network monitoring capability,
Verio has developed and implemented three critical national support services
designed to increase operational efficiencies and enhance the quality,
consistency and scalability of the Company's services. These support services
include 7-day X 24-hour customer technical support and service, financial
information management through a central, standardized accounting system, and a
sophisticated billing and collections system. The strategy of creating a
partnership between local support teams and Verio's established national support
services enables the Company to capture economies of scale, improve quality and
responsiveness, and increase productivity, while allowing local personnel to
focus on relationships with customers.

Customer Technical Support. Verio's customer care combines the
responsiveness and on-site capabilities of local ISP presence with the scale
economies of a national customer support center in order to deliver customer
care to businesses. While local, independent ISPs bring the benefits of
understanding customer needs and providing hands-on support demanded by their
customers, they lack the ability to cost-effectively scale internal resources to
independently support their growing customer base. The Company's national
customer support center (located in Dallas, Texas) enables Verio to provide
7-day X 24-hour responsiveness while maintaining the ability to provide on-site
installation assistance, hands-on troubleshooting and access to local experts
who understand the customer's business. As of April 1998, the Company was
providing customer care services to 23 of the ISPs it had acquired as of such
time and will offer services to all of the Verio regional operations as the
national customer support center continues to expand throughout 1998. The
support center team is utilizing a leading customer support trouble ticketing
and workflow management system offered by Vantive Corporation. The system offers
the Company the ability to track, route, and report on customer issues and
provides significant benefit in ensuring quality and timely care to customers.
Based on information

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received through the trouble ticketing system, as well as through the
centralized billing and collections system, the Company is able to monitor
network reliability and outage experiences. To date, this information, as well
as the low churn rates among the Company's dedicated connectivity customers,
reflects that the outages experienced by the Company's customers, for the most
part, are minor and attributable to expected, ordinary course of business
service interruptions, telco capacity demands, and the customer's hardware and
software functionality issues. While the Company and its ISPs do not provide
general service warranties and have not instituted a uniform policy relating to
the provision or extent of service credits, the Company and its ISPs have
provided and continue to provide credits for outages resulting from network
failures in certain circumstances. To date, these credits have been immaterial.
The Company will continue to monitor outage experiences, and would expect to
record appropriate reserves if the level of outage credits becomes material.

Financial Information Management. The Company is in the process of
converting all of its acquired ISP operations to the PeopleSoft(TM) financial
reporting system and the ADP payroll/human resources system, in order to provide
a central, standardized accounting system. As of April 1998, 19 of the ISPs
acquired were utilizing the financial reporting system and eight were utilizing
the payroll human resources system. These systems enable Verio to cost
effectively increase the productivity and quality of administrative support by
standardizing operational systems such as payroll, payables, purchasing and
financial reporting. These enhancements are part of the Company's initiative to
implement continuous improvement methodology and to create a learning
organization.

Billing and Collections. The Company has implemented the Kenan Systems' EC
Arbor billing solution which offers high quality, flexibility,
cost-effectiveness and scalability. Kenan is a leading billing solutions
provider to the telecommunications industry, providing accurate, timely, and
easy-to-understand invoicing. As of April 1998, this system served 16 of the
ISPs acquired as of such time. The Company is aggressively rolling out this
billing platform to all of its regional operations and will continue on the path
toward centralized management of billing operations.

NTT STRATEGIC RELATIONSHIP

On April 7, 1998, the Company entered into agreements establishing a
strategic relationship with NTT. These agreements provide for an investment by
NTT or one of its affiliates in the Company, concurrent with and conditioned
upon the consummation of the Offering, for up to 12.5% of Company's fully
diluted Common Stock (after giving effect to the Offering and the issuance of
the NTT Shares) up to a maximum investment of $100.0 million, at a 3.25%
discount to the Price to Public. In connection with the NTT Investment, NTT will
be entitled to designate one member to serve on the Company's Board of
Directors. See "Principal Stockholders -- NTT Investment."

In addition, the Company and NTT America entered into a three year Outside
Service Provider Agreement (the "OSP Agreement"), which will take effect upon
the closing of the NTT Investment. Pursuant to the OSP Agreement, the Company
will be designated as the preferred provider of Internet access and related
services to customers of NTT America on a reseller basis. Verio and NTT will
connect their backbones and establish a peering and transit relationship. During
the term of the OSP Agreement, NTT America will pay the Company for the services
provided by the Company at predetermined rates reflective of the strategic
relationship between the parties, under which NTT will be entitled to "most
favored customer" status and pricing concessions, though the specific terms of
such arrangement have not yet been negotiated. Within 30 days after the
consummation of the Offering, NTT America and the Company have agreed to
establish certain working groups to develop the details for implementation of
the specific technical and administrative aspects arising under the OSP
Agreement.

ISP OWNERSHIP STRUCTURE

While the Company now typically seeks to acquire 100% of new ISPs, the
Company's early acquisition strategy was to rapidly build mass and scale by
acquiring less than 100% of its ISPs. In each case where the Company acquired
less than 100% of an ISP initially, it obtained the right to acquire the
remaining equity in the future at a price based on either agreed upon revenue
multiples or the fair market value of the ISP. As part of its integration
strategy, the Company has effected the Buyouts of all but two of the ISPs in
which it did not initially acquire 100% ownership through the use of cash on
hand and the issuance of equity. Verio currently

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<PAGE> 46

expects to effect the Buyouts of the remaining two non-wholly owned ISPs during
the remainder of 1998. However, there can be no assurance that the Company will
be able to complete these additional Buyouts at the times, or on the terms and
conditions, that it currently contemplates.

As the Company completes the Buyouts, in general, the ISPs in each region
are consolidated into integrated regional operating subsidiaries which are
wholly owned by the Company. In certain instances, some of the ISPs may continue
to exist as separate, indirect, wholly owned subsidiaries of Verio, but operated
as part of the particular integrated operating region.

COMPETITION

The market for Internet connectivity and related services is extremely
competitive. The Company anticipates that competition will continue to intensify
as the use of the Internet grows. The tremendous growth and potential market
size of the Internet access market has attracted many new start-ups as well as
existing businesses from different industries. Current and prospective
competitors include, in addition to other national, regional and local ISPs,
long distance and local exchange telecommunications companies, cable television
companies, direct broadcast satellite and wireless communications providers, and
on-line service providers. The Company believes that a reliable national
network, knowledgeable salespeople and the quality of technical support
currently are the primary competitive factors in the Company's target market,
and that price is usually secondary to these factors.

ISPs. According to Boardwatch magazine's directory of Internet Service
Providers, there are currently over 4,000 ISPs in the United States, consisting
of national, regional and local providers. The Company's current primary
competitors include other ISPs with a significant national presence which focus
on business customers, such as UUNet, GTE Internetworking (formerly BBN),
PSINet, Concentric Network and DIGEX. While the Company believes that its level
of local service and support and target market focus distinguish it from these
competitors, some of these competitors have significantly greater market
presence, brand recognition, and financial, technical and personnel resources
than the Company, and have extensive coast-to-coast Internet backbones. The
Company also competes with unaffiliated regional and local ISPs in its targeted
geographic regions.

Telecommunications Carriers. All of the major long distance companies (also
known as interexchange carriers or IXCs), including AT&T, MCI, and Sprint, offer
Internet access services and compete with the Company. The recent sweeping
reforms in the federal regulation of the telecommunications industry have
created greater opportunities for LECs, including the RBOCs, to enter the
Internet connectivity market. In order to address the Internet connectivity
requirements of the current business customers of long distance and local
carriers, the Company believes that there is a move toward horizontal
integration through acquisitions of, joint ventures with, and the wholesale
purchase of connectivity from, ISPs. The WorldCom/MFS/UUNet consolidation, the
NETCOM/ICG merger, the Intermedia/DIGEX merger and GTE's acquisition of BBN are
indicative of this trend. Accordingly, Verio expects that it will experience
increased competition from the traditional telecommunications carriers. Many of
these telecommunications carriers, in addition to their substantially greater
network coverage, market presence, and financial, technical and personnel
resources, also have large existing commercial customer bases. Furthermore,
telecommunications providers may have the ability to bundle Internet access with
basic local and long distance telecommunications services. Such bundling of
services may have an adverse effect on the Company's ability to compete
effectively with the telecommunications providers and may result in pricing
pressure on the Company that would have an adverse effect on the Company's
business, financial condition and results of operations. The Company believes
that its local presence and its strong technical and data-oriented sales force
is an important feature distinguishing it from the centralized voice-oriented
sales approach typified by the current Internet connectivity services offered by
the IXCs and LECs.

Cable Companies, Direct Broadcast Satellite and Wireless Communications
Companies. Many of the major cable companies have announced that they are
exploring the possibility of offering Internet connectivity, relying on the
viability of cable modems and economical upgrades to their networks. MediaOne
Group and TCI have recently announced trials to provide Internet cable service
to their residential customers in select

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<PAGE> 47

areas. However, the cable companies are faced with large-scale upgrades of their
existing plant equipment and infrastructure in order to support connections to
the Internet backbone via high-speed cable access devices. Additionally, their
current subscriber base and market focus is residential which requires that they
partner with business-focused providers or undergo massive sales and marketing
and network development efforts in order to target the business sector. Several
announcements also have recently been made by other alternative service
companies approaching the Internet connectivity market with various wireless
terrestrial and satellite-based service technologies. These include Hughes
Network System's DirecPC product that provides high-speed data through direct
broadcast satellite technology, CAI Wireless System's announcement of an MMDS
wireless cable operator launching data services via 2.5 to 2.7 GHz and
high-speed wireless modem technology, Cellularvision's announcement that it is
offering Internet access via high-speed wireless LMDS technology, and Winstar,
which currently offers high-speed Internet access to business customers over the
38 GHz spectrum.

On-line Service Providers. The predominant on-line service providers,
including America Online, CompuServe, Microsoft Network, and Prodigy, have all
entered the Internet access business by engineering their current proprietary
networks to include Internet access capabilities. The Company competes to a
lesser extent with these on-line service providers.

Recently, there have been several announcements regarding the planned
deployment of broadband services for high speed Internet access by cable and
telephone companies through new technologies such as cable modems and xDSL.
While these providers have initially targeted the residential consumer, it is
likely that their target markets will expand to encompass the Company's targeted
markets, which may significantly affect the pricing of the Company's service
offerings.

PROPERTIES

The Company's corporate headquarters is located in Englewood, Colorado
where the Company leases approximately 39,200 square feet of office space. The
Company's lease agreement, which commenced February 1, 1998, is for a term of
five years. The Company also has executed a lease covering 20,700 square feet of
space in the InfoMart in Dallas, Texas, where the Company maintains its network
operations center and customer support center. That lease expires on June 30,
2002. The Company also leases space, typically less than 200 square feet, in
various geographic locations to house network infrastructure and
telecommunications equipment. Operational functions are principally located in
the offices of its regional operations. The Verio ISPs typically are party to
lease agreements for administrative office space sufficient for their respective
personnel, as well as smaller site leases to house their network equipment.

EMPLOYEES

As of March 31, 1998, the Company employed approximately 960 people,
including full-time and part-time employees at its corporate headquarters in
Colorado, its network operations and customer support center in Texas and at its
controlled ISPs. The Company considers its employee relations to be good. None
of the employees of the Company is covered by a collective bargaining agreement.

TRADEMARKS AND TRADE NAMES

The Company filed for federal trademark protection of "Verio" on November
29, 1996. This application is pending and the Company has no assurance that it
will be granted. Trademark protections for the Verio mark also have been applied
for in the European Economic Community, as well as in Japan. Additionally,
corporate name reservations for the name "Verio Inc." have been filed in all
fifty states. In conjunction with the consolidation of its ISPs into regional
operating entities, the ISPs have migrated to the Verio brand name, with a
regional or local geographical identifier appended.

LEGAL PROCEEDINGS

The Company is not currently party to any material legal proceedings.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages as of April 24, 1998, and
positions of the officers and directors of the Company. Their respective
backgrounds are described below.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Steven C. Halstedt(3)(4)............................. 52 Chairman of the Board
Justin L. Jaschke(3)(4).............................. 40 Chief Executive Officer, Director
James C. Allen(2).................................... 51 Director
Trygve E. Myhren(1)(2)(4)............................ 61 Director
Paul J. Salem........................................ 34 Director
Stephen W. Schovee(1)(2)............................. 38 Director
George J. Still, Jr.(4).............................. 40 Director
Sean G. Brophy....................................... 39 Vice President of Corporate Development
James F. B. Browning................................. 43 Vice President of Network Operations
Chris J. DeMarche.................................... 41 Chief Technical Officer
Carla Hamre Donelson................................. 42 Vice President, General Counsel and
Secretary
Peter B. Fritzinger.................................. 40 Chief Financial Officer
Deb Mayfield Gahan................................... 43 Vice President of Finance and
Administration
James M. Kieffer..................................... 36 Vice President of Customer Operations
John R. Viviani...................................... 43 Vice President of Sales and Marketing
</TABLE>

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

(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Executive Committee
(4) Member of Finance Committee

Mark D. Johnson, who served as the Company's President, Chief Operating
Officer and a director of the Company, died on March 9, 1998. While Mr. Johnson
played an important role in overseeing the Company's operations, the Company
does not expect that his death will adversely affect the Company's operations,
growth or financial prospects, because of the strength of the Company's core
management team. On March 18, 1998, Mr. Jaschke was appointed to serve as the
Company's President while the Company conducts an executive search to seek a
replacement for the positions that were held by Mr. Johnson. See
"Summary -- Recent Developments."

All of the officers identified above serve at the discretion of the Board
of Directors of the Company. There are no family relationships between any
persons identified above. The following are brief biographies of the persons
identified above.

Steven C. Halstedt has served as Chairman of the Board of Directors of
Verio since the Company's inception in March 1996. Mr. Halstedt is a co-founder
of The Centennial Funds. Mr. Halstedt has 17 years of direct venture capital
experience and serves as a general partner of each of the Centennial Holdings'
partnerships. Prior to co-founding The Centennial Funds in 1981, he was
Executive Vice President and Director of Daniels & Associates, Inc., a private
communications service company involved in cable television system operations.
Mr. Halstedt is a member of the Board of Directors of Formus Communications,
Inc., Pluto Technologies International, Inc. and V-I-A Internet, Inc. Mr.
Halstedt was recently a director of Centennial Communications Corp., Masada
Security Holdings, Inc. and Triax Communications Corp. He is also former
Chairman of the Board of OneComm Corporation ("OneComm"), PageAmerica Group,
Inc. and Orion Network Systems, Inc., all publicly traded telecommunications
companies. Mr. Halstedt received a Bachelor of Science with distinction in
management engineering from Worcester Polytechnic Institute, and earned a Master
of Business Administration from the Amos Tuck School of Business Administration
at Dartmouth College, where he was named an Edward Tuck Scholar. He attended the
University of

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Connecticut School of Law. He was a Platoon Leader and Battalion Operations
Officer in a U.S. Army Combat Engineer Battalion in Vietnam.

Justin L. Jaschke has served as Chief Executive Officer of Verio since the
Company's inception in March 1996. He is also a member of the Company's Board of
Directors. Prior to forming Verio, Mr. Jaschke served as Chief Operating Officer
for Nextel Communications ("Nextel") following its merger with OneComm in July
of 1995. Mr. Jaschke served as OneComm's President and a member of its Board of
Directors from the time that he joined that company in April 1993 until the
merger with Nextel. Mr. Jaschke currently serves as Chairman of the Board of
Directors of V-I-A Internet, Inc. and also serves on the Board of Directors of
Metricom, a leading wireless data communications provider, and on the Board of
Directors of Dobson Communications, a rural cellular and local exchange
provider. From May 1990 to April 1993, Mr. Jaschke served as President and CEO
of Bay Area Cellular Telephone Company. From November 1987 to May 1990, Mr.
Jaschke was Vice President of Corporate Development of PacTel Cellular, and from
1985 to 1987 was Director of Mergers and Acquisitions for PacTel Corporation.
Prior to that, Mr. Jaschke was a management consultant with Marakon Associates.
Mr. Jaschke received a Bachelor of Science degree summa cum laude in mathematics
from the University of Puget Sound and a Master of Science degree in management
from the Sloan School of Management at MIT.

James C. Allen has served as a director of Verio since May 1996. Mr. Allen
served as CEO of Brooks Fiber Properties, Inc. until its recent acquisition by
WorldCom. Mr. Allen has 25 years of experience as an entrepreneur, operator,
financier, expert witness and advisor in cable television and broadband
telecommunications. Prior to joining Brooks, he served as Chief Financial
Officer and Chief Operating Officer of David Lipscomb University from which he
holds a Bachelor of Science degree. Mr. Allen was a founder and former
President, CFO and COO of Cencom Cable Associates, which was purchased by a
subsidiary of Hallmark Cards, and a former Vice President of Operations of
Telcom Engineering, Inc., a telecommunications engineering and consulting firm
with clients in both the telephone and cable television industries. Mr. Allen
previously held positions as Vice President of Operations of United Cable
Television, Divisional Manager of Continental Telephone Corporation, and Vice
President of Finance for National Communications Service Corporation. Mr. Allen
also is a director of MetroNet Communications Corp. ("MetroNet"), an LEC.

Trygve E. Myhren has served as a director of Verio since April 1997. Mr.
Myhren is President of Myhren Media, Inc. which invests in and advises media,
communications and consumer products companies. From 1990 to 1996, Mr. Myhren
was President and a director of The Providence Journal Company. From 1975 until
1988, Mr. Myhren was an officer of American Television and Communications
Corporation (ATC), the cable television subsidiary of Time, Inc. (now
Time/Warner Cable), serving as Chairman and CEO from 1980 to 1988. Mr. Myhren
also serves on the boards of The Providence Journal Company, Advanced Marketing
Services, Peapod, Ltd., CableLabs, J.D. Edwards, Inc., Founders Funds and The
University of Denver. Previously, Mr. Myhren served as chairman of the National
Cable Television Association (NCTA), and also served on the boards of Turner
Broadcasting Systems, Continental Cablevision, Inc., Citizens Bank and several
internal Time, Inc. boards, including Home Box Office, Temple-Eastex and Time
Magazine Group. He also served on the FCC's Advisory Committee on High
Definition TV. Mr. Myhren has an undergraduate degree in political science and
philosophy from Dartmouth and a Master of Business Administration from the Amos
Tuck Graduate School at Dartmouth. He served three and one-half years as a naval
officer with the U.S. Pacific Fleet.

Paul J. Salem has served as a director of Verio since December 1996. Mr.
Salem is a Managing Director of Providence Equity Partners, Inc., and is a
partner of the general partner of Providence's private equity funds. Providence
manages over $500 million in equity and specializes in communications and media
investments. Mr. Salem has been responsible for many of Providence's investment
activities, including its investments in competitive local exchange companies,
enhanced specialized mobile radio, wireless data networks, radio representation,
telecommunications infrastructure and other areas. He is currently a director of
Interep National Radio Sales, Inc., MetroNet, Wired Ventures, Inc. and UniSite,
Inc. Prior to joining Providence, Mr. Salem worked for Morgan Stanley & Co. in
corporate finance and mergers and acquisitions. Previously, Mr. Salem spent four
years with Prudential Investment Corporation, an affiliate of Prudential

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<PAGE> 50

Insurance, where his responsibilities included private placement financings,
leveraged buyout transactions and establishing Prudential's European investment
office. Mr. Salem received a Bachelor of Arts in business from Brown University
and a Master of Business Administration from Harvard Business School.

Stephen W. Schovee has been a director of the Company since the Company's
inception in March 1996. Mr. Schovee serves as Managing Member of Telecom
Partners, L.P. and Telecom Partners II, L.P. Mr. Schovee was previously
co-founder, Chief Executive Officer and a director of OneComm from its inception
until its merger with Nextel. Prior to that, Mr. Schovee was a Vice President of
Centennial Holdings, the manager of The Centennial Funds, a Denver based venture
capital fund with over $400 million of subscribed capital. Mr. Schovee was a
partner in two of The Centennial Funds where he focused on telecommunications
investments. Mr. Schovee is a special limited partner of Centennial Fund IV,
L.P. and Centennial Fund V, L.P. He is a director of SMR Direct, Intergram
International, and Infobeat. Mr. Schovee received a Bachelor of Science degree
in mechanical engineering from Bucknell University and a Master of Business
Administration from The Wharton School.

George J. Still, Jr. has been a director of the Company since the Company's
inception in March 1996. Mr. Still, based in Palo Alto, California, is a
Managing Partner of Norwest Venture Partners VI, L.P. and Norwest Equity
Partners V, L.P., and a General Partner of Norwest Equity Partners IV. From July
1984 until October 1989, he was a General Partner with The Centennial Funds
based in Denver, Colorado. Prior to Centennial, Mr. Still was with Ernst &
Whinney (now Ernst & Young) in San Francisco. Currently, he is a director of
PeopleSoft, Inc. and 3Dfx Interactive, Inc., both public companies. In addition,
he serves on the board of several private companies, including Metapath Software
Corporation, Intrepid Systems, ObjectStream, Inc., and Chordiant Software.
Further, Mr. Still serves as a director of the National Venture Capital
Association. He holds a Bachelor of Science degree in business administration
from Pennsylvania State University and a Master of Business Administration from
the Amos Tuck School at Dartmouth College.

Sean G. Brophy has served as Vice President of Corporate Development since
November 1997, and prior to that served as Vice President of Marketing and
Business Development for the Company since joining Verio in May 1996. Mr. Brophy
served as Vice President of Marketing for OneComm and then Nextel from 1994 to
1996. He worked at Northern Telecom from 1990 through 1994 in a variety of
capacities, including strategic planning and product management, where he had
global responsibilities for new products for Personal Communications Services.
Prior to that he worked at Bell Northern Research, the research and development
arm of Northern Telecom, designing telephone equipment and services ranging from
the DMS-100 to key systems. While there he was awarded patent and design
excellence awards. Mr. Brophy holds a Bachelor of Science degree in computer
engineering from McMaster University, a Master of Science degree in electrical
engineering from Carleton University and a Master of Science degree in
management from the Sloan School of Management at MIT.

James F. B. Browning was appointed Vice President of Network Operations for
the Company in January 1998, having previously served as President and CEO of
ATMnet, a company he founded in 1995 to provide integrated digital
communications services to businesses with broadband networking requirements.
Verio acquired ATMnet in November 1997. Mr. Browning has 20 years of experience
managing high technology development and operations. From 1988 to 1994, as
co-founder, he served as Chief Financial Officer and Chief Operating Officer of
VisiCom Laboratories, Inc., a systems engineering firm specializing in digital
satellite communications and operating system level software development. From
1983 to 1988, Mr. Browning served as Executive Vice President and then President
of Pacific Microcomputers, Inc., which developed and produced Single Board
Computers for use in Unix workstations and real time embedded computing
environments. Previously, Mr. Browning held financial and operational management
positions with Advanced Digital Systems and Tetra Tech, a subsidiary of
Honeywell. Mr. Browning holds a Bachelor of Science degree in accounting from
San Diego State University.

Chris J. DeMarche has been Chief Technical Officer of the Company since
joining the Company in May 1996. From 1995 to 1996, Mr. DeMarche was CTO and
Senior Vice President of Nextel, where he was credited with addressing many
critical technology issues. From 1993 to 1995, he was Senior Vice President of
Engineering and Technology at OneComm, where he was responsible for building a
national engineering team

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<PAGE> 51

and designing and implementing wireless communication networks. Mr. DeMarche
also worked in advanced technology areas at PacTel Corporation and Hughes
Aircraft Corporation and served in the U.S. Naval Submarine Force. Mr. DeMarche
received his Master of Business Administration from UCLA in 1990, his Master of
System Management from University of Southern California in 1986, and his
Bachelor of Science from the United States Naval Academy in 1978.

Carla Hamre Donelson has served as Vice President, General Counsel and
Secretary of the Company since joining Verio in October 1996 from the law firm
of Morrison & Foerster LLP, where she had practiced law since March 1987. She
served as a partner in that firm's business department from 1990 and as head of
the Denver business practice from 1993. While in private practice, Ms. Donelson
was engaged in a general corporate and transactional practice, focused primarily
on the communications and related technology industries, representing domestic
and foreign entities in numerous financing, merger, acquisition, investment, and
licensing transactions. She served as regular outside corporate counsel to
OneComm and represented OneComm in connection with a variety of its SMR
acquisitions as well as its merger with Nextel. Ms. Donelson received her
Bachelor of Arts degree in molecular biology from the University of Colorado,
her Juris Doctor degree from the University of Denver College of Law, and is a
member of the Colorado Bar Association.

Peter B. Fritzinger has served as Chief Financial Officer of the Company
since June 1997. From September 1993 until June 1997, Mr. Fritzinger served as
Chief Financial Officer of Louis Dreyfus Natural Gas Corp., an independent,
publicly held oil and gas company headquartered in Oklahoma City. From 1991 to
1993, he was Vice President-Finance and Treasurer of Louis Dreyfus Energy Corp.,
a diversified, global enterprise with investments in oil and gas reserves and
other petroleum-related industries. Mr. Fritzinger joined Louis Dreyfus Energy
Corp. from J.P. Morgan, where he was a Vice President in its corporate finance
group, having held various positions with Morgan Guaranty Trust Company of New
York since 1980. Mr. Fritzinger received his Bachelor of Arts degree in math and
psychology from Amherst College.

Deb Mayfield Gahan has served as Vice President of Finance and
Administration for the Company since joining the Company in May 1996. She brings
with her ten years of extensive start-up and telecommunications experience. From
1994 to 1996, Ms. Gahan served as Vice President of Business Services and
Controller for OneComm and then for Nextel following its acquisition of OneComm.
From 1987 to 1994, she was Director of Business Operations and Controller for
American Cellular Communications and then BellSouth Cellular Corp., a leading
provider of cellular service in 15 states. In these positions, she was
responsible for implementing cost-effective financial control systems, asset
protection, revenue assurance, financial reporting, treasury and business
process development. Ms. Gahan is a Certified Public Accountant and holds a
Master of Business Administration from Mississippi College, as well as a
Bachelor of Science in accounting from Mississippi State University.

James M. Kieffer has served as Vice President of Customer Operations for
the Company since joining the Company in July 1996. Previously, Mr. Kieffer
served as Nextel's Vice President of Customer Operations responsible for
customer care, billing, accounts receivable, and inventory management from
August 1996. Prior to OneComm's merger with Nextel, Mr. Kieffer led the
development of OneComm's customer care as Director of Customer Operations from
January 1994 to August 1995. Prior to that, Mr. Kieffer served as National
Customer Service Manager for Motorola's Land Mobile Products Sector. During his
six years with Motorola, he held several key roles while developing a
consolidated national customer care organization from March 1990 until January
1994. Prior to joining Motorola, Mr. Kieffer managed customer relations and
accounts receivable for IBM. He received his Master of Business Administration
from DePaul University and holds a Bachelor of Science in management from
Illinois State University.

John R. Viviani joined the Company in December 1997 and serves as its Vice
President of Sales and Marketing. Prior to that time, Mr. Viviani was most
recently Sales Director of Worldwide Channels for IBM Networking Hardware
Division. In that capacity, he was responsible for developing worldwide indirect
channels. Prior thereto from 1992 to 1996, Mr. Viviani implemented and directed
national sales and marketing teams responsible for launching IBM U.S. into the
internetworking solution market place and establishing the IBM Networking
division in the indirect channels. Mr. Viviani was employed by IBM since 1978,
serving as a

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<PAGE> 52

business unit executive, account executive and marketing manager. Mr. Viviani
received his Master of Business Administration from St. Thomas Aquinas College
and his Bachelor of Science degree in management and finance from Marymount
College.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board has established an Executive Committee, a Finance
Committee, a Compensation Committee and an Audit Committee. The Executive
Committee is responsible for reviewing and, where appropriate, authorizing
corporate action with respect to the conduct of the business of the Company
between Board meetings. Actions taken by the Executive Committee must be
submitted to the Board for review and ratification at the next meeting, except
in those cases when the Board has specifically delegated final decision-making
authority to the Executive Committee. The Executive Committee is composed of
Messrs. Halstedt and Jaschke. The Finance Committee is responsible for reviewing
and, where appropriate, authorizing certain corporate actions with respect to
the finances of the Company and certain acquisitions of ISPs not involving the
issuance of stock. The Finance Committee is composed of Messrs. Halstedt,
Jaschke, Still and Myhren. The Compensation Committee is responsible for
reviewing and establishing the compensation structure for the Company's officers
and directors, including salary rates, participation in incentive compensation
and benefit plans, 401(k) plans, stock option and purchase plans and other forms
of compensation. The Compensation Committee is composed of Messrs. Allen, Myhren
and Schovee.

The Board also has established an Audit Committee consisting of Messrs.
Myhren and Schovee. The Audit Committee will be comprised solely of independent
directors and will be responsible for recommending the firm to be appointed as
independent accountants to audit the Company's financial statements, discussing
the scope and results of the audit with the independent accountants, reviewing
the functions of the Company's management and independent accountants with
respect to the Company's financial statements and performing such other related
duties and functions as are deemed appropriate by the Audit Committee and the
Board.

DIRECTORS COMPENSATION

From and after the consummation of the Offering, each non-employee director
of the Company will receive an annual retainer fee of $5,000 and a fee of $1,000
for each meeting of the Board attended in person or $500 for each meeting
attended by telephone. The fee for Board committee meetings is $500 per meeting.
A director may elect to receive these payments in the form of Common Stock. In
addition, upon consummation of the Offering, each non-employee director
automatically will be granted an option to acquire 30,000 shares of Common Stock
at an exercise price per share equal to the fair market value of the Common
Stock at the date of grant. Such options will vest and become exercisable in
three equal installments on each yearly anniversary of the grant date.
Non-employee directors elected or appointed to the Board following the Offering
also will be granted automatically at the time of election or appointment an
option to acquire 30,000 shares of Common Stock with the same terms and
conditions at an exercise price equal to the then fair market value of the
Common Stock. After the initial three year vesting period for such options,
non-employee directors will receive automatic annual grants of options to
acquire an additional 3,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock at the date of grant. Such options
will vest and become exercisable on the first anniversary of the grant date. In
April 1998, the Company adopted a separate stock incentive plan under which
options may be granted and shares of Common Stock may be issued to non-employee
directors in accordance with these compensation arrangements, from and after the
consummation of the Offering. See "Stock Option and Incentive Plans -- 1998
Non-Employee Director Stock Incentive Plan."

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<PAGE> 53

EXECUTIVE COMPENSATION

The following table sets forth certain summary information for the years
ended December 31, 1997 and 1996, respectively, concerning the compensation paid
and awarded to: (a) the Company's Chief Executive Officer and (b) the Company's
four most highly compensated executive officers whose salaries and bonuses
exceeded $100,000 who were serving as executive officers as of December 31, 1997
(collectively, with the Chief Executive Officer, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION -----------------------
-------------------------------- RESTRICTED SECURITIES
FISCAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATIONS($)
- --------------------------- ------- --------- -------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke........... 1997 175,003 66,500 85,000 -- --
Chief Executive Officer 1996 124,631(2) 44,867 -- 240,000 --
Mark D. Johnson............. 1997 113,337 50,603 -- 200,000 --
President and Chief
Operating 1996 -- -- -- -- --
Officer(3)
Chris J. DeMarche........... 1997 160,004 60,800 25,000 20,000 --
Chief Technical Officer 1996 106,666(4) 38,215 -- 70,000 --
Carla Hamre Donelson........ 1997 160,004 57,760 -- 20,000 --
Vice President, General 1996 26,320(5) 13,680 50,000 60,000 42,678(7)
Counsel and Secretary
Peter B. Fritzinger......... 1997 89,443(6) 31,287 -- 75,000 70,267(8)
Chief Financial Officer 1996 -- -- -- -- --
</TABLE>

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

(1) Fiscal year 1996 covers the period from inception (March 1, 1996) to
December 31, 1996.

(2) Reflects compensation paid to Mr. Jaschke commencing with his appointment as
Chief Executive Officer in April 1996.

(3) Mr. Johnson, who served as the Company's President and Chief Operating
Officer beginning in March 1997, died on March 9, 1998. See
"Summary -- Recent Developments."

(4) Reflects compensation paid to Mr. DeMarche commencing with his appointment
as Chief Technical Officer in May 1996.

(5) Reflects compensation paid to Ms. Donelson commencing with her appointment
as Vice President, General Counsel and Secretary in October 1996.

(6) Reflects compensation paid to Mr. Fritzinger commencing with his appointment
as Chief Financial Officer in June 1997.

(7) Represents the cost to the Company of tax reimbursements.

(8) Represents the cost to the Company of providing relocation benefits.

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<PAGE> 54

STOCK OPTIONS GRANTED IN LAST FISCAL YEAR

The following table contains information concerning the grant of stock
options by Verio under the Company's stock option plans to the Named Executive
Officers during the year ended December 31, 1997.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM ($)(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE)(1) DATE 5% 10%
---- ----------- -------------- ------------ ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke....... -- -- -- -- -- --
Mark D. Johnson......... 200,000 13.28% 6.00 May 11, 2007 754,674 1,912,491
Chris J. DeMarche....... 20,000 1.38% 6.75 Nov. 24, 2007 84,901 215,155
Carla Hamre Donelson.... 20,000 1.38% 6.75 Nov. 24, 2007 84,901 215,155
Peter B. Fritzinger..... 75,000 5.18% 6.00 May 21, 2007 283,003 717,184
</TABLE>

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

(1) All options were granted at an exercise price per share equal to at least
the fair market value of the Common Stock on the date of grant, as
determined by the Board of Directors.

(2) The potential realizable value is calculated based on the fair market value
on the date of grant, which is equal to the exercise price of the options,
assuming that the stock appreciates in value from the date of grant
compounded annually until the end of the option term at the rate specified
(5% or 10%) and that the option is exercised and sold on the last day of the
option term for the appreciated stock price. Potential realizable value is
net of the option exercise price. The assumed rates of appreciation are
specified in the rules and regulations of the Commission (as defined) and do
not represent the Company's estimate or projection of future stock price.
Actual gains, if any, resulting from stock option exercises and Common Stock
holdings are dependent on the future performance of the Common Stock and
overall stock market conditions. There can be no assurance that the amounts
reflected in this table will be achieved.

OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

The following table sets forth certain information with respect to the
Named Executive Officers regarding the stock options exercised during the last
fiscal year, the aggregate number of unexercised options to purchase Common
Stock granted in all years and held by them as of December 31, 1997, and the
value of unexercised in-the-money options (i.e., options that had a positive
spread between the exercise price and the fair market value of the Common Stock)
as of December 31, 1997:

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Justin L. Jaschke.......... 60,000 1,280,000 -- 180,000 380,000 3,600,000
Mark D. Johnson............ -- -- -- 200,000 -- 3,400,000
Chris J. DeMarche.......... -- -- 14,000 76,000 280,000 1,445,000
Carla Hamre Donelson....... -- -- 12,000 68,000 240,000 1,285,000
Peter B. Fritzinger........ -- -- -- 75,000 -- 1,275,000
</TABLE>

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

(1) The value of options at year-end is based on an assumed fair market value of
$23.00 per share of Common Stock.

EMPLOYMENT AGREEMENTS

As a general matter, the Company does not enter into employment agreements,
and has not entered into employment agreements with any of its officers. Rather,
the employment relationships with each officer are "at will." However, in
connection with the initial employment of each officer, the Company and the
officer executed an offer letter, in which the general compensation and benefits
provided to the officer are outlined,

54
<PAGE> 55

including base salary, targeted annual bonus, option grants and employee
benefits. The base salary and targeted bonus levels for each of the officers
remains the same in 1998 as in 1997. However, upon consummation of the Offering,
the base salary for Mr. Jaschke will be increased to $260,000, which will result
in an increase in his annual targeted bonus level of 30% to 40% of his base
salary.

COMPENSATION PROTECTION AGREEMENTS

The Company has entered into compensation protection agreements (the
"Compensation Protection Agreements") with each of the Named Executive Officers
and certain additional officers (collectively, the "Protected Officers") of the
Company. Each of the Compensation Protection Agreements contain substantially
similar terms. The form of Compensation Protection Agreement has been filed as
an exhibit to the Company's Registration Statement of which this Prospectus is a
part. The Compensation Protection Agreements will be for a term of three years
from April 1, 1998 (the "Effective Date"), subject to automatic yearly
extensions. In no event will the Compensation Protection Agreements terminate
within 12 months of a Change in Control of the Company. "Change in Control"
includes the following:

(a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any Person
(as defined in the Exchange Act) immediately after which such Person has
Beneficial Ownership (as defined in the Exchange Act) of 40% or more of the
combined voting power of the Company's then outstanding Voting Securities.
In determining whether a Change in Control has occurred, Voting Securities
which are acquired in a "Non-Control Acquisition," as defined in the
Compensation Protection Agreements, do not constitute an acquisition which
would cause a Change in Control;

(b) The individuals who, as of the date the Compensation Protection
Agreements were approved by the Board, are members of the Board (the
"Incumbent Board"), cease for any reason to constitute at least a majority
of the Board (subject to certain provisos);

(c) Approval by stockholders of the Company of a merger, consolidation
or reorganization involving the Company, unless such merger, consolidation
or reorganization (each, an "event") satisfies certain specified
conditions;

(d) Any other event that at least two-thirds of the Incumbent Board
determines constitutes a Change in Control; and

(e) If a Protected Officer's employment is terminated prior to a
Change in Control and the Board determines that such termination was at the
request of a third party who has indicated an intention or taken steps to
effect a Change in Control and who subsequently effectuates a Change in
Control, or occurred in connection with, or in anticipation of, a Change in
Control which actually occurs, then a Change in Control is considered to
have occurred with respect to that Protected Officer.

Upon termination within 12 months following a Change in Control, each
Protected Officer will receive the following compensation and benefits:

(i) If a Protected Officer's employment with the Company is terminated
within 12 months following a Change in Control by the Company for Cause (as
defined in the Compensation Protection Agreements) or by reason of the
Protected Officer's Disability (as defined in the Compensation Protection
Agreements), death, retirement, or by the Protected Officer other than for
Good Reason (as defined in the Compensation Protection Agreements), then
the Company must pay to the Protected Officer the Accrued Compensation (as
defined below) due through the date of termination (the "Termination
Date"). Accrued Compensation includes base salary, reimbursement for
reasonable and necessary expenses incurred by the Protected Officer on
behalf of the Company during the period ending on the Termination Date, and
vacation pay.

55
<PAGE> 56

(ii) If a Protected Officer's employment is terminated within 12
months of a Change in Control for any other reason than specified above,
the Protected Officer will receive:

(A) his or her Accrued Compensation;

(B) an amount equal to the product of a fraction, the numerator of
which is the number of days in the Company's fiscal year through the
Termination Date and the denominator of which is 365, and the bonus
amount, which will be the greater of 100% of the last annual incentive
payment paid or payable to the Protected Officer prior to the
Termination Date, and the Protected Officer's incentive target for the
fiscal year in which the Change in Control occurs (the "Bonus Amount");

(C) an amount equal to two times the sum of the Protected Officer's
annual base salary in effect immediately prior to the Change in Control,
plus the Bonus Amount. However, the amount paid to Mr. Jaschke will be
three times that sum;

(D) until the third anniversary of the Termination Date, the same
rights with respect to benefits provided by the Company, as were
provided to the Protected Officer as of the Effective Date, or, if
greater, at any time within 90 days preceding the date of the Change in
Control; and

(E) the immediate vesting and removal of all restrictions on any
outstanding incentive awards granted to the Protected Officer under the
Company's stock option and other stock incentive plans or arrangement.

The Compensation Protection Agreements will further provide that the
Protected Officers will not be required to mitigate the amount of any payment by
seeking employment or otherwise. Protected Officers may be entitled to
additional compensation or benefits in accordance with the Company's employee
benefit plans and other applicable programs, policies and practices then in
effect. The Compensation Protection Agreements will contain a "gross-up"
provision pursuant to which any Severance Payment, which would be subject to
certain excise taxes occurring as a result of Change in Control, would include
an additional gross-up payment resulting in the Protected Officer retaining an
additional amount equal to excise tax.

STOCK OPTION AND INCENTIVE PLANS

1996 Stock Option Plan

The 1996 Stock Option Plan was adopted and approved by the Board of
Directors in May 1996 and by the stockholders of the Company in June 1996. In
February 1998, the 1996 Stock Option Plan was amended, with the approval of the
Board, to reserve a total of 2,205,300 shares of Common Stock for issuance under
this plan. As of April 24, 1998, options to purchase 115,933 shares of Common
Stock granted under the 1996 Stock Option Plan had been exercised, options to
purchase 1,970,967 shares of Common Stock were outstanding and no additional
options to purchase shares of Common Stock remained available for grant. All
options forfeited after the amendment to the 1996 Stock Option Plan was
implemented in February 1998 result in availability under the 1998 Stock
Incentive Plan and are no longer available for grant under the 1996 Stock Option
Plan. The outstanding options were exercisable at a weighted average exercise
price of $6.55 per share. Outstanding options to purchase an aggregate of
1,340,967 shares were held by employees who are not officers or directors of the
Company. Of the 115,933 shares issued upon exercise of options, a total of
48,250 were issued upon exercise prior to their respective exercise vesting
dates, as permitted by the terms of the 1996 Stock Option Plan. As a result,
these shares are subject to repurchase by the Company at their respective
exercise prices, until the date on which they would have become exercisable. The
1996 Stock Option Plan will terminate in 2006, unless sooner terminated by the
Board of Directors.

The Board of Directors has delegated administration of the 1996 Stock
Option Plan to its Compensation Committee (the "Committee"). The Committee is
constituted to comply with the rules under Rule 16b-3 of the Exchange Act.
Awards under the 1996 Stock Option Plan may consist of (i) options to purchase
Common Stock that are designed to qualify, under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as "incentive stock options"
("Incentive Stock Options") or (ii) options to purchase Common

56
<PAGE> 57

Stock that are not described in Sections 422 or 423 of the Code ("Non-Qualified
Stock Options" and, collectively with Incentive Stock Options, "Options").

The Committee has discretion to grant Incentive Stock Options to employees
and officers (including directors who are employees) of the Company or any
Affiliate (as defined in the 1996 Stock Option Plan) of the Company and
Non-Qualified Stock Options to employees, officers, directors or consultants of
the Company and its Affiliates. The Committee may set the terms of such grants,
subject to applicable restrictions in the 1996 Stock Option Plan. Incentive
Stock Option grants are subject to the following limitations: (i) the term of
any Incentive Stock Option may not be longer than ten years, provided that the
term of any Incentive Stock Option granted to an individual possessing more than
10% of the combined voting power of the Company or an Affiliate (a "10% Holder")
may not be longer than five years; (ii) the aggregate fair market value of all
shares underlying Incentive Stock Options granted to an individual that first
become exercisable in any calendar year may not exceed $100,000; and (iii) the
exercise price of Incentive Stock Options may not be less than the fair market
value of the underlying shares on the grant date, provided that the exercise
price of any Incentive Stock Option granted to a 10% Holder may not be less than
110% of the fair market value of the underlying shares on the grant date. With
respect to Non-Qualified Stock Options, the exercise price may not be less than
85% of the fair market value of the underlying shares on the grant date. As of
April 24, 1998, no such below-market grant has been made.

During an optionee's lifetime, an Incentive Stock Option is exercisable
only by the optionee and no Incentive Stock Option may be transferred by the
optionee other than by will or the laws of descent and distribution. During an
optionee's lifetime (or a transferee pursuant to a qualified domestic relation
order), a Non-Qualified Stock Option is exercisable only by the optionee and no
Non-Qualified Stock Option may be transferred by the optionee other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relation order satisfying the requirements of the prior version of Rule 16b-3
under the Exchange Act. An optionee whose continuous status as an employee,
director or consultant of the Company terminates for any reason (other than
termination because of death or disability) may exercise, in the three-month
period following such cessation (unless such Options terminate or expire sooner
by their terms), or such longer or shorter period as specified in the Option,
that portion of the optionee's Options that is exercisable at the time of such
cessation. In the event the optionee becomes disabled, the Options vested as of
the date of disability may be exercised prior to the earlier of such Option's
specified expiration date or 12 months from the date of the optionee's
disability, or such longer or shorter period as specified in the Option. In the
event the optionee dies, the Options vested as of the date of disability may be
exercised prior to the earlier of such Option's specified expiration date or 18
months from the date of the optionee's disability, or such longer or shorter
period as specified in the Option.

In the event of (i) a dissolution or liquidation of the Company, (ii) a
merger or consolidation in which the Company is not the surviving corporation,
(iii) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's outstanding common stock immediately prior to such
merger are converted into other property, whether in the form of securities,
cash or otherwise, or (iv) any other capital reorganization in which the
Company's shareholders receive less than 50% of the outstanding voting shares of
the surviving corporation: (a) any surviving corporation shall assume any
Options outstanding under the 1996 Stock Option Plan; (b) such Options shall
continue in full force and effect; or (c) the Options shall terminate if not
exercised prior to such event.

1997 California Stock Option Plan

The Company's 1997 California Stock Option Plan (the "1997 California
Plan") was adopted by the Board of Directors in February 1997, and approved by
the Company's stockholders in April 1997. In February 1998, the 1997 California
Plan was amended, with the approval of the Board, to reserve a total of 795,400
shares of Common Stock for issuance under this plan. This amendment has been
approved by the Company's stockholders. As of April 24, 1998, no options to
purchase shares of Common Stock had been exercised under the 1997 California
Plan, options to purchase 617,605 shares of Common Stock were outstanding and
options to purchase an additional 177,795 shares of Common Stock remained
available for grant. The outstanding options were exercisable at a weighted
average exercise price of $12.47 per share. Outstanding options to
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<PAGE> 58

purchase an aggregate of 507,605 shares were held by employees who are not
officers or directors of the Company.

The 1997 California Plan may be administered by the Board of Directors or
the Committee (either, the "1997 Plan Administrator"). The 1997 California Plan
provides for the granting to employees of the Company and of its subsidiaries or
parent corporations of Incentive Stock Options, and for the granting to
employees and independent contractors of Non-Qualified Stock Options. The 1997
Plan Administrator has the power to determine the terms of the Options granted,
including the exercise price, number of shares subject to the Option and the
exercisability thereof, and the form of consideration payable upon exercise.
Options granted under the 1997 California Plan are not transferable by the
optionee other than by will or by the laws of descent or distribution, and each
Option is exercisable during the lifetime of the optionee only by such optionee.
The exercise price of all Incentive Stock Options granted under the 1997
California Plan must be at least equal to the fair market value, as determined
by the Board of Directors, of the Common Stock on the grant date. The exercise
price of all Non-Qualified Stock Options granted under the 1997 California Plan
must be at least 85% of the fair market value, as determined by the 1997 Plan
Administrator, of the Common Stock on the grant date. With respect to any
participant who owns stock possessing more than 10% of the voting power or value
of all classes of the Company's outstanding capital stock, the exercise price of
any Incentive Stock Option or Non-Qualified Stock Option granted must equal at
least 110% of the fair market value of the Common Stock on the grant date and
the term of the Option must not exceed five years. The term of all other Options
granted under the 1997 California Plan may not exceed ten years. The
consideration for exercising any Option may consist of cash, check, shares of
Common Stock, a promissory note, the assignment of part of the proceeds from the
sale of shares acquired upon exercise of the Options or any combination thereof
as specified in the agreement evidencing the Option.

The 1997 California Plan provides that in the event of a merger of the
Company with or into another corporation or a consolidation, sale of
substantially all of the Company's assets or like transaction involving the
Company in which the Company's stockholders before the transaction do not retain
a majority interest in the Company, each Option may be assumed or an equivalent
Option may be substituted by a successor corporation. If the successor
corporation chooses not to assume the Options under the 1997 California Plan,
the Options not otherwise exercisable will terminate immediately prior to the
consummation of the transaction.

Unless terminated sooner, the 1997 California Plan will terminate
automatically in 2007. The Board has the authority to amend, suspend or
terminate the 1997 California Plan, subject to stockholder approval of certain
amendments and provided no such action may affect any share of Common Stock
previously issued and sold or any Option previously granted under the 1997
California Plan without the optionee's consent.

1998 Stock Incentive Plan

The Company's 1998 Stock Incentive Plan (the "1998 Stock Incentive Plan"),
which was adopted by the Board of Directors in February 1998, was amended and
restated as of March 19, 1998 and has been approved by the Company's
stockholders. From and after the Offering, all further option grants will be
made solely under the 1998 Stock Incentive Plan. Initially, 165,000 shares of
Series D-1 Preferred Stock and 1,749,300 shares of Common Stock, together with
any shares of Common Stock represented by awards under the 1996 Stock Option
Plan which are forfeited, expire or are cancelled following the adoption of the
1998 Stock Incentive Plan, were reserved for issuance under the 1998 Stock
Incentive Plan. Upon and after the Offering, 6,199,300 shares of Common Stock
will be reserved for issuance under the 1998 Stock Incentive Plan, together with
(a) any shares of Common Stock available for future awards under the 1997
California Plan as of the Offering and (b) any shares of Common Stock
represented by Awards under the 1996 Stock Option Plan and the 1997 California
Plan (the "Prior Plans"), that are forfeited, expire or are cancelled following
the Offering. In connection with the adoption of the 1998 Stock Incentive Plan,
the Board determined that the Company will limit the issuance of 1998 Awards (as
defined) under the 1998 Stock Incentive Plan such that the aggregate number of
shares subject to 1998 Awards granted under the 1998 Stock Incentive Plan and
the Prior Plans will not at any time exceed 15% of the Company's outstanding
fully-diluted equity.

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<PAGE> 59

As of April 24, 1998, no options to purchase shares of Common Stock had
been exercised under the 1998 Stock Incentive Plan, options to purchase
1,314,266 shares of Common Stock were outstanding, options to purchase 160,502
shares of Series D-1 Preferred Stock were outstanding (which will automatically
convert to options to acquire shares of Common Stock upon consummation of the
Offering), and options to purchase an additional 232,430 shares of Common Stock
remained available for grant prior to the consummation of the Offering. The
outstanding options were exercisable at a weighted average exercise price of
$13.71 per share. Outstanding options to purchase an aggregate of 1,059,768
shares were held by employees who are not officers or directors of the Company.

The purpose of the 1998 Stock Incentive Plan is to attract and retain the
best available personnel, to provide additional incentive to employees,
directors and consultants of the Company and its related entities and to promote
the success of the Company's business. The 1998 Stock Incentive Plan provides
for the granting to employees of Incentive Stock Options and the granting of
nonstatutory stock options, stock appreciation rights, dividend equivalent
rights, restricted stock, performance units, performance shares, and other
equity-based rights ("1998 Awards") to employees, directors and consultants of
the Company and its related entities.

With respect to 1998 Awards granted to directors or officers, the 1998
Stock Incentive Plan is administered by the Board of Directors or a committee
designated by the Board of Directors constituted to permit such 1998 Awards to
be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3
thereunder. With respect to 1998 Awards granted to other participants, the 1998
Stock Incentive Plan is administered by the Board of Directors or a committee
designated by the Board of Directors. In each case, the respective plan
administrator shall determine the provisions, terms and conditions of each 1998
Award, including, but not limited to, the 1998 Award vesting schedule,
repurchase provisions, rights of first refusal, forfeiture provisions, form of
payment (cash, shares of Common Stock, or other consideration) upon settlement
of the 1998 Award, payment contingencies and satisfaction of any performance
criteria.

Incentive Stock Options are not transferable by the optionee other than by
will or the laws of descent or distribution, and each Incentive Stock Option is
exercisable during the lifetime of the optionee only by such optionee. Other
1998 Awards shall be transferable to the extent provided in the agreement
evidencing the 1998 Award.

The exercise price of Incentive Stock Options must be at least equal to the
fair market value of the Common Stock on the date of grant, and the term of the
option must not exceed ten years. The term of other 1998 Awards will be
determined by the respective plan administrator. With respect to an employee who
owns stock possessing more than 10% of the voting power of all classes of the
Company's outstanding capital stock, the exercise price of any Incentive Stock
Option must equal at least 110% of the fair market value of the Common Stock on
the grant date and the term of the option must not exceed five years. The
exercise price or purchase price, if any, of other 1998 Awards will be such
price as determined by the respective plan administrator, but not less than 85%
of the fair market value of the stock. The consideration to be paid for the
shares of Common Stock upon exercise or purchase of a 1998 Award will be
determined by the respective plan administrator and may include cash, check,
shares of Common Stock, or the assignment of part of the proceeds from the sale
of shares acquired upon exercise or purchase of the 1998 Award.

Where the 1998 Award agreement permits the exercise or purchase of a 1998
Award for a certain period of time following the recipient's termination of
service with the Company, disability, or death, such 1998 Award will terminate
to the extent not exercised or purchased on the last day of the specified period
or the last day of the original term of such 1998 Award, whichever occurs first.

Unless terminated sooner, the 1998 Stock Incentive Plan will terminate
automatically in 2008. The Board has the authority to amend, suspend or
terminate the 1998 Stock Incentive Plan subject to stockholder approval of
certain amendments and provided no such action may affect 1998 Awards previously
granted under the 1998 Stock Incentive Plan unless agreed to by the affected
grantees.

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<PAGE> 60

1998 Employee Stock Purchase Plan

The Company's 1998 Employee Stock Purchase Plan (the "Stock Purchase Plan")
was approved by the Board of Directors in February 1998 and has been approved by
the Company's stockholders. The Stock Purchase Plan was subsequently amended and
restated as of April 13, 1998. The Stock Purchase Plan is intended to qualify as
an "employee stock purchase plan" under Section 423 of the Code in order to
provide employees of the Company with an opportunity to purchase Common Stock
through payroll deductions. An aggregate of 3,000,000 shares of the Company's
Common Stock has been reserved for issuance under the Stock Purchase Plan and
available for purchase thereunder, subject to adjustment in the event of a stock
split, stock dividend or other similar change in the Common Stock or the capital
structure of the Company. All employees of the Company (and employees of
"subsidiary corporations" and "parent corporations" of the Company (as defined
by the Code) designated by the administrator of the Stock Purchase Plan) whose
customary employment is for more than five months in any calendar year and more
than 20 hours per week are eligible to participate in the Stock Purchase Plan.
Employees hired after the consummation of the Offering are eligible to
participate in the Stock Purchase Plan, subject to a six-month waiting period
after hiring. Non-employee directors, consultants, and employees subject to the
rules or laws of a foreign jurisdiction that prohibit or make impractical the
participation of such employees in the Stock Purchase Plan are not eligible to
participate in the Stock Purchase Plan.

The Stock Purchase Plan designates Purchase Periods, Accrual Periods and
Exercise Dates. Purchase Periods are generally overlapping periods of 12 months.
The initial Purchase Period begins on the effective date of the Stock Purchase
Plan, which is the effective date of the Company's Registration Statement
relating to the Offering, and ends on May 14, 1999. Additional Purchase Periods
will commence each May 15 and November 15. Accrual Periods are generally six
month periods, with the initial Accrual Period commencing on the effective date
of the Stock Purchase Plan and ending on November 14, 1998. Thereafter, Accrual
Periods will commence each May 15 and November 15. Exercise Dates are the last
day of each Accrual Period. In the event of a merger of the Company with or into
another corporation, the sale of all or substantially all of the assets of the
Company, or certain other transactions in which the stockholders of the Company
before the transaction own less than 50% of the total combined voting power of
the Company's outstanding securities following the transaction, the
administrator of the Stock Purchase Plan may elect to shorten the Purchase
Period then in progress.

On the first day of each Purchase Period, a participating employee is
granted a purchase right which is a form of option to be automatically exercised
on the forthcoming Exercise Dates within the Purchase Period during which
deductions are to be made from the pay of participants (in accordance with their
authorizations) and credited to their accounts under the Stock Purchase Plan.
When the purchase right is exercised, the participant's withheld salary is used
to purchase shares of Common Stock of the Company. The price per share at which
shares of Common Stock are to be purchased under the Stock Purchase Plan during
any Accrual Period is the lesser of (a) 85% of the fair market value of the
Common Stock on the date of the grant of the option (the commencement of the
Purchase Period) or (b) 85% of the fair market value of the Common Stock on the
Exercise Date (the last day of an Accrual Period). The participant's purchase
right is exercised in this manner on both Exercise Dates arising in the Purchase
Period unless, on the first day of any Accrual Period, the fair market value of
the Common Stock is lower than the fair market value of the Common Stock on the
first day of the Purchase Period. If so, the participant's participation in the
original Purchase Period is terminated, and the participant is automatically
enrolled in the new Purchase Period effective the same date.

Payroll deductions may range from 1% to 10% (in whole percentage
increments) of a participant's regular base pay and bonuses, exclusive of
overtime, shift-premiums or commissions. Participants may not make direct cash
payments to their accounts. The maximum number of shares of Common Stock which
any employee may purchase under the Stock Purchase Plan during an Accrual Period
is 1,250 shares. Certain additional limitations on the amount of Common Stock
which may be purchased during any calendar year are imposed by the Code.

The Stock Purchase Plan will be administered by the Board of Directors or a
committee designated by the Board, which will have the authority to terminate or
amend the Stock Purchase Plan (subject to specified

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<PAGE> 61

restrictions) and otherwise to administer the Stock Purchase Plan and to resolve
all questions relating to the administration of the Stock Purchase Plan.

1998 Non-Employee Director Stock Incentive Plan

In April 1998, the Company's Board of Directors adopted the 1998
Non-Employee Director Stock Incentive Plan (the "1998 Non-Employee Director
Plan"), under which the total number of shares available for grant is equal to
300,000 shares of Common Stock, in order to provide for option grants and stock
issuances to members of the Company's Board of Directors who are not employees
of the Company, following the consummation of the Offering, in accordance with
the compensation guidelines described in "-- Directors Compensation." No awards
will be made under the 1998 Non-Employee Director Plan until consummation of the
Offering. The 1998 Non-Employee Director Plan has been approved by the Company's
stockholders.

The purposes of the 1998 Non-Employee Director Plan are to attract and
retain the best available non-employee directors, to provide them additional
incentives, and to promote the success of the Company's business. The 1998
Non-Employee Director Plan establishes two programs for the grant of awards to
non-employee directors: the Automatic Option Grant Program and the Stock Fee
Program (the "Non-Employee Director Awards").

Under the Automatic Option Grant Program, each non-employee director
serving on the Company's Board of Directors upon consummation of the Offering
automatically will be granted an option to acquire 30,000 shares of Common Stock
at an exercise price per share equal to the fair market value of the Common
Stock at the date of grant. These options will vest and become exercisable in
three equal installments on each yearly anniversary of the grant date.
Non-employee directors appointed to the Board of Directors following the
Offering also will be granted automatically at the time of election or
appointment an option to acquire 30,000 shares of Common Stock with the same
terms and conditions at an exercise price equal to the then fair market value of
the Common Stock. After the initial three year vesting period for such options,
each non-employee director will receive automatic annual grants of options to
acquire an additional 3,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock at the date of grant. Such options
will vest and become fully exercisable on the first anniversary of the grant
date.

Each automatic option grant will have a term of eight years and will be
transferable to the extent provided in the agreement evidencing the option. The
consideration for exercising an option may consist of cash, check, shares of
Common Stock, the assignment of part of the proceeds from the sale of shares
acquired upon exercise of the option or any combination thereof. In the event of
a merger of the Company with or into another corporation, a sale of
substantially all of the Company's assets, a person becoming more than a 50%
owner of the Company or a like transaction involving the Company in which the
Company's stockholders before the transaction do not retain a majority interest
in the Company, immediately prior to the transaction, one-third of the shares
subject to the options to purchase 30,000 shares of Common Stock will vest and
become exercisable and all of the shares subject to the options to purchase
3,000 shares of Common Stock will vest and become exercisable. Upon consummation
of such transaction all such options will terminate, unless they are assumed by
the successor company. In the event of a hostile takeover of the Company or
change in the majority of the Board of Directors through contested elections,
the vesting of all such options will likewise accelerate as described above, but
the options will remain exercisable according to their terms.

Under the Stock Fee Program, each non-employee director will be eligible to
apply all or any portion of the annual retainer and meeting fees otherwise
payable in cash to the non-employee director to the acquisition of shares of
Common Stock. The non-employee director must make the stock purchase election
prior to the start of the calendar year for which the election is to be in
effect. The first year for which such elections may be made is 1999. On the
first trading day following the due date for payment of a portion of the annual
retainer fee or the date of any meeting in a calendar year for which the
election is effective, the portion of the annual retainer or meeting fee subject
to such election automatically will be applied to the acquisition of shares of
Common Stock by dividing the selected dollar amount by the then fair market
value per share of the Common Stock. The number of issuable shares will be
rounded down to the next whole share.

The 1998 Non-Employee Director Plan is administered by the Board of
Directors or a committee designated by the Board of Directors (either, the "1998
Plan Administrator") constituted to permit Non-

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<PAGE> 62

Employee Director Awards to be exempt from Section 16(b) of the Exchange Act in
accordance with Rule 16b-3 thereunder. The 1998 Plan Administrator shall approve
forms of the Non-Employee Director Award agreement for use under the Plan,
determine the terms and conditions of Non-Employee Director Awards, and construe
and interpret the terms of the 1998 Non-Employee Director Plan and Non-Employee
Director Awards granted pursuant thereto.

Unless terminated sooner, the 1998 Non-Employee Director Plan will
terminate automatically in 2008. The Board of Directors has the authority to
amend, suspend or terminate the 1998 Non-Employee Director Plan subject to
stockholder approval of certain amendments and provided no such action may
affect Non-Employee Director Awards previously granted under the 1998
Non-Employee Director Plan unless agreed to by the affected non-employee
directors.

401(k) PLAN

In January 1997, the Company implemented an employee savings and retirement
plan (the "401(k) Plan") covering certain of the Company's employees who have at
least one month of service with the Company and have attained the age of 21.
Pursuant to the 401(k) Plan, eligible employees may elect to reduce their
current compensation by up to the lesser of 20% of such compensation or the
statutorily prescribed annual limit ($10,000 in 1998) and have the amount of
such reduction contributed to the 401(k) Plan. The Company may make
contributions to the 401(k) Plan on behalf of eligible employees. Employees
become 20% vested in these Company contributions after one year of service, and
increase their vested percentages by an additional 20% for each year of service
thereafter. The 401(k) Plan is intended to qualify under Section 401 of the
Internal Revenue Code of 1986, as amended, so that contributions by employees or
by the Company to the 401(k) Plan, and income earned on the 401(k) Plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by the Company, if any, will be deductible by
the Company when made. The trustee under the 401(k) Plan, at the direction of
each participant, invests the 401(k) Plan employee salary deferrals in selected
investment options. The Company made no contributions to the 401(k) Plan in 1996
or in 1997. The Company does not presently expect to make any contributions to
the 401(k) Plan during the fiscal 1998.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Chairman of the Compensation Committee is Mr. Schovee. No member of the
Compensation Committee was at any time during the fiscal year ended December 31,
1997, or at any other time, an officer or employee of the Company. No member of
the Compensation Committee of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee. See "Certain Transactions" for a description of transactions between
the Company and entities affiliated with members of the Compensation Committee.

LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation and Bylaws provide that the
Company shall indemnify to the fullest extent permitted by Section 145 of the
DGCL, as it now exists or as amended, all directors and officers pursuant
thereto. The Company's Certificate of Incorporation and Bylaws also authorize
the Company to indemnify its employees and other agents, at its option, to the
fullest extent permitted by Section 145, as it now exists or as amended. The
Company intends to enter into agreements to indemnify its directors and
officers, in addition to indemnification provided for in the Company's charter
documents. These agreements, among other things, provide for the indemnification
of the Company's directors and officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or officer of
the Company, any subsidiary of the Company or any other company or enterprise to
which such person provides services at the request of the Company to the fullest
extent permitted by applicable law. The Company believes that these provisions
and agreements will assist the Company in attracting and retaining qualified
persons to serve as directors and officers.

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Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
or (iv) for any transaction from which the director derived an improper personal
benefit. The Company's Certificate of Incorporation provides for the elimination
of personal liability of a director for breach of fiduciary duty, as permitted
by Section 102(b)(7) of the DGCL.

The Underwriting Agreement provides for indemnification by the Underwriters
under certain circumstances of directors, officers and controlling persons of
the Company against certain liabilities, including liabilities under the
Securities Act.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions contained in the Certificate of Incorporation and
Bylaws of the Company, the DGCL, the Underwriting Agreement, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the Common Stock
being registered hereunder, the Company 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 Company intends to purchase and maintain insurance on behalf of the
officers and directors insuring them against liabilities that they may incur in
such capacities or arising out of such status.

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<PAGE> 64

CERTAIN TRANSACTIONS

SERIES A PURCHASE AGREEMENT

Pursuant to a Series A Preferred Stock purchase agreement by and among
Centennial Fund IV, L.P., Centennial Holdings, Inc., Telecom Partners, L.P.,
Norwest Equity Partners, V and Brooks Fiber Properties, Inc. (together, the
"Series A Purchasers") and the Company, dated as of June 25, 1996 (the "Series A
Purchase Agreement"), the Series A Purchasers made their initial investments in
the Company. The Series A Purchasers purchased, in the aggregate, 5,250,000
shares of Series A Preferred Stock for an aggregate purchase price of
$15,750,000. Pursuant to Amendment No. 1 to the Series A Stock Purchase
Agreement, dated as of July 3, 1996, the Company sold an additional 756,666
shares of Series A Preferred Stock to certain of the Series A Purchasers and to
certain additional purchasers for the aggregate purchase price of $2,270,000.
Subsequently, the Company sold an additional 26,667 shares of Series A Preferred
Stock to certain members of the Company's management for an aggregate purchase
price of $80,001. In connection with the Series A Purchase Agreement, the
Company, the Series A Purchasers and certain members of the Company's management
entered into a stockholders agreement, dated as of June 25, 1996 (the "Series A
Stockholders Agreement"), which provided the Series A Stockholders with certain
demand and piggyback registration rights. The parties to Amendment No. 1 to the
Series A Stock Purchase Agreement became parties to the Series A Stockholders
Agreement. The Series A Stockholders Agreement was replaced by the Series B
Stockholders Agreement which, in turn was replaced by the Stockholders
Agreement. See "-- Series B Purchase Agreement" and "-- Series C Purchase
Agreement."

SERIES B PURCHASE AGREEMENT

The Company, certain of the Series A Purchasers and several additional
purchasers (together, the "Series B Purchasers") entered into a Series B
Preferred stock purchase agreement, dated as of December 5, 1996 (the "Series B
Stock Purchase Agreement"), pursuant to which the Series B Purchasers acquired,
in the aggregate, 10,000,000 shares of Series B Preferred Stock for the
aggregate purchase price of $60,000,000. In connection with the Series B Stock
Purchase Agreement, the Company, the Series A Purchasers, the Series B
Purchasers and members of the Company's management entered into a stockholders
agreement, dated as of December 5, 1996 (the "Series B Stockholders Agreement").
The Series B Stockholders Agreement replaced the Series A Stockholders Agreement
and was later replaced by the Stockholders Agreement. See "-- Series C Purchase
Agreement."

SERIES C PURCHASE AGREEMENT

The Company, certain of the Series A Purchasers and certain of the Series B
Purchasers (together, the "Series C Purchasers") entered into a Series C
Preferred stock purchase agreement, dated as of May 20, 1997 (the "Series C
Stock Purchase Agreement"), pursuant to which the Series C Purchasers acquired,
in the aggregate, 2,500,000 shares of Series C Preferred Stock for the aggregate
purchase price of $20,000,000. In connection with the Series C Stock Purchase
Agreement, the Company, the Series A Purchasers, the Series B Purchasers, the
Series C Purchasers, and members of the Company's management entered into a
Stockholders Agreement (the "Stockholders Agreement"), which replaced the Series
B Stockholders Agreement. See "-- Stockholders Agreement."

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<PAGE> 65

The following table sets forth the number of shares of Series A, Series B
and Series C Preferred Stock, and Common Stock purchased by the Company's
directors, five percent stockholders and their respective affiliates.

<TABLE>
<CAPTION>
COMMON SERIES A SERIES B SERIES C
HOLDERS STOCK PREFERRED PREFERRED PREFERRED
- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C>
Brooks Fiber Properties, Inc.(1)................. -- 1,666,667 2,500,000 498,304
Norwest Equity Partners V, L.P.(2)............... 270,000 1,666,667 2,083,333 281,250
Providence Equity Partners, L.P.(3).............. -- -- 2,083,333 972,360
Centennial Fund V, L.P.(4)....................... -- -- 1,627,983 674,320
Centennial Fund IV, L.P.(4)...................... 250,000 1,543,210 353,395 12,500
Centennial Entrepreneurs Fund V, L.P.(4)......... -- -- 50,350 20,855
Centennial Holdings I, LLC(4).................... 14,452 89,208 37,289 316
Justin L. Jaschke................................ 110,000 33,333 22,501 --
Estate of Mark D. Johnson........................ 60,000 -- -- --
James C. Allen................................... 25,000 -- -- --
Trygve E. Myhren................................. -- -- 10,000 --
</TABLE>

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

(1) As a result of the acquisition of Brooks by WorldCom, which resulted in
Brooks becoming a wholly owned subsidiary of WorldCom, WorldCom may be
deemed to indirectly beneficially own the shares owned by Brooks. James C.
Allen served as CEO of Brooks until the acquisition. Mr. Allen serves on the
Company's Board of Directors.

(2) George J. Still, Jr. is a general partner of Itasca Partners V. ("Itasca"),
which is the sole general partner of Norwest Equity Partners V, L.P.
("Norwest"). Mr. Still serves on the Company's Board of Directors.

(3) Paul J. Salem, a member of Providence Equity Partners LLC ("PEPLLC"), which
is the sole general partner of Providence Equity Partners, L.P.
("Providence"), serves on the Company's Board of Directors.

(4) The sole General Partner of Centennial Fund IV, L.P. ("Centennial IV") is
Centennial Holdings IV, L.P. ("Holdings IV"), the sole General Partner of
Centennial Fund V, L.P. ("Centennial V") and Centennial Entrepreneurs Fund
V, L.P. ("Centennial Entrepreneurs") is Centennial Holdings V, L.P.
("Holdings V"). Steven C. Halstedt is a general partner of Holdings IV and
Holdings V, and a unit holder of Centennial Holdings I, L.L.C. ("Holdings
LLC"). Mr. Halstedt serves as the Chairman of the Board of Directors of the
Company.

SERIES D-1 AGREEMENTS

In connection with the acquisitions of iServer and NSNet, the Company
issued a total of 797,642 shares of Series D-1 Preferred Stock to former
stockholders of iServer and NSNet. The Company has issued a total of
approximately 1,416,871 additional shares of Series D-1 Preferred Stock pursuant
to Buyouts completed as of April 24, 1998. In addition, options to acquire
164,989 shares of Series D-1 Preferred Stock were issued in connection with the
Buyout of NorthWestNet, Inc.

The Series D-1 Preferred Stock will automatically convert into Common
Stock, and the options to acquire shares of Series D-1 Preferred Stock will
automatically convert into options to acquire shares of Common Stock, upon
completion of the Offering. The recipients of the shares of Series D-1 Preferred
Stock issued in the Buyouts and the acquisition of NSNet have been granted
certain registration rights with respect to the shares of Common Stock issuable
upon conversion of the Series D-1 Preferred Stock and have agreed to certain
market standoff provisions following the Offering in the agreements pursuant to
which the Series D-1 Preferred Stock is issued (the "Series D-1 Agreements").
See "Description of Capital Stock -- Registration Rights" and "Shares Eligible
for Future Sale."

STOCKHOLDERS AGREEMENT

Pursuant to the terms of the Stockholders Agreement, the holders of the
Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock (together, the "Investors") acquired certain

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registration rights with respect to the Company. At any time after the effective
date of the first registration statement filed by the Company under the
Securities Act, holders of 25% or more of the Registrable Securities (as defined
in the Stockholders Agreement) may require the Company to effect registration
under the Securities Act of their Registrable Securities, subject to the Board
of Directors' right to defer such registration for a period of up to 180 days.
In addition, if the Company proposes to register securities under the Securities
Act (other than a registration relating either to the sale of securities to
employees pursuant to a stock option, stock purchase or similar plan or a
transaction under Rule 145 of the Securities Act), then any of the Investors has
a right (subject to quantity limitations determined by underwriters if the
offering involves an underwriting) to request that the Company register such
holder's Registrable Securities. All registration expenses incurred in
connection with up to two long-form and all short-form and piggyback
registrations will be borne by the Company. Each Investor will pay for selling
expenses pro rata on the basis of the number of shares sold by such Investor.
The Company has agreed to indemnify the Investors (including the officers,
directors, partners, agents, employees and representatives, and each person
controlling such Investor within the meaning of Section 15 of the Securities
Act) against all expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue or alleged untrue statement of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Investor for any legal and any other expenses reasonably
incurred in connection with investigating and defending or settling any such
claim, loss, damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such
Investor and stated to be specifically for use therein. This indemnification
does not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company.

Subject to certain exceptions, the Company has a right of first refusal to
purchase shares of Common Stock held by Management Holders (as defined in the
Stockholders Agreement) which, to the extent not purchased by the Company, are
subject to an additional right of first refusal by the Investors according to
their respective pro rata shares. In addition, transfers of Common Stock held by
Investors are subject to a right of first refusal by other Investors who also
are holders of Common Stock. Subject to certain exceptions, upon the issuance by
the Company of any Common Stock or any other equity securities, each of the
Specified Investors (as defined in the Stockholders Agreement) has the
preemptive right to purchase its pro rata share of up to 80% of the securities
so offered according to their respective pro rata interests. If any Specified
Investor declines to exercise such right in full, the remaining electing
Specified Investors are entitled to purchase such Specified Investor's
unpurchased portion of the offered securities on a pro rata basis. All
preemptive rights and rights of first refusal contained in the Stockholders
Agreement terminate upon consummation of the Offering.

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

On June 16, 1997, the Company made a loan in the amount of $100,000 to
Peter Fritzinger, which Mr. Fritzinger repaid on July 21, 1997 with interest at
the then current market rate.

OTHER TRANSACTIONS

On March 18, 1998, in response to an offer by Brooks, the Company and
Brooks reached an agreement pursuant to which the Company agreed to repurchase
the $50.0 million principal amount of the Company's 1997 Notes held by Brooks
for an aggregate net purchase price of approximately $54.5 million, plus accrued
interest. A portion of the proceeds from the sale of the 1998 Notes was used to
effect the Refinancing. See "Summary -- Recent Developments."

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On April 7, 1998, the Company entered into the NTT Investment Agreement and
the OSP Agreement. The NTT Investment Agreement provides NTT with certain Board
representation rights, and imposes certain standstill and other limitations on
its ability to make further acquisitions of the Company's capital stock. Under
the OSP Agreement, NTT will be entitled to "most favored customer" status and
pricing concessions, though the specific terms of such arrangement have not yet
been negotiated. See "Business -- NTT Strategic Relationship" and "Principal
Stockholders -- NTT Investment."

In April 1998, the Company's Board of Directors approved an additional
equity investment in V-I-A Internet, Inc. ("VIANet") in the amount of up to $8.0
million in order to preserve the Company's current ownership interest of
approximately 18% in VIANet. The Company has no right to acquire the remaining
equity of VIANet. The Board of Directors has determined that its investment in
VIANet will be the primary component of its international strategy in the near
term, but the Company also may pursue direct investments in certain
international markets where appropriate opportunities exist. The Company
believes that its indirect international strategy through VIANet is the most
effective means to leverage the Company's resources.

A number of the Company's significant stockholders (including certain of
The Centennial Funds and Norwest) are, or are expected possibly to become,
investors in VIANet. Mr. Jaschke serves as the Chairman of the Board of
Directors of VIANet and Mr. Halstedt is a member of VIANet's Board of Directors.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of April 24, 1998,
and upon consummation of the Offering and the NTT Investment, with respect to
the beneficial ownership of the Company's Common Stock by (i) each stockholder
known by the Company to own beneficially more than five percent, in the
aggregate, of the outstanding shares of the Company's outstanding Common Stock,
(ii) each director and Named Executive Officer of the Company and (iii) all
executive officers and directors as a group.

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY
NUMBER OF OWNED(1)
SHARES --------------------
BENEFICIALLY PRIOR TO AFTER
HOLDERS OWNED OFFERING OFFERING
------- ------------ -------- --------
<S> <C> <C> <C>
Brooks Fiber Properties, Inc.(2)............................ 5,369,131 23.58% 16.74%
425 Woods Mill Road South
Suite 300
Town & Country, Missouri 63017
Nippon Telegraph and Telephone Corporation(3)............... 4,493,877 -- 14.02%
Global Communications Headquarters
Tokyo Opera City Tower
20-2 Nishi-Shinjuku 3-chome
Shinjuku-ku
Tokyo 163-14, Japan
Norwest Equity Partners V, L.P.............................. 4,301,250 19.49% 13.41%
245 Lytton Avenue
Palo Alto, California 94301
Providence Equity Partners, L.P............................. 3,055,693 13.85% 9.53%
50 Kennedy Plaza
Providence, Rhode Island 02903
Centennial Fund V, L.P.(4).................................. 2,302,303 10.43% 7.18%
1428 Fifteenth Street
Denver, Colorado 80202
Centennial Fund IV, L.P.(4)................................. 2,159,105 9.78% 6.73%
1428 Fifteenth Street
Denver, Colorado 80202
Steven C. Halstedt(5)....................................... -- -- --
Justin L. Jaschke(6)........................................ 185,834 * *
Estate of Mark D. Johnson(7)................................ 130,000 * *
James C. Allen(8)........................................... 25,000 * *
Trygve E. Myhren(9)......................................... 20,000 * *
Paul J. Salem(10)........................................... -- -- --
Stephen W. Schovee.......................................... -- -- --
George J. Still, Jr.(11).................................... -- -- --
Chris J. DeMarche(12)....................................... 88,833 * *
Carla Hamre Donelson(13).................................... 29,917 * *
Peter B. Fritzinger(14)..................................... 40,000 * *
All executive officers and directors as a group (12
persons)(15).............................................. 512,584 2.31% 1.59%
</TABLE>

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

* Less than 1%

(1) Percentage of beneficial ownership prior to the Offering is based on (i)
1,294,266 shares of Common Stock outstanding at April 24, 1998, (ii)
18,561,667 shares of Common Stock issuable upon conversion of the Series A,
B, and C Preferred Stock outstanding at April 24, 1998, and (iii) 2,214,513
shares of Common Stock issuable upon conversion of the Series D-1 Preferred
Stock issued in connection with the acquisitions and Buyouts completed as
of April 24, 1998, totalling 22,070,446 shares of capital stock of the
Company. Percentage of beneficial ownership after the Offering is based on
32,064,323 total shares of capital stock outstanding, which includes the
shares of capital stock outstanding prior to the Offering identified above
plus (i) 4,493,877 shares of Common Stock to be sold by the Company to

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<PAGE> 69

NTT for approximately $100.0 million concurrently with the Offering and
(ii) 5,500,000 shares of Common Stock to be sold pursuant to the Offering.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to
options or warrants owned by such person that are currently exercisable or
exercisable within 60 days of April 24, 1998 are deemed outstanding;
provided, that such shares are not deemed outstanding for the purpose of
computing the percentage of ownership of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable
community property laws, each of the persons named in this table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name.

(2) Includes warrants for 704,160 shares of Common Stock exercisable within 60
days. As a result of the acquisition of Brooks by WorldCom, which resulted
in Brooks becoming a wholly owned subsidiary of WorldCom, WorldCom may be
deemed to indirectly beneficially own the shares owned by Brooks.

(3) Because the percentage of beneficial ownership following the Offering
reflected in this table is based on outstanding (not fully diluted) shares
(see footnote 1), the ownership percentage shown for NTT is higher than the
maximum percentage of fully diluted shares that NTT is permitted to
purchase in the NTT Investment.

(4) Does not include 71,205 shares of the Company's capital stock held by
Centennial Entrepreneurs. Holdings V is the sole general partner of
Centennial Entrepreneurs and may be deemed to indirectly beneficially own
such shares by virtue of its authority to make decisions regarding the
voting and disposition of shares beneficially owned by Centennial
Entrepreneurs. Centennial V disclaims beneficial ownership of the shares
held by Centennial Entrepreneurs, and Centennial Entrepreneurs disclaims
beneficial ownership of the shares held by Centennial V. In addition,
Centennial V disclaims beneficial ownership of the shares held by
Centennial IV, and Centennial IV disclaims beneficial ownership of the
shares held by Centennial V.

(5) The sole General Partner of Centennial IV is Holdings IV and the sole
General Partner of Centennial V is Holdings V. Holdings IV and Holdings V
may be deemed to indirectly beneficially own the shares owned by Centennial
IV and Centennial V, respectively. Mr. Halstedt is a general partner of
Holdings IV and Holdings V and may be deemed to be the indirect beneficial
owner of the shares owned by Centennial IV and Centennial V. Mr. Halstedt
disclaims beneficial ownership of shares held by Centennial IV and
Centennial V. In addition, this amount does not include 141,265 shares of
the Company's capital stock held by Holdings LLC, of which Mr. Halstedt is
a unit holder. Centennial Holdings, Inc. ("Holdings Inc."), of which Mr.
Halstedt is an officer and director, is the sole Managing Member of
Holdings LLC and may be deemed to beneficially own shares directly
beneficially owned by Holdings LLC. However, Mr. Halstedt, acting alone,
does not have voting or investment power with respect to any of the shares
directly held by either Holdings Inc. or Holdings LLC, and as a result, Mr.
Halstedt disclaims beneficial ownership of the shares held by Holdings LLC.

(6) Includes options for 20,000 shares of Common Stock exercisable within 60
days.

(7) Includes options exercisable for 70,000 shares of Common Stock exercisable
within 60 days.

(8) On April 6, 1998, Mr. Allen transferred all his shares of Common Stock to
the James C. Allen Revocable Trust. In accordance with the rules of the
Exchange Act, Mr. Allen is deemed to be the beneficial owner of such
shares.

(9) Includes options exercisable for 10,000 shares of Common Stock exercisable
within 60 days.

(10) The sole general partner of Providence is PEPLLC. Mr. Salem is a member of
PEPLLC and may be deemed to indirectly beneficially own the shares owned by
Providence. Mr. Salem disclaims beneficial ownership of these shares.

(11) The sole general partner of Norwest is Itasca. Mr. Still is a general
partner of Itasca and may be deemed to indirectly beneficially own the
shares owned by Norwest. Mr. Still disclaims beneficial ownership of these
shares.

(12) Includes options exercisable for 28,000 shares of Common Stock exercisable
within 60 days.

(13) Includes options exercisable for 12,000 shares of Common Stock exercisable
within 60 days.

(14) Includes options exercisable for 15,000 shares of Common Stock exercisable
within 60 days.

(15) Includes options exercisable for 109,000 shares of Common Stock exercisable
within 60 days (not including options held by Mr. Johnson's estate).

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<PAGE> 70

NTT INVESTMENT

NTT Stock Purchase Agreement and NTT Investment Agreement. Pursuant to a
Stock Purchase and Master Strategic Relationship Agreement, dated as of April 7,
1998, between the Company and NTT (the "NTT Stock Purchase Agreement"), NTT
agreed to purchase, concurrent with and conditioned upon the consummation of the
Offering (the "IPO Closing"), a number of shares of the Company's Common Stock
equal to the lesser of (i) 12.5% of the total number of shares of Common Stock,
on a fully diluted and fully converted basis (calculated as of the IPO Closing
after giving effect to the Offering and the sale to NTT), or (ii) the quotient
of $100.0 million divided by the "Per Share Price" payable by NTT. The "Per
Share Price" to be paid by NTT will be equal to the Price to Public in the
Offering multiplied by 96.75% (subject to certain adjustments in the event that
shares of Common Stock are issued at less than the Per Share Price prior to the
IPO Closing). The Company granted NTT certain registration rights with respect
to the Common Stock it acquires. See "Certain Transactions -- Description of
Capital Stock -- Registration Rights."

The Company and NTT also entered into an Investment Agreement, dated as of
April 7, 1998 (the "NTT Investment Agreement"), providing for certain
arrangements generally effective from and after the purchase of shares by NTT
under the NTT Stock Purchase Agreement, some or all of which could have the
effect of delaying, deferring or preventing a change of control of the Company.
In particular, pursuant to the NTT Investment Agreement, so long as NTT
continues to hold at least 50% of the aggregate number of shares of Common Stock
acquired by it in connection with the NTT Investment, the Company has agreed to
appoint an individual designated by NTT to the Board of Directors of the
Company. The initial NTT designee, who will be appointed following the IPO
Closing, will serve for an initial term ending as of the third annual
stockholder meeting following the IPO Closing. Thereafter, for so long as NTT
continues to meet the share ownership requirement, the Company has agreed,
subject to certain exceptions, to nominate as a member of the Board of Directors
at each subsequent election of the applicable class of directors a person
designated by NTT who will be subject to election by the stockholders of the
Company. In addition, NTT has agreed on behalf of itself and its affiliates to
certain "standstill" restrictions pursuant to which NTT and its affiliates may
only make open market or privately negotiated purchases of additional voting
securities (including Common Stock) so long as the total holdings of NTT and its
affiliates do not exceed 17.5% of the Company's fully diluted Common Stock after
taking into account such acquisition. The "standstill" obligations terminate
five years after the consummation of the NTT Investment. NTT has also agreed,
among other things, that it will not (i) solicit proxies or participate in a
proxy solicitation or otherwise seek to influence voting with respect to the
Company, (ii) call a stockholders meeting, or (iii) make any announcement or
proposal for a tender offer that would result in NTT owning more than 17.5% of
the Company's fully diluted Common Stock. In addition, NTT has agreed that in
connection with any offer or agreement by a third party to acquire over 30% of
the voting power of the Company or over 50% of the assets or earning power of
the Company (an "Acquisition Proposal"), it will not transfer any securities of
the Company in connection with an Acquisition Proposal, unless such Acquisition
Proposal has been recommended by the Board of Directors of the Company or the
Board of Directors has not publicly recommended against such Acquisition
Proposal within three months of the public announcement or presentation to the
Board of Directors of such Acquisition Proposal.

The NTT Investment Agreement also imposes certain limitations on NTT's
ability to dispose of the shares of Common Stock that it acquires. NTT has
granted to the Company certain rights of first offer and rights of first refusal
which apply, under certain circumstances, in the event that NTT proposes to sell
some or all of the shares that it acquires. The specific terms of these rights
vary depending upon the quantity of shares proposed to be sold and other terms
of the proposed sale. In particular, NTT must provide the Company with written
notice setting forth the shares to be sold, the minimum consideration for which
NTT would effect such sale and, in certain cases, the identity of the proposed
transferee. The Company then has the right to buy all shares covered by such
notice within certain specified time periods ranging from 15 to 60 days
depending on the size of the proposed sale. In the event the Company exercises
its right within the applicable time period, it must consummate its purchase of
the subject shares within a period of between 30 and 90 days, again depending on
the size of such sale. If the Company fails to exercise its right of first
offer, NTT must nonetheless require any transferee who would beneficially own
7.5% or more of the Company's fully diluted Common Stock to be bound by these
same right of first offer provisions. The NTT Investment Agreement also
precludes NTT from transferring its Common Stock to certain parties specified by
the Company (which list

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<PAGE> 71

may include no more than 15 specified parties at any one time) that are or are
likely to become competitors of the Company or, subject to certain conditions,
to any person that as a result of such transfer would beneficially own more than
10.0% of the Company's Common Stock.

The NTT Stock Purchase Agreement may be terminated prior to the IPO Closing
only in certain limited circumstances, including in the event that the sale of
shares to NTT has not occurred by July 31, 1998. The NTT Investment Agreement
will terminate automatically upon any termination of the NTT Stock Purchase
Agreement.

In connection with the NTT Investment Agreement, the Company and NTT also
entered into the OSP Agreement, under which NTT will be entitled to "most
favored customer" status and pricing concessions, though the specific terms of
such arrangement have not yet been negotiated. See "Business -- NTT Strategic
Relationship." Under the NTT Investment Agreement, NTT will have the right,
subject to the satisfaction of certain conditions, to designate up to three
individuals to be employed by the Company in corporate development, technical
and/or marketing positions to assist in implementing and carrying out the
commercial relationship between Verio and NTT.

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<PAGE> 72

DESCRIPTION OF CAPITAL STOCK

The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by the provisions of the Certificate of
Incorporation and Bylaws, which have been filed as exhibits to the Company's
Registration Statement of which this Prospectus is a part.

Upon the closing of the Offering, the authorized capital stock of the
Company, after giving effect to the conversion of all outstanding Preferred
Stock into Common Stock will be 137,500,000 shares of capital stock, consisting
of 125,000,000 shares of Common Stock, par value $0.001 per share, and
12,500,000 shares of Preferred Stock, par value $0.001 per share (the
"Undesignated Preferred Stock").

COMMON STOCK

As of April 24, 1998 there were 1,294,266 shares of Common Stock
outstanding held of record by 26 stockholders.

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any outstanding shares of
Preferred Stock, if any. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon completion of the Offering will be, fully paid and
nonassessable. The rights of holders of Common Stock are subject to, and may be
adversely affected by, the rights of any series of Preferred Stock which the
Company may issue in the future.

PREFERRED STOCK

Following completion of the Offering and the conversion of all outstanding
shares of Preferred Stock into Common Stock, the Board of Directors will have
the authority to issue from time to time up to 12,500,000 shares of Undesignated
Preferred Stock in one or more series and to fix the powers, designations,
preferences and relative, participating, optional or other rights thereof,
including dividend rights, conversion rights, voting rights, redemption terms,
liquidation preferences (any or all of which may be greater than the rights of
the Common Stock) and the number of shares constituting each such series,
without any further vote or action by the Company's stockholders. The issuance
of such Undesignated Preferred Stock could adversely affect the rights of
holders of Common Stock and could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plans
to issue any shares of such Undesignated Preferred Stock after the Offering.

WARRANTS

As of April 24, 1998, the Company had warrants outstanding to purchase an
aggregate of 2,112,480 shares of Common Stock at an exercise price per share of
$0.01 (the "Warrants"). The Warrants were issued in connection with the issuance
of the 1997 Notes and will become exercisable after the Offering. Holders of the
Warrants are entitled to certain registration rights. See "-- Registration
Rights."

REGISTRATION RIGHTS

Pursuant to the Stockholders Agreement between the Company and the
Investors, the Investors are entitled to certain demand and piggyback
registration rights with respect to the registration of certain Registrable
Securities (as defined in the Stockholders Agreement) under the Securities Act.
At any time after the effective date of the first registration statement filed
by the Company under the Securities Act, Investors owning 25% or more of the
Registrable Securities may require the Company to effect registration under the
Securities Act of their Registrable Securities, subject to the Board of
Directors' right to defer such registration for a period of up to 180 days. In
addition, if the Company proposes to register securities under the Securities
Act (other than a registration statement on Form S-8 or S-4), whether or not for
its own account, then any of the Investors has a right (subject to quantity
limitations determined by underwriters if the offering involves an

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underwriting) to request that the Company register such Investor's Registrable
Securities. All registration expenses incurred in connection with up to two
long-form and all short-form and piggyback registrations will be borne by the
Company. Each Investor will pay for its own Selling Expenses (as defined in the
Stockholders Agreement) on a pro rata basis. These registration rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such
registration. See "Certain Transactions -- Stockholders Agreement."

In connection with the Series D-1 Agreements the Company entered into
certain investment agreements (the "Investment Agreements") with the holders
(the "Series D-1 Holders") of shares of Series D-1 Preferred Stock. Pursuant to
the Investment Agreements, some of the Series D-1 Holders are entitled to
certain piggyback registration rights with respect to the registration of
certain Registrable Securities (as defined in the Investment Agreements) under
the Securities Act. At any time after a Lock-Up Termination Date (as defined in
the Investment Agreements), the Company proposes to register any of its
securities under the Securities Act (other than a registration statement on Form
S-8 or S-4), whether or not for its own account, such Series D-1 Holders are
entitled to notice of such registration and are entitled to include such Series
D-1 Holder's Registrable Securities therein. All such rights granted under the
Investment Agreements shall terminate with respect to the Registrable Securities
of a Series D-1 Holder upon the earliest to occur of (i) the second anniversary
of the initial public offering of the Company, (ii) such time as all such
Registrable Securities may be immediately sold pursuant to Rule 144 under the
Securities Act within any 90-day period, or (iii) upon any sale of such
Registrable Securities pursuant to a registration statement or Rule 144 under
the Securities Act. The Company is required to bear all registration expenses
(other than underwriting discounts and commissions) incurred in connection with
any such registrations. The Company is not responsible for any expenses of any
counsel retained to act on behalf of Series D-1 Holder participating in such
registration. All of these registration rights are subject to certain conditions
and limitations including, in particular, if the underwriters of an offering
seek to limit the number of shares included in such offering, all holders of
demand and piggyback registration rights (other than the piggyback registration
rights held by the Series D-1 Holders) shall include their shares in such
offering in priority to the Series D-1 Holders.

In connection with the issuance of the 1997 Notes, the holders of a number
of the Warrants, Warrant Shares and Registrable Securities (as defined in a
registration rights agreement entered into in connection with the issuance of
the 1997 Notes) (the "Subject Equity") equivalent to a majority of the Warrant
Shares subject to the originally issued Warrants, will be entitled to require
the Company to effect one registration under the Securities Act of the Subject
Equity, subject to certain limitations. Holders of such Registrable Securities
also will have the right to include such Registrable Securities in any
registration statement under the Securities Act filed by the Company (other than
(a) a registration statement on Form S-8 or S-4, (b) a registration statement
filed in connection with an offer of securities solely to existing
securityholders or (c) a Demand Registration (as defined in the registration
rights agreement)), whether or not for its own account. These registration
rights are subject to certain conditions and limitations, among them the right
of the underwriters of an offering to limit the number of shares included in
such registration.

Pursuant to the NTT Investment Agreement, after the first anniversary of
the consummation of the Offering, NTT and any transferee of NTT's rights may
require, on up to three occasions, that the Company effect a registration
statement under the Securities Act with respect to (a) at least 25% of the NTT
Shares (including any securities issued or issuable by way of a distribution,
stock split or the like, the "NTT Registrable Securities") or (b) NTT
Registrable Securities with an anticipated aggregate net offering price of at
least $25.0 million, unless the Company is eligible at such time to effect a
registration statement on Form S-3, in which case the aggregate net offering
price must be at least $15.0 million. The Company must effect any such
registration as promptly as practicable, subject, in certain circumstances, to
the Company's right to defer such demand for registration for specified periods.
In addition, if the Company proposes to register its securities under the
Securities Act, or another holder of the Company's Common Stock exercises its
demand registration rights, then NTT has a right (subject to certain cutbacks
determined by the underwriters in the event of an underwritten offering) to
include the NTT Registrable Securities in any such offering. All registration
expenses will be borne by the Company subject to certain exceptions, other than
selling expenses which must be paid by NTT. In the event that any NTT Shares are
included in a registration statement, the Company has agreed to indemnify NTT
against certain losses for which NTT may become liable under the Securities Act.

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ANTI-TAKEOVER PROVISIONS

General

Certain provisions of the DGCL and the Company's Certificate of
Incorporation and Bylaws could have the effect of delaying, deterring or
preventing a future takeover or change in control of the Company unless such
takeover or change in control is approved by the Company's Board of Directors.
Such provisions also may render the removal of directors and management more
difficult. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Company's Common Stock. These
provisions of Delaware law and the Company's Certificate of Incorporation and
Bylaws also may have the effect of discouraging or preventing certain types of
transactions involving an actual or threatened change of control of the Company
(including unsolicited takeover attempts), even though such a transaction may
offer the Company's stockholders the opportunity to sell their stock at a price
above the prevailing market price. See "Risk Factors -- Anti-Takeover
Provisions."

Certificate of Incorporation and Bylaws

Certain provisions of the Certificate of Incorporation and Bylaws could
have the effect of discouraging potential acquisition proposals or delaying or
preventing a change of control of the Company. In particular, effective upon
consummation of the Offering, all stockholder actions must be effected at a duly
called meeting and not by a consent in writing, and an affirmative vote of the
holders of 80% of the Company's capital stock would be required to amend such
provision.

The Certificate of Incorporation and Bylaws of the Company also provide
that, upon consummation of the Offering, the Board of Directors will be divided
into three classes of directors, as nearly equal in number as is reasonably
possible, serving staggered terms so that directors' initial terms will expire
at the first, second and third succeeding annual meeting of the stockholders
following the Offering, respectively. At each such succeeding annual meeting of
stockholders, directors elected to succeed those directors whose terms are
expiring at such meeting shall be elected for a term of office to expire at the
third succeeding annual meeting of stockholders following such election. A vote
of at least 80% of the Company's capital stock would be required to amend such
provision.

The Company believes that a classified board of directors will help to
assure the continuity and stability of the Board of Directors and the Company's
business strategies and policies as determined by the Board of Directors, since
a majority of the directors at any given time will have had prior experience as
directors of the Company. The Company believes that this, in turn, will permit
the Board of Directors to more effectively represent the interest of
stockholders. With a classified board of directors, at least two annual meetings
of stockholders, instead of one, will generally be required to effect a change
in the majority of the Board of Directors. As a result, a provision relating to
a classified Board of Directors may discourage proxy contests for the election
of directors or purchases of a substantial block of the Common Stock because its
provisions could operate to prevent obtaining control of the Board of Directors
in a relatively short period of time. The classification provision and the
prohibition on stockholder action by written consent also could have the effect
of discouraging a third party from making a tender offer or otherwise attempting
to obtain control of the Company. Under the DGCL, a director on a classified
board may be removed by the stockholders of the corporation only for cause.

The Company's Bylaws provide that special meetings of the stockholders of
the Company may be called only by the President or, at the direction of the
Board of Directors, the Secretary of the Company. The Company's Bylaws require
advance written notice, which generally must be received by the Secretary of the
Company not less than 30 days nor more than 60 days prior to the meeting, by a
stockholder of a proposal or director nomination which such stockholder desires
to present at a meeting of stockholders. Any amendment of this provision would
require a vote of at least 80% of the Company's capital stock.

The Company's Certificate of Incorporation does not include a provision for
cumulative voting in the election of directors. Under cumulative voting, a
minority stockholder holding a sufficient number of shares may be able to ensure
the election of one or more directors. The absence of cumulative voting may have
the effect of limiting the ability of minority stockholders to effect changes in
the Board of Directors and, as a result, may have the effect of deterring a
hostile takeover or delaying or preventing changes in control or management of
the Company.

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<PAGE> 75

The Company's Bylaws and, effective upon consummation of the Offering, the
Company's Certificate of Incorporation provide that vacancies in the Board of
Directors may be filled by a majority of directors in office, although less than
a quorum, and not by the stockholders.

The Certificate of Incorporation allows the Company to issue up to
12,500,000 shares of Undesignated Preferred Stock with rights senior to those of
the Common Stock and that otherwise could adversely affect the interests of
holders of Common Stock, which could decrease the amount of earnings or assets
available for distribution to the holders of Common Stock or could adversely
affect the rights and powers, including voting rights, of the holders of Common
Stock. In certain circumstances, such issuance could have the effect of
decreasing the market price of the Common Stock, as well as having the
anti-takeover effect discussed above.

These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. These provisions are designed to reduce the vulnerability of the
Company to an unsolicited acquisition proposal and to discourage certain tactics
that may be used in proxy fights. However, such provisions could have the effect
of discouraging others from making tender offers for the Company's shares and,
as a consequence, they also may inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
Such provisions also may have the effect of preventing changes in the management
of the Company. See "Risk Factors -- Anti-Takeover Provisions."

Delaware Takeover Statute

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

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

NTT Investment

The NTT Investment Agreement provides NTT with the right to designate a
member of the Board of Directors, and imposes certain standstill and other
limitations on its ability to make further acquisitions of the Company's capital
stock, that could have the effect of delaying, deferring or preventing a change
of control. See "Risk Factors -- Anti-Takeover Provisions" and "Principal
Stockholders -- NTT Investment."

TRANSFER AGENT AND REGISTRAR

Norwest Bank Minnesota, National Association has been appointed as the
transfer agent and registrar for the Company's Common Stock.

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SHARES ELIGIBLE FOR FUTURE SALE

The Shares sold in the Offering will be freely tradeable without
restriction or further registration under the Securities Act, except for any
Shares purchased by an affiliate of the Company, which will be subject to the
limitations of Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her restricted
securities (as that term is defined in Rule 144) for at least one year from the
date such securities were acquired from the Company or an affiliate of the
Company would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Common Stock and (ii) the average weekly trading
volume of the common stock during the four calendar weeks preceding a sale by
such person. Sales under Rule 144 are also subject to certain manner-of-sale
provisions, notice requirements and the availability of current public
information about the Company. Under Rule 144, however, a person who has held
shares for a minimum of two years from the later of the date such securities
were acquired from the Company or an affiliate of the Company and who is not,
and for the three months prior to the sale of such shares has not been, an
affiliate of the Company is free to sell such shares without regard to the
volume, manner-of-sale and certain other limitations contained in Rule 144.

In general, under Rule 701 of the Securities Act as currently in effect,
any employee, officer, director, consultant or advisor of the Company who
purchased shares from the Company in connection with a compensatory stock or
option plan or written employment agreement is eligible to resell such shares 90
days after the effective date of the Offering in reliance on Rule 144, but
without compliance with certain restrictions, including the holding period,
contained in Rule 144.

Within 90 days of the date of this Prospectus, the Company intends to file
one or more registration statements under the Securities Act to register shares
of Common Stock reserved for issuance under its equity incentive plans, thus
permitting the resale of such shares by non-affiliates in the public market
without restriction under the Securities Act. Such registration statements will
become effective immediately upon filing. As of April 24, 1998, options to
purchase approximately 4,063,340 shares of Common Stock were outstanding under
the Company's stock option plans.

The Company, its directors and its executive officers, and certain
stockholders, who hold, as of April 24, 1998 approximately 20,661,978 shares of
Common Stock (or options to purchase Common Stock that are currently exercisable
or exercisable within 60 days), have agreed not to offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce an offering
of, any shares of Common Stock or any securities convertible into, or
exchangeable for shares of Common Stock for a period of six months from the date
of this Prospectus, without the prior written consent of Smith Barney Inc.,
except under limited circumstances. An additional 12,000 shares of Common Stock
issuable upon exercise of outstanding options, will become saleable after the
six-month lock-up period. In addition, NTT has agreed not to offer, sell or
contract to sell, or otherwise dispose of, directly or indirectly, or announce
an offering of, any NTT Shares for a period of six months from the date of this
Prospectus without the prior written consent of Smith Barney Inc.

In connection with the Buyouts and acquisitions that involved the issuance
of shares of Series D-1 Preferred Stock, the Company has entered into market
standoff agreements with the holders of the Series D-1 Preferred Stock so
issued, which restrictions expire in one-third increments on the six, twelve and
eighteen month anniversaries of the date of this Prospectus. Following the
six-month, twelve-month and eighteen-month lock-up periods, approximately
738,171, 738,171 and 738,171 additional shares of Common Stock, respectively,
will become immediately saleable subject to the manner of sale, volume, notice
and information requirements of Rule 144 of the Securities Act which could be
applicable to certain holders of such Common Stock.

In addition, the Company has granted certain holders of its capital stock
rights to require the registration for sale of such capital stock under the
Securities Act. See "Certain Transactions -- Stockholders Agreement" and
"Description of Capital Stock -- Registration Rights."

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<PAGE> 77

Prior to the Offering, there has been no established market for the Common
Stock and no predictions can be made about the effect, if any, that market sales
of Common Stock or the availability of such shares for sale will have on the
market price prevailing from time to time. Nevertheless, the actual sale of, or
the perceived potential for the sale of, Common Stock in the public market may
have an adverse effect on the market price for the Common Stock.

After the closing of the Offering, the holders of approximately 26,702,537
shares of Common Stock, including approximately 2,112,480 shares of Common Stock
issuable upon exercise of outstanding Warrants, will be entitled to certain
rights with respect to the registration of such shares under the Securities Act.
See "Description of Capital Stock -- Registration Rights."

77
<PAGE> 78

UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement
among the Company and the Underwriters (the "Underwriting Agreement"), the
Company has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of the Underwriters, for whom Smith Barney Inc.,
Credit Suisse First Boston Corporation and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as the representatives (the
"Representatives"), has severally agreed to purchase the number of Shares set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Smith Barney Inc............................................ 1,410,000
Credit Suisse First Boston Corporation...................... 1,410,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 1,410,000
Allen & Company Incorporated................................ 95,000
Bear, Stearns & Co. Inc..................................... 95,000
BT Alex. Brown Incorporated................................. 95,000
A.G. Edwards & Sons, Inc.................................... 95,000
Goldman, Sachs & Co......................................... 95,000
Lazard Freres & Co., LLC.................................... 95,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 95,000
J.C. Bradford & Co.......................................... 55,000
Dain Rauscher Wessels, A Division of Dain Rauscher
Incorporated.............................................. 55,000
EVEREN Securities, Inc...................................... 55,000
Gerard Klauer Mattison & Co., Inc........................... 55,000
Hanifen, Imhoff Inc......................................... 55,000
Kirkpatrick, Pettis, Smith, Polian Inc...................... 55,000
Ragen MacKenzie Incorporated................................ 55,000
Raymond James & Associates, Inc............................. 55,000
The Robinson-Humphrey Company, LLC.......................... 55,000
Tucker Anthony Incorporated................................. 55,000
Wheat First Securities, Inc................................. 55,000
---------
Total............................................. 5,500,000
=========
</TABLE>

The Company has been advised by the Representatives that the several
Underwriters initially propose to offer such Shares to the public at the Price
to Public set forth on the cover page of this Prospectus and part of the Shares
to certain dealers at such price less a concession not in excess of $.90 per
Share under the Price to Public. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $.10 per Share to certain other
dealers. After the Offering, the Price to Public and such concessions may be
changed.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 825,000
additional shares of Common Stock from the Company at the Price to Public less
the Underwriting Discount, solely to cover over-allotments. To the extent that
the Underwriters exercise such option, each Underwriter will be committed,
subject to certain conditions, to purchase a number of option shares
proportionate to such Underwriter's initial commitment.

The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof. The Underwriting Agreement further provides
that this Offering is conditioned upon the concurrent closing of the NTT
Investment.

Subject to certain exceptions (including exceptions for issuances in
connection with mergers and acquisitions activities), the Company, its
directors, officers, certain stockholders and NTT have agreed not to offer,
sell, contract to sell or otherwise dispose of, directly or indirectly, or
announce the offering of any shares

78
<PAGE> 79

of Common Stock, including any such shares beneficially or indirectly owned or
controlled by any such person, or any securities convertible into, or
exchangeable or exercisable for, shares of Common Stock, for six months from the
date of this Prospectus, without the prior written consent of Smith Barney Inc.

At the Company's request, the Underwriters have reserved up to 412,500
shares of Common Stock (the "Directed Shares") for sale at the Price to Public
to persons who are directors, officers or employees of, or otherwise associated
with, the Company and its affiliates and who have advised the Company of their
desire to purchase such Shares. The number of Shares available for sale to the
general public will be reduced to the extent of sales of Directed Shares to any
of the persons for whom they have been reserved. Any Shares not so purchased
will be offered by the Underwriters on the same basis as all other Shares
offered hereby.

The Underwriters will not confirm sales to any discretionary account
without the prior specific written approval of the customer.

During and after the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include overallotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members of other
broker-dealers in respect of the Shares of Common Stock sold in the Offering for
their account may be reclaimed by the syndicate if such Shares are repurchased
by the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock
which may be higher than the price that might otherwise prevail in the open
market. The Underwriters are not required to engage in these activities and may
end these activities at any time.

Prior to the Offering, there has been no public market for the Common
Stock. The Price to Public was determined by negotiations between the Company
and the Representatives. Among the factors considered in determining the Price
to Public were prevailing market conditions, the market values of publicly
traded companies that the Underwriters believed to be somewhat comparable to the
Company, the demand for the Shares and for similar securities of publicly traded
companies that the Underwriters believed to be somewhat comparable to the
Company, the future prospects of the Company and its industry in general, sales,
earnings and certain other financial and operating information of the Company in
recent periods, and other factors deemed relevant. There can be no assurance
that the prices at which the Shares will sell in the public market after the
Offering will not be lower than the Price to Public.

Salomon Brothers Inc, an affiliate of Smith Barney Inc., was an Initial
Purchaser of the 1998 Notes. In addition, Smith Barney Inc. or certain of its
affiliates may provide financial advisory services to the Company, for which it
expects to receive customary compensation.

Credit Suisse First Boston Corporation has provided financial advisory
services to the Company during the past 12 months for which it has received
customary compensation.

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<PAGE> 80

LEGAL MATTERS

The validity of the Shares offered hereby and general corporate legal
matters will be passed upon for the Company by Morrison & Foerster LLP, San
Francisco, California. Certain legal matters relating to the sale of Shares in
the Offering will be passed upon by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York. Members of Morrison &
Foerster LLP will purchase shares in the Company's directed share program. See
"Underwriting."

EXPERTS

The consolidated financial statements of Verio Inc. and Subsidiaries as of
December 31, 1996 and 1997 and for the period from inception (March 1, 1996) to
December 31, 1996, and the year ended December 31, 1997 and the financial
statements of On-Ramp Technologies, Inc. as of and for the nine months ended
July 31, 1996; Global Enterprise Services -- Network Division (a Division of
Global Enterprise Services, Inc.) as of December 31, 1995 and 1996, and for each
of the years in the three-year period ended December 31, 1996 and the period
ended January 17, 1997; Compute Intensive Inc. as of December 31, 1995 and 1996,
and for each of the years in the two-year period ended December 31, 1996, and
the period ended February 18, 1997; NorthWestNet, Inc. as of and for the six
months ended June 30, 1996 and the eight months ended February 28, 1997,
Northwest Academic Computing Consortium, Inc. as of and for the year ended June
30, 1995 and the six months ended December 31, 1995; Aimnet Corporation as of
and for the year ended March 31, 1997 and for the period ended May 19, 1997;
West Coast Online, Inc. as of and for the nine months ended September 30, 1997;
Clark Internet Services, Inc. as of and for the year ended September 30, 1997
and for the period ended October 17, 1997; ATMnet as of and for the years ended
October 31, 1996 and 1997; Global Internet Network Services, Inc. as of December
31, 1996 and November 26, 1997 and for the year and period then ended;
Pennsylvania Research Partnership Network as of and for the years ended November
30, 1996 and 1997 and for the period ended December 24, 1997; Monumental Network
Systems, Inc. as of and for the years ended December 31, 1996 and 1997; Internet
Servers, Inc. as of December 31, 1996 and 1997 and for the period from inception
(August 23, 1995) to December 31, 1995 and the years ended December 31, 1996 and
1997; NSNet, Inc. as of and for the years ended December 31, 1996 and 1997;
Access One, Inc. as of and for the year ended December 31, 1997; STARnet, L.L.C.
as of and for the year ended December 31, 1997; Computing Engineers Inc. as of
and for the years ended December 31, 1996 and 1997; and LI Net, Inc. as of April
30, 1997 and January 31, 1998 and for the years ended April 30, 1996 and 1997
and the nine months ended January 31, 1998, have been included herein and in the
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed concurrently with the Registration Statement on Form
S-1 of which this Prospectus forms a part, a Registration Statement on Form S-4
covering exchange offers for the Company's 1997 Notes and 1998 Notes. When the
Securities and Exchange Commission (the "Commission") declared effective the
Registration Statement on Form S-1, the Company became subject to the
informational requirements of the Exchange Act. Such reports and other
information can be inspected and copied at the Public Reference Section of the
Commission and at the Commission's regional offices at the addresses given
below.

As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits, schedules and undertakings set
forth elsewhere in this Registration Statement. For further information
pertaining to the Company and the securities offered hereby, reference is made
to such Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents or provisions of any
documents referred to herein are not necessarily complete, and in each instance,
reference is made to the copy of the document filed as an exhibit to this
Registration Statement. The Company will issue annual and quarterly reports.
Annual reports will include audited financial statements
80
<PAGE> 81

prepared in accordance with accounting principles generally accepted in the
United States and a report of its independent auditors with respect to the
examination of such financial statements. In addition, the Company will issue to
its securityholders such other unaudited quarterly or other interim reports as
it deems appropriate.

This Registration Statement may be inspected without charge at the office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may
be obtained from the Commission at prescribed rates from the Public Reference
Section of the Commission at such address, and at the Commission's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. In addition, registration statements and certain other filings
made with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's site
on the Internet's World Wide Web, located at http://www.sec.gov.

81
<PAGE> 82

GLOSSARY OF TERMS

ATM Asynchronous Transfer Mode. An information transfer standard
for routing traffic which uses packets (cells) of a fixed
length.

Backbone A centralized high-speed network that interconnects smaller,
independent networks.

Bandwidth The number of bits of information which can move through a
communications medium in a given amount of time; the
capacity of a telecommunications circuit/ network to carry
voice, data and video information. Typically measured in
kbps and Mbps.

caching Temporary storage or replication of a Web server content at
one or more locations throughout the Internet to provide a
quicker response to a browser request.

CPE Customer Premise Equipment.

CSU/DSU Channel Service Unit/Digital Service Unit. A device used to
terminate telephone company equipment and prepare data for
router interface.

DNS Domain Name Server.

DS-3 or T-3 A data communications circuit capable of transmitting data
at 45 Mbps. Equivalent to 28 T-1's of data capacity.
Currently used only by businesses/institutions and carriers
for high end applications.

Ethernet A common method of networking computers in a LAN. Ethernet
will handle about 10 Mbps and can be used with almost any
kind of computer.

FDDI Fiber Distributed Data Interface. A standard for
transmitting data on fiber-optic cables at a rate of 100
Mbps.

Firewall A system placed between networks that filters data passing
through it and prevents unauthorized traffic, thereby
enhancing the security of the network.

Frame Relay An information transfer standard for relaying traffic based
on an address contained in the six-byte header of a variable
length packet that is up to 2,106 bytes long.

Hertz The dimensional unit for measuring the frequency with which
an electromagnetic signal cycles through the zero-value
state between lowest and highest states. One Hertz
(abbreviated Hz) equals one cycle per second. KHz
(KiloHertz) stands for thousands of Hertz; MHz (MegaHertz)
stands for millions of Hertz; GHz (GigaHertz) stands for
billions of Hertz.

Internet A global collection of interconnected computer networks
which use a specific communications protocol.

IP Internet Protocol. Network protocols that allow computers
with different architectures and operating system software
to communicate with other computers on the Internet.

ISDN Integrated Services Digital Network. An information transfer
standard for transmitting digital voice and data over
telephone lines at speeds up to 128 Kbps.

ISPs Internet Service Providers. Companies formed to provide
access to the Internet to consumers and business customers
via local networks.

IXC Interexchange Carrier. A telecommunications company that
provides telecommunications services between local exchanges
on an interstate or intrastate basis.

kbps Kilobits per second. A transmission rate. One kilobit equals
1,024 bits of information.

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<PAGE> 83

LAN Local Area Network. A data communications network designed
to interconnect personal computers, workstations,
minicomputers, file servers and other communications and
computing devices within a localized environment.

Leased Line Telecommunications line dedicated to a particular customer
along predetermined routes.

LEC Local Exchange Carrier. A telecommunications company that
provides telecommunications services in a geographic area in
which calls generally are transmitted without toll charges.
LECs include both RBOCs and competitive local exchange
carriers.

LMDS Local Multipoint Distribution Service. Two blocks of
spectrum with total bandwidth of 1150 MHz and 150 MHz to be
auctioned and used for various wireless services.

MAE-East A major exchange point among ISPs, located in Falls Church,
Virginia.

MAE-West A major exchange point among ISPs, located in Santa Clara,
California.

Mbps Megabits per second. A transmission rate. One megabit equals
1,024 kilobits.

MMDS Microwave Multipoint Distribution Service.

Modem A device for transmitting digital information over an analog
telephone line.

MSAs Metropolitan Statistical Areas. A designation by the U.S.
Census Bureau for Metropolitan areas with a central city or
an urbanized area having a minimum population of 50,000 with
a total metropolitan population of at least 100,000 and
including all counties that have strong economic and social
ties to the central city.

NAP Network Access Point. A location at which ISPs exchange each
other's traffic.

National Node National network access point where IP traffic is exchanged
between network links and where regional networks access the
national network.

NOC Network Operations Center. Facility where the Company
monitors and manages the Company's network.

OC-3 A data communications circuit consisting of three DS-3s
capable of transmitting data at 155 Mbps.

Peering The commercial practice under which ISPs exchange each
other's traffic without the payment of settlement charges.
Peering occurs at both public and private exchange points.

POP Point of Presence. Telecommunications facility where the
Company locates network equipment used to connect customers
to its network backbone.

Proxy Server A server that acts on behalf of one or more other servers,
usually for screening, firewall, caching, or a combination
of these purposes. Typically, a proxy server is used within
a company to gather all Internet requests, forward them out
to Internet servers, and then receive the responses and in
turn forward them to the original requestor within the
company.

Router Equipment placed between networks that relays data to those
networks based upon a destination address contained in the
data packets being routed.

TCP/IP Transmission Control Protocol/Internet Protocol. A suite of
network protocols that allow computers with different
architectures and operating system software to communicate
with other computers on the Internet.

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VPN Virtual Private Network. A network capable of providing the
tailored services of a private network (i.e. low latency,
high throughput, security and customization) while
maintaining the benefits of a public network (i.e. ubiquity
and economies of scale).

WAN Wide Area Network. A data communications network designed to
interconnect personal computers, workstations, mini
computers, file servers and other communications and
computing devices across a broad geographic region.

Web Site A server connected to the Internet from which Internet users
can obtain information.

World Wide Web or Web
A collection of computer systems supporting a communications
protocol that permits multi-media presentation of
information over the Internet.

xDSL A term referring to a variety of new Digital Subscriber Line
technologies. Some of these varieties are asymmetric with
different data rates in the downstream and upstream
directions. Others are symmetric. Downstream speeds range
from 384 kbps (or "SDSL") to 1.5-8 Mbps (or "ASDL").

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VERIO INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Unaudited Pro Forma Condensed Combined Financial Statements:
Pro Forma Condensed Combined Balance Sheet as of December
31, 1997 (unaudited).................................... F-4
Pro Forma Condensed Combined Statement of Operations for
the Year Ended December 31, 1997 (unaudited)............ F-5
Notes to Pro Forma Condensed Combined Financial Statements
(unaudited)............................................. F-6
Verio Inc. and Subsidiaries -- Consolidated Financial
Statements:
Independent Auditors' Report.............................. F-15
Consolidated Balance Sheets as of December 31, 1996 and
1997.................................................... F-16
Consolidated Statements of Operations for the Period from
Inception (March 1, 1996) to December 31, 1996 and the
Year Ended December 31, 1997............................ F-17
Consolidated Statements of Stockholders' Deficit for the
Period from Inception (March 1, 1996) to December 31,
1996 and the Year Ended December 31, 1997............... F-18
Consolidated Statements of Cash Flows for the Period from
Inception (March 1, 1996) to December 31, 1996 and the
Year Ended December 31, 1997............................ F-19
Notes to Consolidated Financial Statements................ F-20
On-Ramp Technologies, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-30
Balance Sheet as of July 31, 1996......................... F-31
Statement of Operations for the Nine Months Ended July 31,
1996.................................................... F-32
Statement of Stockholders' Deficit for the Nine Months
Ended July 31, 1996..................................... F-33
Statement of Cash Flows for the Nine Months Ended July 31,
1996.................................................... F-34
Notes to Financial Statements............................. F-35
Global Enterprises Services -- Network Division -- Financial
Statements:
Independent Auditors' Report.............................. F-38
Balance Sheets as of December 31, 1995 and 1996........... F-39
Statements of Operations and Owner's Deficit for the Years
Ended December 31, 1994, 1995, 1996 and Period Ended
January 17, 1997........................................ F-40
Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996 and Period Ended January 17, 1997... F-41
Notes to Financial Statements............................. F-42
Compute Intensive, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-45
Balance Sheets as of December 31, 1995 and 1996........... F-46
Statements of Operations for the Years Ended December 31,
1995 and 1996 and Period Ended February 18, 1997........ F-47
Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 1995 and 1996 and Period Ended
February 18, 1997....................................... F-48
Statements of Cash Flows for the Years Ended December 31,
1995 and 1996 and Period Ended February 18, 1997........ F-49
Notes to Financial Statements............................. F-50
NorthWestNet, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-55
Balance Sheets as of June 30, 1995 and 1996............... F-56
Statements of Operations for the Year Ended June 30, 1995
and the Six Months Ended December 31, 1995 and Six
Months Ended June 30, 1996 and the Eight Months Ended
February 28, 1997....................................... F-57
Statements of Stockholders' Equity and Fund Balance for
the Year Ended June 30, 1995 and the Six Months Ended
December 31, 1995 and Six Months Ended June 30, 1996 and
the Eight Months Ended February 28, 1997................ F-58
Statements of Cash Flows for the Year Ended June 30, 1995
the Six Months Ended December 31, 1995, and the Six
Months Ended June 30, 1996 and the Eight Months Ended
February 28, 1997....................................... F-59
Notes to Financial Statements............................. F-60
Aimnet Corporation -- Financial Statements:
Independent Auditors' Report.............................. F-67
Balance Sheet as of March 31, 1997........................ F-68
Statement of Operations for the Year Ended March 31, 1997
and Period Ended May 19, 1997........................... F-69
Statements of Stockholders' Equity for the Year Ended
March 31, 1997 and Period Ended May 19, 1997............ F-70
Statements of Cash Flows for the Year Ended March 31, 1997
and Period Ended May 19, 1997........................... F-71
Notes to Financial Statements............................. F-72
West Coast Online, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-75
Balance Sheet as of September 30, 1997.................... F-76
Statement of Operations and Accumulated Deficit for the
Nine Months Ended September 30, 1997.................... F-77
Statement of Cash Flows for the Nine Months Ended
September 30, 1997...................................... F-78
Notes to Financial Statements............................. F-79
Clark Internet Services, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-82
Balance Sheet as of September 30, 1997.................... F-83
Statements of Operations and Retained Earnings for the
Year Ended September 30, 1997 and Period Ended October
17, 1997................................................ F-84
Statements of Cash Flows for the Year Ended September 30,
1997 and Period Ended October 17, 1997.................. F-85
Notes to Financial Statements............................. F-86
ATMnet -- Financial Statements:
Independent Auditors' Report.............................. F-88
Balance Sheets as of October 31, 1996 and 1997............ F-89
Statements of Operations for the Years Ended October 31,
1996 and 1997........................................... F-90
Statements of Stockholders' Deficit for the Years Ended
October 31, 1996 and 1997............................... F-91
</TABLE>

F-1
<PAGE> 86
<TABLE>
<S> <C>
Statements of Cash Flows for the Years Ended October 31,
1996 and 1997........................................... F-92
Notes to Financial Statements............................. F-93
Global Internet Network Services, Inc. -- Financial
Statements:
Independent Auditors' Report.............................. F-97
Balance Sheets as of December 31, 1996 and November 26,
1997.................................................... F-98
Statements of Operations for the Year Ended December 31,
1996 and the Period Ended November 26, 1997............. F-99
Statements of Stockholders' Equity (Deficit) for the Year
Ended December 31, 1996 and the Period Ended November
26, 1997................................................ F-100
Statements of Cash Flows for the Year Ended December 31,
1996 and the Period Ended November 26, 1997............. F-101
Notes to Financial Statements............................. F-102
Pennsylvania Research Partnership Network
(PREPnet) -- Financial Statements:
Independent Auditors' Report.............................. F-105
Balance Sheets as of November 30, 1996 and 1997........... F-106
Statements of Operations and Owner's Deficit for the Years
Ended November 30, 1996 and 1997 and the Period Ended
December 24, 1997....................................... F-107
Statements of Cash Flows for the Years Ended November 30,
1996 and 1997 and the Period Ended December 24, 1997.... F-108
Notes to Financial Statements............................. F-109
Monumental Network Systems, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-112
Balance Sheets as of December 31, 1996 and 1997........... F-113
Statements of Operations for the Years Ended December 31,
1996 and 1997........................................... F-114
Statements of Stockholders' Deficit for the Years Ended
December 31, 1996 and 1997.............................. F-115
Statements of Cash Flows for the Years Ended December 31,
1996 and 1997........................................... F-116
Notes to Financial Statements............................. F-117
Internet Servers, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-121
Balance Sheets as of December 31, 1996 and 1997........... F-122
Statements of Operations for the Period from Inception
(August 23, 1995) to December 31, 1995 and Years Ended
December 31, 1996 and 1997.............................. F-123
Statements of Stockholders' Equity for the Period from
Inception (August 23, 1995) to December 31, 1995 and
Years ended December 31, 1996 and 1997.................. F-124
Statements of Cash Flows for the Period from Inception
(August 23, 1995) to December 31, 1995 and Years Ended
December 31, 1996 and 1997.............................. F-125
Notes to Financial Statements............................. F-126
NSNet, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-129
Balance Sheets as of December 31, 1996 and 1997........... F-130
Statements of Operations for the Years Ended December 31,
1996 and 1997........................................... F-131
Statements of Owner's and Stockholder's Equity for the
Years Ended December 31, 1996 and 1997.................. F-132
Statements of Cash Flows for the Years Ended December 31,
1996 and 1997........................................... F-133
Notes to Financial Statements............................. F-134
Access One, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-137
Balance Sheet as of December 31, 1997..................... F-138
Statement of Operations and Accumulated Deficit for the
Year Ended December 31, 1997............................ F-139
Statement of Cash Flows for the Year Ended December 31,
1997.................................................... F-140
Notes to Financial Statements............................. F-141
STARnet, L.L.C. -- Financial Statements:
Independent Auditors' Report.............................. F-144
Balance Sheet as of December 31, 1997..................... F-145
Statement of Operations for the Year Ended December 31,
1997.................................................... F-146
Statement of Members' Equity for the Year Ended December
31, 1997................................................ F-147
Statement of Cash Flows for the Year Ended December 31,
1997.................................................... F-148
Notes to Financial Statements............................. F-149
Computing Engineers Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-151
Balance Sheets as of December 31, 1996 and 1997........... F-152
Statements of Operations for the Years Ended December 31,
1996 and 1997........................................... F-153
Statements of Stockholders' Equity for the Years Ended
December 31, 1996 and 1997.............................. F-154
Statements of Cash Flows for the Years Ended December 31,
1996 and 1997........................................... F-155
Notes to Financial Statements............................. F-156
LI Net, Inc. -- Financial Statements:
Independent Auditors' Report.............................. F-158
Balance Sheets as of April 30, 1997 and January 31,
1998.................................................... F-159
Statements of Operations for the Years Ended April 30,
1996 and 1997 and the Nine Months Ended January 31,
1998.................................................... F-160
Statements of Stockholders' Equity (Deficit) for the Years
Ended April 30, 1996 and 1997 and the Nine Months Ended
January 31, 1998........................................ F-161
Statements of Cash Flows for the Years Ended April 30,
1996 and 1997 and the Nine Months Ended January 31,
1998.................................................... F-162
Notes to Financial Statements............................. F-163
</TABLE>

F-2
<PAGE> 87

VERIO INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

During the period from August 1, 1996 through the date of this Registration
Statement, Verio Inc. ("Verio" or the "Company") completed numerous business
combinations, whereby the Company acquired newly authorized redeemable,
convertible preferred stock, shares of common stock, or certain net assets of
entities operating in the Internet industry (ISPs), and completed the Buyout of
the remaining equity interests of certain ISPs in which it initially acquired a
less-than-100% equity position (collectively, the "Completed Acquisitions").
Business combinations, which are acquisitions of a 100% ownership interest in
the target business or of a majority ownership interest (upon conversion of the
preferred shares to common stock) on a fully diluted basis, are accounted for
using the purchase method of accounting. Acquisitions of minority interests
represented by preferred stock are accounted for using the equity method of
accounting, as described in Note 1 to the Consolidated Financial Statements. The
Completed Acquisitions are described in Note A to the accompanying pro forma
condensed combined financial statements.

While the Company now seeks to acquire 100% of new ISPs, the Company's
early acquisition strategy was to rapidly build mass and scale by acquiring less
than 100% of its ISPs. In each case where the Company acquired less than 100% of
an ISP initially, it obtained the right to Buyout the remaining equity in the
future at a price based on either agreed upon revenue multiples or the fair
market value of the ISP. As part of its integration strategy, the Company has
effected the Buyouts of all but two of the ISPs in which it did not initially
acquire a 100% interest, through the use of cash on hand and the issuance of
equity. As of the date of this Registration Statement, Verio has consummated the
Buyout of the following fourteen ISPs; On-Ramp Technologies, Inc.; NorthWestNet,
Inc.; National Knowledge Networks, Inc.; Access One, Inc.; Signet Partners,
Inc.; Surf Network, Inc.; Pacific Rim Network, Inc.; Internet Engineering
Associates, Inc.; AimNet Corporation; West Coast Online, Inc.; ServiceTech,
Inc., Clark Internet Services, Inc., Compute Intensive Inc. and Structured
Network Systems, Inc. With respect to those Buyouts that have not yet been
completed, the Company has contractual rights to effect those two Buyouts and
expects to complete these Buyouts during the remainder of 1998. However, there
can be no assurance that the Company will be able to complete these Buyouts at
the times, or in accordance with the terms and conditions, that it currently
contemplates. These acquisitions will also be accounted for using the purchase
method of accounting.

The unaudited pro forma condensed combined balance sheet assumes that the
Completed Acquisitions occurred on December 31, 1997 and includes the December
31, 1997 historical consolidated balance sheets of Verio and the acquired
businesses adjusted for the pro forma effects of these acquisitions. The
unaudited pro forma condensed combined statement of operations for the year
ended December 31, 1997 assumes that the Completed Acquisitions had occurred on
January 1, 1997, and includes the historical consolidated statements of
operations of Verio and the Completed Acquisitions for the year ended December
31, 1997, adjusted for the pro forma effects of the acquisitions. The unaudited
pro forma condensed combined balance sheet also assumes the conversion of the
Preferred Stock into common stock upon completion of the Offering.

The unaudited pro forma condensed combined statement of operations is not
necessarily indicative of the results of operations that would actually have
occurred if the transactions had been consummated as of January 1, 1997 and is
not intended to indicate the expected results for any future period. These
statements should be read in conjunction with the historical consolidated
financial statements and related notes thereto of Verio, and certain acquired
businesses, included herein. The actual purchase accounting adjustments may be
revised upon completion of the acquisitions.

F-3
<PAGE> 88

VERIO INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1997 (UNAUDITED)
AMOUNTS IN THOUSANDS

ASSETS

<TABLE>
<CAPTION>
HISTORICAL
-----------------------
COMPLETED PRO FORMA PRO FORMA
ACQUISITIONS ADJUSTMENTS COMBINED
VERIO (NOTE B) (NOTE D) VERIO
-------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents...................... $ 72,586 $ 1,169 $(46,456)(1) $155,304
128,005(8)
Restricted cash and securities................. 21,015 -- (12,732)(8) 8,283
Receivables, net............................... 7,565 2,012 -- 9,577
Prepaid expenses and other..................... 4,656 975 (535)(3) 5,096
-------- ------- -------- --------
Total current assets................... 105,822 4,156 68,282 178,260
Investments in affiliates, at cost............... 2,378 -- (1,198)(1) 1,180
Restricted cash and securities................... 19,539 -- -- 19,539
Equipment and leasehold improvements, net........ 28,213 4,358 -- 32,571
Other assets:
Goodwill, net.................................. 83,216 -- 69,025(1) 152,241
Other, net..................................... 7,303 237 3,666(8) 11,206
-------- ------- -------- --------
Total assets........................... $246,471 $ 8,751 $139,775 $394,997
======== ======= ======== ========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable and accrued expenses.......... $ 19,634 $ 2,507 $ -- $ 22,141
Lines of credit, notes payable and current
portion of long-term debt and capital lease
obligations................................. 4,326 1,616 (535)(3) 5,407
Deferred revenue............................... 7,177 1,874 -- 9,051
-------- ------- -------- --------
Total current liabilities.............. 31,137 5,997 (535) 36,599
Long-term debt and capital lease obligations,
less current portion........................... 142,321 1,330 129,043(8) 272,694
-------- ------- -------- --------
Total liabilities...................... 173,458 7,327 128,508 309,293
Minority interests in subsidiaries............... 2,765 -- (2,765)(5) --
Redeemable preferred stock....................... 97,249 2,716 (2,716)(2) --
(97,249)(7)
Stockholders' deficit:
Preferred stock................................ 10,200 -- (10,200)(7) --
Common stock and additional paid-in capital.... 1,598 1,692 (1,692)(2) 134,607
107,449(7)
25,560(1)
Warrants....................................... 12,675 -- -- 12,675
Retained earnings (deficit).................... (51,474) (2,984) 2,984(2) (61,578)
(10,104)(9)
-------- ------- -------- --------
(27,001) (1,292) 113,997 85,704
-------- ------- -------- --------
Total liabilities and stockholders'
deficit.............................. $246,471 $ 8,751 $139,775 $394,997
======== ======= ======== ========
</TABLE>

F-4
<PAGE> 89

VERIO INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA

<TABLE>
<CAPTION>
HISTORICAL
-------------------------
COMPLETED PRO FORMA PRO FORMA
ACQUISITIONS ADJUSTMENTS COMBINED
VERIO (NOTE C) (NOTE D) VERIO
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Internet connectivity............................. $ 23,476 $39,677 $ (98)(3) $ 63,055
Enhanced services and other....................... 12,216 12,994 -- 25,210
---------- ------- ----------- -----------
Total revenue.............................. 35,692 52,671 (98) 88,265
---------- ------- ----------- -----------
Costs and expenses:
Internet services operating costs................. 15,974 22,247 (76)(3) 38,145
Selling, general and administrative and other..... 49,383 32,687 -- 82,070
Depreciation and amortization..................... 10,624 3,257 12,030(4) 25,911
---------- ------- ----------- -----------
Total costs and expenses................... 75,981 58,191 11,954 146,126
---------- ------- ----------- -----------
Loss from operations............................ (40,289) (5,520) (12,052) (57,861)
Other income (expense):
Interest income................................... 6,080 67 -- 6,147
Interest expense.................................. (11,826) (591) -- (12,417)
Equity in losses of affiliates.................... (1,958) -- 1,958(5) --
---------- ------- ----------- -----------
Loss before minority interests and income
taxes......................................... (47,993) (6,044) (10,094) (64,131)
Minority interests.................................. 1,924 -- (1,924)(5) --
Income taxes........................................ -- (1,247) 1,247(6) --
---------- ------- ----------- -----------
Net loss................................... (46,069) (7,291) (10,771) (64,131)
Accretion of preferred stock to liquidation value... (260) -- 260(7) --
---------- ------- ----------- -----------
Net loss attributable to common stockholders........ $ (46,329) $(7,291) $ (10,511) $ (64,131)
========== ======= =========== ===========
Weighted average shares outstanding -- basic and
diluted........................................... 1,144,685 20,945,667(7) 22,090,352
========== =========== ===========
Loss per common share -- basic and diluted.......... $ (40.47) $ (2.90)
========== ===========
</TABLE>

F-5
<PAGE> 90

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(A) BASIS OF PRESENTATION

During the period from inception (March 1, 1996) to May 5, 1998, Verio
completed numerous business combinations, and completed the Buyout of the
remaining equity interests of certain ISPs in which it initially acquired a
less-than-100% equity position. All of the acquisitions have been or will be
accounted for using the purchase method of accounting. Summary information
regarding the Completed Acquisitions is as follows:

<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE
FOR THE
COMPLETED CONSIDERATION
ACQUISITIONS ------------------------------
THROUGH CASH
MAY 5, AND PREFERRED
COMPLETED ACQUISITIONS ACQUISITION DATE(S) 1998 NOTES STOCK(B) TOTAL(C)
---------------------- ------------------- ------------- ------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
On-Ramp Technologies, Inc. .............. August 1, 1996 51%
October 4, 1996 4%
February 26, 1998 45% $13,485 $6,985 $ 20,470
National Knowledge Networks, Inc. ....... August 2, 1996 26%
November 7, 1997 15%
February 27, 1998 59% 2,999 -- 2,999
RAINet, Inc. ............................ August 2, 1996 100% 2,000 -- 2,000
Access One, Inc.......................... December 12, 1996 20%
February 27, 1998 80% 6,006 -- 6,006
CCnet, Inc. ............................. December 19, 1996 100% 1,800 -- 1,800
Signet Partners, Inc. ................... December 19, 1996 25%
November 20, 1997 16%
February 26, 1998 59% 1,234 1,283 2,517
Global Enterprise Services -- Network
Division............................... January 17, 1997 100% 2,350 -- 2,350
Surf Network, Inc. ...................... January 31, 1997 25%
December 22, 1997 75% 603 -- 603
Pacific Rim Network, Inc. ............... February 4, 1997 27%
February 16, 1998 73% 850 -- 850
Pioneer Global Telecommunications,
Inc. .................................. February 6, 1997 100% 1,011 -- 1,011
Compute Intensive Inc. .................. February 18, 1997 55%
April 24, 1998 45% 7,099 8,042 15,141
NorthWestNet, Inc. ...................... February 28, 1997 85%
March 6, 1998 15% 12,089 2,475 14,564
Internet Engineering Associates, Inc. ... March 4, 1997 20%
February 25, 1998 80% 206 1,500 1,706
Internet Online, Inc. ................... March 5, 1997 36% 1,050 -- 1,050
Structured Network Systems, Inc. ........ March 6, 1997 20%
April 16, 1998 80% 1,250 -- 1,250
</TABLE>

F-6
<PAGE> 91
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
OWNERSHIP
PERCENTAGE
FOR THE
COMPLETED CONSIDERATION
ACQUISITIONS ------------------------------
THROUGH CASH
MAY 5, AND PREFERRED
COMPLETED ACQUISITIONS ACQUISITION DATE(S) 1998 NOTES STOCK(B) TOTAL(C)
---------------------- ------------------- ------------- ------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
RustNet, Inc. ........................... March 14, 1997 100% 1,703 -- 1,703
AimNet Corporation....................... May 19, 1997 55%
September 22, 1997 45% 7,613 -- 7,613
West Coast Online, Inc. ................. July 26, 1996 20%
April 29, 1997 12%
September 30, 1997 68% 2,000 -- 2,000
ServiceTech, Inc. ....................... August 1, 1997 40%
December 31, 1997 60% 2,055 -- 2,055
Branch Information Services, Inc. ....... September 17, 1997 100% 1,687 -- 1,687
Communique, Inc. ........................ October 2, 1997 100% 3,000 -- 3,000
Clark Internet Services, Inc. ........... October 17, 1997 51%
February 25, 1998 49% 3,969 3,431 7,400
ATMnet................................... November 5, 1997 100% 5,522 -- 5,522
Global Internet Network Services,
Inc. .................................. December 1, 1997 100% 6,000 -- 6,000
Sesquinet................................ December 24, 1997 100%(a) 732 -- 732
PREPnet.................................. December 24, 1997 100% 1,405 -- 1,405
Monumental Network Systems, Inc. ........ December 31, 1997 100% 3,962 -- 3,962
Internet Servers, Inc. .................. December 31, 1997 100% 9,800 10,200 20,000
NSNet, Inc. ............................. February 27, 1998 100% 1,535 1,765 3,300
LI Net, Inc. ............................ April 9, 1998 100% 6,500 -- 6,500
STARnet, L.L.C. ......................... April 14, 1998 100% 3,500 -- 3,500
Computing Engineers Inc. ................ April 15, 1998 100% 9,000 -- 9,000
Florida Internet Corporation............. April 15, 1998 100% 2,200 -- 2,200
Matrix Online Media, Inc. ............... May 5, 1998 100% 4,000 -- 4,000
--------
Total........................... $165,896
========
</TABLE>

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

The total consideration, exclusive of acquisition costs, for the Completed
Acquisitions has been allocated as follows:

<TABLE>
<S> <C>
Equipment................................................... $ 18,095
Goodwill.................................................... 152,156
Net current liabilities..................................... (5,405)
Investment in Internet Online, Inc.......................... 1,050
--------
Total............................................. $165,896
========
</TABLE>

(a) Assets of this entity were purchased by On-Ramp Technologies, Inc.

F-7
<PAGE> 92
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(b) Represents shares of Series D-1 Preferred Stock valued at $15 per share.
For NorthWestNet, Inc., the amount represents options to purchase Preferred
Stock at $15 per share. Such per share value was determined by the
Company's Board of Directors based on comparable valuations of private and
public companies, methodologies based on multiples of revenue and
discounted cash flows, and arms-length negotiated values.

The accompanying unaudited pro forma condensed combined balance sheet as of
December 31, 1997 includes historical balances of Verio and the businesses
acquired adjusted for the pro forma effects of the acquisitions completed
through May 5, 1998, including the acquisitions of the remaining interests in
certain consolidated subsidiaries and minority owned affiliates. All
acquisitions are assumed to have been completed for cash, debt or the issuance
of preferred stock of Verio. The unaudited pro forma condensed combined
statement of operations for the year ended December 31, 1997 includes historical
results of operations of Verio and the businesses acquired, including the
acquisitions of the remaining interests in certain consolidated subsidiaries and
minority owned affiliates, adjusted for the pro forma effects of the
acquisitions.

F-8
<PAGE> 93

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(B) HISTORICAL CONDENSED BALANCE SHEET INFORMATION -- COMPLETED ACQUISITIONS

Historical condensed balance sheet information for the Completed
Acquisitions as of December 31, 1997 is as follows:

<TABLE>
<CAPTION>
INTERNET NATIONAL STRUCTURED
PACIFIC RIM SIGNET ENGINEERING KNOWLEDGE NETWORK
NETWORK, INC. PARTNERS, INC. ASSOCIATES, INC. NSNET, INC. NETWORKS, INC. SYSTEMS, INC.
------------- -------------- ---------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.... $ -- $ 60 $271 $ 20 $ 166 $ 27
Receivables, net............. 46 112 106 86 73 206
Prepaid expenses and other... 31 83 49 354 12 1
----- ----- ---- ---- ------- -----
Total current
assets.............. 77 255 426 460 251 234
Equipment and leasehold
improvements, net............ 181 238 191 379 92 54
Other assets................. -- 25 45 67 13 7
----- ----- ---- ---- ------- -----
Total assets.......... $ 258 $ 518 $662 $906 $ 356 $ 295
===== ===== ==== ==== ======= =====
Current liabilities:
Accounts payable and accrued
expenses................... $ 366 $ 285 $119 $139 $ 70 $ 252
Lines of credit, notes
payable and current portion
of long-term debt and
capital lease
obligations................ 100 35 32 234 89 70
Deferred revenue............. 12 88 157 83 112 16
----- ----- ---- ---- ------- -----
Total current
liabilities......... 478 408 308 456 271 338
Long-term debt and capital
lease obligations, less
current portion............ 124 10 10 62 65 15
----- ----- ---- ---- ------- -----
Total liabilities..... 602 418 318 518 336 353
Redeemable preferred stock..... 150 802 206 -- 899 150
Stockholders' equity:
Common stock and additional
paid-in capital............ 55 38 10 107 227 1
Retained earnings
(deficit).................. (549) (740) 128 281 (1,106) (209)
----- ----- ---- ---- ------- -----
Total stockholders'
equity (deficit).... (494) (702) 138 388 (879) (208)
----- ----- ---- ---- ------- -----
Total liabilities and
stockholders' equity
(deficit)........... $ 258 $ 518 $662 $906 $ 356 $ 295
===== ===== ==== ==== ======= =====
</TABLE>

F-9
<PAGE> 94

VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
FLORIDA COMPUTING MATRIX
ACCESS ONE, LI NET INTERNET ENGINEERS STARNET ONLINE MEDIA,
INC. INC. CORPORATION INC. LLC. INC. TOTAL
----------- ------ ----------- --------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents........... $ 259 $ 25 $ 4 $ 16 $210 $111 $ 1,169
Receivables, net........ 344 225 107 430 112 165 2,012
Prepaid expenses and
other................. 146 9 145 39 88 18 975
------ ----- ----- ------ ---- ---- -------
Total current
assets......... 749 259 256 485 410 294 4,156
Equipment and leasehold
improvements, net....... 679 501 219 1,050 208 566 4,358
Other assets............ 10 29 3 20 4 14 237
------ ----- ----- ------ ---- ---- -------
Total assets..... $1,438 $ 789 $ 478 $1,555 $622 $874 $ 8,751
====== ===== ===== ====== ==== ==== =======
Current liabilities:
Accounts payable and
accrued expenses...... $ 550 $ 268 $ 96 $ 259 $ 44 $ 59 $ 2,507
Lines of credit, notes
payable and current
portion of long-term
debt and capital lease
obligations........... 453 153 -- 308 -- 142 1,616
Deferred revenue........ 294 159 212 250 372 119 1,874
------ ----- ----- ------ ---- ---- -------
Total current
liabilities.... 1,297 580 308 817 416 320 5,997
Long-term debt and
capital lease
obligations, less
current portion....... 38 270 -- 614 -- 122 1,330
------ ----- ----- ------ ---- ---- -------
Total
liabilities.... 1,335 850 308 1,431 416 442 7,327
Redeemable preferred
stock................... 509 -- -- -- -- -- 2,716
Stockholders' equity:
Common stock and
additional paid-in
capital............... 93 317 298 6 -- 540 1,692
Retained earnings
(deficit)............. (499) (378) (128) 118 206 (108) (2,984)
------ ----- ----- ------ ---- ---- -------
Total
stockholders'
equity
(deficit)...... (406) (61) 170 124 206 432 (1,292)
------ ----- ----- ------ ---- ---- -------
Total liabilities
and
stockholders'
equity
(deficit)...... $1,438 $ 789 $ 478 $1,555 $622 $874 $ 8,751
====== ===== ===== ====== ==== ==== =======
</TABLE>

F-10
<PAGE> 95
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Historical condensed statement of operations information for the Completed
Acquisitions for the year ended December 31, 1997 including the periods from
January 1, 1997 to the dates of consolidation is as follows:
<TABLE>
<CAPTION>
PIONEER GLOBAL
AIMNET RUSTNET, COMPUTE NORTHWEST TELECOMMUNICATIONS, WEST COAST
YEAR ENDED DECEMBER 31, 1997 CORPORATION INC. GES INTENSIVE NET INC. ONLINE, INC.
---------------------------- ----------- -------- ----- --------- --------- ------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Internet connectivity....... $1,068 $ 310 $ 112 $ 468 $ 709 $ 62 $1,192
Enhanced services and
other..................... 101 69 -- 326 351 7 457
------ ----- ----- ----- ------ ---- ------
Total revenue......... 1,169 379 112 794 1,060 69 1,649
Operating costs and expenses:
Internet services operating
costs..................... 444 147 94 301 113 33 735
Selling, general and
administrative and
other..................... 978 319 133 673 1,661 37 981
Depreciation and
amortization.............. 248 17 -- 16 136 4 77
------ ----- ----- ----- ------ ---- ------
Total costs and
expenses............ 1,670 483 227 990 1,910 74 1,793
------ ----- ----- ----- ------ ---- ------
Earnings (loss) from
operations................ (501) (104) (115) (196) (850) (5) (144)
Interest income............... 8 -- --
Interest expense.............. -- (8) -- (8) -- (2) --
------ ----- ----- ----- ------ ---- ------
Earnings (loss) before
income taxes............ (493) (112) (115) (204) (850) (7) (144)
Income taxes.................. -- -- -- -- 118 (5) --
------ ----- ----- ----- ------ ---- ------
Net earnings (loss)... $ (493) $(112) $(115) $(204) $ (732) $(12) $ (144)
====== ===== ===== ===== ====== ==== ======

<CAPTION>
BRANCH
INFORMATION
YEAR ENDED DECEMBER 31, 1997 SERVICES, INC.
---------------------------- --------------
<S> <C>
Revenue:
Internet connectivity....... $588
Enhanced services and
other..................... 84
----
Total revenue......... 672
Operating costs and expenses:
Internet services operating
costs..................... 84
Selling, general and
administrative and
other..................... 298
Depreciation and
amortization.............. 2
----
Total costs and
expenses............ 384
----
Earnings (loss) from
operations................ 288
Interest income............... --
Interest expense.............. --
----
Earnings (loss) before
income taxes............ 288
Income taxes.................. (101)
----
Net earnings (loss)... $187
====
</TABLE>

<TABLE>
<CAPTION>
GLOBAL
CLARK INTERNET
INTERNET SURF NETWORK
COMMUNIQUE, SERVICES, NETWORK, SERVICES,
INC. INC. INC. SESQUINET ATMNET INC. PREPNET
----------- --------- -------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Internet connectivity.................... $1,454 $2,582 $ 585 $1,124 $2,754 $2,501 $2,026
Enhanced services and other.............. 764 562 190 -- 73 1,284 121
------ ------ ------ ------ ------- ------ ------
Total revenue...................... 2,218 3,144 775 1,124 2,827 3,785 2,147
Operating costs and expenses:
Internet services operating costs........ 690 1,394 431 538 2,976 2,679 793
Selling, general and administrative and
other.................................. 1,159 1,784 981 367 1,786 1,019 773
Depreciation and amortization............ 5 116 76 54 40 280 121
------ ------ ------ ------ ------- ------ ------
Total costs and expenses............... 1,854 3,294 1,488 959 4,802 3,978 1,687
------ ------ ------ ------ ------- ------ ------
Earnings (loss) from operations........ 364 (150) (713) 165 (1,975) (193) 460
Interest income............................ -- 2 -- -- -- -- --
Interest expense........................... -- (25) (33) -- (171) (8) (11)
------ ------ ------ ------ ------- ------ ------
Earnings (loss) before income taxes.... 364 (173) (746) 165 (2,146) (201) 449
Income taxes............................... (127) -- -- (58) -- -- (171)
------ ------ ------ ------ ------- ------ ------
Net earnings (loss)................ $ 237 $ (173) $ (746) $ 107 $(2,146) $ (201) $ 278
====== ====== ====== ====== ======= ====== ======
</TABLE>

F-11
<PAGE> 96
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
INTERNET
INTERNET SERVICE PACIFIC RIM SIGNET ENGINEERING STRUCTURED
MONUMENTAL, SERVERS, TECH, NETWORK, PARTNERS, NSNET, ASSOCIATES, NETWORK
INC. INC. INC. INC. INC. INC. INC. SYSTEMS, INC.
----------- -------- ------- ------------- --------- ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Internet connectivity..... $2,425 $ 704 $ 1,536 $ 472 $1,133 $1,832 $ 831 $ 859
Enhanced services and
other................... 47 3,688 627 337 518 15 303 27
------ ------ ------- ----- ------ ------ ------ -----
Total revenue......... 2,472 4,392 2,163 809 1,651 1,847 1,134 886
Operating costs and
expenses:
Internet services
operating costs......... 1,162 536 1,229 385 336 471 323 473
Selling, general and
administrative and
other................... 1,757 2,006 1,814 674 1,977 939 678 511
Depreciation and
amortization............ 172 260 197 69 10 126 63 --
------ ------ ------- ----- ------ ------ ------ -----
Total costs and
expenses........... 3,091 2,802 3,240 1,128 2,323 1,536 1,064 984
------ ------ ------- ----- ------ ------ ------ -----
Earnings (loss) from
operations............ (619) 1,590 (1,077) (319) (672) 311 70 (98)
Interest income............. -- 26 -- -- -- -- 14 --
Interest expense............ (16) -- (42) (15) (5) (6) -- (17)
------ ------ ------- ----- ------ ------ ------ -----
Earnings (loss) before
income taxes.......... (635) 1,616 (1,119) (334) (677) 305 84 (115)
Income taxes................ -- (602) 33 (15) -- (116) (29) --
------ ------ ------- ----- ------ ------ ------ -----
Net earnings (loss)... $ (635) $1,014 $(1,086) $(349) $ (677) $ 189 $ 55 $(115)
====== ====== ======= ===== ====== ====== ====== =====
</TABLE>

<TABLE>
<CAPTION>
NATIONAL
KNOWLEDGE FLORIDA COMPUTING MATRIX
ACCESSONE, NETWORKS, LI INTERNET ENGINEERS STARNET, ONLINE
INC. INC. NET, INC. CORPORATION INC. L.L.C. MEDIA, INC. TOTAL
---------- --------- --------- ----------- --------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Internet
connectivity..... $2,484 $1,169 $1,907 $1,172 $3,322 $1,202 $1,094 $39,677
Enhanced services
and other........ 1,035 234 120 264 758 399 233 12,994
------ ------ ------ ------ ------ ------ ------ -------
Total
revenue..... 3,519 1,403 2,027 1,436 4,080 1,601 1,327 52,671
Operating costs and
expenses:
Internet services
operating
costs............ 1,510 669 792 773 1,026 717 393 22,247
Selling, general
and
administrative
and other........ 2,251 1,282 1,573 578 2,341 570 787 32,687
Depreciation and
amortization..... 245 55 135 121 329 156 127 3,257
------ ------ ------ ------ ------ ------ ------ -------
Total costs and
expenses.... 4,006 2,006 2,500 1,472 3,696 1,443 1,307 58,191
------ ------ ------ ------ ------ ------ ------ -------
Earnings (loss)
from
operations..... (487) (603) (473) (36) 384 158 20 (5,520)
Interest income...... -- 6 -- -- -- 9 2 67
Interest expense..... (26) (26) (39) (12) (96) (6) (19) (591)
------ ------ ------ ------ ------ ------ ------ -------
Earnings (loss)
before income
taxes.......... (513) (623) (512) (48) 288 161 3 (6,044)
Income taxes......... -- (3) -- -- (110_ (61) -- (1,247)
------ ------ ------ ------ ------ ------ ------ -------
Net earnings
(loss)...... $ (513) $ (626) $ (512) $ (48) $ 178 $ 100 $ 3 $(7,291)
====== ====== ====== ====== ====== ====== ====== =======
</TABLE>

F-12
<PAGE> 97
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(D) PRO FORMA ADJUSTMENTS

The following pro forma adjustments have been made to the condensed
combined balance sheet as of December 31, 1997 and the condensed combined
statement of operations for the year ended December 31, 1997. The purchase
accounting adjustments relating to the acquisitions completed prior to January
1, 1998 are included in the historical consolidated balance sheet of Verio as of
December 31, 1997.

(1) To reflect cash of $46,456,000 and 1,704,000 shares of preferred
stock valued at $25,560,000, which is the approximate number of shares
proposed and assumed to be issued as of December 31, 1997 in connection
with the Completed Acquisitions subsequent to December 31, 1997, and the
allocation of excess purchase price to goodwill in the amount of
$69,025,000 and to adjust investments in affiliates in the amount of
$1,198,000 for the proposed acquisitions of majority interests. Preferred
stock issued for acquisitions were recorded at fair value as determined by
the Company's Board of Directors and based on other third-party issuances
of Company securities. In the opinion of management, the historical
balances of all other assets acquired and liabilities assumed approximate
fair value.

Cash and notes payable issued for all acquisitions completed from inception
through May 5, 1998 (exclusive of acquisition costs), as described in note
A, is summarized as follows (in thousands):

<TABLE>
<S> <C>
Cash and notes payable issued for acquisitions completed
through December 31, 1997................................. $ 83,759
Cash consideration for Completed Acquisitions subsequent to
December 31, 1997 and through May 5, 1998................. 46,456
--------
Total............................................. $130,215
========
</TABLE>

(2) To eliminate equity accounts and redeemable preferred stock of the
Completed Acquisitions.

(3) To eliminate intercompany revenue, expenses, receivables and
payables.

(4) To adjust amortization expense due to increase in carrying value
of goodwill, using a ten-year life, including additional amortization
expense related to consolidated acquisitions completed during 1997, as if
such acquisitions had been completed as of January 1, 1997, as follows (in
thousands):

<TABLE>
<S> <C>
Pro forma goodwill for acquisitions completed or proposed to
be completed after December 31, 1997 as if the
acquisitions occurred on January 1, 1997.................. $69,025
Amortization period (years)................................. 10
-------
Amortization of goodwill for acquisitions completed or
proposed to be completed after December 31, 1997.......... 6,903
Amortization of goodwill on 1997 acquisitions for the period
from January 1, 1997 through the date of acquisition as if
the acquisitions had occurred as of January 1, 1997....... 5,127
-------
Total....................................................... $12,030
=======
</TABLE>

(5) To eliminate minority interests share of equity and equity in
losses of affiliates upon acquisition of 100% ownership interests.

(6) To eliminate income tax expense or benefit of acquired businesses
due to consolidated net operating loss for the year ended December 31,
1997.

(7) To reflect the conversion of 20,945,667 shares of preferred stock
into common stock upon completion of the Offering, including 1,704,000
shares of preferred stock assumed to be issued and

F-13
<PAGE> 98
VERIO INC.

NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

converted to common stock subsequent to December 31, 1997, and to eliminate
accretion of preferred stock to liquidation value.

(8) To adjust for the effects of the issuance of the 1998 Notes, after
giving effect to the Refinancing, as follows (in thousands):

<TABLE>
<CAPTION>
CASH AND CASH EQUIVALENTS:
--------------------------
<S> <C>
Proceeds from 1998 Notes.................................... $175,000
Less:
Proceeds used to complete the Refinancing................. (54,515)
Offering costs............................................ (5,212)
Reduction of restricted cash requirements in connection
with the Refinancing................................... 12,732
--------
Net increase in cash and cash equivalents......... $128,005
========
</TABLE>

<TABLE>
<CAPTION>
OTHER ASSETS:
-------------
<S> <C>
Deferred financing costs related to 1998 Notes.............. $ 5,212
Less write-off of portion of deferred financing costs
related to 1997 Notes repurchased in the Refinancing...... (1,546)
--------
Net increase in other assets...................... $ 3,666
========
</TABLE>

<TABLE>
<CAPTION>
LONG-TERM DEBT:
---------------
<S> <C>
Principal amount of 1998 Notes.............................. $175,000
Less face amount of 1997 Notes repurchased.................. (50,000)
Add portion of unamortized debt discount related to 1997
Notes repurchased......................................... 4,043
--------
Net increase in long-term debt.................... $129,043
========
</TABLE>

(9) To reflect the extraordinary charge of approximately $10,104,000
for the loss on the Refinancing representing the excess of the repurchase
price of a portion of the 1997 Notes over the carrying value of the notes,
including debt discount and related deferred financing costs.

F-14
<PAGE> 99

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying consolidated balance sheets of Verio Inc.
and subsidiaries as of December 31, 1996 and 1997, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the period
from inception (March 1, 1996) to December 31, 1996 and the year ended December
31, 1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Verio Inc.
and subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the period from inception (March 1, 1996) to
December 31, 1996 and the year ended December 31, 1997 in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-15
<PAGE> 100

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------- DECEMBER 31,
1996 1997 1997(1)
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 66,467 $ 72,586
Restricted cash and securities (notes 3 and 4)............ -- 21,015
Receivables:
Trade, net of allowance for doubtful accounts of $117
and $1,233............................................. 611 7,565
Affiliates.............................................. 119 735
Prepaid expenses and other................................ 410 3,921
-------- --------
Total current assets................................ 67,607 105,822
Restricted cash and securities (notes 3 and 4).............. -- 19,539
Investments in affiliates, at cost (note 2)................. 1,536 2,378
Equipment and leasehold improvements:
Internet access and computer equipment.................... 4,485 30,535
Furniture, fixtures and computer software................. 220 3,301
Leasehold improvements.................................... 141 1,596
-------- --------
4,846 35,432
Less accumulated depreciation and amortization............ (359) (7,219)
-------- --------
Net equipment and leasehold improvements............ 4,487 28,213
Other assets:
Goodwill, net of accumulated amortization of $303 and
$3,595 (note 2)......................................... 8,736 83,216
Debt issuance costs, net of accumulated amortization of
$330.................................................... -- 4,858
Organization costs and other, net......................... 262 2,445
-------- --------
Total assets........................................ $ 82,628 $246,471
======== ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 2,132 $ 7,389
Accrued expenses.......................................... 931 11,401
Accrued interest payable.................................. -- 844
Accrued preferred stock issuance costs.................... 1,110 --
Lines of credit, notes payable and current portion of
long-term debt (note 3)................................. 2,573 2,751
Current portion of capital lease obligations (note 4)..... 64 1,575
Deferred revenue.......................................... 659 7,177
-------- --------
Total current liabilities........................... 7,469 31,137
Long-term debt, less current portion, net of discount (note
3)........................................................ 20 139,376
Capital lease obligations, less current portion (note 4).... 86 2,945
-------- --------
Total liabilities................................... 7,575 173,458
-------- --------
Minority interests in subsidiaries (note 2)................. 2,231 2,765
Redeemable preferred stock (note 5):
Series A, convertible, $.001 par value. 6,100,000 shares
authorized, 6,033,333 shares issued and outstanding at
December 31, 1996 and 1997. Liquidation preference of
$18,100................................................. 18,078 18,080 --
Series B, convertible, $.001 par value. 10,117,000 shares
authorized 10,000,000 and 10,028,334 shares issued and
outstanding at December 31, 1996 and 1997. Liquidation
preference of $60,170................................... 58,799 59,193 --
Series C, convertible, $.001 par value. 2,500,000 shares
authorized, issued and outstanding at December 31, 1997.
Liquidation preference of $20,000....................... -- 19,976 --
-------- -------- --------
76,877 97,249 --
-------- -------- --------
Stockholders' equity (deficit) (note 6):
Preferred stock, Series D-1, convertible, $.001 par value.
3,000,000 shares authorized, 680,000 shares issued and
outstanding at December 31, 1997. Liquidation preference
of $10,200 (note 5)..................................... -- 10,200 --
Common stock, $.001 par value; 35,133,000 shares
authorized; 1,090,000 and 1,254,533 shares issued and
outstanding at December 31, 1996 and 1997 (20,496,200
shares pro forma)....................................... 1 1 20
Additional paid-in capital................................ 1,089 14,272 121,702
Accumulated deficit....................................... (5,145) (51,474) (51,474)
-------- -------- --------
Total stockholders' equity (deficit)................ (4,055) (27,001) 70,248
-------- -------- --------
Commitments (notes 2, 4 and 5)
Total liabilities and stockholders' deficit......... $ 82,628 $246,471
======== ========
</TABLE>

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

(1) Reflects the conversion of all preferred shares into common stock on the
basis described in Note 5, only upon completion of the offering described in
the registration statement.

See accompanying notes to consolidated financial statements.

F-16
<PAGE> 101

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR
(MARCH 1, 1996) ENDED
TO DECEMBER 31, DECEMBER 31,
1996 1997
----------------- ------------
<S> <C> <C>
Revenue:
Internet connectivity:
Dedicated.............................................. $ 1,100 $ 16,383
Dial-up................................................ 1,139 7,093
Enhanced services and other............................... 126 12,216
------- ---------
Total revenue..................................... 2,365 35,692
Costs and expenses:
Internet services operating costs......................... 974 15,974
Selling, general and administrative and other............. 7,002 49,383
Depreciation and amortization............................. 669 10,624
------- ---------
Total costs and expenses.......................... 8,645 75,981
------- ---------
Loss from operations.............................. (6,280) (40,289)
Other income (expense):
Interest income........................................... 593 6,080
Interest expense.......................................... (115) (11,826)
Equity in losses of affiliates............................ -- (1,958)
------- ---------
Loss before minority interests.................... (5,802) (47,993)
Minority interests.......................................... 680 1,924
------- ---------
Net loss.......................................... (5,122) (46,069)
Accretion of preferred stock to liquidation value........... (23) (260)
------- ---------
Net loss attributable to common shareholders...... $(5,145) $ (46,329)
======= =========
Loss per common share -- basic and diluted.................. $ (5.29) $ (40.47)
======= =========
Weighted average number of common shares outstanding --basic
and diluted............................................... 971,748 1,144,685
======= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-17
<PAGE> 102

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
PREFERRED ------------------ PAID-IN ACCUMULATED
STOCK SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT INCEPTION................ $ -- -- $-- $ -- $ -- $ --
Issuance of common stock for cash.... -- 1,090,000 1 1,089 -- 1,090
Accretion of preferred stock to
liquidation value.................. -- -- -- -- (23) (23)
Net loss............................. -- -- -- -- (5,122) (5,122)
------- --------- --- ------- -------- --------
BALANCES AT DECEMBER 31, 1996........ -- 1,090,000 1 1,089 (5,145) (4,055)
Issuance of common stock for exercise
of options......................... -- 76,200 148 -- 148
Issuance of common stock for cash.... -- 88,333 360 -- 360
Warrants issued in connection with
debt offering (note 3)............. -- -- -- 12,675 -- 12,675
Issuance of preferred stock in
business combination (note 5)...... 10,200 -- -- -- -- 10,200
Accretion of redeemable preferred
stock to liquidation value......... -- -- -- (260) (260)
Net loss............................. -- -- -- (46,069) (46,069)
------- --------- --- ------- -------- --------
BALANCES AT DECEMBER 31, 1997........ $10,200 1,254,533 $ 1 $14,272 $(51,474) $(27,001)
======= ========= === ======= ======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-18
<PAGE> 103

VERIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM INCEPTION YEAR
(MARCH 1, 1996) ENDED
TO DECEMBER 31, DECEMBER 31,
1996 1997
--------------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(5,122) $(46,069)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization.......................... 669 10,624
Minority interests' share of losses.................... (680) (1,924)
Equity in losses of affiliates......................... -- 1,958
Changes in operating assets and liabilities, excluding
effects of business combinations:
Receivables.......................................... (265) (1,561)
Prepaid expenses and other current assets............ (284) (2,305)
Accounts payable..................................... 1,439 (1,656)
Accrued expenses..................................... 1,910 3,082
Accrued interest payable............................. -- 844
Deferred revenue..................................... 7 1,684
------- --------
Net cash used by operating activities............. (2,326) (35,323)
------- --------
Cash flows from investing activities:
Acquisition of equipment and leasehold improvements....... (3,430) (14,547)
Acquisition of net assets in business combinations and
investments in affiliates, net of cash acquired........ (5,627) (64,023)
Restricted cash and securities............................ (40,554)
Other..................................................... (66) (1,206)
------- --------
Net cash used by investing activities............. (9,123) (120,330)
------- --------
Cash flows from financing activities:
Proceeds from lines of credit, notes payable and long-term
debt................................................... -- 145,512
Repayments of lines of credit and notes payable........... (20) (3,468)
Repayments of capital lease obligations................... (8) (950)
Proceeds from issuance of common and preferred stock, net
of issuance costs...................................... 77,944 20,678
------- --------
Net cash provided by financing activities......... 77,916 161,772
------- --------
Net increase in cash and cash equivalents......... 66,467 6,119
Cash and cash equivalents:
Beginning of period....................................... -- 66,467
------- --------
End of period............................................. $66,467 $ 72,586
======= ========
Supplemental disclosures of cash flow information:
Cash paid for interest.................................... $ -- $ 10,982
======= ========
Equipment acquired through capital lease obligations...... $ 58 $ 3,301
======= ========
Acquisition of net assets in business combination through
issuance of notes payable.............................. $ 6,675 $ 4,718
======= ========
Acquisition of net assets in business combination through
issuance of preferred stock............................ $ -- $ 10,200
======= ========
Warrants issued in connection with debt offering.......... $ -- $ 12,675
======= ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-19
<PAGE> 104

VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Organization and Basis of Presentation

Verio Inc. (Verio or the Company) was incorporated on March 1, 1996 to
capitalize on the growing demand for Internet access and enhanced services by
business users through the acquisition, integration, and growth of existing
independent Internet service providers with a business customer focus in
targeted geographic regions. The goal of the Company is to be the dominant,
full-service national provider of Internet connectivity and enhanced Internet
services to small and medium sized businesses. The Company commenced operations
in April 1996 and had no activity other than the sale of common stock to
founders prior to April 1, 1996.

The accompanying consolidated financial statements include the accounts of
Verio and its majority owned subsidiaries, as described in Note 2. All
significant intercompany balances and transactions have been eliminated in
consolidation. The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

(b) Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. Included in cash
equivalents as of December 31, 1996 and December 31, 1997 are U.S. government,
municipal and corporate debt securities, money market accounts and commercial
paper, totaling $61,769,000 and $75,442,000 (exclusive of cash overdraft in the
amount of $11,228,000), respectively, with maturities ranging from thirty to
ninety days.

Restricted cash and securities include U.S. government securities which are
classified as securities held to maturity and recorded at cost. At December 31,
1997, cost approximated market value.

Equipment and leasehold improvements are recorded at cost. Depreciation is
provided over the estimated useful lives of the assets ranging from 3 to 5 years
using the straight-line method. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of the asset.

(d) Investments in Affiliates and Consolidation of Subsidiaries

Investments in affiliates represent newly issued preferred shares of
various affiliates. The preferred shares are convertible at the option of the
Company into common shares on a one-for-one basis and represent future common
stock ownership interests, upon conversion, of less than 50%. As the Company did
not acquire a common stock ownership interest, these investments are recorded at
cost until such time as the preferred shares are converted to common. In
addition, if these entities incur losses resulting in the equity of the common
shareholders being reduced to zero, the Company will utilize the equity method
of accounting for these investments and will generally recognize 100% of all
losses of the affiliates from that date, up to the amount of the Company's
investment, based on the inability of the majority common shareholders to fund
additional losses. During the year ended December 31, 1997, the Company
recognized equity in losses of affiliates of $1,958,000 under this method of
accounting.

The Company has also acquired preferred shares in certain entities which
are convertible into future common stock ownership interests of greater than
50%. In these situations, the Company has majority representation on the Board
of Directors and majority voting rights, exercises significant control over the

F-20
<PAGE> 105
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

entities' operations, and intends to acquire a 100% common ownership interest in
the future. Accordingly, the accounts of these investees have been consolidated
with those of the Company in the accompanying consolidated financial statements
from the dates of acquisition (see note 2).

(e) Other Assets

The excess of cost over the fair value of net assets acquired, or goodwill,
is amortized using the straight-line method over a 10-year period. Other
intangibles are amortized using the straight-line method over periods ranging
from three to seven years.

(f) Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lives Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. In addition, the
recoverability of goodwill is further evaluated under the provisions of APB
Opinion No. 17, Intangible Assets, based upon undiscounted cash flows. If such
assets are impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the estimated fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
value or fair value, less costs to sell.

(g) Revenue Recognition

Revenue related to Internet services is recognized as the services are
provided, and deferred and amortized to operations for amounts billed relating
to future periods. Installation and customer set-up fees are recognized upon
completion of the services. Revenue from consulting services is recognized as
the services are provided. Revenue from hardware and software sales is
recognized upon shipment of the respective products.

(h) Peering Relationships

The Company does not pay any fees in connection with its peering
relationships with other companies and does not record revenue or expense in
connection with those arrangements. The nature of these relationships is that
the parties share the responsibility for communications that occur between their
respective local networks. These peering relationships are essentially exchanges
of similar productive assets rather than a culmination of an earnings process.
Accordingly, these arrangements are appropriately not reflected in the
operations of the Company.

(i) Income Taxes

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the difference is expected to reverse.

(j) Stock-Based Compensation

The Company accounts for its stock-based employee compensation plans using
the intrinsic value based method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations (APB 25). The Company has provided pro forma disclosures of net
loss and loss per share as if the fair value based method of accounting for the
plans, as prescribed by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), had been applied. Pro forma
disclosures include the effects of employee stock options granted during the
period and year ended December 31, 1996 and 1997.
F-21
<PAGE> 106
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(k) Loss Per Share

Loss per share is presented in accordance with the provisions of Statement
of Financial Accounting Standards No. 128, Earnings Per Share, (SFAS 128). SFAS
128 replaced the presentation of primary and fully diluted earnings (loss) per
share (EPS), with a presentation of basic EPS and diluted EPS. Under SFAS 128,
basic EPS excludes dilution for common stock equivalents and is computed by
dividing income or loss available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock and resulted in the
issuance of common stock. Basic and diluted EPS are the same in 1996 and 1997,
and all common stock equivalents are antidilutive.

(2) BUSINESS COMBINATIONS AND INVESTMENTS IN AFFILIATES

During the period from inception (March 1, 1996) to December 31, 1996, the
Company completed seven business combinations and investments for cash and notes
payable. All of the acquisitions were accounted for using the purchase method of
accounting, and represent the acquisition of stock or net assets. Outstanding
stock options of acquired businesses were included in the determination of the
purchase prices based on fair values. For those businesses acquired and
consolidated, the results of operations for the acquired businesses are included
in the Company's consolidated statement of operations from the dates of
acquisition. Summary information regarding the business combinations is as
follows:

Consolidated acquisitions in 1996:

<TABLE>
<CAPTION>
TOTAL OWNERSHIP
OWNERSHIP INTEREST AT APPROXIMATE
INTEREST DECEMBER 31, PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASED(A) 1996(A) PRICE
------------- ---------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
On-Ramp Technologies, Inc........ August 1, 1996 51%
October 4, 1996 4% 55%(b) $ 8,775,000
RAINet, Inc...................... August 2, 1996 100% 100%(c) 2,000,000
CCnet Inc........................ December 19, 1996 100% 100%(c) 1,800,000
-----------
$12,575,000
Acquisition costs................ 284,000
-----------
$12,859,000
===========
</TABLE>

The aggregate purchase price, including acquisition costs was allocated based
upon fair value as follows:

<TABLE>
<S> <C>
Equipment............................................ $ 1,359,000
Goodwill............................................. 9,039,000
Net current assets................................... 2,461,000
-----------
Total purchase price........................ $12,859,000
===========
</TABLE>

Unconsolidated investments in 1996:

<TABLE>
<CAPTION>
OWNERSHIP TOTAL OWNERSHIP APPROXIMATE
INTEREST INTEREST AT PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASED(A) DECEMBER 31, 1996(A) PRICE
------------- ---------------- ------------ -------------------- -----------
<S> <C> <C> <C> <C>
West Coast Online, Inc....... July 26, 1996 20% 20%(b) $ 225,000
National Knowledge Networks,
Inc........................ August 2, 1996 26% 26%(b) 300,001
Access One, Inc.............. December 12, 1996 20% 20%(b) 506,039
Signet Partners, Inc......... December 19, 1996 25% 25%(b) 402,960
----------
$1,434,000
Acquisition costs............ 102,000
----------
$1,536,000
==========
</TABLE>

During the year ended December 31, 1997, the Company completed 23 business
combinations and investments for cash, notes payable and preferred stock. All of
the acquisitions were accounted for using the purchase method of accounting. For
those businesses acquired and consolidated, the results of operations for

F-22
<PAGE> 107
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the acquired businesses are included in the Company's consolidated statement of
operations from the dates of acquisition. Seventeen subsidiaries were acquired
and newly consolidated during 1997. In addition, the Company formed two new
start-up subsidiaries. Summary information regarding these acquisitions is as
follows:

Consolidated acquisitions in 1997:

<TABLE>
<CAPTION>
OWNERSHIP TOTAL OWNERSHIP APPROXIMATE
INTEREST INTEREST AT PURCHASE
BUSINESS NAME ACQUISITION DATE PURCHASED(A) DECEMBER 31, 1997(A) PRICE(E)
------------- ---------------- ------------ -------------------- -----------
<S> <C> <C> <C> <C>
Global Enterprise
Services -- Network
Division............... January 17, 1997 100% 100%(d) $ 2,350,000
Pioneer Global
Telecommunications,
Inc. .................. February 6, 1997 100% 100%(c) 1,011,000
Compute Intensive
Inc. .................. February 18, 1997 55% 55%(b) 4,900,000
NorthWestNet, Inc. ...... February 28, 1997 85% 85%(c) 9,464,000
RUSTnet, Inc. ........... March 14, 1997 100% 100%(c) 1,703,000
Aimnet Corporation....... May 19, 1997 55%
September 22, 1997 45% 100%(c) 7,613,000
Branch Information
Services, Inc. ........ September 17, 1997 100% 100%(c) 1,687,000
West Coast Online,
Inc. .................. April 29, 1997 12%
September 30, 1997 68% 100%(b) 1,775,000
Communique, Inc. ........ October 2, 1997 100% 100%(c) 3,000,000
Clark Internet Services,
Inc. .................. October 17, 1997 51% 51%(b) 3,520,000
ATMnet .................. November 5, 1997 100% 100%(d) 5,522,000
Global Internet Network
Services, Inc. ........ December 1, 1997 100% 100%(c) 6,000,000
Surf Network, Inc. ...... January 31, 1997 25%
December 22, 1997 75% 100%(b) 603,000
PREPnet.................. December 24, 1997 100% 100%(d) 1,405,000
Sesquinet................ December 24, 1997 100% 100%(d) 732,000
Service Tech, Inc. ...... August 1, 1997 40%
December 31, 1997 60% 100%(b) 2,055,000
Monumental Network
Systems, Inc. ......... December 31, 1997 100% 100%(c) 3,962,000
Internet Servers,
Inc. .................. December 31, 1997 100% 100%(c) 20,000,000
-----------
$77,302,000
Acquisition costs........ 3,396,000
-----------
$80,698,000
===========
</TABLE>

The aggregate purchase price, including acquisition costs of $3,396,000 was
allocated based upon fair values as follows:

<TABLE>
<S> <C>
Equipment...................................... $ 12,378,000
Goodwill....................................... 77,772,000
Net current liabilities........................ (9,452,000)
------------
Total purchase price................. $ 80,698,000
============
</TABLE>

F-23
<PAGE> 108
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Unconsolidated investments in 1997:

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

(a) Represents existing ownership interest or, in the case of investments in
preferred stock, ownership upon conversion of preferred shares to common,
on a fully diluted basis.

(b) Represents ownership of preferred stock of affiliate or subsidiary.

(d) Represents acquisition of net assets.

(e) Purchase prices are comprised of cash and notes payable for all
Acquisitions except Internet Servers, Inc. which included the issuance of
680,000 shares of Series D-1 preferred stock at $15 per share. Such per
share value was determined by the Company's Board of Directors based on
comparable valuations of private and public companies, methodologies based
on multiples of revenue and discounted cash flows, and arms-length
negotiated values.

The following unaudited condensed pro forma information presents the
unaudited results of operations of the Company as if the above consolidated
acquisitions had occurred on January 1, 1996:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997
---------- ----------
(AMOUNTS IN THOUSANDS,
EXCEPT FOR PER SHARE DATA)
<S> <C> <C>
Revenue..................................................... $ 44,693 $ 63,665
Net loss.................................................... (33,326) (59,006)
Net loss attributable to common shareholders................ (33,349) (59,266)
Loss per common share -- basic and diluted.................. $ (34.32) $ (51.77)
</TABLE>

The pro forma results do not necessarily represent results that would have
occurred if the consolidated acquisitions had taken place as of January 1, 1996,
nor are they necessarily indicative of the results of future operations.

For all of its less-than-100%-owned ISP affiliates, the Company has the
option to acquire all of the remaining ownership interests. Generally, the
option may be exercised beginning one year from the date of the initial
investment or upon the earlier of the completion of an initial public offering
of common stock by the

F-24
<PAGE> 109
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company or a significant strategic investment in the Company. In one case, the
Company's option becomes mandatorily exercisable upon completion of an initial
public offering.

Subsequent to December 31, 1997 and through February 25, 1998, the Company
has completed or expects to complete the acquisition of the remaining ownership
interests and acquisitions of 12 ISPs, for total consideration of approximately
$50 million in preferred stock and cash.

(3) DEBT

Lines of credit, notes payable and long-term debt consists of the following
as of December 31, 1996 and 1997:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
--------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
13.5% Senior Notes due in 2004, net of unamortized discount
of $12,130,136(a)......................................... $ -- $137,870
Revolving lines of credit, bearing interest at .5% to 2.00%
above prime, (9.0% to 10.5% at December 31, 1997) due
primarily on demand, secured by restricted cash of
$765,000.................................................. -- 788
Unsecured notes payable bearing interest primarily at 7%,
due in 1998 and 1999...................................... 2,500 2,809
Other....................................................... 93 660
------- --------
2,593 142,127
Less current portion........................................ (2,573) (2,751)
------- --------
Long-term debt, less current portion.............. $ 20 $139,376
======= ========
</TABLE>

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

(a) In June 1997, the Company completed a debt offering of $150,000,000, 13.5%
Senior Notes due 2004 (the "1997 Notes") and warrants to purchase 2,112,480
shares of common stock at $.01 per share, which were valued at
approximately $12,675,000 based on the Company's most recent equity
offering. Interest on the 1997 Notes is payable semi-annually on June 15
and December 15 of each year. The value attributed to the warrants has been
recorded as debt discount and is being amortized to interest expense using
the interest method over the term of the 1997 Notes. Upon closing, the
Company deposited U.S. Treasury securities in an escrow account in an
amount that, together with interest on the securities, will be sufficient
to fund the first five interest payments (through December 1999) on the
1997 Notes. This restricted cash and securities balance totaled $38,195,404
at December 31, 1997. The 1997 Notes are redeemable on or after June 15,
2002 at 103% of the face value.

The indenture covering the 1997 Notes includes various covenants
restricting the payment of dividends, additional indebtedness, disposition of
assets, and transactions with affiliates.

Maturities of lines of credit, notes payable and long-term debt are as
follows:

<TABLE>
<S> <C>
1998.............................................. $ 2,751
1999.............................................. 1,032
2000.............................................. 474
2001.............................................. --
2002.............................................. --
Thereafter........................................ 137,870
--------
$142,127
========
</TABLE>

F-25
<PAGE> 110
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of February 25, 1998, Verio had received commitments from a group of
commercial lending institutions to provide an aggregate of up to $57.5 million
pursuant to a two-year revolving credit financing facility. The Company is in
the process of negotiating the definitive terms and conditions and final
documentation for this facility. Chase Manhattan Bank has committed to serve as
agent for the lenders in this facility. In addition, the Company is considering
a possible private placement of up to $100 million in senior notes. There can be
no assurance that the Company will be able to negotiate final terms and
conditions that are acceptable to the Company with respect to, or to consummate,
either of such financing efforts.

(4) LEASES AND COMMITMENTS

The Company leases office space, certain facilities storing internet points
of presence and certain computer and office equipment under capital and
operating leases expiring at various dates through 2003. Future minimum annual
lease payments under these leases as of December 31, 1997 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
1998........................................................ $ 2,279 $ 5,786
1999........................................................ 1,840 5,178
2000........................................................ 1,128 3,485
2001........................................................ 42 1,393
2002........................................................ 9 487
Thereafter.................................................. -- 172
------- -------
Total minimum payments............................ $ 5,298 $16,501
=======
Less amount representing interest........................... (778)
-------
Present value of net minimum lease payments....... 4,520
Less current portion........................................ (1,575)
-------
$ 2,945
=======
</TABLE>

Rent expense for the period from inception (March 31, 1996) to December 31,
1996 and the year ended December 31, 1997 was $128,000 and $1,856,000,
respectively.

In addition, the Company has entered into agreements with two
telecommunications companies to provide the Company with products and services
to be used in its operations. Under one agreement, the minimum payments as of
December 31, 1997 are as follows (in thousands):

<TABLE>
<S> <C>
1998................................................ $1,200
1999................................................ 1,900
2000................................................ 2,400
2001................................................ 800
------
Total minimum payments.................... $6,300
======
</TABLE>

Under the second agreement, the Company is obligated to spend a total of
$39 million between June 16, 1997 and June 16, 2002 of which $1,500,000 had been
paid as of December 31, 1997. Annual payments will be based on actual usage by
the Company.

The Company had an outstanding irrevocable letter of credit in the amount
of $1.1 million as of December 31, 1997. This letter of credit, which is
automatically renewed after one year at the discretion of the bank, not to be
extended beyond January 31, 2003, is to collateralize the Company's lease
obligation to a third party. The fair value of this letter of credit
approximates contract value which is fixed over the life of the commitment.
Restricted cash in the amount of $1,400,000 secures the letter of credit.
F-26
<PAGE> 111
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) PREFERRED STOCK

Series A, B and C preferred shares were issued in 1996 and 1997 at $3, $6
and $8 per share, respectively, for total proceeds of $18,100,001, $60,170,004
and $20,000,000, respectively, and are convertible into common stock initially
on a one-for-one basis. In December 1997, the Company also issued 680,000 shares
of Series D-1 preferred shares at $15 per share in connection with an
acquisition. The preferred shares are entitled to receive dividends equal, on an
as-converted basis, to any amount paid to common stockholders. In the event of
any liquidation or dissolution of the Company, including certain mergers,
consolidations and asset sales, holders of the preferred shares are entitled to
receive an amount equal to the original issuance price, plus any declared and
unpaid dividends.

In addition, the Series A, B and C preferred shares are subject to
mandatory redemption, in total, by the Company in October 2004. The Series D-1
preferred shares are not redeemable. Upon redemption, the Series C shares are
senior to Series B shares, which are senior to Series A shares, on the basis
provided in the preferred stock terms. Series A, B, C and D-1 preferred shares
may be converted into shares of common stock at any time at the option of the
holder. The Series A, B, C and D-1 preferred shares are also subject to
mandatory conversion upon consummation of a public offering of common stock
resulting in proceeds to the Company of not less than $30 million and at an
offering price per share equal to at least $15. In addition, shares of Series
D-1 preferred stock are subject to mandatory conversion upon the election of
each of the Series A, B and C classes, each voting as a separate class, to
convert to common.

(6) STOCK-BASED COMPENSATION PLANS

The Company has established Incentive Stock Option Plans (the Plans)
whereby, at the discretion of the Board of Directors (the Board), the Company
may grant stock options to employees of the Company and its controlled
subsidiaries. As of December 31, 1997, the Company had reserved 2,750,000 shares
for issuance under the Plans. The Plans were amended subsequent to December 31,
1997 to increase the number of shares reserved for issuance to 4,750,000. The
option price is determined by the Board at the time the option is granted, but
in no event is less than the fair market value of the Company's common stock at
the date of grant, as determined by the Board. As of December 31, 1996 and
December 31, 1997, options had been granted entitling the holders to purchase
707,200 and 2,237,050 shares of the Company's common stock, respectively, at
exercise prices of $1, $3, $6, $6.75 and $8.50 per share. Options granted on or
before December 19, 1997, vest over a five year period, and expire ten years
from the date of grant. Options granted December 20, 1997, or later, vest over a
four year period, and expire eight years from the date of grant. In certain
circumstances, options vest earlier or later based upon the fair value of the
Company's common shares or upon reaching certain performance targets, as
defined, and in the case that such performance targets are not met, such
performance-based options vest seven years from the date of grant. Performance
based options granted on or before December 19, 1997, expire ten years from the
date of grant, and performance based options granted December 20, 1997, or
later, expire eight years from the date of grant. As of December 31, 1997,
54,700 options, in total, were vested and exercisable. Options may be exercised
prior to their scheduled vesting date, but are subject to a repurchase by the
Company at the exercise price until the scheduled vesting date. The weighted
average contractual term of outstanding options was approximately 5 years at
December 31, 1997.

F-27
<PAGE> 112
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes option activity for the period from
inception (March 1, 1996) through December 31, 1997:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
OPTIONS PRICE
--------- --------
<S> <C> <C>
Options granted at the following exercise prices:
$1 per share.............................................. 60,000
$3 per share.............................................. 647,700
---------
Options outstanding at December 31, 1996.................. 707,700 $2.83
Options granted at the following exercise prices:
$3 per share.............................................. 6,000
$6 per share.............................................. 924,550
$6.75 per share........................................... 635,450
$8.50 per share........................................... 191,250
Options forfeited......................................... (151,700) $5.95
Options exercised......................................... (76,200) $1.95
--------- -----
Options outstanding at December 31, 1997.................... 2,237,050 $5.55
========= =====
</TABLE>

As discussed in Note 1, the Company applies APB Opinion 25 and related
interpretations in accounting for its stock compensation plan. Accordingly,
since the Company grants stock options with exercise prices equal to fair value
at the date of grant, no compensation expense has been recognized relating to
option grants in 1996 and 1997. During the period and year ended December 31,
1996 and 1997, the per share weighted-average fair value of stock options
granted was $.46 and $1.08, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: no dividends or volatility, risk-free interest rate of 6%, and
expected life of three years. If the Company had recorded compensation expense
for the period and year ended December 31, 1996 and 1997, based on the fair
value of the options at the grant date under SFAS No. 123, net loss available to
common stockholders would increase to $5,210,000 and $46,737,000, respectively,
and basic and diluted net loss per common share would increase to $4.78 and
$40.83, respectively.

(7) INCOME TAXES

Income tax benefit for the year and period ended December 31 differs from
the amounts that would result from applying the federal statutory rate of 34% as
follows:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Expected tax benefit........................................ $(1,749) (15,752)
State income taxes, net of federal benefit.................. (180) (1,622)
Nondeductible goodwill amortization......................... 26 820
Change in valuation allowance for deferred tax assets,
exclusive of effect of acquired net operating losses...... 1,877 16,472
Other....................................................... 26 82
------- --------
Actual income tax benefit.............................. $ -- --
======= ========
</TABLE>

F-28
<PAGE> 113
VERIO INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Temporary differences that give rise to the components of deferred tax
assets as of December 31 are as follows:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Net operating loss carryforwards, including acquisitions.... $ 2,238 18,586
Other, net.................................................. 39 163
------- --------
Gross deferred tax asset.......................... 2,277 18,749
Valuation allowance......................................... (2,277) (18,749)
------- --------
Net deferred tax asset............................ $ -- --
======= ========
</TABLE>

At December 31, 1997, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $49.9 million, of which $5.9
million and $44.0 million is available to offset future federal taxable income,
if any, through 2011 and 2012, respectively. As a result of various preferred
stock transactions during 1996 and 1997, management believes the Company has
undergone an "ownership change" as defined by section 382 of the Internal
Revenue Code. Accordingly, the utilization of a portion of the net operating
loss carryforward may be limited. Due to this limitation, and the uncertainty
regarding the ultimate utilization of the net operating loss carryforward, no
tax benefit for losses has been recorded by the Company in 1996 and 1997, and a
valuation allowance has been recorded for the entire amount of the deferred tax
asset.

(8) CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
accounts receivable. As of December 31, 1996 and 1997, the Company had no
concentrations of credit risk. Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers comprising
the Company's customer base and the relatively minor balances of each individual
account. At December 31, 1996 and December 31, 1997, the fair value, of the
Company's financial instruments approximate their carrying value, based on their
terms and interest rates.

(9) EMPLOYEE BENEFIT PLAN

The Company has a 401(k) Plan (the Plan) for all full time employees of the
Company. The Company may make discretionary contributions to the Plan on behalf
of employees that meet certain contribution eligibility requirements defined
under the terms of the Plan. The Company did not make any contributions to the
Plan during 1996 or 1997.

(10) QUARTERLY FINANCIAL DATA (UNAUDITED)

Summary quarterly financial information for the Company is as follows. The
second quarter of 1996 represents the period from inception (March 1, 1996) to
March 31, 1996 (Amounts in Thousands).

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
1996 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
---- -------- ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue.................................. $ -- $ -- $ 678 $ 1,687 $ 2,365
Loss from operations..................... -- (329) (1,395) (4,556) (6,280)
Net loss................................. -- (329) (1,442) (3,374) (5,145)
Loss per common share -- basic and
diluted................................ -- (0.34) (1.48) (3.47) (5.29)
</TABLE>

<TABLE>
<CAPTION>
1997 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 TOTAL
---- -------- ------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Revenue.................................. $ 4,414 $ 8,249 $ 9,624 $ 13,405 $ 35,692
Loss from operations..................... (5,592) (8,854) (10,741) (15,102) (40,289)
Net loss................................. (4,677) (8,120) (12,762) (20,770) (46,329)
Loss per common share -- basic and
diluted................................ (4.29) (7.28) (10.84) (18.06) (40.47)
</TABLE>

F-29
<PAGE> 114

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of On-Ramp Technologies,
Inc. as of July 31, 1996, and the related statements of operations,
stockholders' deficit, and cash flows for the nine months then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of On-Ramp Technologies, Inc.
as of July 31, 1996, and the results of its operations and its cash flows for
the nine months then ended in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Denver, Colorado
April 11, 1997

F-30
<PAGE> 115

ON-RAMP TECHNOLOGIES, INC.

BALANCE SHEET
JULY 31, 1996

ASSETS

<TABLE>
<S> <C>
Current assets:
Trade receivables, net of allowance for doubtful accounts
of $80,812............................................. $ 433,075
Prepaid expenses and other................................ 25,079
-----------
Total current assets.............................. 458,154
Equipment, net (note 2)..................................... 867,388
-----------
Total assets...................................... $ 1,325,542
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Cash overdraft............................................ $ 91,342
Accounts payable.......................................... 448,460
Accrued liabilities....................................... 61,750
Current portion of note payable (note 3).................. 55,003
Deferred revenue.......................................... 652,965
-----------
Total current liabilities......................... 1,309,520
Note payable, less current portion (note 3)................. 58,692
-----------
Total liabilities................................. 1,368,212
-----------
Stockholders' equity (deficit) (note 5):
Common stock, $0.001 par value, 40,000,000 shares
authorized, 1,079,000 shares issued.................... 1,079
Additional paid-in capital................................ 1,804,871
Accumulated deficit....................................... (1,822,620)
Treasury stock -- 689,971 shares at cost.................. (26,000)
-----------
Total stockholders' deficit....................... (42,670)
-----------
Commitments and contingencies (note 4):
Total liabilities and stockholders' deficit....... $ 1,325,542
===========
</TABLE>

See accompanying notes to financial statements.

F-31
<PAGE> 116

ON-RAMP TECHNOLOGIES, INC.

STATEMENT OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1996

<TABLE>
<S> <C>
Revenue:
Internet services......................................... $2,959,650
Computer hardware and software sales...................... 312,487
Consulting services....................................... 92,881
----------
Total revenue..................................... 3,365,018
----------
Cost and expenses:
Internet services operating costs......................... 606,249
Cost of hardware and software sales....................... 249,990
Selling, general and administrative....................... 2,210,706
Provision for bad debts................................... 497,742
Depreciation.............................................. 260,194
----------
Total operating expenses.......................... 3,824,881
----------
Loss from operations.............................. (459,863)
Other income (expense):
Interest income........................................... 8,035
Interest expense.......................................... (7,991)
----------
Net loss.......................................... $ (459,819)
==========
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE> 117

ON-RAMP TECHNOLOGIES, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT
NINE MONTHS ENDED JULY 31, 1996

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON PAID-IN ACCUMULATED TREASURY EQUITY
STOCK CAPITAL DEFICIT STOCK (DEFICIT)
------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT NOVEMBER 1, 1995............ 1,079 1,799,699 (1,362,801) (26,000) 411,977
Capital contribution.................... -- 5,172 -- -- 5,172
Net loss................................ -- -- (459,819) -- (459,819)
------ --------- ---------- ------- --------
BALANCES AT JULY 31, 1996............... $1,079 1,804,871 (1,822,620) (26,000) (42,670)
====== ========= ========== ======= ========
</TABLE>

See accompanying notes to financial statements.

F-33
<PAGE> 118

ON-RAMP TECHNOLOGIES, INC.

STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1996

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(459,819)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 260,194
Provision for bad debts................................ 497,742
Changes in operating assets and liabilities:
Trade receivables.................................... (375,867)
Prepaid expenses..................................... 6,103
Accounts payable..................................... (170,123)
Accrued liabilities.................................. 4,891
Deferred revenue..................................... 227,140
---------
Net cash used by operating activities............. (9,739)
---------
Cash flows from investing activities --
purchases of equipment.................................... (222,564)
---------
Cash flows from financing activities:
Increase in cash overdraft................................ 91,342
Principal payments on note payable........................ (26,919)
Capital contribution...................................... 5,172
---------
Net cash used by financing activities............. 69,595
---------
Decrease in cash.................................. (162,708)
Cash at beginning of period................................. 162,708
---------
Cash at end of period....................................... $ --
=========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 7,991
=========
</TABLE>

See accompanying notes to financial statements.

F-34
<PAGE> 119

ON-RAMP TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Presentation

On-Ramp Technologies, Inc. (the Company) was incorporated in the State of
Texas on December 27, 1993. The Company's business consists of providing
regional internet access services, and hardware and software sales and
consulting, to customers in Texas and Georgia.

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

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized as the services are
provided. Revenue from hardware and software sales is recognized upon shipment
of the respective products.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using the straight-line method over the estimated useful life of the
related assets of three years. Costs for normal repairs and maintenance are
expensed as incurred.

Income Taxes

Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, (SFAS 109).
Under SFAS 109, deferred income taxes are recognized for the future tax
consequences of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end based on enacted tax laws and
statutory rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. The adoption of SFAS 121 as of November
1, 1995 did not have a significant effect on the Company's financial position or
results of operations.

Stock Based Compensation

In October 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, (SFAS No. 123), which establishes a fair

F-35
<PAGE> 120
ON-RAMP TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

value-based method of accounting for stock-based compensation plans. Companies
are encouraged to adopt all provisions of SFAS No. 123 and are required to
comply with the disclosure requirements of SFAS No. 123, which was effective for
fiscal years beginning after December 15, 1995. The Company will continue to
account for stock based compensation under the provisions of APB Opinion No. 25
and will provide the pro forma disclosures required by SFAS 123.

(2) EQUIPMENT

Equipment consisted of the following at July 31, 1996:

<TABLE>
<S> <C>
Internet and computer equipment............................. $1,155,370
Furniture and office equipment.............................. 119,973
Leasehold improvements...................................... 6,668
----------
1,282,011
Less accumulated depreciation............................... (414,623)
----------
$ 867,388
==========
</TABLE>

(3) DEBT

Debt as of July 31, 1996 consists of the following:

<TABLE>
<S> <C>
Note payable bearing interest at 18%, monthly principal and
interest payments of $7,020 through April 1, 1998......... $113,695
Less current portion...................................... (55,003)
--------
$ 58,692
========
</TABLE>

(4) COMMITMENTS AND CONTINGENCIES

Future minimum annual lease payments under operating leases for each of the
years ending July 31, are as follows:

Rent expense for the nine months ended July 31, 1996 totaled $90,999.

Concentration of Credit Risk and Financial Instruments

The Company provides unsecured credit to customers in the normal course of
business. Failure of the customers to pay could result in losses up to the
recorded receivable balances. The Company does not have any customers that
represent greater than 5% of total revenue at July 31, 1996.

The Company conducts business in Texas and Georgia. Customers who operate
in Texas represent approximately 97% of the Company's customer base and accounts
receivable.

At July 31, 1996, the fair values of the Company's financial instruments
approximate their carrying values based on their terms and interest rates.

F-36
<PAGE> 121
ON-RAMP TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) STOCKHOLDERS' EQUITY

Effective August 1, 1996, the Company issued 1,250,000 shares of newly
authorized redeemable, convertible preferred stock to Verio Inc. (Verio)for cash
consideration of $2,336,816, cancellation of indebtedness in the amount of
$1,663,184, and a note receivable of $4,175,000. The preferred shares are
convertible into common shares on a one for one basis and represent a 50.82%
interest in the Company upon conversion. The preferred shares are redeemable at
the option of the holder at any time, vote on an as-converted basis, and have a
liquidation preference equal to the issuance price. On October 4, 1996, Verio
purchased 100,000 shares of common stock from two Company shareholders for cash
consideration of $600,000, representing an additional 4.07% interest in the
Company. In addition, Verio acquired an option to acquire a 100% common stock
ownership in the Company in the future upon the occurrence of certain events,
including an initial public offering of Verio common stock.

The Company established a stock option plan (the Plan) which provides that
salaried officers or key employees, non-employee directors, and consultants who
provide services to the Company may, at the discretion of the Board of
Directors, be granted options to purchase shares of common stock. 130,560 shares
of the Company's Common Stock have been authorized for issuance under the Plan,
of which 59,878 shares were granted during the nine months ended July 31, 1996,
with an exercise price of $6.34 per share. There were no options exercised or
canceled during the nine months ended July 31, 1996. As of July 31, 1996, 11,976
options were exercisable.

Generally, options vest 20% or 25% on the date of grant of the option and
the balance vests thereafter over a 4 or 3 year period.

During the nine months ended July 31, 1996, the per share weighted-average
fair values of stock options granted was $.71 on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions; expected dividend yield 0%, risk-free interest rate of 6%, and
expected life of four years. If the Company determined compensation expense for
the nine months ended July 31, 1996 based on the fair value of the options at
the grant date under SFAS No. 123, net loss would have been approximately
$468,000.

(6) INCOME TAXES

At December 31, 1995, the Company has a net operating loss carryforward for
federal income tax purposes of $534,000 which is available to offset future
federal taxable income, if any, through 2010. Management believes the Company
has undergone an ownership change under section 382 of the Internal Revenue Code
and, accordingly, the utilization of the net operating loss carryforward
incurred prior to this ownership change is limited. Due to this limitation and
the uncertainty regarding the ultimate utilization of the net operating loss
carryforward a valuation allowance has been recorded for the full amount of the
deferred tax asset related to the net operating loss carryforward, which
represents the only significant temporary difference as of December 31, 1996.

F-37
<PAGE> 122

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Global Enterprise
Services -- Network Division (a Division of Global Enterprise Services, Inc.) as
of December 31, 1995 and 1996, and the related statements of operations and
owners' deficit, and cash flows for each of the years in the three-year period
ended December 31, 1996 and the period ended January 17, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Enterprise
Services -- Network Division (a Division of Global Enterprises Services, Inc.)
as of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996 and
for the period ended January 17, 1997, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-38
<PAGE> 123

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

BALANCE SHEETS
DECEMBER 31, 1995 AND 1996

ASSETS

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 31,072 33,018
Accounts receivable, net of allowance for doubtful
accounts of $67,247 in 1995 and $84,510 in 1996........ 843,980 822,823
Prepaid expenses and other assets......................... 26,286 10,424
----------- -----------
Total current assets.............................. 901,338 866,265
Equipment, net (note 2)..................................... 1,672,045 2,388,509
Other assets................................................ 43,487 118,888
----------- -----------
Total assets...................................... $ 2,616,870 3,373,662
=========== ===========
LIABILITIES AND OWNER'S DEFICIT
Current liabilities:
Accounts payable.......................................... $ 1,223,510 2,450,316
Accrued expenses.......................................... 378,400 449,270
Deferred revenue.......................................... 1,293,360 1,545,884
Current portion of capital lease obligations (note 6)..... 213,041 548,608
Due to related party (note 3)............................. 866,840 2,183,256
----------- -----------
Total current liabilities......................... 3,975,151 7,177,334
Capital lease obligations, less current portion (note 6).... 454,122 824,034
----------- -----------
Total liabilities................................. 4,429,273 8,001,368
Owner's deficit............................................. (1,812,403) (4,627,706)
----------- -----------
Total liabilities and owner's deficit............. $ 2,616,870 3,373,662
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-39
<PAGE> 124

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

STATEMENTS OF OPERATIONS AND OWNER'S DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND PERIOD ENDED JANUARY 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
1994 1995 1996 JANUARY 17, 1997
---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Internet services revenue, net........... $3,386,621 3,642,063 3,958,049 155,170
Costs and expenses:
Internet services operating costs...... 1,965,110 2,484,276 3,227,766 163,076
Selling, general and administrative.... 1,716,853 1,953,712 2,847,300 107,179
Depreciation and amortization.......... 191,983 291,541 556,112 33,126
---------- ----------- ----------- -----------
Total operating costs and
expenses..................... 3,873,946 4,729,529 6,631,178 303,381
---------- ----------- ----------- -----------
Loss from operations........... (487,325) (1,087,466) (2,673,129) (148,211)
Interest expense, net.................... (6,479) (39,960) (142,174) (6,622)
---------- ----------- ----------- -----------
Net loss....................... (493,804) (1,127,426) (2,815,303) (154,833)
Owner's deficit at beginning of period... (191,173) (684,977) (1,812,403) (4,627,706)
---------- ----------- ----------- -----------
Owner's deficit at end of period......... $ (684,977) (1,812,403) (4,627,706) (4,782,539)
========== =========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-40
<PAGE> 125

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND PERIOD ENDED JANUARY 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 17,
1994 1995 1996 1997
-------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. (493,804) (1,127,426) (2,815,303) $(154,833)
Adjustments to reconcile net loss to
net cash provided (used) by
operating activities:
Depreciation and amortization...... 191,983 291,541 556,112 33,126
Provision for doubtful accounts.... 30,644 31,714 25,993 --
Changes in operating assets and
liabilities:
Accounts receivable.............. 170,528 (291,457) (4,836) 148,984
Prepaid expenses and other
current assets................ (26,819) 11,404 15,862 (9,636)
Other assets..................... (27,258) 3,771 (75,401) 60,000
Accounts payable................. 286,981 766,581 1,226,806 (52,610)
Accrued expenses................. 63,273 (3,735) 70,870 116,785
Deferred revenue................. 297,900 (387,288) 252,524 (155,171)
-------- ---------- ----------- ---------
Net cash provided (used) by
operating activities........ 493,428 (704,895) (747,373) (13,355)
-------- ---------- ----------- ---------
Cash flows from investing
activities -- purchases of
equipment............................. (321,399) (497,168) (345,436) --
-------- ---------- ----------- ---------
Cash flows from financing activities:
Net change in due to related party.... (142,215) 1,318,772 1,316,416 (153,663)
Proceeds from debt.................... -- -- -- 134,000
Principal repayments on capital lease
obligations........................ (22,739) (93,738) (221,661) --
-------- ---------- ----------- ---------
Net cash provided (used) by
financing activities........ (164,954) 1,225,034 1,094,755 (19,663)
-------- ---------- ----------- ---------
Net increase (decrease) in cash......... 7,075 22,971 1,946 (33,018)
Cash at beginning of period............. 1,026 8,101 31,072 33,018
-------- ---------- ----------- ---------
Cash at end of period................... 8,101 31,072 33,018 $ --
======== ========== =========== =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for
interest........................... 6,073 35,249 70,535 $ 6,622
======== ========== =========== =========
Supplemental disclosure of non-cash
investing activities -- equipment
acquired through capital leases....... 10,908 735,088 927,140 $ --
======== ========== =========== =========
</TABLE>

See accompanying notes to financial statements.

F-41
<PAGE> 126

GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Business and Basis of Presentation

Global Enterprise Services, Inc. (GES) was formed in August 1992 to provide
internet services to subscribers on a national and international basis through a
high performance telecommunications network. The accompanying financial
statements include the accounts of the domestic operations (Network Division),
assuming that the Network Division had been operated separately as of January 1,
1994 and thereafter.

In preparing the accompanying financial statements, management has
allocated certain assets, liabilities, revenue and expenses based upon the
characteristics of the accounts and the business divisions to which they relate.
Expenses which are not directly related to a particular division are allocated
based upon revenue or payroll expense of the division which, in the opinion of
management, represents a reasonable and appropriate method of allocation.

Effective January 17, 1997, the net assets of the Network Division were
acquired by Verio Inc.

Revenue Recognition

Internet services are recognized as the services are provided. The Network
Division records deferred revenue for amounts billed and/or collected in
advance.

Equipment

Equipment, including any assets under capital leases, is stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization is
recorded using the straight-line method over the estimated useful lives of the
related assets or the lease term, which range from five to seven years. Costs
for normal repairs and maintenance are expensed as incurred.

Income Taxes

The operations of the Network Division are included in the income tax
returns of GES, which was treated as a subchapter S Corporation in 1994 and
through August 14, 1995, and a C Corporation beginning on August 15, 1995.

No tax benefit has been allocated to the Network Division in 1994, 1995 and
1996 or for the period ended January 17, 1997, due to losses at the GES level
for which no tax benefit has been provided for financial statement purposes.

F-42
<PAGE> 127
GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

The Network Division provides unsecured credit to customers in the normal
course of business. Failure of the customers to pay could result in losses up to
the recorded receivable balances. The Network Division does not have any
customers that represent greater than 5% of total revenue for the years ended
December 31, 1994, 1995 and 1996 or for the period ended January 17, 1997.

At December 31, 1996, the fair values of the Network Division's financial
instruments approximate their carrying values based on their terms and interest
rates.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. The adoption of SFAS 121 effective
January 1, 1996 did not have a significant effect on the Network Division's
financial position or results of operations.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Internet and computer equipment............................. $2,277,949 3,286,929
Furniture and office equipment.............................. 5,889 64,709
Leasehold improvements...................................... 27,165 204,624
---------- -----------
2,311,003 3,556,262
Less accumulated depreciation and amortization.............. (638,958) (1,167,753)
---------- -----------
$1,672,045 2,388,509
========== ===========
</TABLE>

(3) RELATED PARTY TRANSACTIONS

Amounts due to related party represent net cash transfers between the
Network Division and the other divisions of GES, and are non interest bearing.

(4) EMPLOYEE BENEFIT PLAN

GES has established a defined contribution savings plan which provides for
eligible employees who have met certain age and service requirements to
participate by electing to contribute up to 15% of their gross salary to the
plan, as defined, with GES and the Network Division matching 25% of a
participant's contribution up to a maximum of 10% of gross salary, as defined.
Employee contributions are immediately vested. Contributions to the savings plan
on behalf of the Network Division employees for the years ended December 31,
1994, 1995 and 1996 were $3,253, $1,697 and $6,838, respectively.

F-43
<PAGE> 128
GLOBAL ENTERPRISE SERVICES -- NETWORK DIVISION
(A DIVISION OF GLOBAL ENTERPRISE SERVICES, INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) NATIONAL SCIENCE FOUNDATION GRANTS

The Network Division receives grant revenue from the National Science
Foundation (NSF) to provide network connections to certain not-for-profit
educational institutions. Funding is received on a per entity basis. The grant
revenue is recognized ratably over the term of the contract with the
not-for-profit educational institution, which is generally twelve months. Grant
revenue amounted to $131,166, $99,487 and $47,112, in 1994, 1995 and 1996,
respectively. Total amounts receivable at December 31, 1994, 1995 and 1996 were
$34,990, $72,199 and $23,243, respectively.

In September 1994, GES and the Network Division entered into a four year
cooperative agreement with the NSF to provide for interregional connectivity for
the Network Division's United States research and educational customers in the
aggregate amount of $625,115. Pursuant to the agreement, the Network Division
will be reimbursed by the NSF for costs associated with upgrading the Network
Division's existing telecommunications network. The level of funding for each
year will be determined based upon a progress review of the Network Division by
the NSF and the availability of NSF funds. The Network Division is required to
submit an annual plan to the NSF. For the years ended December 31, 1995 and
1996, respectively, the Network Division recognized $154,344 and $196,169 as a
reduction to internet services operating costs. No amounts were recognized for
the year ended December 31, 1994. Total amounts receivable were $30,904 and
$10,326 as of December 31, 1995 and 1996, respectively.

(6) LEASES

The Network Division has entered into capital and operating leases for
telecommunications equipment and office space. Future minimum lease commitments
under all leases at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ ---------- ---------
<S> <C> <C>
1997................................... $ 650,731 344,562
1998................................... 468,940 360,623
1999................................... 392,382 360,830
2000................................... 89,056 372,295
2001................................... -- 191,466
---------- ---------
Total minimum lease payments............................. 1,601,109 1,629,776
=========
Less amount representing interest.......................... (228,467)
----------
Present value of minimum lease payments.................. $1,372,642
Less current portion....................................... (548,608)
----------
$ 824,034
==========
</TABLE>

Rent expense for the years ended December 31, 1994, 1995 and 1996 was
$193,904, $218,408 and $455,936, respectively.

The Network Division has guaranteed monthly usage levels with its primary
communications vendors at December 31, 1996 as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997.................................................... $205,000
1998.................................................... 205,000
1999.................................................... 51,250
--------
Total.............................................. $461,250
========
</TABLE>

F-44
<PAGE> 129

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Compute Intensive, Inc.
as of December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the two
year period ended December 31, 1996 and for the period ended February 18, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Compute Intensive, Inc. as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the years in the two year period ended December 31, 1996 and
for the period ended February 18, 1997 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-45
<PAGE> 130

COMPUTE INTENSIVE INC.

BALANCE SHEETS
DECEMBER 31, 1995 AND 1996

ASSETS

<TABLE>
<CAPTION>
1995 1996
-------- ---------
<S> <C> <C>
Current assets:
Cash...................................................... $ 20,335 44,328
Trade receivables, net of allowance for doubtful accounts
of $35,033 and $105,858 in 1995 and 1996,
respectively........................................... 455,148 506,017
Income taxes receivable................................... 9,612 15,510
Deferred income taxes (note 7)............................ 16,362 --
Prepaid expenses and other................................ 5,937 183,834
-------- ---------
Total current assets.............................. 507,394 749,689
Equipment, net (note 2)..................................... 344,988 604,358
Other assets................................................ 15,408 48,587
-------- ---------
Total assets...................................... $867,790 1,402,634
======== =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Revolving lines of credit (note 3)........................ $ 28,193 207,115
Current portion of note payable to related party (note
3)..................................................... 18,341 --
Current portion of obligations under capital leases (note
4)..................................................... 60,220 121,535
Accounts payable.......................................... 373,146 809,791
Accrued liabilities....................................... 113,218 142,235
Deferred revenue.......................................... 43,343 53,295
-------- ---------
Total current liabilities......................... 636,461 1,333,971
Note payable to related party, less current portion (note
3)........................................................ 70,384 --
Capital lease obligations, less current portion (note 4).... 104,048 169,476
Deferred income taxes (note 7).............................. 27,790 --
-------- ---------
Total liabilities................................. 838,683 1,503,447
Stockholders' equity (deficit):
Common stock, no par value, 1,000,000 shares authorized,
900,000 shares issued and outstanding.................. 900 900
Additional paid-in capital................................ 41,112 106,266
Accumulated deficit....................................... (12,905) (207,979)
-------- ---------
Total stockholders' equity (deficit).............. 29,107 (100,813)
-------- ---------
Commitments and contingencies (note 4)
Total liabilities and stockholders' equity
(deficit)....................................... $867,790 1,402,634
======== =========
</TABLE>

See accompanying notes to financial statements.

F-46
<PAGE> 131

COMPUTE INTENSIVE INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND PERIOD ENDED FEBRUARY 18, 1997

<TABLE>
<CAPTION>
PERIOD
ENDED
FEBRUARY 18,
1995 1996 1997
---------- --------- ------------
<S> <C> <C> <C>
Revenue:
Internet services....................................... $ 584,174 2,013,098 519,127
Consulting services..................................... 1,562,814 1,878,336 187,812
Computer hardware sales................................. 263,924 387,215 44,540
Computer software sales................................. 5,345 37,881 17,375
Other................................................... 69,145 60,037 24,736
---------- --------- --------
Total revenue................................... 2,485,402 4,376,567 793,590
---------- --------- --------
Operating expenses:
Cost of consulting services............................. 503,454 537,000 107,604
Cost of internet services............................... 317,768 670,158 144,457
Cost of hardware sales.................................. 227,913 292,941 26,394
Cost of software sales.................................. 5,859 28,043 15,032
Marketing and selling................................... 348,006 541,426 137,449
General and administrative.............................. 1,001,736 2,331,945 544,350
Depreciation and amortization........................... 46,174 133,280 15,954
---------- --------- --------
Total operating expenses........................ 2,450,910 4,534,793 991,240
---------- --------- --------
Earnings (loss) from operations................. 34,492 (158,226) (197,650)
Interest expense.......................................... (23,319) (54,174) (7,254)
---------- --------- --------
Earnings (loss) before income taxes............. 11,173 (212,400) (204,904)
Income tax benefit (expense) (note 7)..................... (7,308) 17,326 --
---------- --------- --------
Net earnings (loss)............................. $ 3,865 (195,074) (204,904)
========== ========= ========
</TABLE>

See accompanying notes to financial statements.

F-47
<PAGE> 132

COMPUTE INTENSIVE INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND PERIOD ENDED FEBRUARY 18, 1997

<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL STOCKHOLDERS'
COMMON STOCK PAID-IN ACCUMULATED EQUITY
STOCK SUBSCRIBED CAPITAL DEFICIT (DEFICIT)
------ ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1995........ $ -- 900 41,112 (16,770) 25,242
Issuance of common stock........... 900 (900) -- -- --
Net earnings....................... -- -- -- 3,865 3,865
---- ---- ------- -------- ---------
BALANCES AT DECEMBER 31, 1995...... 900 -- 41,112 (12,905) 29,107
Capital contribution (note 3)...... -- -- 65,154 -- 65,154
Net loss........................... -- -- -- (195,074) (195,074)
---- ---- ------- -------- ---------
BALANCES AT DECEMBER 31, 1996...... 900 -- 106,266 (207,979) (100,813)
Net loss........................... -- -- -- (204,904) (204,904)
---- ---- ------- -------- ---------
BALANCES AT FEBRUARY 18, 1997...... $900 -- 106,266 (412,883) (305,717)
==== ==== ======= ======== =========
</TABLE>

See accompanying notes to financial statements.

F-48
<PAGE> 133

COMPUTE INTENSIVE INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND PERIOD ENDED FEBRUARY 18, 1997

<TABLE>
<CAPTION>
PERIOD
ENDED
FEBRUARY 18,
1995 1996 1997
--------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................................... $ 3,865 (195,074) (204,904)
Adjustments to reconcile net earnings (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization...................... 46,174 133,280 15,954
Deferred income tax expense (benefit).............. 11,972 (11,428) --
Provision for bad debts............................ 35,015 135,593 5,580
Changes in operating assets and liabilities:
Increase in receivables.......................... (306,539) (186,462) (64,719)
Decrease (increase) in prepaid expenses and
other......................................... 4,463 (117,897) (33,368)
Increase in other assets......................... (7,678) (35,191) (2,251)
Increase in accounts payable..................... 306,005 372,637 78,036
Increase in accrued liabilities.................. 22,478 29,017 49,219
Increase in income tax receivable................ (17,064) (5,898) 15,510
Increase in deferred revenue..................... 34,358 9,952 (18,215)
--------- --------- ---------
Net cash provided (used) by operating
activities.................................. 133,049 128,529 (159,428)
--------- --------- ---------
Cash flows from investing activities -- Purchases of
equipment............................................. (131,193) (158,549) (119,999)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving lines of credit............ 19,000 305,258 66,057
Repayments of revolving lines of credit............... (1,808) (126,336) (98,225)
Borrowings (payments) on note payable to related
party.............................................. (11,275) (19,563) 200,000
Principal payments on capital lease obligations....... (24,880) (105,346) (12,717)
Cash overdraft........................................ -- -- 79,984
--------- --------- ---------
Net cash provided (used) by financing
activities.................................. (18,963) 54,013 235,099
--------- --------- ---------
Increase (decrease) in cash................... (17,107) 23,993 (44,328)
Cash, beginning of period............................... 37,442 20,335 44,328
--------- --------- ---------
Cash, end of period..................................... $ 20,335 44,328 --
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes....................................... $ 10,800 -- $ --
========= ========= =========
Interest........................................... $ 21,571 54,175 $ 7,253
========= ========= =========
Noncash investing and financing activities -- Equipment
acquired through capital lease obligations............ $ 158,006 232,089 $ --
========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-49
<PAGE> 134

COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Compute Intensive, Inc. (the Company) was incorporated in the State of
California on December 31, 1993. The Company has three distinct areas of
business; providing regional internet access services to customers in California
and New Mexico, software and hardware consulting and sales, and software
development and implementation.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized when services have been
rendered. On fixed price contracts, revenue is recognized over the course of the
contract using the percentage-of-completion method. The Company provides for any
anticipated losses on such contracts in the period in which such losses are
first determinable.

Revenue from hardware and software sales is recognized upon shipment of the
respective products if the Company has no significant future obligations and
collectibility is probable.

Equipment

Equipment, including any assets under capital leases, is stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization is
recorded using the straight-line method over the estimated useful lives of the
related assets on the lease term, which range from five to seven years. Costs
for normal repairs and maintenance are expensed as incurred.

Income Taxes

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1995 and 1996 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

F-50
<PAGE> 135
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at lower of the carrying amount or
fair value less costs to sell. The adoption of SFAS 121 in 1996 did not have a
significant effect on the Company's financial position or results of operations.

Stock Based Compensation

In October 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, (SFAS No. 123), which establishes a fair value-based method of
accounting for stock-based compensation plans. Companies are encouraged to adopt
all provisions of SFAS No. 123 and are required to comply with the disclosure
requirements of SFAS No. 123, which was effective for fiscal years beginning
after December 15, 1995. The Company will continue to account for stock based
compensation under the provisions of APB Opinion No. 25 and will provide the pro
forma disclosures required by SFAS 123.

Reclassifications

Certain reclassifications have been made to the 1995 financial statements
to conform with the 1996 presentation.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Internet and computer equipment............................. $342,407 730,143
Furniture and office equipment.............................. 55,016 57,718
Leasehold improvements...................................... 1,892 2,092
-------- --------
399,315 789,953
Less accumulated depreciation and amortization.............. (54,327) (185,595)
-------- --------
$344,988 604,358
======== ========
</TABLE>

Equipment includes assets owned under capital leases with a net book value
of $173,607 and $315,303 at December 31, 1995 and 1996, respectively.

(3) DEBT

At December 31, 1995 and 1996, the Company had an $100,000 unsecured
revolving line of credit agreement with a bank, under which $28,193 and $32,167
was outstanding, respectively. Borrowings under the line bear interest at the
bank's prime lending rate plus 4.75% or 4.5%, based on an average daily balance,
payable monthly (12.75% at December 31, 1996) and are due in 1997.

F-51
<PAGE> 136
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On October 16, 1996, the Company entered into an additional $200,000
revolving line of credit agreement with a bank, under which $174,948 was
outstanding at December 31, 1996. Borrowings under the line bear interest at the
bank's prime lending rate plus 2%, based on an average daily balance, payable
monthly (10.25% at December 31, 1996) and are due in 1997.

Note payable to related party at December 31, 1995 bore interest at 7.5%
and was due in monthly installments through 2000. During 1996, the unpaid
balance of $65,154 was assumed by the Company's majority stockholder and was
forgiven and recorded as a capital contribution. The Company borrowed $200,000
from Verio Inc. (Verio) (See note 6), during the period ended February 18, 1997.
Such amount was non interest bearing and was repaid in connection with Verio's
investment in the Company.

(4) COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 1997.

Future minimum annual lease payments under capital and noncancelable
operating leases for each of the years ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ---------
<S> <C> <C>
1997........................................................ $ 166,477 200,490
1998........................................................ 123,363 269,220
1999........................................................ 50,815 281,820
2000........................................................ 24,352 307,020
2001........................................................ 11,823 313,320
--------- ---------
Total minimum payments.................................... 376,830 1,371,870
=========
Less amount representing interest........................... (85,819)
---------
Present value of net minimum lease payments............... 291,011
Less current portion........................................ (121,535)
---------
$ 169,476
=========
</TABLE>

Rent expense for the years ended December 31, 1995 and 1996 and the period
ended February 18, 1997 was $83,148, $128,130 and $27,800, respectively.

Concentration of Credit Risk

The Company provides unsecured credit to customers in the normal course of
business. Failure of the customers to pay could result in losses up to the
recorded receivable balances. The Company's largest customer represented
approximately 32% and 20% of total revenues for the years ended December 31,
1995 and 1996, respectively.

The Company conducts business in California and New Mexico. Customers who
operate in California represent at least 75% of the Company's customer base and
accounts receivable.

(5) EMPLOYEE BENEFIT PLAN

The Company has a Simplified Employee Pension Plan (the Plan) covering all
employees who meet certain eligibility requirements. The Company may make
discretionary contributions to the Plan on behalf of

F-52
<PAGE> 137
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

employees that meet certain contribution eligibility requirements defined under
the terms of the Plan. The Company did not make any contributions to the Plan
during 1995 or 1996.

(6) STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK

On February 18, 1997, the Company issued 770,234 shares of newly authorized
redeemable, convertible preferred stock to Verio for cash consideration of
$4,899,998. The preferred shares are convertible into common shares on a 1.000
for 1.0017 basis and represent a 55% ownership interest in the Company upon
conversion. The preferred shares are redeemable at the option of the holder at
any time, vote on an as-converted basis, and include a liquidation preference
equal to the issuance price. In addition, Verio acquired an option to acquire a
100% common stock ownership in the Company which it may exercise at any time on
or after one year following the issuance date of the preferred shares. Upon the
initial public offering of Verio common stock or a significant strategic
investor in Verio, Verio is required to exercise the option.

The Company's 1995 Stock Option/Stock Issuance Plan (the Plan) was adopted
by the Board of Directors and approved by the shareholders of the Company in
March 1995. The Plan provides that salaried officers or key employees,
non-employee directors, and consultants who provide services to the Company may,
at the discretion of the plan administrator, be granted options to purchase
shares of common stock. 250,000 shares of the Company's Common Stock have been
authorized for issuance under the Plan, of which 131,000 and 29,500 nonqualified
options were granted in 1995 and 1996, respectively, with an exercise price of
$.05 and $.001 per share, respectively. All options were granted at fair value
at the date of grant, as determined by the Company's Board of Directors. There
were no options exercised and 18,176 were canceled during 1996.

Generally, options vest 25% on the first anniversary of the option grant
date and the balance vests thereafter in equal successive monthly installments
over the next 36 months of service. Option grants to nonemployee directors must
be approved by the Board.

During 1995 and 1996, the per share weighted-average fair values of stock
options granted was $.01 and $.65, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for both years; expected dividend yield 0%, risk-free interest rate
of 6%, and expected life of three years. If the Company determined compensation
expense in 1995 and 1996 based on the fair value of the options at the grant
date under SFAS No. 123, net loss and net earnings would not have been
significantly different than the historical results of operations.

(7) INCOME TAXES

Income tax expense (benefit) consists of the following for the years ended
December 31:

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Current:
Federal.................................................. $(3,838) (6,698)
State.................................................... (826) 800
------- -------
(4,664) (5,898)
------- -------
Deferred:
Federal.................................................. 9,261 (8,717)
State.................................................... 2,711 (2,711)
------- -------
11,972 (11,428)
------- -------
$ 7,308 (17,326)
======= =======
</TABLE>

No tax benefit was recorded for the period ended February 18, 1997 due to
uncertainty as to realization of the net operating loss for the period.

F-53
<PAGE> 138
COMPUTE INTENSIVE INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income taxes expense (benefit) for the years ended December 31 differs from
the amounts that would result from applying the federal statutory rate of 34% as
follows:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Expected tax expense (benefit).............................. $ 3,798 (72,216)
State income taxes, net of federal benefit.................. 335 (6,373)
Nondeductible expenses...................................... 3,175 7,142
Increase in valuation allowance for deferred tax assets..... -- 41,066
Other....................................................... -- 13,055
-------- --------
Actual income tax expense (benefit).................... $ 7,308 (17,326)
======== ========
</TABLE>

Temporary differences that give rise to the components of deferred tax
assets and liabilities as of December 31 are as follows:

<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ -- 50,231
Accounts receivable, due to allowance for doubtful
accounts for financial statement purposes only......... 15,169 37,983
Other..................................................... 1,193 --
-------- --------
Gross deferred tax asset.......................... 16,362 88,214
Valuation allowance......................................... -- (41,066)
-------- --------
Net deferred tax asset............................ 16,362 47,148
-------- --------
Deferred tax liability:
Equipment, due to differences in depreciation for
financial statement and tax purposes................... (23,696) (43,054)
Other..................................................... (4,094) (4,094)
-------- --------
Total deferred tax liability...................... (27,790) (47,148)
-------- --------
Net deferred tax liability........................ $ 11,428 --
======== ========
</TABLE>

As of December 31, 1996, the Company has a net operating loss carryforward
of approximately $132,000 for federal income tax purposes which will expire in
2011, if not utilized. A valuation allowance has been recorded for a portion of
the related deferred tax asset due to the uncertainty relating to the
realization of the entire net operating loss carryforward in the future.

F-54
<PAGE> 139

INDEPENDENT AUDITORS' REPORT

The Board of Directors
NorthWestNet, Inc.:

We have audited the accompanying balance sheet of NorthWestNet, Inc. as of
June 30, 1996, and the related statements of operations, stockholders' equity,
and cash flows for the six months ended June 30, 1996 and the eight months ended
February 28, 1997. We have also audited the accompanying balance sheet of
Northwest Academic Computing Consortium, Inc. (Predecessor Company) as of June
30, 1995 and the related statements of operations, fund balance and cash flows
for the year ended June 30, 1995 and the six months ended December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NorthWestNet, Inc. as of
June 30, 1996, and the results of its operations and its cash flows for the six
months ended June 30, 1996, and the eight months ended February 28, 1997 and the
financial position of Northwest Academic Computing Consortium, Inc. as of June
30, 1995 and the results of its operations and its cash flows for the year ended
June 30, 1995 and the six months ended December 31, 1995 in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

Seattle, Washington
January 31, 1998

F-55
<PAGE> 140

NORTHWESTNET, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
PREDECESSOR
COMPANY NORTHWESTNET, INC.
----------- ------------------
JUNE 30, JUNE 30,
1995 1996
----------- ------------------
<S> <C> <C>
Cash and cash equivalents................................... $ 563,952 277,284
Accounts receivable, net.................................... 842,753 1,243,981
Prepaids and other assets................................... 29,605 32,505
---------- ----------
Total current assets.............................. 1,436,310 1,553,770
Equipment, furniture and leasehold improvements, net........ 1,246,180 1,613,981
Deferred income taxes....................................... -- 46,000
---------- ----------
Total assets...................................... $2,682,490 3,213,751
========== ==========

LIABILITIES, STOCKHOLDERS' EQUITY AND FUND BALANCE

Accounts payable............................................ $ 108,297 165,606
Accrued liabilities......................................... 102,010 340,677
Deferred revenues and customer advances..................... 965,589 1,374,708
---------- ----------
Total current liabilities......................... 1,175,896 1,880,991
---------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 10,000,000
shares; issued and outstanding 4,000,000 shares and
4,000,100 shares at June 30, 1995 and June 30, 1996,
respectively........................................... -- 40,000
Additional paid-in capital................................ -- 1,193,402
Retained earnings......................................... -- 99,358
---------- ----------
Total stockholders' equity........................ -- 1,332,760
---------- ----------
Fund balance................................................ 1,506,594 --
---------- ----------
Total liabilities and stockholders' equity........ $2,682,490 3,213,751
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-56
<PAGE> 141

NORTHWESTNET, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PREDECESSOR COMPANY NORTHWESTNET, INC.
-------------------------- --------------------------
SIX MONTHS SIX MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, FEBRUARY 28,
1995 1995 1996 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenue:
Internet access and connection fees..... $2,218,354 1,197,690 1,655,211 2,572,917
Online information service fees......... 430,031 310,430 380,522 976,404
Grants.................................. 10,000 146,734 78,342 85,795
Other................................... 117,835 15,407 16,949 47,019
---------- --------- --------- ---------
Total revenue................... 2,776,220 1,670,261 2,131,024 3,682,135
Operating expenses:
Salaries and employee benefits.......... 1,145,224 770,215 886,958 2,728,589
Network operations and circuits......... 225,570 356,711 320,396 547,031
Professional fees....................... 254,982 126,789 39,307 61,047
Marketing and advertising............... 55,222 32,460 66,209 114,544
General and administrative.............. 624,314 309,961 364,418 673,541
Depreciation and amortization........... 507,693 248,770 311,261 509,122
---------- --------- --------- ---------
Total operating expenses........ 2,813,005 1,844,906 1,988,549 4,633,874
---------- --------- --------- ---------
Operating income (loss)................... (36,785) (174,645) 142,475 (951,739)
Interest income........................... 46,108 25,639 15,883 25,083
---------- --------- --------- ---------
Earnings (loss) before income
taxes......................... 9,323 (149,006) 158,358 (926,656)
---------- --------- --------- ---------
Income tax expense (benefit).............. -- -- 59,000 (135,000)
---------- --------- --------- ---------
Net earnings (loss)............. $ 9,323 (149,006) 99,358 (791,656)
========== ========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-57
<PAGE> 142

NORTHWESTNET, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY AND FUND BALANCE

<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS TOTAL
FUND COMMON PAID-IN (ACCUMULATED STOCKHOLDERS'
BALANCE STOCK CAPITAL DEFICIT) EQUITY
----------- ------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1994............... $ 1,497,271 -- -- -- --
Net earnings............................ 9,323 -- -- -- --
----------- ------ --------- -------- ---------
BALANCES AT JUNE 30, 1995............... 1,506,594 -- -- -- --
Net loss for the six months ended
December 31, 1995..................... (149,006) -- -- -- --
Distribution to stockholder............. (124,186) -- -- -- --
----------- ------ --------- -------- ---------
BALANCES AT DECEMBER 31, 1995........... 1,233,402 -- -- -- --
Issuance of common stock to effect
corporate reorganization.............. (1,233,402) 40,000 1,193,402 -- 1,233,402
Net earnings for the six months ended
June 30, 1996......................... -- -- -- 99,358 99,358
----------- ------ --------- -------- ---------
BALANCES AT JUNE 30, 1996............... -- 40,000 1,193,402 99,358 1,332,760
Exercise of stock options............... -- 1 86 -- 87
Contingent stock compensation expense... -- -- 451,696 -- 451,696
Net loss for the eight months ended
February 28, 1997..................... -- -- -- (791,656) (791,656)
----------- ------ --------- -------- ---------
BALANCES AT FEBRUARY 28, 1997........... $ -- 40,001 1,645,184 (692,298) 992,887
=========== ====== ========= ======== =========
</TABLE>

See accompanying notes to financial statements.

F-58
<PAGE> 143

NORTHWESTNET, INC.

STATEMENTS OF CASH FLOWS
JUNE 30, 1995 AND 1996 AND DECEMBER 31, 1996

<TABLE>
<CAPTION>
PREDECESSOR COMPANY NORTHWESTNET, INC.
------------------------- -------------------------
SIX MONTHS SIX MONTHS EIGHT MONTHS
YEAR ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, FEBRUARY 28,
1995 1995 1996 1997
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................... $ 9,323 (149,006) 99,358 (791,656)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization...... 507,693 248,770 311,261 509,122
Contingent stock option
compensation..................... -- -- -- 451,696
Loss on disposition of equipment... -- -- -- 10,526
Deferred tax benefit............... -- -- (46,000) (74,000)
Increases and decreases in:
Accounts receivable.............. (272,151) 418,635 (819,863) 624,707
Prepaids and other assets........ (18,841) (28,347) 25,447 (1,396,570)
Accounts payable................. (73,064) (48,302) (37,056) 304,296
Accrued liabilities.............. (9,079) 110,275 128,392 1,069,605
Deferred revenue................. 331,904 76,759 332,360 (599,775)
--------- ---------- --------- -----------
Net cash provided by (used in)
operating activities........ 475,785 628,784 (6,101) 107,951
--------- ---------- --------- -----------
Cash flows from investing activities:
Purchase of equipment, furniture and
leasehold improvements............. (760,922) (260,850) (524,315) (1,047,283)
Disposition of equipment.............. -- -- -- 22,678
--------- ---------- --------- -----------
Net cash used in investing
activities.................. (760,922) (260,850) (524,315) (1,024,605)
--------- ---------- --------- -----------
Cash flows from financing activities:
Advances from Verio, Inc. ............ -- -- -- 2,560,294
Distribution to stockholder........... -- -- (124,186) --
Exercise of stock options............. -- -- -- 87
--------- ---------- --------- -----------
Net cash provided by (used in)
financing activities........ -- -- (124,186) 2,560,381
--------- ---------- --------- -----------
Increase (decrease) in cash
and cash equivalents........ (285,137) 367,934 (654,602) 1,643,727
Cash and cash equivalents at beginning
of period............................. 849,089 563,952 931,886 277,284
--------- ---------- --------- -----------
Cash and cash equivalents at end of
period................................ $ 563,952 931,886 277,284 1,921,011
========= ========== ========= ===========
Supplemental disclosures of cash flow
information -- cash paid during the
period for income taxes............... $ 900 -- 82,000 118,000
========= ========== ========= ===========
Supplemental schedule of noncash
financing and investing activities:
Accounts payable related to purchase
of equipment....................... $ 15,140 13,523 129,144 --
========= ========== ========= ===========
Issuance of common stock to effect
corporate reorganization........... $ -- 1,233,402 -- --
========= ========== ========= ===========
</TABLE>

See accompanying notes to financial statements.

F-59
<PAGE> 144

NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996 AND FEBRUARY 28, 1997

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business

NorthWestNet, Inc. (NorthWestNet), a for-profit corporation incorporated in
the state of Oregon, is a subsidiary of Northwest Academic Computing Consortium,
Inc. (NWACC). NorthWestNet provides Internet access and related on-line
information services to businesses, educational institutions and other
organizations located principally in the Northwest.

(b) Corporate Reorganization

NWACC, a nonprofit corporation organized to promote research, education and
economic development in the Northwest, had been providing Internet access to
businesses and organizations in the Northwest since 1991.

On January 1, 1996, NWACC completed a transaction that included the
creation of NorthWestNet. The transaction consisted of the transfer of
substantially all of NWACC's operating assets and liabilities to NorthWestNet in
exchange for 4,000,000 shares of common stock, which represented all of the
outstanding common stock of NorthWestNet. This transaction represented a
tax-free transfer pursuant to the Internal Revenue Code (IRC) section 351. In
connection with the transaction, all NWACC employees became NorthWestNet
employees.

NWACC's relationship to NorthWestNet, is now that of a stockholder,
currently the majority stockholder. NWACC intends to maintain its tax-exempt
status under IRC section 501(c)(3); however, its activities are independent of
NorthWestNet and its employees.

There was no change in the carrying amounts of assets and liabilities
transferred from NWACC to NorthWestNet effective January 1, 1996. The
accompanying financial statements include the accounts of NWACC through December
31, 1995, presented as Predecessor Company.

The carrying amounts of net assets transferred from NWACC to NorthWestNet
effective January 1, 1996 are summarized as follows:

<TABLE>
<S> <C>
Cash and cash equivalents................................... $ 807,700
Accounts receivable, net.................................... 424,118
Prepaids and other assets................................... 57,952
Equipment, furniture and leasehold improvements, net........ 1,271,783
----------
Total assets...................................... 2,561,553
----------
Accounts payable............................................ 73,518
Accrued expenses............................................ 212,285
Deferred revenue............................................ 1,042,348
----------
Total liabilities................................. 1,328,151
----------
Net assets........................................ $1,233,402
==========
</TABLE>

(d) Cash Equivalents

All short-term investments with original maturities of three months or less
at date of purchase are considered to be cash equivalents.

F-60
<PAGE> 145
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(e) Concentrations of Credit Risk

Financial instruments that potentially subject NorthWestNet to
concentrations of credit risk consist principally of cash equivalents and
accounts receivable. NorthWestNet's cash equivalents represent investments in
money market funds which are readily convertible to cash. Accounts receivable
are principally from NorthWestNet's customers located throughout the Northwest.

(f) Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. The adoption of SFAS 121 effective July
1, 1996 did not have a significant effect on the NorthWestNet's financial
position or results of operations.

(g) Revenue Recognition

Revenues consist primarily of Internet access fees, connection fees and
on-line information service fees. Internet access fees consist of fixed monthly
amounts and are recognized ratably over the terms of the service contracts.
Connection fees, representing customer site equipment and installation charges,
are recognized upon installation of a customer's Internet connectivity. Fixed
on-line information service fees are recognized ratably over the terms of the
service contracts. Volume-based on-line information service fees are recognized
as such services are delivered. Payments received in advance of providing
services are deferred until the period such services are provided.

(h) Advertising Costs

Advertising costs are expensed as incurred.

(i) Depreciation and Amortization

Equipment, furniture and leasehold improvements are stated at cost.
Depreciation and amortization are provided on the straight-line method over the
estimated useful lives of the assets, or the lease term, if shorter. The
estimated useful lives of the assets are as follows:

<TABLE>
<CAPTION>
<S> <C>
Network equipment........................................... 3 - 4 years
Computer and office equipment............................... 2 - 3 years
Furniture and fixtures...................................... 7 years
Leasehold improvements...................................... 5 years
</TABLE>

(j) Use of Estimates

NorthWestNet management has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, revenues and expenses, and
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.

F-61
<PAGE> 146
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(k) Income Taxes

NorthWestNet accounts for income taxes using the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts and tax bases of existing assets and liabilities.

NWACC was exempt from the payment of Federal income taxes under IRC section
501(c)(3). Therefore, no provision for income taxes was required through
December 31, 1995.

(l) Stock-Based Compensation

Prior to July 1, 1996, NorthWestNet accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
July 1, 1996, NorthWestNet adopted Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of APB Opinion No. 25 for
transactions with employees and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied to these transactions. NorthWestNet has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions
of SFAS No. 123.

(2) EQUIPMENT, FURNITURE AND LEASEHOLD IMPROVEMENTS

Equipment, furniture and leasehold improvements and related accumulated
depreciation and amortization consist of the following:

<TABLE>
<CAPTION>
JUNE 30
------------------------
1995 1996
----------- ---------
<S> <C> <C>
Network equipment........................................... $ 1,645,558 1,878,787
Computer and office equipment............................... 603,051 586,653
Furniture and fixtures...................................... 102,010 77,011
Leasehold improvements...................................... 50,301 50,301
----------- ---------
Total cost........................................ 2,400,920 2,592,752
Less accumulated depreciation and amortization.............. (1,154,740) (978,771)
----------- ---------
$ 1,246,180 1,613,981
=========== =========
</TABLE>

(3) ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
JUNE 30
------------------
1995 1996
-------- -------
<S> <C> <C>
Accrued compensation and benefits........................... $102,010 153,447
Network operations and circuits............................. -- 129,080
Other....................................................... -- 58,150
-------- -------
$102,010 340,677
======== =======
</TABLE>

F-62
<PAGE> 147
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) BORROWING AGREEMENT

NorthWestNet had a borrowing agreement with a commercial bank, which
expired in June 1997, that provided for a $400,000 operating line of credit
(Line of Credit) and a $600,000 equipment term loan (Term Loan). Borrowings
under the Line of Credit were limited to 75% of eligible accounts receivable and
bear interest at the bank's prime rate plus 1.75%. The Term Loan bore interest
at the bank's prime rate plus 2%. Borrowings under this agreement were secured
by substantially all of NorthWestNet's assets. There were no borrowings under
the Line of Credit or Term Loan as of June 30, 1996.

(5) INCOME TAXES

The components of NorthWestNet's income tax expense (benefit) for the six
months ended June 30, 1996 and the eight months ended February 28, 1997 are as
follows:

<TABLE>
<CAPTION>
SIX EIGHT
MONTHS MONTHS
ENDED ENDED
JUNE 30, FEBRUARY 28,
1996 1997
-------- ------------
<S> <C> <C>
Current:
Federal..................................................... $100,000 (66,000)
State....................................................... 5,000 5,000
Deferred -- Federal......................................... (46,000) (74,000)
-------- ---------
$ 59,000 (135,000)
======== =========
</TABLE>

Deferred income taxes result from temporary differences in the recognition
of income and expense between financial statement and income tax reporting.
Temporary differences at June 30, 1996 are primarily attributable to
depreciation and amortization of equipment, furniture and leasehold
improvements. The tax effects of these temporary differences result in deferred
tax assets which are classified as noncurrent on the accompanying June 30, 1996
balance sheet. Actual tax expense for the six months ended June 30, 1996
approximates the amount calculated using the Federal statutory rate of 34%, plus
the provision for state taxes. The tax benefit for the eight months ended
February 28, 1997 differs from the expected benefit, calculated using the
Federal statutory rate of 34%, primarily due to non-deductible stock option
compensation.

(6) STOCKHOLDERS' EQUITY -- EMPLOYEE STOCK OPTION PLAN

NorthWestNet adopted a stock option plan (Plan) in January 1996 to
compensate its employees for future services and has reserved 1.5 million shares
of common stock for option grants under the Plan. Of the reserved shares,
500,000 are for options which are exercisable, upon reaching defined corporate
objectives (Contingent Options), at an exercise price of $.875 per share. The
date the defined corporate objectives are met, any excess of fair market value
per share over the exercise price per share of the outstanding options would be
charged to salaries and benefits expense in the statement of operations with a
corresponding increase in stockholder's equity. As of December 31, 1996, 370,000
contingent shares were outstanding. The remaining 1 million reserved shares are
for options which generally vest, based on continued employment, over periods
ranging from three to four years in equal monthly increments beginning the month
after the grant (Noncontingent Options). All options expire ten years from the
date of grant and are exercisable at the fair market value of the common stock
at the grant date.

F-63
<PAGE> 148
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option activity under the Plan follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------------
WEIGHTED-
SHARES AVERAGE
AVAILABLE NON- EXERCISE
FOR GRANT CONTINGENT CONTINGENT PRICE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Authorization of Plan.......................... 1,500,000 -- -- $ --
Options granted................................ (988,000) 583,000 405,000 0.875
Options relinquished........................... 76,771 (41,771) (35,000) 0.875
Balances at June 30, 1996...................... 588,771 541,229 370,000 0.875
Options granted................................ (54,000) 54,000 -- 1.956
Options exercised.............................. -- (100) -- 0.875
Options relinquished........................... 3,229 (3,229) -- 0.875
Options surrendered for cash................... -- (192,265) -- 0.875
Balances at February 28, 1997.................. 538,000 399,635 370,000 $0.951
</TABLE>

NorthWestNet applies APB Opinion No. 25 in accounting for its Plans, and,
because the Company grants options at fair value, as determined by the Company's
Board of Directors, no compensation cost has been recognized for its employee
stock options in the financial statements. Had NorthWestNet determined
compensation cost of employee stock options based on the fair value at the grant
date for its stock options under SFAS No. 123, NorthWestNet's net earnings would
have been reported as the pro forma amounts indicated below:

<TABLE>
<CAPTION>
SIX EIGHT
MONTHS MONTHS
ENDED ENDED
JUNE 30, FEBRUARY 28,
1996 1997
-------- ------------
<S> <C> <C>
Net earnings (loss):
As reported............................................... $99,359 (791,656)
Pro forma................................................. 26,469 (892,205)
</TABLE>

The per share weighted-average fair value of stock options granted during
the six months ended June 30, 1996 and the eight months ended February 28, 1997
was $0.28 and $0.70 respectively, on the date of grant using the Black Scholes
option-pricing model with the following weighted-average assumptions: six months
ended June 30, 1996 -- expected dividend yield 0%, risk-free interest rate of
5.51% and an expected life of 7 years; eight months ended February 28,
1997 -- expected dividend yield 0%, risk-free interest rate of 6.55%, and an
expected life of 7 years.

F-64
<PAGE> 149
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding
under the Plan at June 30, 1996 and February 28, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------
WEIGHTED-AVERAGE
NUMBER REMAINING
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE
--------------- ----------- ---------------------
<S> <C> <C>
June 30, 1996:
$0.875............................................... 911,229 9.5 years
-------
February 28, 1997:
$0.875............................................... 715,635
1.375............................................... 6,000
2.000............................................... 34,500
$2.10................................................ 13,500
-------
$0.875-2.000......................................... 769,635 9.5 years
-------
</TABLE>

All options became vested and exercisable upon completion of the ownership
change described in note 10.

(7) LEASES

NorthWestNet leases its office and certain network operations facilities
under operating leases which expire in 2002. NorthWestNet subleases a portion of
its office space as sublessor under operating leases which expire in 1996 and
1997. Rental expense, net of sublease income, is included in general and
administrative expenses and is comprised of the following:

<TABLE>
<CAPTION>
MINIMUM SUBLEASE
RENTALS INCOME TOTAL
-------- -------- -------
<S> <C> <C> <C>
Year ended June 30, 1995................................ $142,318 34,665 107,653
Six months ended December 31, 1995...................... 88,960 28,623 60,337
Six months ended June 30, 1996.......................... 88,795 24,423 64,372
Eight months ended February 28, 1997.................... 119,696 25,455 94,241
</TABLE>

NorthWestNet leases circuit lines from various vendors under month-to-month
operating leases. Rent expense on these circuit line leases amounted to
$225,570, $316,712, $270,395, and $413,697 for fiscal year ended 1995, the six
months ended December 31, 1995 and June 30, 1996, and the eight months ended
February 28, 1997, respectively, and is included in network operations and
circuits in the statements of operations.

In November 1996, NorthWestNet amended its existing operating lease for its
office facilities. The amendment increased the space leased by NorthWestNet by
approximately 9,000 square feet, beginning in February 1997, and extended the
lease term of existing space to February 2002. Additionally, in December 1996,
NorthWestNet entered into an operating lease for network operations facilities.
The initial term of the lease is five years, beginning in March 1997, with two
three-year extensions available at NorthWestNet's option.

(8) DEFINED CONTRIBUTION PLAN

NorthWestNet and NWACC both sponsor defined contribution plans. For the
NorthWestNet plan, employees who have worked a minimum of three months and
attained age 20 are eligible to participate and employee contributions are
matched by NorthWestNet up to certain limits. Sponsor contributions to the plans

F-65
<PAGE> 150
NORTHWESTNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

totaled $35,765, $17,589, $26,781, and $68,855 for the year ended June 30, 1995
and the six months ended December 31, 1995 and June 30, 1996, and the eight
months ended February 28, 1997, respectively.

(9) BUSINESS CONCENTRATION

One customer accounted for approximately 25%, 23%, 27%, and 23% of revenues
for the year ended June 30, 1995, the six months ended December 31, 1995 and
June 30, 1996, and the eight months ended February 28, 1997, respectively. Such
customer had account receivable balance of $227,662 at June 30, 1996.

Additionally, another customer accounted for approximately 14% of revenues
for the eight months ended February 28, 1997.

(10) OWNERSHIP CHANGE

On January 22, 1997, NorthWestNet, NWACC and Verio Inc. (Verio) executed a
Stock Purchase Agreement (Agreement) pursuant to which Verio acquired all of the
common stock of NorthWestNet owned by NWACC. Under the Agreement, Verio also
agreed to contribute at least $3.4 million to NorthWestNet, of which
approximately $2.3 million was funded in February 1997. The transaction closed
on February 28, 1997.

In connection with the sale to Verio, 370,000 contingent options became
exercisable and $451,696 of compensation expense was recorded by NorthWestNet in
February 1997 which was funded by Verio in addition to the $3.4 million. (See
note 6). In addition, the Plan was amended to provide for Verio's right to
acquire all of the securities outstanding under that plan.

F-66
<PAGE> 151

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
VERIO INC.:

We have audited the accompanying balance sheet of Aimnet Corporation
(wholly-owned by Aimquest Corporation) as of March 31, 1997 and the related
statements of operations, stockholder's equity, and cash flows for the year
ended March 31, 1997 and the period ended May 19, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aimnet Corporation as of
March 31, 1997, and the results of its operations and its cash flows for the
year ended March 31, 1997 and the period ended May 19, 1997 in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-67
<PAGE> 152

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

BALANCE SHEET
MARCH 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $ 201,074
Trade receivables, net of allowance for doubtful accounts
of $52,770............................................. 460,611
Inventory................................................. 39,344
Prepaid expenses and other................................ 44,867
-----------
Total current assets.............................. 745,896
Equipment, net (note 2)..................................... 880,224
-----------
Total assets...................................... $ 1,626,120
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable.......................................... $ 141,680
Accrued expenses.......................................... 31,260
Deferred revenue.......................................... 19,251
Due to parent (note 3).................................... 514,122
Current portion of obligations under capital lease
obligations (note 4)................................... 8,153
-----------
Total current liabilities......................... 714,466
Capital lease obligations, less current portion (note 4).... 17,409
-----------
Total liabilities................................. 731,875
Stockholder's equity (note 6):
Common stock, no par value, 1,000 shares authorized, 100
shares issued and outstanding.......................... 2,307,640
Accumulated deficit....................................... (1,413,395)
-----------
Total stockholder's equity........................ 894,245
Commitments (note 4)
-----------
Total liabilities and stockholder's equity........ $ 1,626,120
===========
</TABLE>

See accompanying notes to financial statements.

F-68
<PAGE> 153

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1997 AND PERIOD ENDED MAY 19, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
MAY 19,
1997 1997
----------- ------------
<S> <C> <C>
Revenue:
Internet services......................................... $ 2,649,839 303,600
Other (note 3)............................................ 215,279 87,788
----------- ---------
Total revenue..................................... 2,865,118 391,388
----------- ---------
Operating expenses:
Internet services and other operating costs............... 1,225,329 124,275
Selling, general and administrative....................... 2,098,958 437,292
Provision for bad debts................................... 425,295 --
Depreciation.............................................. 528,931 94,801
----------- ---------
Total operating expenses.......................... 4,278,513 656,368
----------- ---------
Net loss.......................................... $(1,413,395) (264,980)
=========== =========
</TABLE>

See accompanying notes to financial statements.

F-69
<PAGE> 154

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

STATEMENT OF STOCKHOLDER'S EQUITY
YEAR ENDED MARCH 31, 1997 AND PERIOD ENDED MAY 19, 1997

<TABLE>
<CAPTION>
INTERCOMPANY
COMMON ACCOUNT ACCUMULATED
STOCK WITH PARENT DEFICIT TOTAL
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Balance as of March 31, 1996................ $ -- 1,592,490 -- 1,592,490
Incorporation as wholly owned subsidiary and
additional capital contribution by
parent.................................... 2,307,640 (1,592,490) -- 715,150
Net loss.................................... -- -- (1,413,395) (1,413,395)
---------- ---------- ---------- ----------
Balances as of March 31, 1997............... $2,307,640 -- (1,413,395) 894,245
Net loss.................................... -- -- (264,980) (264,980)
---------- ---------- ---------- ----------
Balances as of May 19, 1997................. $2,307,640 -- (1,678,375) 629,265
========== ========== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-70
<PAGE> 155

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1997 AND PERIOD ENDED MAY 19, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
1997 MAY 19, 1997
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,413,395) (264,980)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 528,931 94,801
Provision for bad debts................................ 425,295 --
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables............. (375,042) 40,670
Decrease (increase) in inventory..................... (5,423) 13,107
Decrease in prepaid expenses and other............... 7,047 4,416
Decrease in accounts payable......................... (44,692) (7,459)
Increase (decrease) in accrued expenses.............. (15,248) 18,522
Increase (decrease) in deferred revenue.............. 10,968 (5,171)
----------- --------
Net cash used by operating activities............. (881,559) (106,094)
----------- --------
Cash flows from investing activities -- purchases of
equipment................................................. (320,809) (54,458)
----------- --------
Cash flows from financing activities:
Cash capital contribution by parent....................... 715,150 --
Increase in due to related party.......................... 514,122 55,264
Principal payments on capital lease obligations........... (3,255) (1,548)
----------- --------
Net cash provided by financing activities......... 1,226,017 53,716
----------- --------
Increase (decrease) in cash....................... 23,649 (106,836)
Cash, beginning of period................................... 177,425 201,074
----------- --------
Cash, end of period......................................... $201,074 94,238
=========== ========
Noncash investing and financing activities --
Equipment acquired through capital lease obligations...... $28,817 --
=========== ========
</TABLE>

See accompanying notes to financial statements.

F-71
<PAGE> 156

AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Aimnet Corporation (the Company) was incorporated in the State of
California on September 26, 1996 as a wholly owned subsidiary of Aimquest
Corporation (Aimquest). Prior to incorporation, the Company's assets,
liabilities, and operations were included in the financial statements of
Aimquest. The Company provides regional internet access services, and hardware
and software sales to customers in California. The accompanying financial
statements include the operations of the Company assuming that the Company had
been operated separately as of April 1, 1996 and thereafter.

Effective May 19, 1997, Verio Inc. acquired a 55% ownership interest in the
Company (see note 6).

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance. Revenue
from hardware and software sales is recognized upon shipment of the respective
products.

Inventory

Inventory, consisting of systems hardware and software and maintenance
parts and supplies is recorded at the lower of cost (first-in, first-out) or
market.

Equipment

Equipment, including assets held under capital leases, is stated at cost,
less accumulated depreciation and amortization. Depreciation and amortization is
recorded using the straight-line method over the shorter of the estimated useful
lives of the related assets or the lease term, which are two or three years.
Costs for normal repairs and maintenance are expensed as incurred.

Income Taxes

The Company is included in the tax returns of Aimquest. Income taxes are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, (SFAS 109). Under SFAS 109,
deferred income taxes are recognized for the future tax consequences of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.

No tax benefit has been allocated to the Company due to the Company's net
loss and the uncertainty regarding the ultimate utilization of such loss in the
consolidated income tax returns of Aimquest. A valuation allowance has been
recorded for the entire balance of the deferred tax asset related to the
Company's net loss.

F-72
<PAGE> 157
AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of March 31, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

Customers who operate in California represent substantially all of the
Company's customer base and accounts receivable. However, no single customer
comprised more than 5% of accounts receivable or total revenue as of or for the
year ended March 31, 1997 or the period ended May 19, 1997.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell. The adoption of SFAS 121 effective
April 1, 1996 did not have a significant effect on the Company's financial
position or results of operations.

(2) EQUIPMENT

Equipment consisted of the following at March 31, 1997:

<TABLE>
<S> <C>
Internet and computer equipment.......................... $1,712,000
Furniture................................................ 29,144
----------
1,741,144
Less accumulated depreciation............................ (860,920)
----------
$ 880,224
==========
</TABLE>

Equipment includes assets owned under capital leases with a net book value
of $25,562 at March 31, 1997.

(3) RELATED PARTY TRANSACTIONS

The Company provides internet services to Aimquest which totaled $5,924 for
the year ended March 31, 1997 and $20,386 for the period ended May 19, 1997.

Amounts due to parent represent cash transfers from Aimquest which are
noninterest bearing.

F-73
<PAGE> 158
AIMNET CORPORATION
(WHOLLY-OWNED BY AIMQUEST CORPORATION)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2001. Future minimum annual lease
payments under capital and noncancelable operating leases for each of the years
ending March 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ----------
<S> <C> <C>
1998.................................................... $12,396 327,146
1999.................................................... 12,396 283,916
2000.................................................... 8,780 279,810
2001.................................................... -- 109,488
Less future minimum payments to be received under
noncancelable subleases............................... -- (31,059)
------- -------
Total minimum payments................................ 33,572 969,301
=======
Less amount representing interest....................... (8,010)
-------
Present value of net minimum lease payments........... 25,562
Less current portion.................................... (8,153)
-------
$17,409
=======
</TABLE>

Rent expense for the year ended March 31, 1997 and the period ended May 19,
1997 totaled $314,890 and $38,203, respectively.

(5) EMPLOYEE BENEFIT PLAN

Aimquest has a 401(k) (the Plan) covering all employees of the Company who
meet certain eligibility requirements. Employer contributions are not required
and the Company did not make any contributions to the Plan during the year ended
March 31, 1997 or the period ended May 19, 1997.

(6) SUBSEQUENT EVENT

Effective May 19, 1997, Verio Inc. (Verio) acquired 77 shares of the
Company's series A preferred stock for cash consideration of approximately
$4,171,000. The preferred shares represent a 55% ownership interest in the
Company, on a fully diluted basis, and are convertible into common shares on a
one for one basis. In addition, the preferred shares have a liquidation
preference equal to the issuance price. Verio also acquired an option to acquire
a 100% ownership in the Company in the future upon the occurrence of certain
events, including an initial public offering of Verio common stock.

F-74
<PAGE> 159

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of West Coast Online, Inc.
as of September 30, 1997 and the related statements of operations and
accumulated deficit, and cash flows for the nine months then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of West Coast Online, Inc. as
of September 30, 1997, and the results of its operations and its cash flows for
the nine months then ended in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Denver, Colorado
November 21, 1997

F-75
<PAGE> 160

WEST COAST ONLINE, INC.

BALANCE SHEET
SEPTEMBER 30, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $ 25,907
Trade receivables, net of allowance for doubtful accounts
of $3,588.............................................. 96,659
Prepaid expenses and other................................ 4,933
---------
Total current assets.............................. 127,499
Equipment, net (note 2)..................................... 524,474
Other assets................................................ 7,148
---------
Total assets...................................... $ 659,121
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable:
Trade.................................................. $ 41,270
Related party (note 5)................................. 27,009
Accrued liabilities....................................... 105,487
Deferred revenue.......................................... 99,679
Current portion of capital lease obligations (note 3)..... 57,874
---------
Total current liabilities......................... 331,319
Capital lease obligations, less current portion (note 3).... 69,994
Total liabilities................................. 401,313
---------
Redeemable preferred stock, 2,000,000 shares authorized
(note 4):
Series A, 60,000 shares issued and outstanding............ 225,000
Series B, 50,710 shares issued and outstanding............ 250,000
---------
Total redeemable preferred stock.................. 475,000
---------
Stockholders' deficit (note 4):
Common stock, no par value, 1,000,000 shares authorized,
246,000 shares issued and outstanding.................. 79,775
Accumulated deficit....................................... (296,967)
---------
Total stockholders' deficit....................... (217,192)
Commitments (note 3)
Total liabilities and stockholders' deficit....... $ 659,121
=========
</TABLE>

See accompanying notes to financial statements.

F-76
<PAGE> 161

WEST COAST ONLINE, INC.

STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
<S> <C>
Revenue:
Internet services......................................... $1,354,911
Computer hardware sales................................... 171,818
Other..................................................... 126,394
----------
Total revenue..................................... 1,653,123
----------
Operating expenses:
Internet services operating costs......................... 641,106
Cost of hardware sales.................................... 136,978
Selling, general and administrative....................... 913,743
Depreciation.............................................. 106,185
----------
Total operating expenses.......................... 1,798,012
----------
Loss from operations.............................. (144,889)
Interest expense............................................ (22,772)
----------
Net loss.......................................... (167,661)
Accumulated deficit at beginning of period.................. (129,306)
----------
Accumulated deficit at end of period........................ $ (296,967)
==========
</TABLE>

See accompanying notes to financial statements.

F-77
<PAGE> 162

WEST COAST ONLINE, INC.

STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(167,661)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 106,185
Provision for bad debts................................ 3,588
Changes in operating assets and liabilities:
Receivables.......................................... (39,945)
Prepaid expenses and other current assets............ 5,197
Other assets......................................... (7,148)
Accounts payable and accrued liabilities............. 12,802
Deferred revenue..................................... 35,944
---------
Net cash used by operating activities............. (51,038)
---------
Cash flows from investing activities -- purchase of
equipment................................................. (154,301)
---------
Cash flows from financing activities:
Proceeds from issuance of redeemable preferred stock...... 250,000
Principal payments under capital lease obligations........ (36,541)
---------
Net cash provided by financing activities......... 213,459
---------
Net increase in cash.............................. 8,120
Cash at beginning of period................................. 17,787
---------
Cash at end of period....................................... $ 25,907
=========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 22,772
=========
Noncash investing and finance activities -- equipment
acquired through capital lease obligations................ $ 67,064
=========
</TABLE>

See accompanying notes to financial statements.

F-78
<PAGE> 163

WEST COAST ONLINE, INC.

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

West Coast Online, Inc. (the Company) was incorporated in the State of
California on January 30, 1996. The Company provides internet access services
and computer hardware sales to customers primarily in California.

As of September 30, 1997, Verio Inc. (Verio) acquired all of the
outstanding common stock of the Company, resulting in 100% ownership.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using the straight-line method over the shorter of the estimated useful
lives of the related assets or the lease term, which range from three to five
years. Costs of normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
Under SFAS 109, deferred income taxes are recognized for the future tax
consequences of differences between the tax bases of assets and liabilities and
their financial reporting amounts at September 30, 1997 based on enacted tax
laws and statutory rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.
The Company has a net operating loss carryforward of approximately $181,000
which expires in 2012. No tax benefit has been recorded by the Company for the
nine months ended September 30, 1997 due to the Company's net loss and the
uncertainty regarding the ultimate utilization of such loss carryforward. A
valuation allowance has been

F-79
<PAGE> 164
WEST COAST ONLINE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

recorded for the entire balance of the deferred tax asset related to the
carryforward. Other temporary differences between financial statement and income
tax bases of assets and liabilities are not significant.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

Customers who operate in California represent substantially all of the
Company's customer base. However, no single customer comprised more than 10% of
accounts receivable or total revenue for the nine months ended September 30,
1997.

(2) EQUIPMENT

Equipment consisted of the following at September 30, 1997:

<TABLE>
<S> <C>
Internet and computer equipment............................. $ 733,411
Furniture and office equipment.............................. 21,312
---------
754,723
Less accumulated depreciation and amortization.............. (230,249)
---------
$ 524,474
=========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of $134,362 at September 30, 1997.

(3) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable leases expiring
at various dates through 2001. Future minimum annual lease payments under
noncancelable operating leases for each of the years ending September 30 are as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998................................................... $ 70,104 $ 72,160
1999................................................... 63,728 36,342
2000................................................... 18,974 10,743
2001................................................... -- 7,162
-------- --------
Total minimum payments............................... $152,806 $126,407
========
Less amount representing interest...................... (24,938)
--------
Present value of net minimum lease payments.......... 127,868
Less current portion................................... (57,874)
--------
$ 69,994
========
</TABLE>

Rent expense for the nine months ended September 30, 1997 totaled $64,820.

F-80
<PAGE> 165
WEST COAST ONLINE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) REDEEMABLE PREFERRED STOCK

The Company issued 60,000 Series A and 50,710 Series B shares of
redeemable, convertible preferred stock in 1996 and 1997, respectively, to
Verio. The preferred shares were convertible into common shares on a one for one
basis and were mandatorily redeemable in 2000. On September 30, 1997, in
connection with the Verio Acquisition, as described in Note 1, Verio converted
these preferred shares to common stock.

(5) TRANSACTIONS WITH RELATED PARTY

During the nine months ended September 30, 1997, the Company received
certain network services from Verio Inc. The entire cost of these services
remain in Accounts Payable-Related Party at September 30, 1997 and is included
in internet services and network operating costs.

F-81
<PAGE> 166

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of Clark Internet Services,
Inc. as of September 30, 1997, and the related statements of operations and
retained earnings, and cash flows for the year ended September 30, 1997 and the
period ended October 17, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Clark Internet Services,
Inc. as of September 30, 1997, and the results of its operations and its cash
flows for the year ended September 30, 1997 and the period ended October 17,
1997 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-82
<PAGE> 167

CLARK INTERNET SERVICES, INC.

BALANCE SHEET
SEPTEMBER 30, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 54,293
Trade accounts receivable, net of allowance for doubtful
accounts of $28,154.................................... 438,186
Related party receivable (note 5)......................... 42,104
Prepaid expenses and other................................ 122,894
----------
Total current assets.............................. 657,477
Equipment, net (note 2)..................................... 650,001
Other assets, net........................................... 112,475
----------
Total assets...................................... $1,419,953
==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 261,194
Accrued liabilities....................................... 91,474
Salaries and commissions payable.......................... 98,220
Deferred revenue and customer advances.................... 514,555
Current portion of long-term debt (note 3)................ 175,800
----------
Total current liabilities......................... 1,141,243
Long-term debt, net of current portion (note 3)............. 264,950
Total liabilities................................. 1,406,193
Stockholders' equity:
Common stock, no par value, 1,000,000 shares authorized,
860,000 shares issued and outstanding.................. 4,000
Retained earnings......................................... 9,760
----------
Total stockholders' equity........................ 13,760
----------
Commitments (note 4)
Total liabilities and stockholders' equity........ $1,419,953
==========
</TABLE>

See accompanying notes to financial statements.

F-83
<PAGE> 168

CLARK INTERNET SERVICES, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED SEPTEMBER 30, 1997 AND PERIOD ENDED OCTOBER 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 17,
1997 1997
---------- ------------
<S> <C> <C>
Revenue:
Internet services......................................... $3,601,491 159,079
Other..................................................... 114,193 48,917
---------- -------
Total revenue..................................... 3,715,684 207,996
---------- -------
Operating expenses:
Internet services......................................... 1,672,046 48,346
Selling, general and administrative....................... 2,053,619 195,610
Depreciation and amortization............................. 139,379 9,547
---------- -------
Total operating expenses.......................... 3,865,044 253,503
---------- -------
Loss from operations.............................. (149,360) (45,507)
Other income (expense):
Interest income........................................... 2,702 (1,054)
Interest expense.......................................... (26,929) --
---------- -------
Net loss.......................................... (173,587) (46,561)
Retained earnings (deficit):
Beginning of period....................................... 183,347 9,760
---------- -------
End of period............................................. $ 9,760 (36,801)
========== =======
</TABLE>

See accompanying notes to financial statements.

F-84
<PAGE> 169

CLARK INTERNET SERVICES, INC.

STATEMENTS OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1997 AND PERIOD ENDED OCTOBER 17, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
1997 OCTOBER 17, 1997
--------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(173,587) (46,561)
Adjustments to reconcile net loss to net cash provided by
operating activities -- depreciation and
amortization........................................... 139,379 9,547
Changes in operating assets and liabilities:
Trade and related party accounts receivable, net....... (362,396) 2,483
Prepaid expenses and other............................. (19,671) 32,793
Accounts payable....................................... 157,360 (78,954)
Accrued liabilities, and salaries and commissions
payable............................................... 92,849 30,677
Deferred revenue and customer advances................. 245,114 30,809
Other assets, net...................................... (61,263) 12,179
--------- --------
Net cash provided (used) by operating
activities...................................... 17,785 (7,027)
Cash flows used by investing activities --
purchases of equipment.................................... (425,477) --
--------- --------
Cash flows used by financing activities:
Proceeds from bank lines of credit........................ 90,000 --
Proceeds from bank loan................................... 375,000 --
Repayment of bank loan.................................... (51,929) --
--------- --------
Net cash provided by financing activities......... 413,071 --
--------- --------
Net increase (decrease) in cash and cash
equivalents..................................... 5,379 (7,027)
Cash and cash equivalents, at beginning of period........... 48,914 54,293
--------- --------
Cash and cash equivalents, at end of period................. $ 54,293 47,266
========= ========
Supplemental disclosures of cash flow information --
cash paid during year for interest........................ $ 26,929 1,053
========= ========
</TABLE>

See accompanying notes to financial statements.

F-85
<PAGE> 170

CLARK INTERNET SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Clark Internet Services, Inc. (the Company) is a provider of internet
access services to businesses and individuals, primarily in the Maryland,
Washington DC, and Northern Virginia regions.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.

Effective October 17, 1997, Verio Inc. acquired 51% of the outstanding
common stock of the Company.

Cash and Cash Equivalents

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

Equipment

Equipment is recorded at cost. Depreciation is provided over the estimated
useful lives of the assets ranging from 3 to 5 years using the straight-line
method.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of (Statement No. 121). Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations, including goodwill, when
indicators of impairment are present and the undiscounted future cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. If such assets are impaired, the impairment to be recognized is measured
by the amounts by which the carrying amount of the assets exceeds the fair value
of the assets. Assets to be disposed of are reported at the lower of the
carrying value or fair value, less costs to sell.

Revenue Recognition

Internet services revenue is recognized as the services are provided.
Installation charges and set-up fees are recognized when installation is
completed. The Company records deferred revenue for accounts billed and/or
collected in advance.

Income Taxes

At December 31, 1997, the Company has a net operating loss carryforward for
federal income tax purposes of $235,000 which is available to offset future
federal taxable income, if any, through 2012. Due to the uncertainty regarding
the ultimate utilization of the net operating loss carryforward a valuation
allowance

F-86
<PAGE> 171
CLARK INTERNET SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

has been recorded for the full amount of the deferred tax asset related to the
net operating loss carryforward, which represents the only significant temporary
difference as of September 30, 1997.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statements purposes. Management estimates that the fair values of all
financial instruments as of September 30, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

(2) EQUIPMENT

Equipment consisted of the following at September 30, 1997:

<S> <C>
Furniture and fixtures...................................... $ 337,163
Computer and equipment...................................... 656,496
---------
993,659
Less accumulated depreciation............................... (343,658)
---------
$ 650,001
=========
</TABLE>

Depreciation expense for the year ended September 30, 1997 and the period
ended October 17, 1997 totaled $138,054 and $9,547, respectively.

(3) BANK LINE OF CREDIT AND NOTES PAYABLE

In April 1997, the Company entered into a $200,000 line of credit agreement
with a bank, with interest at the prime rate plus 1.5% (10.0% at September 30,
1997). Borrowings under the line of credit are due in April 1998.

In addition, the Company also borrowed $375,000 from a bank under a loan
secured by the Small Business Administration with interest at the prime rate
plus 2% (10.5% at September 30, 1997). Monthly principal payments of $6,250 are
due through April 2002.

(4) LEASES

The Company leases its facilities under long-term operating leases expiring
at various dates through 2002. Future minimum lease payments consist of the
following at September 30:

<S> <C>
1998........................................................ $363,000
1999........................................................ 182,155
2000........................................................ 42,926
2001........................................................ 25,320
2002........................................................ 13,811
--------
Total minimum lease payments...................... $627,212
========
</TABLE>

Rent expense totaled $484,162 for the year ended September 30, 1997.

(5) TRANSACTION WITH RELATED PARTY

The related party receivable at September 30, 1997 is due from an entity
owned by the Company's Chief Executive Officer, for whom the Company provides
general accounting and administrative services. These amounts were repaid
subsequent to September 30, 1997.

F-87
<PAGE> 172

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of ATMnet as of October 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ATMnet as of October 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.

KPMG Peat Marwick LLP

Denver, Colorado
December 13, 1997

F-88
<PAGE> 173

ATMNET

BALANCE SHEETS
OCTOBER 31, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 76,037 11,739
Trade receivables, net of allowance for doubtful accounts
of $30,000 and $25,981................................. 279,871 192,726
Other receivables......................................... 13,646 --
Other..................................................... 56,607 65,886
----------- -----------
Total current assets.............................. 426,161 270,351
Equipment and leasehold improvements, net (note 2).......... 1,404,863 1,120,396
Investment in affiliate (note 3)............................ 87,500 --
Intangible assets, net of accumulated amortization of
$99,758 and $52,952....................................... 181,081 134,273
----------- -----------
Total assets...................................... $ 2,099,605 1,525,020
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 1,736,880 2,738,070
Accrued liabilities....................................... 162,381 589,794
Due to related parties (note 6)........................... 16,235 41,209
Deferred revenue.......................................... 176,481 115,393
Subordinated notes payable to stockholders and related
parties (note 4)....................................... -- 908,979
Current portion of capital lease obligations (note 7)..... 140,223 150,134
----------- -----------
Total current liabilities......................... 2,232,200 4,543,579
Capital lease obligations, less current portion............. 164,514 14,379
----------- -----------
Total liabilities................................. 2,396,714 4,557,958
Stockholders' deficit (note 5):
Common stock, no par value, 83,000,000 shares authorized;
29,100,000 shares issued and outstanding............... 1,158,532 1,158,532
Accumulated deficit....................................... (1,455,641) (4,191,470)
----------- -----------
Total stockholders' deficit....................... (297,109) (3,032,938)
Commitments (note 7)........................................
----------- -----------
Total liabilities and stockholders' deficit....... $ 2,099,605 1,525,020
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-89
<PAGE> 174

ATMNET

STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Revenue:
Internet services (note 6)................................ $ 1,236,478 $ 2,730,732
Equipment sales........................................... 440,315 513,941
----------- -----------
Total revenue..................................... 1,676,793 3,244,673
----------- -----------
Operating expenses:
Cost of internet services................................. 845,465 1,963,858
Cost of equipment sold.................................... 258,517 381,043
Other operating expenses.................................. 645,710 721,012
Selling, general and administrative....................... 957,253 1,927,589
Depreciation and amortization............................. 343,682 649,510
----------- -----------
Total operating expenses.......................... 3,050,627 5,643,012
----------- -----------
Loss from operations...................................... (1,373,834) (2,398,339)
Other expenses:
Interest expense.......................................... (36,203) (167,864)
Other..................................................... (21,000) (169,626)
----------- -----------
Net loss.......................................... $(1,431,037) $(2,735,829)
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-90
<PAGE> 175

ATMNET

STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED OCTOBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
---------- ----------- -----------
<S> <C> <C> <C>
BALANCE AS OF NOVEMBER 1, 1995....................... $ 458,200 $ (24,604) $ 433,596
Issuance of common stock for cash.................... 700,332 -- 700,332
Net loss............................................. -- (1,431,037) (1,431,037)
---------- ----------- -----------
BALANCES AS OF OCTOBER 31, 1996...................... 1,158,532 (1,455,641) (297,109)
Net loss............................................. -- (2,735,829) (2,735,829)
---------- ----------- -----------
BALANCES AS OF OCTOBER 31, 1997...................... $1,158,532 $(4,191,470) $(3,032,938)
========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-91
<PAGE> 176

ATMNET

STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,431,037) $(2,735,829)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization.......................... 343,682 649,510
Provision for doubtful accounts........................ 62,000 58,686
Loss on write-off of investment........................ -- 87,500
Changes in operating assets and liabilities:
Trade receivables.................................... (302,792) 28,459
Other receivables.................................... 46,354 13,646
Other current assets................................. (51,943) (9,279)
Accounts payable..................................... 1,710,981 1,001,190
Accrued liabilities and due to related parties....... 172,852 452,387
Deferred revenue..................................... 171,898 (61,088)
----------- -----------
Net cash provided (used) by operating
activities..................................... 721,995 (514,818)
----------- -----------
Cash flows from investing activities:
Purchase of equipment and leasehold improvements.......... (1,235,719) (318,235)
Investment in affiliates, at cost......................... (87,500) --
----------- -----------
Net cash used by investing activities............. (1,323,219) (318,235)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of subordinated debt............... -- 1,018,979
Proceeds from issuance of common stock.................... 700,332 --
Principal payments on subordinated debt................... -- (110,000)
Principal payments on capital lease obligations........... (114,166) (140,224)
----------- -----------
Net cash provided by financing activities......... 586,166 768,755
----------- -----------
Net decrease in cash.............................. (15,058) (64,298)
Cash, beginning of year..................................... 91,095 76,037
----------- -----------
Cash, end of year........................................... $ 76,037 $ 11,739
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest............................................... $ 36,203 $ 25,765
=========== ===========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ 345,046 $ --
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-92
<PAGE> 177

ATMNET

NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

ATMnet (the Company) was incorporated in the State of California on
February 26, 1997. The Company provides regional internet access services, and
hardware sales to customers mainly in California.

Effective November 5, 1997, Verio Inc. acquired substantially all of the
net assets of the Company.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance. Revenue
from hardware sales is recognized upon shipment of the respective products.

Equipment and Leasehold Improvements

Equipment and leasehold improvements, including assets held under capital
leases, is stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization is recorded using the straight-line method over
the shorter of the estimated useful lives of the related assets or the lease
term, which are two or three years. Costs for normal repairs and maintenance are
expensed as incurred.

Investment in Affiliates

Investment in affiliate represents common stock of an affiliate
representing less than a 20% ownership interest which is accounted for using the
cost method.

Intangible Assets

The excess of cost over the fair value of net assets acquired, or goodwill,
and organization costs are amortized using the straight-line method over five
years.

Income Taxes

The Company has a net operating loss carryforward for income tax purposes
of approximately $3,883,000 which expires in 2012. No tax benefit has been
recorded by the Company in fiscal 1996 and 1997 due to the Company's net loss
and the uncertainty regarding the ultimate utilization of such loss
carryforward. A valuation allowance has been recorded for the entire balance of
the deferred tax asset related to the carryforward. Other temporary differences
between financial statement and income tax bases of assets and liabilities are
not significant.

F-93
<PAGE> 178
ATMNET

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996 AND 1997

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of October 31, 1997 and 1996 approximate their carrying
values based on their terms and interest rates. The use of different market
assumptions and/or estimation methodologies may have a significant effect on the
estimated fair values.

Long-Lived Assets

The Company accounts for long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
(SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value, less
costs to sell.

Stock-Based Compensation

The Company applies APB Opinion 25 and related interpretations in
accounting for its stock compensation plan. Accordingly, since the Company
grants stock options with exercise prices equal to fair value at the date of
grant, no compensation expense has been recognized in 1996 or 1997. Under
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), entities are permitted to adopt the fair value method
of accounting for employee stock-based compensation plans. However, SFAS 123
allows an entity to continue using the intrinsic value method under APB Opinion
No. 25, but requires the entity to make pro forma disclosures of net income or
loss as if the fair value method of accounting had been applied.

(2) EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment consisted of the following at October 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Internet and computer equipment............................. $1,613,305 1,786,575
Furniture and fixtures...................................... 77,668 133,730
Leasehold improvements...................................... 12,080 100,983
---------- ---------
1,703,053 2,021,288
Less accumulated depreciation............................... (298,190) (900,892)
---------- ---------
$1,404,863 1,120,396
========== =========
</TABLE>

Equipment and leasehold improvements includes assets owned under capital
leases with a net book value of $195,294 and $333,079 at October 31, 1996 and
1997, respectively.

F-94
<PAGE> 179
ATMNET

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996 AND 1997

(3) INVESTMENT IN AFFILIATE

During fiscal 1996, the Company acquired a 10% interest in Turpike
Corporation for a purchase price of $87,500. The investment was written off in
fiscal 1997.

(4) SUBORDINATED NOTES PAYABLE

Subordinated notes payable as of October 31, 1997 consists of notes payable
to stockholders and related parties, with interest at rates varying from prime
plus 2% (10.5% at October 31, 1997) to 18%, due in June 1998. The notes are
subordinate to all other senior indebtedness of the Company. Interest expense
related to the subordinated notes totaled $104,130 in 1997.

(5) STOCK COMPENSATION PLANS

The Company established a Stock Option Plan in March 1996, whereby. at the
discretion of the Board of Directors (the Board), the Company may grant stock
options to certain key employees of the Company. The option price is determined
by the Board at the time the option is granted, but in no event is less than the
fair market value of the Company's common stock at the date of grant, as
determined by the Board. The options vest over a five year period or, in certain
circumstances, earlier based on the fair value of the Company's common shares,
as defined, and expire ten years from the date of grant. As of October 31, 1997,
no options had been exercised or are exercisable. The weighted-average
contractual life of outstanding options as of October 31, 1997 is approximately
two years.

The following table summarizes option activity for two years ended October
31, 1997:

Options granted during fiscal 1996 at the following exercise price:

<TABLE>
<S> <C>
Options granted during fiscal 1996 at the following exercise
price:
$0.30 per share........................................... 4,410,000
$0.33 per share........................................... 1,000,000
----------
Options outstanding at October 31, 1996..................... 5,410,000
Options cancelled......................................... (1,545,000)
----------
Options outstanding at October 31, 1997..................... 3,865,000
==========
Weighted average exercise price of outstanding options...... $.31
==========
</TABLE>

During the years ended October 31, 1996 and 1997, the per share
weighted-average fair value of stock options granted was $.03 on the date of
grant using the Black-Scholes opinion-pricing model with the following
weighted-average assumptions; no dividends or volatility, risk-free interest
rate of 6%, and expected life of two years. If the Company had determined
compensation expense for the years ended October 31, 1996 and 1997 based on the
fair value of the options at the grant dates under SFAS No. 123, net loss would
increase to $1,595,000 and $2,854,000, respectively.

(6) RELATED PARTY TRANSACTIONS

The Company provides internet services to a company whose founder and CEO
is a shareholder of ATMnet. Revenue earned by ATMnet from this company totaled
$15,523 and $22,581 during the years ended October 31, 1996 and 1997,
respectively.

Amounts due to related parties are for services provided, are non-interest
bearing and are due within one year.

F-95
<PAGE> 180
ATMNET

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996 AND 1997

(7) LEASES

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2000. Future minimum annual lease
payments under capital and noncancelable operating leases for each of the years
ending October 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ---------
<S> <C> <C>
1998........................................................ $ 161,028 173,868
1999........................................................ 22,524 142,068
2000........................................................ -- 26,209
--------- -------
Total minimum payments.................................... 183,552 342,145
=======
Less amount representing interest........................... (19,039)
---------
Present value of net minimum lease payments............... 164,513
Less current portion........................................ (150,134)
---------
$ 14,379
=========
</TABLE>

Rent expense for the years ended October 31, 1996 and 1997 totaled $72,686
and $168,410, respectively.

F-96
<PAGE> 181

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Global Internet Network
Services, Inc. (wholly-owned by Global Internet.Com Inc.) as of December 31,
1996 and November 26, 1997, and the related statements of operations,
stockholder's equity (deficit), and cash flows for the year ended December 31,
1996 and the period ended November 26, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Internet Network
Services, Inc. as of December 31, 1996 and November 26, 1997 and, and the
results of its operations and its cash flows for the year ended December 31,
1996 and the period ended November 26, 1997 in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 20, 1998

F-97
<PAGE> 182

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

BALANCE SHEETS
DECEMBER 31, 1996 AND NOVEMBER 26, 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Current assets:
Cash...................................................... $ 132,118 30,681
Trade receivables, net of allowance for doubtful accounts
of $59,777 in 1996 and $86,166 in 1997................. 935,979 449,959
Receivables from affiliates (note 3)...................... 40,497 53,542
Inventory................................................. 126,020 102,801
Prepaid expenses and other................................ 60,869 83,323
---------- ---------
Total current assets.............................. 1,295,483 720,306
Equipment, net (note 2)..................................... 557,142 799,179
Other assets................................................ 3,864 3,723
---------- ---------
Total assets...................................... $1,856,489 1,523,208
========== =========

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:
Accounts payable.......................................... $ 631,660 109,651
Accrued liabilities....................................... 17,996 18,168
Deferred revenue.......................................... 486,167 418,885
Current portion of obligations under capital leases (note
4)..................................................... 37,828 106,720
Due to parent (note 3).................................... 942,098 --
---------- ---------
Total current liabilities......................... 2,115,749 653,424
Capital lease obligations, less current portion (note 4).... 31,687 193,630
---------- ---------
Total liabilities................................. 2,147,436 847,054
---------- ---------
Stockholder's equity (deficit):
Common stock, $1.00 par value, 10,000 shares authorized,
5,000 shares issued and outstanding.................... 5,000 5,000
Additional paid-in capital................................ 245,000 1,412,849
Accumulated deficit....................................... (540,947) (741,695)
---------- ---------
Total stockholder's equity (deficit)................... (290,947) 676,154
---------- ---------
Commitments (note 4)
Total liabilities and stockholder's equity (deficit)... $1,856,489 1,523,208
========== =========
</TABLE>

See accompanying notes to financial statements.

F-98
<PAGE> 183

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 AND
PERIOD ENDED NOVEMBER 26, 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $1,979,201 2,501,037
Consulting services (note 3).............................. 344,233 564,150
Computer hardware and software sales (note 3)............. 853,396 355,731
National Science Foundation revenue (note 7).............. 440,119 114,982
Other..................................................... 80,401 248,816
---------- ----------
Total revenue..................................... 3,697,350 3,784,716
---------- ----------
Operating expenses:
Internet services operating costs......................... 1,530,020 1,960,653
Cost of hardware and software sales....................... 591,227 292,874
Engineering and network................................... 507,843 425,430
Marketing and selling..................................... 248,986 238,982
General and administrative................................ 956,052 785,960
Depreciation and amortization............................. 259,956 280,445
---------- ----------
Total operating expenses.......................... 4,094,084 3,984,344
---------- ----------
Loss from operations.............................. (396,734) (199,628)
Other income (expense):
Interest expense.......................................... (9,897) (8,229)
Other, net................................................ 43,577 7,109
---------- ----------
Net loss.......................................... $ (363,054) (200,748)
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-99
<PAGE> 184

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1996 AND
PERIOD ENDED NOVEMBER 26, 1997

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDER'S
COMMON PAID-IN ACCUMULATED EQUITY
STOCK CAPITAL DEFICIT (DEFICIT)
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996..................... $5,000 245,000 (177,893) 72,107
Net loss........................................ -- -- (363,054) (363,054)
------ --------- -------- --------
BALANCES AT DECEMBER 31, 1996................... 5,000 245,000 (540,947) (290,947)
Transfer of net assets to parent (note 6)....... -- (101,088) -- (101,088)
Conversion of note payable to parent to equity
(note 6)...................................... -- 1,156,437 -- 1,156,437
Capital contribution by parent (note 6)......... -- 112,500 -- 112,500
Net loss........................................ -- -- (200,748) (200,748)
------ --------- -------- --------
BALANCES AT NOVEMBER 26, 1997................... $5,000 1,412,849 (741,695) 676,154
====== ========= ======== ========
</TABLE>

See accompanying notes to financial statements.

F-100
<PAGE> 185

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 AND
PERIOD ENDED NOVEMBER 26, 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(363,054) (200,748)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization.......................... 259,956 280,445
Provision for bad debts................................ 70,445 95,913
Changes in operating assets and liabilities:
Trade receivables.................................... (231,005) 377,062
Inventory............................................ (43,335) 23,219
Other current assets................................. (26,954) (22,454)
Accounts payable..................................... 575,188 (522,009)
Accrued liabilities.................................. (382,897) 172
Deferred revenue..................................... 58,277 (67,282)
Other................................................ (3,241) --
--------- ---------
Net cash used by operating activities............. (86,620) (35,682)
--------- ---------
Cash flows from investing activities -- purchases of
equipment................................................. (336,795) (334,161)
--------- ---------
Cash flows from financing activities:
Capital contribution by parent............................ -- 112,500
Advances by parent........................................ 544,707 214,339
Principal payments made under capital lease obligations... (39,720) (58,433)
--------- ---------
Net cash provided by financing activities......... 504,987 268,406
--------- ---------
Increase (decrease) in cash....................... 81,572 (101,437)
Cash, beginning of year..................................... 50,546 132,118
--------- ---------
Cash, end of year........................................... $ 132,118 30,681
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 10,095 15,681
========= =========
Noncash investing and financing activities:
Equipment acquired through capital lease obligations... $ -- 299,940
========= =========
Transfer of assets to parent........................... $ -- 101,088
========= =========
</TABLE>

See accompanying notes to financial statements.

F-101
<PAGE> 186

GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND NOVEMBER 26, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Global Internet Network Services, Inc. (the Company) is engaged in
providing regional internet access services, software and hardware consulting
and sales to customers in a ten state region. The Company was incorporated in
Nebraska in September 1987, as Midnet Inc., a nonprofit corporation organized to
promote research, education and economic development. On July 15, 1994, Midnet
Inc. became a for profit corporation and was purchased by Global Internet.Com
Inc. (Parent) on August 8, 1994. On March 12, 1997, the Company changed its
corporate name from Midnet Inc. to Global Internet Network Services, Inc.

Effective November 26, 1997, Verio Inc. (Verio) acquired a 100% ownership
interest in the Company. (see note 6).

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance. Revenue
from consulting services is recognized when services have been rendered. Revenue
from hardware and software sales is recognized upon shipment of the respective
products.

Inventory

Inventory, consisting of systems hardware and software and maintenance
parts and supplies is recorded at the lower of cost (first-in, first-out) or
market.

Equipment

Equipment, including any assets held under capital leases, is recorded at
cost, less accumulated depreciation and amortization. Depreciation and
amortization is recorded using the straight-line method over the estimated
useful lives of the related assets or the lease term, which range from three to
five years. Costs for normal repairs and maintenance are expensed as incurred.

Income Taxes

The Company is included in the tax returns of the Parent. Income taxes are
accounted for under the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS 109,
deferred income taxes are recognized for the future tax consequences of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.

The Company has a net operating loss carryforward of approximately
$518,000, which expires in 2012. No tax benefit has been recorded by the Company
for 1996 or 1997 due to the Company's net loss and the uncertainty regarding the
ultimate utilization of such loss in the consolidated income tax returns of the
Parent. A valuation allowance has been recorded for the entire balance of the
deferred tax asset related to the

F-102
<PAGE> 187
GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Company's net loss. Other temporary differences between financial statement and
income tax bases of assets and liabilities are not significant.

Concentration of Credit Risk

The Company provides unsecured credit to customers in the normal course of
business. Failure of the customers to pay could result in losses up to the
recorded receivable balances. The Company did not have any customers that
represent greater than 5% of total revenue for the year ended December 31, 1996
and the period ended November 26, 1997, respectively.

Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121). This
statement was effective for financial statements for fiscal years beginning
after December 15, 1995. Statement No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at lower of the carrying amount or
fair value less costs to sell. SFAS 121 did not have a significant effect on the
Company's financial position or results of operations in 1997 and 1996.

(2) EQUIPMENT

Equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 26,
1996 1997
------------ ------------
<S> <C> <C>
Internet and computer equipment............................ $821,921 1,342,321
Furniture and office equipment............................. 137,847 150,254
Leasehold improvements..................................... 1,228 2,001
-------- ---------
960,996 1,494,576
Less accumulated depreciation and amortization............. (403,854) (695,397)
-------- ---------
$557,142 799,179
======== =========
</TABLE>

(3) TRANSACTIONS WITH PARENT

Amounts due to Parent represent noninterest bearing cash transfers from the
Parent (see note 6).

Hardware and software sales and consulting revenue from affiliates of the
Parent for the year ended December 31, 1996 and the period ended November 27,
1997 were $92,273 and $561,438, respectively.

(4) LEASES

The Company leases certain internet and computer equipment under capital
leases. At December 31, 1996 and November 26, 1997, leased equipment was
included in internet and computer equipment with net book values of $80,117 and
$367,003, respectively. The Company also leases office space under a
noncancelable operating lease expiring in November 2002.

F-103
<PAGE> 188
GLOBAL INTERNET NETWORK SERVICES, INC.
(WHOLLY-OWNED BY GLOBAL INTERNET.COM INC.)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum annual lease payments under capital and noncancelable
operating leases for years ending November 30 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ---------
<S> <C> <C>
1998........................................................ $ 131,748 47,634
1999........................................................ 116,448 50,016
2000........................................................ 95,435 52,516
2001........................................................ -- 55,142
2002........................................................ -- 57,899
--------- -------
Total minimum payments.................................... 343,631 263,207
=======
Less amount representing interest........................... (43,281)
---------
Present value of net minimum lease payments............... 300,350
Less current portion........................................ (106,720)
---------
$ 193,630
=========
</TABLE>

Rent expense for the year ended December 31, 1996 and the period ended
November 26, 1997 was $71,738 and $63,724, respectively.

(5) EMPLOYEE BENEFIT PLAN

The Parent has a 401(k) (the Plan) covering all employees of the Company
who meet certain eligibility requirements. Employer contributions are not
required and the Parent did not make any contributions to the Plan during the
year ended December 31, 1996 and the period ended November 26, 1997.

(6) STOCKHOLDER'S EQUITY

In connection with the acquisition of common stock of the Company by Verio
Inc. (Verio) amounts due to parent totaling $1,156,437 were converted to equity
and the Parent made a cash contribution to the Company in the amount of
$112,500.

Prior to the Verio acquisition in November 1997, the Company transferred
certain net assets of a division to the Parent in the amount of $101,088, which
division was not acquired by Verio.

(7) NATIONAL SCIENCE FOUNDATION GRANTS

The Company receives grant revenue under contracts with the National
Science Foundation (NSF) to provide network connections to certain
not-for-profit educational institutions. Grant revenue is recognized ratably
over the term of the contract, which is generally twelve months. Grant revenue
amounted to $440,119 and $114,982 for the year ended December 31, 1996 and the
period ended November 26, 1997, respectively. Total amounts receivable at
December 31, 1996 and November 26, 1997 were $65,858 and $16,439, respectively.

F-104
<PAGE> 189

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of the Pennsylvania
Research Partnership Network (PREPnet) as of November 30, 1996 and 1997, and the
related statements of operations and owners' deficit, and cash flows for the
years then ended and the period ended December 24, 1997. These financial
statements are the responsibility of PREPnet's management. Our responsibility is
to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Pennsylvania Research
Partnership Network (PREPnet) as of November 30, 1996 and 1997, and the results
of its operations and its cash flows for the years then ended and for the period
ended December 24, 1997 in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Denver, Colorado
February 20, 1998

F-105
<PAGE> 190

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

BALANCE SHEETS
NOVEMBER 30, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
----------- ---------
<S> <C> <C>
Current assets:
Trade receivables, net of allowance for doubtful accounts
of $14,631 and $13,313, respectively................... $ 73,943 $ 102,041
Prepaid expenses and other................................ 1,769 15,409
----------- ---------
Total current assets.............................. 75,712 117,450
Equipment, net (note 2)..................................... 200,538 138,008
----------- ---------
Total assets...................................... $ 276,250 $ 255,458
=========== =========

LIABILITIES AND OWNER'S DEFICIT

Current liabilities:
Accounts payable.......................................... $ 88,639 $ 132,039
Accrued liabilities....................................... 44,555 3,020
Current portion of obligations under capital leases (note
3)..................................................... 57,468 56,262
Deferred revenue.......................................... 1,084,501 683,371
----------- ---------
Total current liabilities......................... 1,275,163 874,692
Capital lease obligations, less current portion (note 3).... 55,502 --
----------- ---------
Total liabilities................................. 1,330,665 874,692
Owners' deficit............................................. (1,054,415) (619,234)
Commitments (note 3)
----------- ---------
Total liabilities and owner's deficit............. $ 276,250 $ 255,458
=========== =========
</TABLE>

See accompanying notes to financial statements.

F-106
<PAGE> 191

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

STATEMENTS OF OPERATIONS AND OWNERS' DEFICIT
YEARS ENDED NOVEMBER 30, 1996 AND 1997 AND PERIOD ENDED DECEMBER 24, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 24,
1996 1997 1997
----------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Internet services.................................... $ 2,027,682 $ 2,026,439 $ 156,459
Grant revenue (note 4)............................... 194,343 98,711 --
Other................................................ 6,309 22,477 --
----------- ----------- ----------
Total revenue................................ 2,228,334 2,147,627 156,459
----------- ----------- ----------
Costs and expenses:
Internet services operating costs.................... 588,543 792,684 80,972
Selling, general and administrative (note 5)......... 831,230 773,174 64,625
Depreciation......................................... 92,251 121,192 8,285
----------- ----------- ----------
Total costs and expenses..................... 1,512,024 1,687,050 153,882
----------- ----------- ----------
Earnings from operations..................... 716,310 460,577 2,577
Interest expense, net.................................. (18,331) (11,261) (938)
----------- ----------- ----------
Net earnings................................. 697,979 449,316 1,639
Owners' deficit at beginning of period................. (726,569) (1,054,415) (619,234)
Net advances to owners................................. (1,025,825) (14,135) (23,911)
----------- ----------- ----------
Owners' deficit at end of period....................... $(1,054,415) $ (619,234) $ (641,506)
=========== =========== ==========
Pro forma information:
Historical net earnings.............................. $ 697,979 $ 449,316 $ 1,639
Pro forma adjustment for income tax expense.......... (265,000) (171,000) (600)
----------- ----------- ----------
Pro forma net earnings....................... $ 432,979 $ 278,316 $ 1,039
=========== =========== ==========
</TABLE>

See accompanying notes to financial statements.

F-107
<PAGE> 192

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1996 AND 1997 AND PERIOD ENDED DECEMBER 24, 1997

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 24,
1996 1997 1997
----------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................................ $ 697,979 $ 449,316 $ 1,639
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation..................................... 92,251 121,192 8,285
Provision for bad debts.......................... 14,631 13,313 --
Changes in operating assets and liabilities:
Trade receivables.............................. 58,406 (41,411) (38,747)
Prepaid expenses and other assets.............. -- (13,640) 6,294
Accounts payable and accrued liabilities....... 100,318 1,865 (5,400)
Deferred revenue............................... 178,313 (401,130) 57,131
----------- --------- ---------
Net cash provided by operating activities... 1,141,898 129,505 29,202
----------- --------- ---------
Cash flows from investing activities -- purchase of
equipment........................................... (61,987) (58,662) --
----------- --------- ---------
Cash flows from financing activities:
Repayments of capital lease obligations............. (54,086) (56,708) (5,291)
Net advances to owners.............................. (1,025,825) (14,135) (23,911)
----------- --------- ---------
Net cash used by financing activities....... (1,079,911) (70,843) (29,202)
----------- --------- ---------
Net change in cash and cash at beginning and
end of period............................. $ -- $ -- $ --
=========== ========= =========
Supplemental disclosure of cash flow
information -- cash paid for interest............... $ 18,331 $ 11,261 $ 938
=========== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-108
<PAGE> 193

THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

The accompanying financial statements include the accounts of the
Pennsylvania Research Partnership Network (PREPnet), the data communications
network of a consortium of research institutions in Pennsylvania. A joint
venture between Carnegie Mellon University and the University of Pittsburgh
serves as the legal entity and coordinator of the consortium. The accompanying
financial statements have been prepared assuming that PREPnet had been operated
separately as of December 1, 1995 and thereafter. PREPnet provides internet
services to businesses, educational institutions, not-for-profit organizations,
and individual subscribers.

Effective December 24, 1997, the net assets of PREPnet were acquired by
Verio Inc. in a purchase business combination.

Revenue Recognition

Internet services are recognized as the services are provided. PREPnet
records deferred revenue for amounts billed and/or collected in advance.

Equipment

Equipment, including any assets held under capital leases, is stated at
cost, less accumulated depreciation. Depreciation is recorded using the
straight-line method over the estimated useful lives of the related assets or
the lease term, which is 3 years. Costs for normal repairs and maintenance are
expensed as incurred.

Long-Lived Assets

PREPnet evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.

Income Taxes

The operations of PREPnet are included in the income tax returns of the
joint venture, which is a non-profit entity and is exempt from income taxes.
However, pro forma information has been included in the accompanying statement
of operations to reflect a pro forma adjustment for income tax expense as if
PREPnet had been a separate taxable entity subject to federal and state income
taxes for all periods presented.

F-109
<PAGE> 194
THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statements purposes. Management estimates that the fair values of all
financial instruments as of November 30, 1996 and 1997 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

(2) EQUIPMENT

Equipment consisted of the following at November 30:

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Internet and computer equipment............................. $ 321,434 $ 376,014
Furniture and office equipment.............................. 5,854 9,936
--------- ---------
327,288 385,950
Less accumulated depreciation and amortization.............. (126,750) (247,942)
--------- ---------
$ 200,538 $ 138,008
========= =========
</TABLE>

(3) COMMITMENTS

PREPnet leases certain computer and office equipment under capital leases.
PREPnet also leases office space under noncancelable operating leases expiring
at various dates through 2001.

Future minimum annual lease payments under capital and noncancelable
operating leases for each of the years ending November 30 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ $ 58,810 $ 50,731
1999........................................................ -- 50,341
2000........................................................ -- 27,867
2001........................................................ -- 49,171
-------- --------
Total minimum payments.................................... 58,810 $178,110
========
Less amount representing interest........................... (2,548)
--------
Present value of net minimum lease payments............... 56,262
Less current portion........................................ (56,262)
--------
$ --
========
</TABLE>

Rent expense for the years ended November 30, 1996 and 1997 and the period
ended December 24, 1997 was $47,674, $73,218 and $6,102, respectively.

(4) GRANT REVENUE

PREPnet receives grant revenue from the National Science Foundation and
other government agencies to provide network connections to certain
not-for-profit educational institutions. Grant revenue is recognized ratably
over the term of the contract, which is generally twelve months. Total deferred
grant revenue at November 30, 1996 was $71,667.

F-110
<PAGE> 195
THE PENNSYLVANIA RESEARCH PARTNERSHIP NETWORK
(PREPNET)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) RELATED PARTY TRANSACTIONS

Carnegie Mellon University provides administrative support and use of
facilities to PREPnet and allocates the cost of these services to the entity.
Such allocations totalled approximately $69,188 and $81,886 for the years ended
November 30, 1996 and 1997, respectively.

F-111
<PAGE> 196

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Monumental Network
Systems, Inc. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Monumental Network Systems,
Inc. 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.

KPMG Peat Marwick LLP

Denver, Colorado
February 25, 1998

F-112
<PAGE> 197

MONUMENTAL NETWORK SYSTEMS, INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
--------- -----------
<S> <C> <C>
Current assets:
Cash...................................................... $ 63,693 $ --
Trade receivables, net of allowance for doubtful accounts
of $15,363 and $41,207................................. 138,263 214,440
--------- -----------
Total current assets.............................. 201,956 214,440
Equipment, net (note 2)..................................... 359,327 440,406
Other assets, net........................................... 17,664 66,562
--------- -----------
Total assets...................................... $ 578,947 $ 721,408
========= ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable.......................................... $ 186,526 $ 258,319
Accrued liabilities....................................... 23,052 163,436
Current portion of notes payable (note 3):
Related party.......................................... 30,025 132,954
Other.................................................. 9,789 49,694
Current portion of obligations under capital lease (note
4)..................................................... 70,736 82,194
Deferred revenue.......................................... 326,924 573,057
Cash overdraft............................................ -- 166,157
--------- -----------
Total current liabilities......................... 647,052 1,425,811
Notes payable, less current portion (note 3)................ 8,915 21,067
Capital lease obligations, less current portion (note 4).... 114,764 97,208
--------- -----------
Total liabilities................................. 770,731 1,544,086
Stockholders' deficit:
Common stock, $1.00 par value, 500,000 shares authorized,
300,944 and 302,779 shares issued and outstanding as of
December 31, 1996 and 1997............................. 300,944 302,779
Additional paid-in capital................................ 197,494 199,329
Accumulated deficit....................................... (690,222) (1,324,786)
--------- -----------
Total stockholders' deficit....................... (191,784) (822,678)
Commitments (note 4)
--------- -----------
Total liabilities and stockholders' deficit....... $ 578,947 $ 721,408
========= ===========
</TABLE>

See accompanying notes to financial statements.

F-113
<PAGE> 198

MONUMENTAL NETWORK SYSTEMS, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $1,250,789 $2,425,121
Computer hardware and software sales...................... 95,557 41,733
Other..................................................... 24,197 4,653
---------- ----------
Total revenue..................................... 1,370,543 2,471,507
---------- ----------
Operating expenses:
Internet services operating costs......................... 385,439 743,524
Cost of hardware and software sales....................... 198,486 417,559
Selling, general and administrative....................... 1,246,716 1,756,956
Depreciation.............................................. 74,607 172,092
---------- ----------
Total operating expenses.......................... 1,905,248 3,090,131
---------- ----------
Loss from operations.............................. (534,705) (618,624)
Interest expense, net....................................... 18,448 15,940
---------- ----------
Net loss.......................................... $ (553,153) $ (634,564)
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-114
<PAGE> 199

MONUMENTAL NETWORK SYSTEMS, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
------------------ PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996.............. 114,015 $114,015 $ -- $ (137,069) $ (23,054)
Issuance of common shares for cash....... 100,000 100,000 100,000 -- 200,000
Issuance of common shares for services or
equipment.............................. 86,929 86,929 97,494 -- 184,423
Net loss................................. -- -- -- (553,153) (553,153)
------- -------- -------- ----------- ---------
BALANCES AT DECEMBER 31, 1996............ 300,944 300,944 197,494 (690,222) (191,784)
Issuance of common shares for cash....... 1,000 1,000 1,000 -- 2,000
Issuance of common shares for services... 835 835 835 -- 1,670
Net loss................................. -- -- -- (634,564) (634,564)
------- -------- -------- ----------- ---------
BALANCES AT DECEMBER 31, 1997............ 302,779 $302,779 $199,329 $(1,324,786) $(822,678)
======= ======== ======== =========== =========
</TABLE>

See accompanying notes to financial statements.

F-115
<PAGE> 200

MONUMENTAL NETWORK SYSTEMS, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(553,153) $(634,564)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation........................................... 74,607 172,092
Provision for bad debts................................ 15,363 170,634
Changes in operating assets and liabilities:
Trade receivables.................................... (127,442) (246,811)
Other assets......................................... (15,691) (48,898)
Accounts payable..................................... 120,414 71,793
Accrued liabilities.................................. 13,704 140,384
Deferred revenue..................................... 278,172 246,133
--------- ---------
Net cash used by operating activities............. (194,026) (129,237)
--------- ---------
Cash flows from investing activities -- purchases of
equipment................................................. (142,367) (178,377)
--------- ---------
Cash flows from financing activities:
Net change in cash overdraft.............................. -- 166,157
Borrowings under note payable to related parties.......... 30,848 130,000
Principal payments on note payable to related parties..... (823) (27,071)
Borrowings under notes payable............................ 18,704 66,229
Repayments of notes payable............................... -- (14,172)
Principal payments on capital lease obligations........... (36,824) (80,892)
Issuance of common stock.................................. 384,423 3,670
--------- ---------
Net cash provided by financing activities......... 396,328 243,921
--------- ---------
Increase (decrease) in cash....................... 59,935 (63,693)
Cash at beginning of year................................... 3,758 63,693
--------- ---------
Cash at end of year......................................... $ 63,693 $ --
========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 18,739 $ 16,508
========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ 219,242 $ 74,794
========= =========
</TABLE>

See accompanying notes to financial statements.

F-116
<PAGE> 201

MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Monumental Network Systems, Inc. (the Company) was incorporated in the
State of Virginia on April 13, 1994. The Company's business consists of
providing regional internet access services, hardware and software sales, and
consulting to customers in Virginia, Maryland and the Washington D.C. area.

Effective December 31, 1997, Verio Inc. acquired all of the outstanding
common stock of the Company.

Equipment

Equipment, including any assets held under capital leases, is stated at
cost, less accumulated depreciation. Depreciation is recorded using the
straight-line method over the estimated useful lives of the related assets, or
over the lease term, which range from three to seven years. Costs for normal
repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at lower of the carrying amount or fair value less
costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized when services have been
rendered.

Revenue from hardware and software sales is recognized upon shipment of the
respective products, if significant future vendor obligations do not exist and
collectibility is probable.

Income Taxes

F-117
<PAGE> 202
MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1996 and 1997 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

Customers who operate in Virginia, Maryland and the Washington D.C. area
represent substantially all of the Company's customer base. No single customer
comprised more than 10% of accounts receivable or total revenue as of or for the
years ended December 31, 1996 or 1997.

Stock-Based Compensation

The Company accounts for its stock-based employee compensation plan using
the intrinsic value based method prescribed by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations (APB 25). The Company has provided pro forma disclosures of net
loss as if the fair value based method of accounting for the plan, as prescribed
by Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), had been applied. Pro forma disclosures
include the effects of employee stock options granted during the years ended
December 31, 1996 and 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Equipment................................................... $413,615 $ 642,498
Furniture and office equipment.............................. 39,310 55,505
Leasehold improvements...................................... -- 8,093
-------- ---------
452,925 706,096
Less accumulated depreciation............................... (93,598) (265,690)
-------- ---------
$359,327 $ 440,406
======== =========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of $198,445 and $201,745 at December 31, 1996 and 1997, respectively.
Depreciation expense totaled $74,607 and $172,092 for the years ended December
31, 1996 and 1997, respectively.

(3) DEBT

Notes payable consists of the following as of December 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Notes payable with interest rates ranging from 8.25% to
8.39%, secured by vehicles due through 2002............... $14,319 $ 34,625
Unsecured notes payable to vendors with interest at 15% due
in 1998................................................... 4,385 36,136
------- --------
18,704 70,761
Less current portion........................................ (9,789) (49,694)
------- --------
$ 8,915 $ 21,067
======= ========
</TABLE>

F-118
<PAGE> 203
MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

During 1996, the Company issued notes payable to stockholders of the
Company in the amount of $30,848, with interest at 6%, and monthly payments of
principal and interest due in various dates through 1998. The total unpaid
balance as of December 31, 1997 was $30,025.

During 1997, the Company issued additional notes payable to stockholders of
the Company totaling $130,000, which bear interest at 9%, with interest payable
annually, and are due on demand.

(4) COMMITMENTS

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ $103,978 $29,132
1999........................................................ 66,919 5,736
2000........................................................ 39,031 1,710
2001........................................................ 3,818 --
-------- -------
Total minimum payments.................................... 213,746 $36,578
=======
Less amount representing interest........................... (34,344)
--------
Present value of net minimum lease payments............... 179,402
Less current portion........................................ (82,194)
--------
$ 97,208
========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 was $38,967 and
$53,084, respectively.

(5) INCOME TAXES

As of December 31, 1997, the Company has a net operating loss carryforward
of approximately $470,000 which will expire in 2012, if not utilized. A
valuation allowance has been recorded for the entire deferred tax asset related
primarily to the net operating loss carryforward due to the uncertainty relating
to the realization of the benefit of the deferred tax asset in the future.

(6) STOCK OPTION PLAN

The Company's 1997 Option Plan (the Plan) was adopted by the Board of
Directors and approved by the stockholders of the Company on January 1, 1997.
The Plan provides that salaried officers or key employees, non-employee
directors, and consultants who provide services to the Company may, at the
discretion of the plan administrator, be granted Incentive or Non-statutory
stock options to purchase shares of common stock. 200,000 shares of the
Company's common stock have been authorized for issuance under the Plan, of
which 11,872 incentive stock options were granted in 1997, with an exercise
price of $2.00 per share. None of the options were exercised or canceled during
1997.

Options vest 25% on the first anniversary of the option grant date and 25%
on each of the following three anniversary dates. As of December 31, 1997, no
options were vested or exercisable. The weighted average contractual term of
outstanding options was approximately 9 years at December 31, 1997.

The per share weighted-average fair value of stock options granted was $.33
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions; expected dividend yield

F-119
<PAGE> 204
MONUMENTAL NETWORK SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

0%, risk-free interest rate of 6%, and expected life of three years. If the
Company determined compensation expense in 1997 based on the fair value of the
options at the grant date under SFAS No. 123, net loss would not have been
significantly different from the historical results of operations other than for
compensation expense recognized for options granted at less than fair value, as
discussed below.

None of the incentive stock option shares were exercisable or vested as of
December 31, 1997. However, in accordance with the acquisition agreement between
the Company and Verio Inc., Monumental Network Systems, Inc. purchased the
11,872 options outstanding as of December 31,1997 at fair market value, less the
exercise price per share, and recorded a charge to operations of $84,152.

F-120
<PAGE> 205

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Internet Servers, Inc.
as of December 31, 1996 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for the period from inception (August 23,
1995) to December 31, 1995 and the years ended December 31, 1996 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Internet Servers, Inc. as of
December 31, 1996 and 1997, and the results of its operations and its cash flows
for the period from inception (August 23, 1995) to December 31, 1995 and the
years ended December 31, 1996 and 1997 in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
March 2, 1998

F-121
<PAGE> 206

INTERNET SERVERS, INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS

<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 18,021 $1,161,510
Receivables:
Trade, net of allowance for doubtful accounts of
$11,029 in 1997....................................... 98,675 220,571
Employees.............................................. -- 67,000
Prepaid expenses and other................................ -- 85,478
-------- ----------
Total current assets.............................. 116,696 1,534,559
Equipment, net (note 2)..................................... 484,240 714,205
-------- ----------
Total assets...................................... $600,936 $2,248,764
======== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 35,061 $ 118,241
Accrued liabilities....................................... 11,731 159,366
Income taxes payable...................................... 111,314 316,456
Deferred revenue.......................................... -- 14,388
-------- ----------
Total current liabilities......................... 158,106 608,451
Stockholders' equity (note 5):
Common stock, no par value, 100,000 shares authorized,
10,895 and 11,092 shares issued and outstanding........ 70,918 426,129
Retained earnings......................................... 371,912 1,214,184
-------- ----------
Total stockholders' equity........................ 442,830 1,640,313
Commitments (note 4)
-------- ----------
Total liabilities and stockholders' equity........ $600,936 $2,248,764
======== ==========
</TABLE>

See accompanying notes to financial statements.

F-122
<PAGE> 207

INTERNET SERVERS, INC.

STATEMENTS OF OPERATIONS
PERIOD FROM INCEPTION (AUGUST 23, 1995) TO DECEMBER 31, 1995 AND
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 23,
1995) TO
DECEMBER 31,
1995 1996 1997
------------ ---------- ----------
<S> <C> <C> <C>
Revenue:
Enhanced services................................... $48,380 $1,507,875 $3,476,045
Internet services................................... -- -- 704,187
Other............................................... 2,520 -- 211,962
------- ---------- ----------
Total revenue............................... 50,900 1,507,875 4,392,194
======= ========== ==========
Operating costs and expenses:
Enhanced and internet services operating costs...... 8,240 631,111 1,820,757
Selling, general and administrative................. 35,698 166,751 721,337
Depreciation........................................ 5,728 90,343 259,984
------- ---------- ----------
Total costs and expenses.................... 49,666 888,205 2,802,078
------- ---------- ----------
Earnings from operations.................... 1,234 619,670 1,590,116
Other income, net..................................... -- 322 26,215
------- ---------- ----------
Earnings before income taxes................ 1,234 619,992 1,616,331
Income tax expense (note 3)........................... -- (111,314) (602,059)
------- ---------- ----------
Net earnings................................ $ 1,234 $ 508,678 $1,014,272
======= ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-123
<PAGE> 208

INTERNET SERVERS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (AUGUST 23, 1995) TO DECEMBER 31, 1995 AND
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
COMMON STOCK
------------------ RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ -------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCES AT INCEPTION......................... -- $ -- $ -- $ --
Issuances of common stock for cash............ 9,800 13,000 -- 13,000
Net earnings.................................. -- -- 1,234 1,234
------ -------- ---------- ----------
BALANCES AT DECEMBER 31, 1995................. 9,800 13,000 1,234 14,234
Issuance of common stock for services......... 1,095 57,918 -- 57,918
Dividends paid in cash........................ -- -- (138,000) (138,000)
Net earnings.................................. -- -- 508,678 508,678
------ -------- ---------- ----------
BALANCES AT DECEMBER 31, 1996................. 10,895 70,918 371,912 442,830
Issuance of common stock for services......... 197 355,211 -- 355,211
Dividends paid in cash........................ -- -- (172,000) (172,000)
Net earnings.................................. -- -- 1,014,272 1,014,272
------ -------- ---------- ----------
BALANCES AT DECEMBER 31, 1997................. 11,092 $426,129 $1,214,184 $1,640,313
====== ======== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-124
<PAGE> 209

INTERNET SERVERS, INC.

STATEMENTS OF CASH FLOWS
PERIOD FROM INCEPTION (AUGUST 23, 1995) TO DECEMBER 31, 1995 AND
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(AUGUST 23,
1995) TO
DECEMBER 31,
1995 1996 1997
------------ --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings......................................... $ 1,234 $ 508,678 $1,014,272
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation...................................... 5,728 90,343 259,984
Provision for bad debts........................... -- -- 58,371
Common stock issued for services.................. -- 57,918 355,211
Changes in operating assets and liabilities:
Receivables..................................... (12,611) (86,064) (247,267)
Prepaid expenses and other...................... -- -- (85,478)
Accounts payable................................ 13,224 21,837 83,180
Accrued liabilities............................. 4,896 6,835 147,635
Income taxes payable............................ -- 111,314 205,142
Deferred revenue................................ -- -- 14,388
-------- --------- ----------
Net cash provided by operating activities.... 12,471 710,861 1,805,438
-------- --------- ----------
Cash flows from investing activities -- purchases of
equipment............................................ (35,144) (545,167) (489,949)
-------- --------- ----------
Cash flows from financing activities:
Borrowings on debt................................... 7,000 -- --
Repayments of debt................................... -- (7,000) --
Proceeds from issuance of common stock............... 13,000 -- --
Dividends............................................ -- (138,000) (172,000)
Net change in cash overdraft......................... 2,673 (2,673) --
-------- --------- ----------
Net cash provided (used) by financing
activities................................. 22,673 (147,673) (172,000)
-------- --------- ----------
Increase in cash and cash equivalents........ -- 18,021 1,143,489
Cash and cash equivalents at beginning of period....... -- -- 18,021
-------- --------- ----------
Cash and cash equivalents at end of period............. $ -- $ 18,021 $1,161,510
======== ========= ==========
Supplemental disclosure of cash flow information --
cash paid during the year for income taxes........... $ -- $ 40,000 $ 349,743
======== ========= ==========
</TABLE>

See accompanying notes to financial statements.

F-125
<PAGE> 210

INTERNET SERVERS, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Internet Servers, Inc. (the Company) was incorporated in the State of Utah
on August 23, 1995. The Company's business consists of providing regional
internet enhanced services and consulting to customers in Utah and throughout
the Western states.

Effective December 31, 1997, Verio Inc. acquired 100% of the outstanding
common stock of the Company.

Cash and Cash Equivalents

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

Revenue Recognition

Revenue related to enhanced and internet services is recognized as the
services are provided. Enhanced services consists primarily of web hosting
services to customers. The Company records deferred revenue for accounts billed
and/or collected in advance.

Revenue from hardware and software sales is recognized upon shipment of the
respective products if the Company's future obligations are not significant and
collectibility is probable.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
provided over the estimated useful lives of the assets ranging from three to
seven years using the straight-line method. Costs for normal repairs and
maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations including goodwill when indications of impairment are
present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value less costs to sell.

Income Taxes

From inception to September 1, 1996, the Company elected to be treated as a
subchapter S Corporation for income tax purposes. Accordingly, taxable income
through September 1, 1996 was included in the income tax returns of the
shareholders. On September 1, 1996, the Company converted to a C Corporation.

F-126
<PAGE> 211
INTERNET SERVERS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the difference is expected to reverse.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1996 and 1997 approximate their
carrying values based on their terms and interest rates. The use of different
market assumptions and/or estimation methodologies may have a significant effect
on the estimated fair values.

Customers who operate in Utah represent substantially all of the Company's
customer base and accounts receivable. However, no single customer comprised
more than 10% of accounts receivable or total revenue as of or for the years
ended December 31, 1995, 1996 or 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Internet and computer equipment............................. $561,296 $1,044,691
Furniture and office equipment.............................. 19,015 25,569
-------- ----------
580,311 1,070,260
Less accumulated depreciation and amortization.............. (96,071) (356,055)
-------- ----------
$484,240 $ 714,205
======== ==========
</TABLE>

(3) INCOME TAXES

Income tax expense consists of the following for the years ended December
31:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Current:
Federal...................................... $ 91,314 $548,794
State........................................ 20,000 53,265
-------- --------
$111,314 $602,059
======== ========
</TABLE>

Income tax expense for the years ended December 31 differs from the amounts
computed using the federal statutory tax rate of 34% to earnings before income
taxes as follows:

<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Expected tax expense........................................ $ 210,797 $549,553
State income taxes, net of federal benefit.................. 20,460 53,341
S Corporation taxable income................................ (120,693) --
Other....................................................... 750 (835)
--------- --------
Actual income tax expense......................... $ 111,314 $602,059
========= ========
</TABLE>

F-127
<PAGE> 212
INTERNET SERVERS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Temporary differences in the bases of assets and liabilities for financial
statement and income tax purposes are not significant as of December 31, 1996
and 1997.

(4) COMMITMENTS

The Company leases certain computer equipment and office space under
noncancelable operating leases expiring at various dates through 2000. Future
minimum annual lease payments under noncancelable operating leases for each of
the years ending December 31 are as follows:

<TABLE>
<S> <C>
1998.............................................. $359,139
1999.............................................. 345,684
2000.............................................. 148,654
--------
Total minimum payments............................ $853,477
========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 was $14,500 and
$241,402, respectively.

(5) STOCKHOLDERS' EQUITY

On October 21, 1996, the Company entered into an employment agreement with
an officer. The agreement included a compensation and benefit package which also
included a long-term incentive provision consisting of the granting of shares of
the Company's common stock equal to two percent of the total common shares
outstanding. As of December 31, 1996, 25 shares had been issued resulting in
compensation expense of $45,078 based on the estimated fair value of the stock,
as determined by the Company's Board of Directors.

In accordance with the acquisition agreement between the Company and Verio
Inc., the unvested shares under the employment agreement were fully vested at
December 31, 1997. An additional 197 shares were issued as of December 31, 1997
and compensation expense of $355,211 was recognized by the Company based on the
estimated fair value of the stock using the acquisition price in the Verio Inc.
transaction.

F-128
<PAGE> 213

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of NSNet, Inc. as of
December 31, 1996 and 1997, and the related statements of operations, owner's
and stockholder's equity, 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NSNet, Inc. 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.

KPMG Peat Marwick LLP

Denver, Colorado
March 13, 1998

F-129
<PAGE> 214

NSNET, INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS (NOTE 3)

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Current assets:
Cash...................................................... $ 4,188 $ 20,169
Receivables:
Trade, net of allowance for doubtful accounts of $3,133
and $12,158 in 1996 and 1997, respectively............ 27,494 85,881
Other.................................................. -- 20,377
Prepaid expenses and other................................ 124,829 333,130
-------- --------
Total current assets.............................. 156,511 459,557
Equipment, net (note 2)..................................... 177,410 378,874
Other assets................................................ -- 67,665
-------- --------
Total assets...................................... $333,921 $906,096
======== ========

LIABILITIES AND OWNER'S AND STOCKHOLDER'S EQUITY

Current liabilities:
Cash overdraft............................................ $ 41,057 $ --
Accounts payable.......................................... 7,614 94,252
Accrued liabilities....................................... 37,778 44,866
Revolving lines of credit (note 3)........................ -- 200,000
Current portion of capital lease obligations (note 4)..... -- 34,231
Deferred revenue and customer advances.................... 42,827 82,699
-------- --------
Total current liabilities......................... 129,276 456,048
Capital lease obligations, less current portion (note 4).... -- 61,636
-------- --------
Total liabilities................................. 129,276 517,684
Owner's and Stockholder's equity:
Owner's equity............................................ 204,645 --
Common stock, no par value, 2,000,000 shares authorized,
100,000 shares issued and outstanding at December 31,
1997................................................... -- 204,645
Retained earnings......................................... -- 183,767
-------- --------
Total owner's and stockholder's equity............ 204,645 388,412
Commitments (note 4)
-------- --------
Total liabilities and owner's and stockholder's
equity.......................................... $333,921 $906,096
======== ========
</TABLE>

See accompanying notes to financial statements.

F-130
<PAGE> 215

NSNET, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $887,939 $1,832,374
Other..................................................... -- 14,550
-------- ----------
Total revenue..................................... 887,939 1,846,924
-------- ----------
Operating expenses:
Internet services operating costs......................... 210,517 471,247
Selling, general and administrative....................... 485,128 938,523
Depreciation.............................................. 61,106 126,301
-------- ----------
Total operating expenses.......................... 756,751 1,536,071
-------- ----------
Earnings from operations.......................... 131,188 310,853
Other income (expense), net................................. 1,885 (5,508)
-------- ----------
Net earnings...................................... $133,073 305,345
======== ==========
Pro forma information:
Historical net earnings................................... 133,073 305,345
Pro forma adjustment for income tax expense............... (51,000) (116,000)
-------- ----------
Pro forma net earnings............................ $ 82,073 $ 189,345
======== ==========
</TABLE>

See accompanying notes to financial statements.

F-131
<PAGE> 216

NSNET, INC.

STATEMENTS OF OWNER'S AND STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
TOTAL
OWNER'S COMMON RETAINED STOCKHOLDER'S
EQUITY STOCK EARNINGS EQUITY
--------- -------- --------- -------------
<S> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996..................... $ 75,037 $ -- $ -- $ 75,037
Distributions................................. (3,465) -- -- (3,465)
Net earnings.................................. 133,073 -- -- 133,073
--------- -------- --------- ---------
BALANCES AT DECEMBER 31, 1996................... 204,645 -- -- 204,645
Issuance of common stock upon incorporation
(note 1)................................... (204,645) 204,645 -- --
Distributions................................. -- -- (121,578) (121,578)
Net earnings.................................. -- -- 305,345 305,345
--------- -------- --------- ---------
BALANCES AT DECEMBER 31, 1997................... $ -- $204,645 $ 183,767 $ 388,412
========= ======== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-132
<PAGE> 217

NSNET, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 133,073 $ 305,345
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation........................................... 61,106 126,301
Provision for bad debts................................ 3,133 24,334
Changes in operating assets and liabilities:
Receivables.......................................... (17,073) (103,098)
Prepaid expenses and other........................... (124,829) (208,301)
Accounts payable and accrued liabilities............. 26,911 93,726
Deferred revenue and customer advances............... 25,647 39,872
--------- ---------
Net cash provided by operating activities......... 107,968 278,179
--------- ---------
Cash flows from investing activities:
Purchases of equipment.................................... (141,372) (217,958)
Increase in other assets.................................. -- (67,665)
--------- ---------
Net cash used by investing activities............. (141,372) (285,623)
--------- ---------
Cash flows from financing activities:
Cash overdraft............................................ 41,057 (41,057)
Borrowings under revolving lines of credit................ -- 240,000
Repayments under revolving lines of credit................ -- (40,000)
Principal payments under capital lease obligations........ -- (13,940)
Distributions............................................. (3,465) (121,578)
--------- ---------
Net cash provided by financing activities......... 37,592 23,425
--------- ---------
Increase in cash.................................. 4,188 15,981
Cash at beginning of year................................... -- 4,188
--------- ---------
Cash at end of year......................................... $ 4,188 $ 20,169
========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ -- $ 5,508
========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ -- $ 109,807
========= =========
</TABLE>

See accompanying notes to financial statements.

F-133
<PAGE> 218

NSNET, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

NSNet, Inc. (the Company) was incorporated as a subchapter S Corporation in
the State of California on January 1, 1997. Prior to incorporation, the Company
was operating as NextGen Systems Internet Services, a sole proprietorship formed
in 1992. All assets and liabilities of the sole proprietorship were contributed
to the Company upon incorporation and recorded at historical cost. The Company
provides internet access services to customers in California.

Effective February 27, 1998, Verio Inc. acquired 100% of the outstanding
common stock of the Company.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for accounts billed and/or collected in advance.

Equipment

Equipment, including assets held under capital leases, is stated at cost,
less accumulated depreciation. Depreciation is recorded using the straight-line
method over the shorter of the estimated useful lives of the related assets or
the lease term, which is three years. Costs for normal repairs and maintenance
are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Income Taxes

No provision for income taxes has been included in the accompanying
financial statement for 1996 or 1997 due to the Company's status as a sole
proprietorship and subchapter S Corporation. Accordingly, net earnings as of
December 31, 1996 were included in owner's equity and taxable income has been
included in the tax returns of the owner and stockholder. However, pro forma
information has been included in the accompanying statements of operations to
reflect a pro forma adjustment for income tax expense as if the Company had been
a separate taxable entity subject to federal and state income taxes for both
years presented.

Concentration of Credit Risk and Financial Instruments

F-134
<PAGE> 219
NSNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

values of all financial instruments as of December 31, 1996 and 1997 approximate
their carrying values based on their terms and interest rates. The use of
different market assumptions and/or estimation methodologies may have a
significant effect on the estimated fair values.

Customers who operate in California represent substantially all of the
Company's customer base. No single customer comprised more than 10% of accounts
receivable or total revenue as of or for the years ended December 31, 1996 or
1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Internet and computer equipment............................. $255,112 $ 568,239
Furniture................................................... 10,000 24,638
-------- ---------
265,112 592,877
Less accumulated depreciation............................... (87,702) (214,003)
-------- ---------
$177,410 $ 378,874
======== =========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of $94,248 at December 31, 1997.

(3) DEBT

At December 31, 1997, the Company had a $150,000 unsecured revolving line
of credit agreement with a bank, under which $100,000 was outstanding.
Borrowings under the line bear interest at the bank's prime rate plus 2.975%
(11.475% at December 31, 1997), and are due in 1998. The agreement included
various restrictive covenants including limitations on indebtedness and payment
of dividends. As of December 31, 1997, the Company was not in compliance with
the restrictions on additional indebtedness. All borrowings under this line were
paid in full subsequent to the acquisition by Verio, Inc.

At December 31, 1997, the Company had an additional $125,000 revolving line
of credit agreement with a second bank, secured by substantially all of the
assets of the Company, under which $100,000 was outstanding. Borrowings under
the line bear interest at the bank's prime rate plus 1.5% (10% at December 31,
1997), and are due in 1998.

F-135
<PAGE> 220
NSNET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(4) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2002. Future minimum annual lease
payments under capital and noncancelable operating leases for each of the years
ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1998........................................................ $ 43,434 $ 95,767
1999........................................................ 43,434 110,092
2000........................................................ 23,227 114,004
2001........................................................ -- 118,862
2002........................................................ -- 108,956
-------- --------
Total minimum payments.................................... 110,095 $547,681
========
Less amount representing interest........................... (14,228)
--------
Present value of net minimum lease payments............... 95,867
Less current portion........................................ (34,231)
--------
$ 61,636
========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 totaled $19,801
and $34,082, respectively.

F-136
<PAGE> 221

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of Access One, Inc. as of
December 31, 1997 and the related statements of operations and accumulated
deficit, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

KPMG Peat Marwick LLP

Denver, Colorado
April 9, 1998

F-137
<PAGE> 222

ACCESS ONE, INC.

BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $ 259,144
Trade receivables, net of allowance for doubtful accounts
of $148,040 (note 3)................................... 344,773
Inventory................................................. 40,635
Prepaid expenses and other................................ 105,365
----------
Total current assets.............................. 749,917
Equipment, net (notes 2 and 3).............................. 678,752
Other assets................................................ 9,853
----------
Total assets...................................... $1,438,522
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Revolving line of credit.................................. $ 110,000
Accounts payable:
Trade.................................................. 144,297
Related party (note 5)................................. 273,306
Accrued liabilities....................................... 376,330
Notes payable (note 3).................................... 88,550
Current portion of capital lease obligations (note 4)..... 8,858
Note payable to related party (note 5).................... 32,194
Deferred revenue.......................................... 294,266
----------
Total current liabilities......................... 1,327,801
Capital lease obligations, less current portion (note 4).... 6,812
----------
Total liabilities................................. 1,334,613
Redeemable preferred stock, $0.01 par value, 500,000 shares
authorized, 200,000 shares issued and outstanding (note
6)........................................................ 508,748
Stockholders' deficit (note 6):
Common stock, $0.01 par value, 2,000,000 shares
authorized, 800,000 shares issued and outstanding...... 8,000
Additional paid-in capital................................ 85,476
Accumulated deficit....................................... (498,315)
----------
Total stockholders' deficit....................... (404,839)
Commitments (note 4)
----------
Total liabilities and stockholders' deficit....... $1,438,522
==========
</TABLE>

See accompanying notes to financial statements.

F-138
<PAGE> 223

ACCESS ONE, INC.

STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
Revenue:
Internet services......................................... $2,485,583
Enhanced services......................................... 702,639
Computer hardware and software sales...................... 303,465
Other..................................................... 27,019
----------
Total revenue..................................... 3,518,706
----------
Operating expenses:
Internet and enhanced services operating costs (note 5)... 613,084
Cost of hardware and software sales....................... 226,205
Selling, general and administrative (note 5).............. 2,922,073
Depreciation.............................................. 245,003
----------
Total operating expenses.......................... 4,006,365
----------
Loss from operations.............................. (487,659)
Other expense:
Interest expense.......................................... (21,833)
Other, net................................................ (3,808)
----------
Net loss.......................................... $ (513,300)
==========
Retained earnings at beginning of year...................... 14,985
Accumulated deficit at end of year.......................... (498,315)
==========
</TABLE>

See accompanying notes to financial statements.

F-139
<PAGE> 224

ACCESS ONE, INC.

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(513,300)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation......................................... 245,003
Provision for bad debts.............................. 386,983
Changes in operating assets and liabilities:
Receivables....................................... (445,284)
Inventory......................................... (40,635)
Prepaid expenses and other current assets......... (96,000)
Other assets...................................... (9,708)
Accounts payable and accrued liabilities.......... 541,280
Deferred revenue.................................. 148,798
---------
Net cash provided by operating activities.... 217,137
---------
Cash flows from investing activities -- purchase of
equipment................................................. (559,530)
---------
Cash flows from financing activities:
Borrowings under revolving line of credit................. 110,000
Borrowings under note payable............................. 127,916
Principal payments on note payable........................ (39,366)
Borrowings under notes to related parties................. 6,965
Principal payments under capital lease obligations........ (15,501)
---------
Net cash provided by financing activities.... 190,014
---------
Net decrease in cash......................... (152,379)
Cash at beginning of year................................... 411,523
---------
Cash at end of year......................................... $ 259,144
=========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 21,822
=========
</TABLE>

See accompanying notes to financial statements.

F-140
<PAGE> 225

ACCESS ONE, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Access One, Inc. (the Company) was originally organized as a limited
liability company on July 1, 1994. The Company reincorporated on December 9,
1996 as a C corporation in the state of Washington. The Company provides
internet access and enhanced services and computer hardware and software sales
to customers primarily in Washington.

Effective February 27, 1998, Verio Inc. (Verio) acquired all of the
outstanding common stock of the Company, resulting in 100% ownership (see Note
6).

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using the straight-line method over the shorter of the estimated useful
lives of the related assets or the lease terms, which range from three to five
years. Costs for normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet and enhanced services are recognized as the services are provided.
Enhanced services consist primarily of web hosting and collocation services to
customers. The Company records deferred revenue for amounts billed and/or
collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

F-141
<PAGE> 226
ACCESS ONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company has a net operating loss carryforward for income tax purposes
of approximately $337,000 which expires in 2012. No tax benefit has been
recorded by the Company in 1997 due to the Company's net loss and the
uncertainty regarding the ultimate utilization of such loss carryforward. The
Company also has a deferred tax asset related to the allowance for doubtful
accounts of approximately $56,000. A valuation allowance has been recorded for
the entire balance of the deferred tax asset related to the carryforward and the
allowance for doubtful accounts. Other temporary differences between financial
statement and income tax bases of assets and liabilities are not significant.

Concentration of Credit Risk and Financial Instruments

Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized for
financial statement purposes. Management estimates that the fair values of all
financial instruments as of December 31, 1997 approximate their carrying values
based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

Customers who operate in Washington represent substantially all of the
Company's customer base. No single customer comprised more than 10% of revenue
or accounts receivable as of or for the year ended December 31, 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31, 1997:

<TABLE>
<S> <C>
Internet and computer equipment........................... $ 926,175
Furniture and office equipment............................ 120,657
---------
1,046,832
Less accumulated depreciation and amortization.............. (368,080)
---------
$ 678,752
=========
</TABLE>

Equipment includes assets held under capital lease with a net book value of
$12,990 at December 31, 1997.

(3) DEBT

Lines of credit and notes payable consist of the following as of December
31, 1997:

<TABLE>
<S> <C>
Revolving line of credit, maximum credit available of
$300,000, bearing interest at 1.5% above the bank's prime
lending rate, (10% at December 31, 1997), due in 1998, and
secured by accounts receivable............................ $ 110,000
Notes payable, bearing interest at 10.25%, due on demand, or
if no demand is made, in monthly payments of principal and
interest of $5,945 through April, 1999, and secured by
certain equipment of the Company.......................... 88,550
---------
198,550
Less current portion........................................ (198,550)
---------
Long-term debt, less current portion...................... $ --
=========
</TABLE>

The Company's revolving line of credit includes various restrictive
covenants including limitations on indebtedness and maintaining a specified debt
to equity ratio. As of December 31, 1997, the Company was not

F-142
<PAGE> 227
ACCESS ONE, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

in compliance with limitations placed by the debt to equity ratio. All
borrowings under the line were repaid upon completion of the buyout by Verio
Inc. in February 1998.

(4) COMMITMENTS

Leases

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 1999. Future minimum annual lease
payments under noncancelable capital and operating leases for each of the years
ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998.................................... $ 8,280 $80,808
1999.................................... 7,589 1,512
------- -------
Total minimum payments................ $15,869 $82,320
======= =======
Less amount representing interest....... (199)
-------
Present value of net minimum lease
payments.............................. 15,670
Less current portion.................... (8,858)
-------
$ 6,812
=======
</TABLE>

Rent expense for the year ended December 31, 1997 totaled $219,500.

The Company has commitments with two different telecommunications companies
to receive future services from such companies. Future payments under these
agreements total $8,200 per month through September 1999.

(5) TRANSACTIONS WITH RELATED PARTIES

During 1997, the Company received customer service, technical support, and
backbone transport services provided by Verio. Total amounts charged to the
Company by Verio in this manner were $79,421 included in internet and enhanced
services operating costs and $178,969 included in selling, general, and
administrative expenses. Verio also purchased approximately $14,916 of equipment
on behalf of the Company. Amounts due to related party at December 31, 1997
relate to these services and purchases of equipment and are non interest
bearing.

Note payable to related party is a non interest bearing, unsecured note
payable to the majority stockholder of the Company.

(6) REDEEMABLE PREFERRED STOCK

During 1996, the Company issued 200,000 shares of redeemable, convertible
Series A preferred stock to Verio. The preferred shares are convertible into
common shares on a one for one basis and are mandatorily redeemable in 2002. In
connection with the Verio acquisition disclosed in note 1, the preferred shares
were converted to common stock.

(7) EMPLOYEE BENEFIT PLAN

The Company sponsors a 401(k) Plan (the Plan) for all full time employees.
The Company makes matching contributions of 25% of employee contributions up to
6% of the respective employee's salary. During 1997 the Company made
contributions to the Plan totaling $11,876.

F-143
<PAGE> 228

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheet of STARnet, L.L.C. as of
December 31, 1997 and the related statements of operations, members' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

KPMG Peat Marwick LLP

Denver, Colorado
March 27, 1998

F-144
<PAGE> 229

STARNET, L.L.C.

BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash...................................................... $210,089
Trade receivables, net of allowance for doubtful accounts
of $22,944............................................. 111,541
Inventory................................................. 69,089
Prepaid expenses and other................................ 18,779
--------
Total current assets.............................. 409,498
Equipment, net (note 2)..................................... 208,336
Other assets................................................ 4,583
--------
Total assets...................................... $622,417
========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 31,371
Accrued liabilities....................................... 12,895
Deferred revenue.......................................... 371,608
--------
Total current liabilities......................... 415,874
Members' equity............................................. 206,543
Commitments (note 3)
--------
Total liabilities and members' equity............. $622,417
========
</TABLE>

See accompanying notes to financial statements.

F-145
<PAGE> 230

STARNET, L.L.C.

STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
<S> <C>
Revenue:
Internet services......................................... $1,201,504
Computer hardware sales................................... 386,376
Other..................................................... 13,094
----------
Total revenue..................................... 1,600,974
----------
Operating expenses:
Internet services operating costs......................... 397,019
Cost of hardware sales.................................... 319,486
Selling, general and administrative....................... 570,461
Depreciation.............................................. 155,968
----------
Total operating expenses.......................... 1,442,934
----------
Earnings from operations.......................... 158,040
Other income (expense):
Interest income........................................... 9,411
Other, net................................................ (6,282)
----------
Net earnings...................................... $ 161,169
==========
Pro forma information:
Historical net earnings................................... 161,169
Pro forma adjustment for income tax expense............... (61,000)
----------
Pro forma net earnings............................ $ 100,169
==========
</TABLE>

See accompanying notes to financial statements.

F-146
<PAGE> 231

STARNET, L.L.C.

STATEMENT OF MEMBERS' EQUITY
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
Balance at January 1, 1997.................................. $ 290,109
Distributions to members.................................... (244,735)
Net earnings................................................ 161,169
---------
Balance at December 31, 1997................................ $ 206,543
=========
</TABLE>

See accompanying notes to financial statements.

F-147
<PAGE> 232

STARNET, L.L.C.

STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 161,169
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation........................................... 155,968
Provision for bad debts................................ 44,484
Loss on sale of assets................................. 6,282
Changes in operating assets and liabilities:
Receivables.......................................... (40,725)
Inventory............................................ 50,205
Prepaid expenses and other current assets............ (13,944)
Other assets......................................... 834
Accounts payable and accrued liabilities............. (54,304)
Deferred revenue..................................... (3,346)
---------
Net cash provided by operating activities......... 306,623
---------
Cash flows from investing activities -- purchase of
equipment................................................. (117,202)
---------
Cash flows from financing activities -- distributions to
members................................................... (244,735)
---------
Net decrease in cash.............................. (55,314)
Cash at beginning of year................................... 265,403
---------
Cash at end of year......................................... $ 210,089
=========
</TABLE>

See accompanying notes to financial statements.

F-148
<PAGE> 233

STARNET, L.L.C.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

STARnet, L.L.C. (the Company) was originally organized as a limited
liability company in the State of Missouri as Internetix, L.L.C. on June 21,
1994. On August 18, 1997, the Company changed its name to STARnet, L.L.C. The
Company provides internet access services and computer hardware sales to
customers primarily in Missouri and Illinois.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is
recorded using a method that estimates the straight-line method over the
estimated useful lives of the related assets, which is three years. Costs for
normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

No provision for income taxes has been included in the accompanying
financial statements due to the Company's status as a limited liability
corporation. Accordingly, taxable income has been included in the tax returns of
the members. However, pro forma information has been included in the
accompanying statement of operations to reflect a pro forma adjustment for
income tax expense as if the Company had been a separate taxable entity subject
to federal and state income taxes for the year ended December 31, 1997.

Concentration of Credit Risk and Financial Instruments

F-149
<PAGE> 234
STARNET, L.L.C.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

terms and interest rates. The use of different market assumptions and/or
estimation methodologies may have a significant effect on the estimated fair
values.

Customers who operate in Missouri and Illinois represent substantially all
of the Company's customer base. Three customers comprised approximately 38% of
accounts receivable as of December 31, 1997. However, no single customer
comprised more than 10% of revenue for the year ended December 31, 1997.

(2) EQUIPMENT

Equipment consisted of the following at December 31, 1997:

<TABLE>
<S> <C>
Internet and computer equipment............................. $ 503,324
Furniture and office equipment.............................. 2,750
---------
506,074
Less accumulated depreciation and amortization.............. (297,738)
---------
$ 208,336
=========
</TABLE>

(3) COMMITMENTS

The Company leases office space and equipment under noncancelable leases
expiring at various dates through 2002. Future minimum annual lease payments
under noncancelable operating leases for each of the years ending December 31
are as follows:

<TABLE>
<S> <C>
1998............................................... $32,873
1999............................................... 26,236
2000............................................... 2,716
2001............................................... 870
2002............................................... 400
-------
Total minimum payments................... $63,095
=======
</TABLE>

Rent expense for the year ended December 31, 1997 totaled $39,630.

In addition, the Company has a verbal agreement to guarantee certain
obligations of a related party with a telecommunications company for one year in
the amount of $250,000.

F-150
<PAGE> 235

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Verio Inc.:

We have audited the accompanying balance sheets of Computing Engineers Inc.
as of December 31, 1996 and 1997, and the related statements of operations,
stockholders' equity 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Computing Engineers Inc. 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.

KPMG Peat Marwick LLP

Denver, Colorado
March 27, 1998

F-151
<PAGE> 236

COMPUTING ENGINEERS INC.

BALANCE SHEETS
DECEMBER 31, 1996 AND 1997

ASSETS (NOTE 3)

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash...................................................... $ -- $ 15,995
Trade receivables, net of allowance for doubtful accounts
of $133,739 and $62,085 in 1996 and 1997,
respectively........................................... 340,799 429,171
Inventory................................................. -- 37,411
Prepaid expenses and other................................ 2,014 2,014
---------- ----------
Total current assets.............................. 342,813 484,591
Equipment, net (note 2)..................................... 821,637 1,049,662
Other assets, net........................................... -- 20,420
---------- ----------
Total assets...................................... $1,164,450 $1,554,673
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Cash overdraft............................................ $ 54,352 $ --
Accounts payable.......................................... 355,223 225,153
Accrued liabilities....................................... 5,252 33,373
Current portion of note payable (note 3).................. -- 84,352
Current portion of obligations under capital leases (note
4)..................................................... 193,873 223,826
Deferred revenue.......................................... 146,010 249,817
---------- ----------
Total current liabilities......................... 754,710 816,521
Note payable, less current portion (note 3)................. -- 585,002
Capital lease obligations, less current portion (note 4).... 49,776 28,811
---------- ----------
Total liabilities................................. 804,486 1,430,334
Stockholders' equity:
Common stock, $10 par value, 1,000 shares authorized, 100
shares issued and outstanding.......................... 1,000 1,000
Additional paid-in capital................................ 5,000 5,000
Retained earnings......................................... 353,964 118,339
---------- ----------
Total stockholders' equity........................ 359,964 124,339
---------- ----------
Commitments (note 4)
Total liabilities and stockholders' equity........ $1,164,450 $1,554,673
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-152
<PAGE> 237

COMPUTING ENGINEERS INC.

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenue:
Internet services......................................... $2,326,898 $3,321,562
Consulting services....................................... -- 162,683
Computer hardware and software sales...................... 88,664 537,057
Other..................................................... -- 58,176
---------- ----------
Total revenue..................................... 2,415,562 4,079,478
---------- ----------
Operating expenses:
Internet services operating costs......................... 606,522 632,653
Costs of hardware and software sales...................... 148,770 392,676
Marketing and selling..................................... 47,155 299,990
General and administrative................................ 1,179,149 2,041,265
Depreciation and amortization............................. 144,953 329,296
---------- ----------
Total operating expenses.......................... 2,126,549 3,695,880
---------- ----------
Earnings from operations.......................... 289,013 383,598
Interest expense............................................ (19,254) (95,223)
---------- ----------
Net earnings...................................... $ 269,759 $ 288,375
========== ==========
Pro forma information:
Historical net earnings................................... $ 269,759 $ 288,375
Pro forma adjustment for income tax expense............... (103,000) (110,000)
---------- ----------
Pro forma net earnings............................ $ 166,759 $ 178,375
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-153
<PAGE> 238

COMPUTING ENGINEERS INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1996............ 100 $1,000 $5,000 $ 207,104 $ 213,104
Distributions to stockholders.......... -- -- -- (122,899) (122,899)
Net earnings........................... -- -- -- 269,759 269,759
--- ------ ------ --------- ---------
BALANCES AT DECEMBER 31, 1996.......... 100 1,000 5,000 353,964 359,964
Distributions to stockholders.......... -- -- -- (524,000) (524,000)
Net earnings........................... -- -- -- 288,375 288,375
--- ------ ------ --------- ---------
BALANCES AT DECEMBER 31, 1997.......... 100 $1,000 $5,000 $ 118,339 $ 124,339
=== ====== ====== ========= =========
</TABLE>

See accompanying notes to financial statements.

F-154
<PAGE> 239

COMPUTING ENGINEERS INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 269,759 $ 288,375
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization.......................... 144,953 329,296
Provision for bad debts................................ 133,739 165,153
Changes in operating assets and liabilities:
Trade receivables.................................... (472,524) (253,525)
Inventory............................................ -- (37,411)
Prepaid expenses and other........................... 142 --
Accounts payable..................................... 355,223 (130,070)
Accrued liabilities.................................. 238 28,121
Deferred revenue..................................... 146,010 103,807
--------- ---------
Net cash provided by operating activities......... 577,540 493,746
--------- ---------
Cash flows from investing activities -- purchases of
equipment................................................. (336,776) (228,892)
--------- ---------
Cash flows from financing activities:
Net change in cash overdraft.............................. (15,314) (54,352)
Borrowings under note payable............................. -- 700,000
Debt issuance costs....................................... -- (20,420)
Principal payments on note payable........................ -- (30,646)
Principal payments on capital lease obligations........... (102,551) (319,441)
Distributions to shareholders............................. (122,899) (524,000)
--------- ---------
Net cash used by financing activities............. (240,764) (248,859)
--------- ---------
Increase in cash.................................. -- 15,995
Cash at beginning of year................................... -- --
--------- ---------
Cash at end of year......................................... $ -- $ 15,995
========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest......................... $ 19,254 $ 95,223
========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations................ $ 346,200 $ 328,429
========= =========
</TABLE>

See accompanying notes to financial statements.

F-155
<PAGE> 240

COMPUTING ENGINEERS INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

Computing Engineers Inc. (the Company) was incorporated in the State of
Illinois on November 1, 1993. The Company is a provider of internet access
services to businesses and individuals, primarily in Illinois.

Equipment

Equipment, including any assets held under capital leases, is stated at
cost, less accumulated depreciation and amortization. Depreciation and
amortization is recorded using the straight-line method over the shorter of the
estimated useful lives of the related assets or the lease term, which is three
years. Costs for normal repairs and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). Statement No. 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at lower of the carrying amount or fair value less
costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from consulting services is recognized when services have been
rendered.

Revenue from hardware and software sales is recognized upon shipment of the
respective products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

No provision for income taxes has been included in the accompanying
financial statements for 1996 or 1997 due to the Company's status as a
subchapter S corporation. Accordingly, taxable income has been included in the
tax returns of the stockholders. However, pro forma information has been
included in the accompanying statements of operations to reflect a pro forma
adjustment for income tax expense as if the Company had been a separate taxable
entity subject to federal and state income taxes for all periods presented.

Concentration of Credit Risk and Financial Instruments

F-156
<PAGE> 241
COMPUTING ENGINEERS INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

(2) EQUIPMENT

Equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Internet and computer equipment............................ $ 973,392 $1,522,201
Furniture and office equipment............................. 22,048 30,560
--------- ----------
995,440 1,552,761
Less accumulated depreciation and amortization............. (173,803) (503,099)
--------- ----------
$ 821,637 $1,049,662
========= ==========
</TABLE>

Equipment includes assets owned under capital leases with a net book value
of $305,530 and $474,893 at December 31, 1996 and 1997, respectively.

(3) DEBT

Debt consists of the following as of December 31, 1997:

<TABLE>
<S> <C>
Note payable bearing interest at prime plus 2.75% (11.25% at
December 31, 1997), monthly principal and interest
payments of $11,986 through May 12, 2004, secured by
substantially all the assets of the Company............... $669,354
Less current portion........................................ (84,352)
--------
$585,002
========
</TABLE>

(4) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2005. Future minimum annual lease
payments under capital and noncancelable operating leases for each of the years
ending December 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
1998........................................................ $ 252,242 $ 234,353
1999........................................................ 29,695 219,153
2000........................................................ -- 192,161
2001........................................................ -- 197,120
2002........................................................ -- 202,079
Thereafter.................................................. -- 472,345
--------- ----------
Total minimum payments.................................... 281,937 $1,517,211
==========
Less amount representing interest........................... (29,300)
---------
Present value of net minimum lease payments............... 252,637
Less current portion........................................ (223,826)
---------
$ 28,811
=========
</TABLE>

Rent expense for the years ended December 31, 1996 and 1997 was $93,501 and
$134,777, respectively.

F-157
<PAGE> 242

INDEPENDENT AUDITORS' REPORT

The Board of Directors
LI Net, Inc.:

We have audited the accompanying balance sheets of LI Net, Inc. as of April
30, 1997 and January 31, 1998, and the related statements of operations,
stockholders' equity (deficit), and cash flows for the years ended April 30,
1996 and 1997 and the nine months ended January 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LI Net, Inc. as of April 30,
1997 and January 31, 1998, and the results of its operations and its cash flows
for the years ended April 30, 1996 and 1997 and the nine months ended January
31, 1998 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Denver, Colorado
March 27, 1998

F-158
<PAGE> 243

LI NET, INC.

BALANCE SHEETS
APRIL 30, 1997 AND JANUARY 31, 1998

ASSETS

<TABLE>
<CAPTION>
1997 1998
-------- ---------
<S> <C> <C>
Current assets:
Cash...................................................... $ 49,036 $ 24,575
Receivables (note 3):
Trade, net of all allowance for doubtful accounts of
$28,948 and $50,000, respectively..................... 157,643 225,148
Other.................................................. -- 6,000
Prepaid expenses and other................................ 3,850 3,850
-------- ---------
Total current assets.............................. 210,529 259,573
Equipment, net (notes 2 and 3).............................. 355,906 500,654
Other assets................................................ 25,057 28,708
-------- ---------
Total assets...................................... $591,492 $ 788,935
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $171,038 $ 245,777
Accrued liabilities....................................... 13,942 22,521
Current portion of notes payable (note 3):
Bank................................................... -- 22,476
Related party (note 6)................................. 9,038 8,885
Revolving line of credit (note 3)......................... 15,265 39,993
Current portion of obligations under capital leases (note
4)..................................................... 52,090 81,652
Deferred revenue.......................................... 77,766 158,740
-------- ---------
Total current liabilities......................... 339,139 580,044
Notes payable, less current portion (note 3):
Bank...................................................... -- 93,542
Related party (note 6).................................... 126,052 114,029
Capital lease obligations, less current portion (note 4).... 87,826 62,453
-------- ---------
Total liabilities................................. 553,017 850,068
Stockholders' equity (deficit):
Common stock, no par value, 100 shares authorized and
issued................................................. 44,000 44,000
Additional paid-in capital................................ -- 273,100
Retained earnings (deficit)............................... 6,375 (378,233)
Treasury stock -- 5 shares at April 30, 1997, at cost..... (11,900) --
-------- ---------
Total stockholders' equity (deficit).............. 38,475 (61,133)
-------- ---------
Commitments (note 4)
Total liabilities and stockholders' equity
(deficit)....................................... $591,492 $ 788,935
======== =========
</TABLE>

See accompanying notes to financial statements.

F-159
<PAGE> 244

LI NET, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Internet services..................................... $608,714 $1,033,595 $1,430,480
Computer hardware sales............................... 152,854 325,723 90,233
-------- ---------- ----------
Total revenue................................. 761,568 1,359,318 1,520,713
-------- ---------- ----------
Operating expenses:
Internet services operating costs..................... 197,025 317,225 551,993
Costs of hardware sold................................ 73,370 156,347 42,987
Selling, general and administrative expenses(note
7)................................................. 358,627 769,898 1,180,146
Depreciation.......................................... 64,470 77,762 100,902
-------- ---------- ----------
Total operating expenses...................... 693,492 1,321,232 1,876,028
Earnings (loss) from operations............... 68,076 38,086 (355,315)
Interest expense........................................ (10,596) (55,325) (29,293)
-------- ---------- ----------
Earnings (loss) before income taxes........... 57,480 (17,239) (384,608)
Income tax expense (note 5)............................. (7,600) -- --
-------- ---------- ----------
Net earnings (loss)........................... $ 49,880 $ (17,239) $ (384,608)
======== ========== ==========
</TABLE>

See accompanying notes to financial statements.

F-160
<PAGE> 245

LI NET, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL RETAINED STOCKHOLDERS'
COMMON PAID-IN EARNINGS TREASURY EQUITY
STOCK CAPITAL (DEFICIT) STOCK (DEFICIT)
------- ---------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT MAY 1, 1995............ $44,000 $ -- $ (26,266) $ -- $ 17,734
Purchase of treasury stock......... -- -- -- (10,000) (10,000)
Net earnings....................... -- -- 49,880 -- 49,880
------- -------- --------- -------- ---------
BALANCES AT APRIL 30, 1996......... 44,000 -- 23,614 (10,000) 57,614
Purchase of treasury stock......... -- -- -- (13,800) (13,800)
Issuance of treasury stock for
services (note 7)................ -- -- -- 11,900 11,900
Net loss........................... -- -- (17,239) -- (17,239)
------- -------- --------- -------- ---------
BALANCES AT APRIL 30, 1997......... 44,000 -- 6,375 (11,900) 38,475
Issuance of treasury stock for
services (note 7)................ -- 273,100 -- 11,900 285,000
Net loss........................... -- -- (384,608) -- (384,608)
------- -------- --------- -------- ---------
BALANCES AT JANUARY 31, 1998....... $44,000 $273,100 $(378,233) $ -- $ (61,133)
======= ======== ========= ======== =========
</TABLE>

See accompanying notes to financial statements.

F-161
<PAGE> 246

LI NET, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)..................................... $ 49,880 $ (17,239) $(384,608)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation......................................... 64,470 77,762 100,902
Provision for bad debts.............................. -- 28,948 50,000
Issuance of treasury stock for services.............. -- 11,900 285,000
Changes in operating assets and liabilities:
Receivables........................................ (66,218) (103,079) (123,505)
Prepaid expenses and other current assets.......... -- (3,850) --
Other assets....................................... (13,602) (6,580) (3,651)
Accounts payable and accrued liabilities........... 88,042 67,313 83,318
Deferred revenue................................... -- 77,766 80,974
--------- --------- ---------
Net cash provided by operating activities....... 122,572 132,941 88,430
--------- --------- ---------
Cash flows from investing activities -- purchases of
equipment............................................... (149,667) (94,633) (182,471)
--------- --------- ---------
Cash flows from financing activities:
Borrowings under revolving lines of credit.............. -- 15,265 24,728
Proceeds from borrowings from bank...................... -- -- 130,000
Principal payments on notes payable to bank............. -- -- (13,982)
Proceeds from borrowings from related parties........... 107,713 -- --
Principal payments on notes payable to related party.... (21,128) (13,677) (12,176)
Principal payments on capital lease obligations......... -- (39,872) (58,990)
Purchase of treasury stock.............................. (10,000) (13,800) --
--------- --------- ---------
Net cash provided (used) by financing
activities.................................... 76,585 (52,084) 69,580
--------- --------- ---------
Net increase (decrease) in cash................. 49,490 (13,776) (24,461)
Cash at beginning of year................................. 13,322 62,812 49,036
--------- --------- ---------
Cash at end of year....................................... $ 62,812 $ 49,036 $ 24,575
========= ========= =========
Supplemental disclosure of cash flow information -- cash
paid during the year for interest....................... $ 10,596 $ 39,621 $ 22,593
========= ========= =========
Noncash investing and financing activities -- equipment
acquired through capital lease obligations.............. $ 32,876 $ 146,912 $ 63,179
========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-162
<PAGE> 247

LI NET, INC.

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED APRIL 30, 1996 AND 1997 AND NINE MONTHS ENDED JANUARY 31, 1998

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

LI Net, Inc. (the Company) was incorporated in the State of New York and
provides regional internet access services to customers in New York.

Equipment

Equipment, including assets held under capital leases, is stated at cost,
less accumulated depreciation. Depreciation is recorded using the straight-line
method over the shorter of the estimated useful lives of the related assets or
the lease terms, which range from three to five years. Costs for normal repairs
and maintenance are expensed as incurred.

Long-Lived Assets

The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived
assets used in operations, including goodwill, when indications of impairment
are present and the undiscounted future cash flows estimated to be generated by
those assets are less than the assets' carrying amount. If such assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the estimated fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.

Revenue Recognition

Internet services are recognized as the services are provided. The Company
records deferred revenue for amounts billed and/or collected in advance.

Revenue from hardware sales is recognized upon shipment of the respective
products if the Company's future obligations are not significant and
collectibility is probable.

Income Taxes

Concentration of Credit Risk and Financial Instruments

F-163
<PAGE> 248
LI NET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

based on their terms and interest rates. The use of different market assumptions
and/or estimation methodologies may have a significant effect on the estimated
fair values.

(2) EQUIPMENT

Equipment consisted of the following at April 30, 1997 and January 31,
1998:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Internet and computer equipment............................. $ 409,376 $ 641,881
Furniture and office equipment.............................. 67,532 80,677
Leasehold improvements...................................... 32,297 32,297
--------- ---------
509,205 754,855
Less accumulated depreciation and amortization.............. (153,299) (254,201)
--------- ---------
$ 355,906 $ 500,654
========= =========
</TABLE>

Equipment includes assets held under capital leases with a net book value
of approximately $139,000 and $155,000 at April 30, 1997 and January 31, 1998,
respectively.

(3) DEBT

During fiscal 1998, the Company entered into a loan agreement with a bank
and borrowed $130,000. The loan is secured by the Company's equipment, and bears
interest at 8.75%. Principal and interest payments of $2,683 are due monthly
through 2002. At January 31, 1998, the outstanding balance was $116,018.

At April 30, 1997 and January 31, 1998, the Company had a $50,000 revolving
line of credit agreement with a bank, secured by receivables, under which
$15,265 and $39,993 was outstanding, respectively. Borrowings under the line
bear interest at the bank's prime lending rate plus 2% (10.5% at January 31,
1997) and are due in 1998.

Maturities of the line of credit and note payable for each of the years
ending January 31 are as follows:

(4) COMMITMENTS

The Company leases certain computer and office equipment under capital
leases. The Company also leases office space under noncancelable operating
leases expiring at various dates through 2002.

F-164
<PAGE> 249
LI NET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum annual lease payments under capital and noncancelable
operating leases for each of the years ending January 31 are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ---------
<S> <C> <C>
1999........................................................ $100,042 $ 63,879
2000........................................................ 53,085 47,121
2001........................................................ 17,937 23,386
2002........................................................ 10,060 5,459
-------- --------
Total minimum payments.................................... 181,124 $139,845
========
Less amount representing interest........................... (37,019)
--------
Present value of net minimum lease payments............... 144,105
Less current portion........................................ (81,652)
--------
$ 62,453
========
</TABLE>

Rent expense for the years ended April 30, 1996 and 1997 and nine months
ended January 31, 1998, was $25,335, $35,353, and $52,779 respectively.

(5) INCOME TAXES

Income tax expense (benefit) for the years ended April 30, 1996 and 1997
and nine months ended January 31, 1998 differs from the amounts that would
result from applying the federal statutory rate of 34% as follows:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- ---------
<S> <C> <C> <C>
Expected tax expense (benefit)...................... $19,543 $(5,861) $(130,777)
State income taxes, net of federal benefit.......... 2,300 (690) (15,374)
Nondeductible expenses.............................. -- 622 1,653
Change in valuation allowance for deferred tax
assets............................................ (14,243) 5,929 144,498
------- ------- ---------
Actual income tax expense................. $ 7,600 $ -- $ --
======= ======= =========
</TABLE>

Temporary differences that give rise to the components of deferred tax
assets and liabilities as of April 30, 1997 and January 31, 1998 are as follows:

<TABLE>
<CAPTION>
1997 1998
-------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 12,738 $ 148,824
Accounts receivable, due to allowance for doubtful
accounts for financial statement purposes only......... 11,000 30,000
Other..................................................... 173 140
-------- ---------
Total deferred tax assets......................... 23,911 178,964
Valuation allowance....................................... (5,929) (150,427)
-------- ---------
Net deferred tax assets........................... 17,982 28,537
-------- ---------
Deferred tax liability:
Equipment, due to differences in depreciation for
financial statement and tax purposes................... (17,982) (28,537)
-------- ---------
Net deferred tax asset (liability)................ $ -- $ --
======== =========
</TABLE>

F-165
<PAGE> 250
LI NET, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

As of January 31, 1998, the Company has a net operating loss carryforward
of approximately $392,000 for federal income tax purposes which will expire in
2013, if not utilized. A valuation allowance has been recorded for a portion of
the related deferred tax asset due to the uncertainty relating to the
realization of the net operating loss carryforward in the future.

(6) TRANSACTIONS WITH RELATED PARTIES

Notes payable to related party at April 30, 1997 and January 31, 1998
included $93,917 and $89,334, respectively, of unsecured notes due to
stockholders of the Company. The loans bear interest at 10% with the principal
and interest due in total on July 1, 1999 or upon sale of 50% or more of the
stock of the stockholders.

Also included in notes payable to related party at April 30, 1997 and
January 31, 1998 was an unsecured note due to a relative of a stockholder of the
Company. Principal outstanding on the note was $41,176 and $33,580 at April 30,
1997 and January 31, 1998, respectively. The note bears interest at 10% and is
payable in monthly principal and interest payments of $1,062 until 2001.

Maturities of notes payable to related parties for each of the years ending
January 31 are as follows:

(7) STOCKHOLDERS' EQUITY

During the year ended April 30, 1997 and the nine months ended January 31,
1998, the Company issued treasury shares to an officer as compensation for
services. The Company recorded compensation expense of $11,900 and $285,000,
respectively, which, in the opinion of the Company's Board of Directors,
represented fair value of the shares at the date of issuance.

F-166
<PAGE> 251

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 20
Dividend Policy....................... 20
Capitalization........................ 21
Dilution.............................. 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 33
Management............................ 48
Certain Transactions.................. 64
Principal Stockholders................ 68
Description of Capital Stock.......... 72
Shares Eligible for Future Sale....... 76
Underwriting.......................... 78
Legal Matters......................... 80
Experts............................... 80
Additional Information................ 80
Glossary of Terms..................... 82
Index to Financial Statements......... F-1
</TABLE>

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

Until June 5, 1998 (25 days after the commencement of the Offering), all
dealers effecting transactions in the Common Stock, 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.

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

5,500,000 SHARES

VERIO INC.

COMMON STOCK
[VERIO INC. LOGO]
------------
PROSPECTUS

MAY 11, 1998

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

SALOMON SMITH BARNEY

CREDIT SUISSE FIRST BOSTON

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

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