ACME COMMUNICATIONS INC, 424B4, 1999-09-30

ACME COMMUNICATIONS INC
424B4, 1999-09-30
TELEVISION BROADCASTING STATIONS

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<PAGE> 1

Filed Pursuant to Rule 424(b)(4)
File No. 333-84191

[ACME COMMUNICATIONS LOGO]

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

ACME COMMUNICATIONS, INC.
5,000,000 Shares
Common Stock
- --------------------------------------------------------------------------------

This is the initial public offering of common stock of ACME Communications, Inc.

Our common stock has been approved for listing on the Nasdaq National Market
under the symbol "ACME."

Investing in our common stock involves risks. See "Risk Factors" beginning on
page 8.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ------------
<S> <C> <C>
PUBLIC OFFERING PRICE $23.00 $115,000,000
UNDERWRITING DISCOUNTS AND COMMISSIONS $ 1.61 $ 8,050,000
PROCEEDS, BEFORE EXPENSES, TO ACME $21.39 $106,950,000
</TABLE>

The selling stockholders have granted the underwriters the right to purchase up
to an additional 750,000 shares at the public offering price within 30 days from
the date of this prospectus to cover over-allotments.

Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Morgan Stanley Dean Witter
CIBC World Markets

The date of this prospectus is September 29, 1999.
<PAGE> 2

INSIDE FRONT COVER

[ACME COMMUNICATIONS LOGO]

[COLLAGE OF ACTORS ON THE WB NETWORK AND SYNDICATED PROGRAMS]

FRONT GATEFOLD

[A MAP OF THE UNITED STATES IDENTIFYING THE LOCATION OF EACH OF OUR STATIONS AND
THE CALL LETTERS AND CHANNEL OF EACH OF OUR STATIONS]
<PAGE> 3

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock we are selling in this
offering, including the risk factors and our financial statements and related
notes, included elsewhere in this prospectus.

THE COMPANY

We currently own and operate nine broadcast television stations in
medium-sized markets. Our stations cover in the aggregate approximately 5.4% of
total U.S. television households. Each of our stations is a network affiliate of
The WB Television Network, making us the third largest WB Network affiliated
station group in the country. Jamie Kellner, our Chairman and Chief Executive
Officer, is also a founder, Chief Executive Officer and partner of The WB
Network. Mr. Kellner and our other founders formed our company to capitalize on
the opportunity to affiliate with The WB Network.

Since our formation in 1997, we have focused primarily on acquiring
independently-owned stations, under-performing stations and construction permits
for new stations in markets that we believe have the growth potential and
demographic profile to support the successful launch of a new WB Network
affiliate. We believe that medium-sized markets provide advantages such as fewer
competitors and lower operating costs compared to large markets. Because many of
our stations are newly launched, we have experienced losses of $28.4 million for
the six months ended June 30, 1999 as compared to an $11.3 million loss for the
six months ended June 30, 1998. However, we have experienced significant revenue
and broadcast cash flow growth and anticipate further growth. For the six months
ended June 30, 1999, we generated $26.6 million in revenues and $6.5 million in
broadcast cash flow, representing an increase of 37.8% in revenues and 47.0% in
broadcast cash flow over the six months ended June 30, 1998.

Like The WB Network, we target our programming to younger audiences, in
particular, young adults, teens and kids. We believe that these younger
audiences are a growing and increasingly important demographic target for
advertisers, and that our affiliation with The WB Network affords us a
significant competitive advantage over other network affiliated television
broadcasters in attracting these younger audiences. To build and retain our
audience share during non-network hours, we also acquire the broadcast rights to
popular syndicated programming that we believe complements The WB Network
programming. In addition, we broadcast local programming such as news in St.
Louis, local weather updates and local and regional sports programming in
selected markets. We believe this programming enhances our ability to sell
advertising time to local and regional advertisers and increases audience
awareness of our newly launched stations.

The WB Network was created in 1995 and is a more demographically focused
network than ABC, CBS, NBC and Fox. The WB Network provides popular, targeted
prime time programming each season such as 7th Heaven, Dawson's Creek, Buffy the
Vampire Slayer, Felicity and Charmed. In addition to its prime time programming,
The WB Network provides popular animated weekday, and Saturday morning
programming through Kids'WB, including the number one rated kids' show, Pokemon.
Mr. Kellner believes that the future of broadcast television, much like radio,
requires that programming be targeted more directly to specific audiences rather
than attempting to appeal to all demographic groups.

3
<PAGE> 4

THE OFFERING(1)

COMMON STOCK OFFERED BY ACME.... 5,000,000 shares

COMMON STOCK TO BE
OUTSTANDING AFTER
THE OFFERING(2)............... 16,750,000 shares

USE OF PROCEEDS................. We intend to use the net proceeds of this
offering to:
- repay all indebtedness under our
revolving credit facility;
- fund the acquisition of KASY;
- repay debt incurred in connection with
the acquisition of WBDT, WIWB and WBUI;
and
- provide funds for general corporate
purposes, including working capital and
future acquisitions.

RISK FACTORS.................... See "Risk Factors" beginning on page 8 for a
discussion of factors you should carefully
consider before deciding to invest in our
common stock.

NASDAQ NATIONAL MARKET SYMBOL... "ACME"
- -------------------------
(1) Does not include 750,000 shares of common stock subject to a 30-day
over-allotment option granted to the underwriters by the selling
stockholders.

(2) Based on the number of shares that will be outstanding after our
reorganization. Excludes approximately 4,200,000 shares of common stock
reserved for issuance pursuant to our 1999 Stock Incentive Plan, 2,834,091
of which are subject to options that will be outstanding before the
consummation of this offering.

Our principal executive offices are located at 2101 E. Fourth Street, Suite
202, Santa Ana, California 92705. Our telephone number is (714) 245-9499.

4
<PAGE> 5

OUR SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA

The following table summarizes our historical and pro forma financial data.
The pro forma financial data gives effect to the acquisition of Koplar
Communications, Inc. and the reorganization of our business from a limited
liability company into a C corporation, as if the acquisition and reorganization
had occurred at the beginning of each period indicated. The data presented in
this table are derived from the "Selected Consolidated and Pro Forma Financial
Data" and the financial statements and notes which are included elsewhere in
this prospectus. You should read those sections for a further explanation of the
financial data summarized here.

Net revenues.................. $ 11,347 $ 43,928 $ 43,928 $ 19,327 $ 26,635 $ 26,635

Operating expenses:

Station operating
expenses.................. 10,158 32,973 32,973 15,165 19,990 19,990

Depreciation and
amortization.............. 1,215 11,355 14,718 4,181 8,159 8,634

Corporate................... 1,415 2,627 2,627 1,194 1,483 1,483

Equity-based compensation... -- -- -- -- 10,700 10,700
-------- -------- ----------- -------- -------- -----------
Operating loss................ (1,441) (3,027) (6,390) (1,213) (13,697) (14,172)

Other income (expenses):

Interest income............. 287 231 231 188 27 27

Interest expense............ (6,562) (23,953) (21,478) (11,472) (14,068) (12,840)

Gain on sale of asset....... -- 1,112 1,112 -- -- --

Other....................... -- (380) (380) 10 -- --
-------- -------- ----------- -------- -------- -----------
Loss before taxes and minority
interest.................... (7,716) (26,017) (26,905) (12,487) (27,738) (26,985)

Income tax benefit
(expense)................... -- 2,393 10,762 365 (2,064) 10,794
-------- -------- ----------- -------- -------- -----------
Loss before minority
interest.................... (7,716) (23,624) (16,143) (12,122) (29,802) (16,191)

Minority interest............. 237 1,684 -- 868 1,403 --
-------- -------- ----------- -------- -------- -----------
Net loss...................... $ (7,479) $(21,940) $ (16,143) $(11,254) $(28,399) $ (16,191)
======== ======== =========== ======== ======== ===========

Pro forma basic and diluted
net loss per share.......... n/a n/a $ (1.37) n/a n/a $ (1.38)

Basic and diluted weighted
average shares
outstanding(1).............. n/a n/a 11,750,000 n/a n/a 11,750,000

BALANCE SHEET DATA:

Total assets.................. $220,475 $288,082 n/a $290,439 $330,282 $ 350,703

Long-term debt(2)............. 192,452 220,256 n/a 214,074 277,426 252,670

Total members' capital........ 16,306 1,413 n/a 12,488 (16,286) n/a

Total shareholders' equity.... n/a n/a n/a n/a n/a 34,472
</TABLE>

5
<PAGE> 6

<TABLE>
<CAPTION>
ACME TELEVISION HOLDINGS, LLC
---------------------------------------------
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------- --------------------
1997 1998 1998 1999
--------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
SUPPLEMENTAL FINANCIAL DATA:
Broadcast cash flow and adjusted EBITDA(3):
Operating loss......................................... $ (1,441) $ (3,027) $ (1,213) $(13,697)
Add back:
Equity-based compensation............................ -- -- -- 10,700
Depreciation and amortization........................ 1,215 11,355 4,181 8,159
Time brokerage fees.................................. -- 228 228 --
Amortization of program rights....................... 1,433 5,321 2,195 3,250
Corporate expenses................................... 1,415 2,627 1,194 1,483
Adjusted program payments(3)......................... (1,598) (5,124) (2,152) (3,379)
--------- -------- -------- --------
Broadcast cash flow................................ $ 1,024 $ 11,380 $ 4,433 $ 6,516
Less:
Corporate expenses................................... 1,415 2,627 1,194 1,483
--------- -------- -------- --------
Adjusted EBITDA.................................... $ (391) $ 8,753 $ 3,239 $ 5,033
Broadcast cash flow margin(3)............................ 9.0% 25.9% 22.9% 24.5%
Adjusted EBITDA margin(3)................................ n/m 19.9% 16.8% 18.9%
Cash flows provided by (used in) operations:
Operating activities................................... $ (599) $ 319 $ (89) $ 3,731
Investing activities................................... (191,730) (15,504) (20,790) (48,841)
Financing activities................................... 201,153 7,362 13,949 45,778
Deficiency of earnings to fixed charges(4)............... $ 7,716 $ 23,624 $ 12,122 $ 29,802
</TABLE>

- -------------------------
(1) Reflects our acquisition of Koplar Communications, Inc. and our
reorganization as explained in the pro forma financial information included
elsewhere in this prospectus.

(2) Includes amounts outstanding under our bridge loan, convertible debentures,
10 7/8% senior discount notes and 12% senior secured notes.

(3) We define:

- broadcast cash flow as operating income, plus equity-based compensation,
depreciation and amortization, time brokerage fees, amortization of
program rights, and corporate expenses, less program payments -- the
latter as adjusted to reflect reductions for liabilities relating to
expired rights or rights which have been written-off in connection with
acquisitions;

- adjusted EBITDA as broadcast cash flow less corporate expenses;

- broadcast cash flow margin as broadcast cash flow as a percentage of net
revenues; and

- adjusted EBITDA margin as adjusted EBITDA as a percentage of net
revenues.

We have included broadcast cash flow, broadcast cash flow margin, adjusted
EBITDA and adjusted EBITDA margin data because management believes that
these measures are useful to an investor to evaluate our ability to service
debt and to assess the earning ability of our stations' operations.
However, you should not consider these items in isolation or as substitutes
for net income, cash flows from operating activities or other statement of
operations or cash flows data prepared in accordance with generally
accepted accounting principles. These measures are not necessarily
comparable to similarly titled measures employed by other companies.

(4) Earnings are defined as earnings or loss before minority interest and fixed
charges. Fixed charges are the sum of:

- interest costs, including estimated interest within rental expense; and

- amortization of deferred financing costs.

We have disclosed the deficiency of earnings to fixed charges, as earnings
were not adequate to cover fixed charges in each of the periods presented.

6
<PAGE> 7

OUR PREDECESSOR'S SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes the financial data of our predecessor,
Channel 32, Incorporated. The data presented in this table are derived from the
financial statements and notes which are included elsewhere in this prospectus.
You should read those sections for a further explanation of the financial data
summarized here.

<TABLE>
<CAPTION>
CHANNEL 32, INCORPORATED (PREDECESSOR)
--------------------------------------------------------
PERIOD FROM
DECEMBER 16, PERIOD FROM
1993 (INCEPTION) YEARS ENDED JUNE 30, JULY 1, 1996
TO JUNE 30, -------------------- TO JUNE 17,
1994 1995 1996 1997
---------------- -------- -------- ------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ -- $ 288 $ 2,729 $ 1,306
Operating expenses:
Station operating expenses..... 17,626 896 4,736 2,364
Depreciation and
amortization................ -- 234 542 346
-------- ------- ------- -------
Operating loss................... (17,626) (842) (2,549) (1,404)
Other income (expenses):
Interest income................ -- -- 45 --
Interest expense............... (4,691) (200) (3,252) (2,222)
Other.......................... -- -- (259) (10)
-------- ------- ------- -------
Net loss......................... $(22,317) $(1,042) $(6,015) $(3,636)
======== ======= ======= =======
</TABLE>

7
<PAGE> 8

RISK FACTORS

You should carefully consider the risks described below before making a
decision to buy our common stock. You should also refer to the other information
in this prospectus, including our financial statements and the related notes.

BECAUSE WE ARE HIGHLY LEVERAGED OUR FUTURE CASH FLOWS MIGHT NOT BE SUFFICIENT TO
MEET OUR OBLIGATIONS AND WE MIGHT HAVE MORE DIFFICULTY OBTAINING FINANCING.

Our highly leveraged financial position means:

- a substantial portion of our cash flow from operations will be required
to service our indebtedness;

- our ability to obtain financing in the future for working capital,
capital expenditures and general corporate purposes, including
acquisitions might be impeded; and

- we are more vulnerable to economic downturns and our ability to withstand
competitive pressures is limited.

Our future cash flow might not be sufficient to meet our obligations and
commitments. If we do not meet our interest obligations under our credit
agreement or indentures or if we otherwise default under these instruments, our
debt may be accelerated under these instruments as well as other debt
instruments we have. In addition, because we are highly leveraged, it could
limit our ability to respond to market conditions or meet extraordinary capital
needs. If we are unable to generate sufficient cash flow from operations to meet
our obligations and commitments, we will be required to refinance or restructure
our indebtedness or raise additional debt or equity capital. Additionally, we
may be required to sell material assets or operations or delay or forego
acquisitions. These alternative strategies might not be effected on satisfactory
terms, if at all.

THE TERMS OF OUR DEBT LIMIT OUR FINANCIAL FLEXIBILITY AND COULD LIMIT OUR GROWTH
OPPORTUNITIES.

Our credit agreement and our subsidiaries' indentures contain restrictive
covenants that may limit our ability to:

- incur additional debt;

- pay dividends;

- merge, consolidate or sell assets;

- make acquisitions or investments; or

- change the nature of our business.

Our credit agreement and indentures also require us to maintain certain
financial covenants, including specified financial tests. Without lender
consents, or if we do not meet these tests, we may not be able to make
acquisitions as planned or meet general or extraordinary capital needs.

8
<PAGE> 9

IF THERE IS A CHANGE OF CONTROL WE MAY BE REQUIRED TO REPAY OUR OUTSTANDING
INDEBTEDNESS.

If we experience a change of control, either with respect to the credit
agreement or either indenture, we might not have sufficient funds to repay all
amounts outstanding under our revolving credit facility and to repurchase the
notes, as may be required. Alternatively, if we are able to satisfy the change
of control provisions, it would require a substantial diversion of cash flow
from our operations and our acquisition plans and could have a material adverse
effect on our economic viability.

OUR HOLDING COMPANY STRUCTURE COULD LIMIT OUR ABILITY TO PAY DIVIDENDS OR MAKE
DEBT PAYMENTS.

We are a holding company with no operations of our own. Therefore, if our
subsidiaries are unable to pay dividends or make distributions to us, we would
be unable to make dividend payments to our stockholders or pay any future
indebtedness. Our subsidiaries' ability to pay dividends and distributions to us
is limited by the terms of our subsidiaries' credit agreement and indentures.

WE EXPECT TO CONTINUE TO EXPERIENCE NET LOSSES FROM OUR OPERATIONS IN THE
FUTURE.

We have incurred losses from continuing operations in each of our fiscal
years since inception and expect to continue to experience net losses in the
foreseeable future. These net losses, which may be greater than our net losses
in the past, are principally a result of interest expense on our outstanding
debt and non-cash charges for depreciation and amortization expense related to
fixed assets and goodwill related to acquisitions.

OUR GROWTH COULD BE LIMITED IF WE ARE UNABLE TO SUCCESSFULLY ACQUIRE ADDITIONAL
TELEVISION STATIONS.

Our growth could be limited if we are unable to successfully implement our
acquisition plans. Our ability to acquire additional television stations is
affected by the following:

- many competing acquirers have greater resources available to make such
acquisitions than we have;

- desired stations might not be available for purchase;

- we might be unable to obtain The WB Network affiliation for all of the
stations we acquire;

- we might not have the financial resources necessary to acquire additional
stations;

- we might be unable to obtain FCC approval of the assignments or transfers
of control of FCC licenses; and

- the law limits the number and location of broadcasting properties that
any one person or entity, including its affiliates, may own and could
limit our ability to pursue desired stations.

Generally when we sign acquisition agreements, we enter into interim local
marketing agreements with the seller under which we receive all station revenues
and pay all station expenses. Because the seller retains ultimate programming
control, we bear the economic risks of paying station expenses until closing the
acquisition.

9
<PAGE> 10

IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE ACQUIRED STATIONS, OUR OPERATING
RESULTS WILL BE NEGATIVELY AFFECTED.

Once we acquire a station, we might not be successful in integrating it
into our group or might be required to divert our limited management resources.
As a result, acquisitions could harm our operating results in the short term as
a result of increased capital requirements.

FAILURE OF NEW STATIONS TO PRODUCE PROJECTED REVENUES COULD HARM OUR FINANCIAL
RESULTS AND EXPECTED GROWTH.

If our new stations do not generate operating cash flow within the expected
time periods, it could harm our financial results and our expected growth.

Generally, it takes a few years for our newly acquired or built stations to
generate operating cash flow. Additionally, in most cases, in the first few
years after we acquire or build a station, we have incurred, and expect to
continue incurring losses, resulting in part from significant expenses related
to:

- acquiring syndicated programming;

- improving technical facilities;

- increasing and improving cable distribution;

- hiring new personnel; and

- marketing the station to viewers.

Additionally, there may be a period before we start generating revenues
because it requires time to gain viewer awareness of new station programming and
to attract advertisers.

OUR BUSINESS OPERATIONS COULD BE SIGNIFICANTLY DISRUPTED IF WE LOSE MEMBERS OF
OUR MANAGEMENT TEAM.

Our success is largely dependent on the continued services of our senior
management team, which includes Mr. Kellner, Doug Gealy, our President and Chief
Operating Officer, and Tom Allen, our Executive Vice President and Chief
Financial Officer. Although we have employment and consulting agreements with
these executives, we might not be able to retain them. The loss of the services
of key personnel could harm our business. Our success will also be dependent in
part on our ability to attract and retain quality general managers and other
management personnel for our stations.

OUR CHIEF EXECUTIVE OFFICER MIGHT HAVE CONFLICTS OF INTEREST WITH OUR BUSINESS.

Mr. Kellner's consulting agreement provides that he may perform services
for other businesses unaffiliated with ours that, in certain limited
circumstances, may be competitive. Because of Mr. Kellner's experience in the
television broadcast industry, if Mr. Kellner provides services to a competing
business, it could materially affect our operations.

Mr. Kellner's ownership and position at The WB Network could create
conflicts with his position with us if our interests differ from those of The WB
Network. Because Mr. Kellner is both our Chief Executive Officer and The WB
Network's Chief Executive Officer, The WB Network requires that he recuse
himself from any material transaction between The WB Network and us.
Additionally, due to his responsibilities with The WB Network, Mr. Kellner might
have limited time available to devote to us.

10
<PAGE> 11

OUR RELATIONSHIP WITH THE WB NETWORK COULD BE ADVERSELY AFFECTED IF MR. KELLNER
LEAVES THE WB NETWORK.

Mr. Kellner is an owner and the Chief Executive Officer of The WB Network
but he does not have a written employment contract with The WB Network. If Mr.
Kellner leaves The WB Network, our relationship with The WB Network could be
adversely affected.

OUR RATINGS AND REVENUES COULD DECLINE SIGNIFICANTLY IF OUR RELATIONSHIP WITH
THE WB NETWORK, OR THE WB NETWORK'S SUCCESS, CHANGES IN AN ADVERSE MANNER.

If our relationship with The WB Network changes in an adverse manner, or if
The WB Network's success diminishes, it might have a material adverse effect on
our ability to generate advertising revenue on which our business is dependent.
The WB Network's relationships with Time Warner and Tribune Broadcasting are
important to The WB Network's continued success but those relationships might
not continue to exist. Similarly, The WB Network might not renew, or might
adversely change any one of our station affiliation agreements. Additionally,
the ratings of The WB Network programming might not continue to improve or The
WB Network might not continue to provide programming, marketing and other
support to its affiliates on the same basis as currently provided. Finally, by
aligning ourselves closely with The WB Network, we might forego other
opportunities that could provide diversity of our network affiliation and avoid
dependence on any one network.

IF OUR BROADCAST CASH FLOW FROM KPLR DECLINES SIGNIFICANTLY, WE WILL BE UNABLE
TO MEET OUR OBLIGATIONS.

If we experience a significant decline in broadcast cash flow from KPLR we
will not have any positive cash flow and will not be able to fulfill our current
and future obligations and commitments. Due to negative net cash flow at our
start-up stations, broadcast cash flow from KPLR accounted for more than 100% of
our total broadcast cash flow in 1998 and for the six months ended June 30,
1999.

IF OUR SYNDICATED PROGRAMMING COSTS INCREASE OR WE CANNOT OBTAIN POPULAR
PROGRAMS, OUR OPERATING COSTS COULD INCREASE OR OUR RATINGS AND REVENUES COULD
DECLINE.

If we are unable to acquire popular syndicated programming, our ratings and
revenues could decline. One of our most significant operating costs is
syndicated programming. We may be exposed in the future to increased syndicated
programming costs that could adversely affect our operating results. In
addition, syndicated programs that meet our criteria might not be available in
the future or might not be available at prices that are acceptable to us. We
believe that the prices of the most sought after syndicated programming will
continue to increase. Syndicated programming rights are often acquired several
years in advance and may require multi-year commitments, making it difficult to
accurately predict how a program will perform. In some instances, programs must
be replaced before their costs have been fully amortized, resulting in
write-offs that increase station operating costs.

IF WE DO NOT MAINTAIN FAVORABLE AUDIENCE RATINGS IT COULD HARM OUR ABILITY TO
PRODUCE ADVERTISING REVENUE.

If our ratings declined, it could harm our ability to produce advertising
revenue. The broadcast television industry is highly competitive, and cable
television and formerly independent stations now affiliated with new networks
have captured increasing market

11
<PAGE> 12

share and overall viewership from general broadcast network television. We also
face increasing competition from home satellite delivery, direct broadcast
satellite television systems and video delivery systems utilizing telephone
lines. Rating declines resulting from these competitors, it could harm our
ability to attract advertisers.

THE REQUIRED CONVERSION TO DIGITAL TELEVISION WILL IMPOSE SIGNIFICANT COSTS ON
US WHICH MAY NOT BE BALANCED BY CONSUMER DEMAND.

The required conversion of the broadcast industry to provide digitally
transmitted television signals will require us to make significant capital
expenditures which may not be balanced by consumer demand for digital
television. The FCC requires us to provide a digitally transmitted signal by
2002 for all of our stations and, generally, to stop using analog signals on the
stations by 2006. Although we have begun preparations to make the transition to
digital television by entering into lease agreements to install digital
television antennas and transmitters, we are unable to predict how much the
entire transition will cost and how long it will take. Because digital
television is generally available only in some of the top-ten viewing markets,
we are unable to predict what the consumer demand for digital division will be
or when the demand will arise.

FCC REGULATION OF OUR BUSINESS COULD ADVERSELY AFFECT OUR LICENSES AND OUR
ABILITY TO ACQUIRE NEW STATIONS.

Our operations are subject to extensive and changing regulation on an
ongoing basis by Congress, the FCC and the courts. This regulation could limit
our ability to acquire more stations as well as adversely affect our existing
licenses. The prior approval of the FCC is required for the issuance, renewal,
modification, assignment and transfer of control of station permits and
licenses. Our growth is subject to the requirement that the FCC must approve any
acquisitions that require an assignment or transfer of control of an FCC
license. In addition, the FCC licenses we hold are subject to renewal from time
to time. If the FCC finds that we have not complied with certain regulations or
if a party files a complaint, the FCC could refuse to renew one of our FCC
licenses or could issue the FCC license subject to conditions. The non-renewal
or conditional renewal of one or more of our television broadcast licenses could
harm our business.

CHANGES IN FEDERAL LAWS COULD RESULT IN INCREASED COMPETITION FOR OUR STATIONS.

Recent and prospective actions by Congress, the FCC and the courts could
cause us to face significant competition in the future. The changes include the:

- relaxation of restrictions on television station ownership;

- relaxation of restrictions on the participation by regional telephone
operating companies in cable television and other direct-to-home video
technologies;

- relaxation of restrictions on the offering of multiple network services
by the existing major television networks; and

- increased restrictions on the use of local marketing agreements.

For example, we own one station and have received FCC approval for the
purchase of another station in Albuquerque. We intend to sell the station we own
in the Albuquerque market at the same time that we purchase the other station.
However, we also intend to operate the station we sell under a local marketing
agreement. Although we have entered into a local marketing agreement for the
station we will sell in Albuquerque, because of the recent FCC rule changes the
FCC could require us to terminate the agreement.

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<PAGE> 13

NEW FCC REGULATIONS COULD HARM OUR ABILITY TO MAINTAIN THE RIGHT TO BE CARRIED
ON CABLE TELEVISION.

It is possible that new laws or regulations may eliminate, or at least
limit the scope of, our stations' right to be carried on cable television.
Because our television stations rely on must carry rights and retransmission
consent to obtain the right to be carried on cable television, either of those
results could have a material adverse impact on our operations. Pursuant to the
must carry provisions of the Cable Television Consumer Protection and
Competition Act of 1992, a broadcaster may demand the right to be carried on a
specific channel on cable systems within its market. However, the future of
those must carry rights is uncertain. The current FCC rules relate to only the
right to be carried for analog television signals. It is not clear what, if any,
must carry rights television stations will have after they make the transition
to digital television.

THE FCC COULD IMPOSE SEVERE PENALTIES ON US IF IT RESCINDS APPROVAL OF OUR
SHORT-FORM CHANGE OF CONTROL APPLICATION, OR IF OUR INTERIM VOTING AGREEMENT
TERMINATES BEFORE FCC FINAL APPROVAL OF OUR LONG-FORM CHANGE OF CONTROL
APPLICATION.

If the FCC rescinds its grant of our short-form application, because of an
issue with our interim voting agreement, an appeal or the FCC's reconsideration
of its grant, the FCC could force us to pay fines, deny renewal of our licenses,
refuse to approve any of our acquisitions, divest our FCC licenses, restructure
our reorganization or take any other action necessary to come into compliance
with an FCC order. Because our reorganization and offering constitute a change
of control under FCC Regulations, to obtain a grant of our short-form
application, we have agreed to enter into an interim voting agreement to prevent
a substantial change of control.

Until the FCC has issued a final order approving our long-form application,
the interim voting agreement must remain in effect. If our interim voting
agreement terminates before approval of our long-form application, the FCC could
force us to pay fines, deny renewal of our licenses, refuse to approve any of
our acquisitions, divest our FCC licenses, restructure our reorganization or
take any other action necessary to come into compliance with an FCC order. If
the FCC delays a grant or denies this long-form application, we would continue
to be restricted by the provisions of the interim voting agreement.

WHILE OUR INTERIM VOTING AGREEMENT AND LONG-TERM VOTING AGREEMENT ARE IN EFFECT,
STOCKHOLDERS WHO PURCHASE STOCK IN THIS OFFERING WILL NOT INFLUENCE THE ELECTION
OF THE BOARD OR OUR MANAGEMENT.

Stockholders who purchase stock in this offering will not influence the
election of the board or our management during the period that the interim
voting agreement and the long-term voting agreement are in effect. During the
period the interim voting agreement is in effect we will effectively be
controlled by our senior management members. Additionally, during the period our
long-term voting agreement is in effect, we will be effectively controlled by
our senior management members, along with Messrs. Embrescia and Roberts and
investment funds managed by or affiliated with Alta Communications, BancBoston,
CEA Capital and TCW Asset Management Company.

13
<PAGE> 14

BECAUSE OUR BOARD'S POWER IS LIMITED BY OUR INTERIM VOTING AGREEMENT IT MIGHT BE
PROHIBITED FROM TAKING ACTIONS WHICH ARE IN OUR BEST INTEREST.

Because the interim voting agreement prohibits our management from taking
actions that might not otherwise need approval outside our board it might be
prohibited from taking actions which are in our best interest. At least 60% in
interest of certain investment funds managed by or affiliated with Alta
Communications, BancBoston, CEA Capital and TCW Asset Management Company must
approve:

- redemption of our shares;

- authorization or issuance of additional shares of our common stock;

- payment or declaration of dividends;

- our merger or consolidation;

- the reorganization or sale of us, our subsidiaries, or any of our
material assets;

- entry into new businesses;

- our consent to enter into bankruptcy;

- incurrence of substantial debt;

- significant capital expenditures;

- any change of control requiring FCC approval;

- significant acquisitions; and

- changes in senior management or senior management compensation.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS COULD HINDER ACQUISITION OF OUR
COMPANY.

Delaware corporate law and our certificate of incorporation and bylaws
contain provisions that could delay, defer or prevent a change of control of our
company or a change in our management. These provisions could also discourage
proxy contests and make it more difficult for you and other stockholders to
elect directors and take other corporate actions. As a result, these provisions
could limit the price that investors are willing to pay in the future for shares
of our common stock.

WE COULD BE ADVERSELY AFFECTED BY YEAR 2000 ISSUES.

Year 2000 issues are a result of computer software applications using a
two-digit format, as opposed to a four-digit format, to indicate the year. Some
computer software applications might be unable to distinguish between dates
beyond the year 1999, which could cause system failures or miscalculations in
our broadcast and corporate locations that could cause disruptions of
operations, including a temporary inability to produce broadcast signals or
engage in normal business activities. Additionally, year 2000 disruptions at our
suppliers and business partners, including The WB Network, syndicated
programmers, advertisers, communications service providers, utilities and
financial institutions could cause a loss of power and communications links that
are crucial to our operations, but largely beyond our control.

14
<PAGE> 15

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "intend," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue" or the
negative of such terms or other comparable terminology.

Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause our and the television broadcast industry's
actual results, levels of activity, performance, achievements and prospects to
be materially different from those expressed or implied by such forward-looking
statements. These risks, uncertainties and other factors include those
identified under "Risk Factors" in this prospectus.

We are under no duty to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise,
after the date of this prospectus. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this prospectus might not
occur.

15
<PAGE> 16

USE OF PROCEEDS

We will receive net proceeds of $105.6 million from the sale of shares of
common stock in this offering after deducting underwriting discounts and
estimated offering expenses. We expect to use the net proceeds of this offering
to:

- repay all indebtedness outstanding under our revolving credit facility
($39.4 million);

- fund the acquisition of KASY ($24.0 million due at closing);

- repay debt incurred in connection with the acquisition of WBDT, WIWB and
WBUI ($15.0 million); and

- provide funds for general corporate purposes, including working capital
requirements and future acquisitions.

Indebtedness under our revolving credit facility accrues interest at
variable rates and must be repaid in full by September 30, 2002. At June 30,
1999, the weighted average interest rate on revolving credit facility borrowings
was 8.0%. Indebtedness incurred on April 23 and June 23, 1999 to acquire WBDT,
WIWB and WBUI accrues interest at a rate of 22.5% and must be repaid in full on
the earlier of April 23, 2002 or consummation by us of any debt or equity
financings generating net proceeds greater than the outstanding loan balance.

Pending use of the net proceeds as described above, we will invest the net
proceeds in investment grade, short-term marketable securities.

DIVIDEND POLICY

We have not declared or paid any cash dividends or distributions on our
common stock since our inception. We anticipate that, for the foreseeable
future, all earnings will be retained for use in our business and no cash
dividends will be paid on our common stock. Any payment of future cash dividends
on our common stock will be dependent upon the ability of our subsidiaries to
pay dividends or make cash payments or advances to us. Our credit agreement and
our subsidiaries' indentures impose restrictions on our subsidiaries' ability to
make these payments. Our ability to pay future dividends will also be subject to
restrictions under any future debt obligations and other factors that our board
of directors deems relevant.

16
<PAGE> 17

CAPITALIZATION

The following table sets forth our cash and cash equivalents and
capitalization as of June 30, 1999 on an actual basis, and on a pro forma basis
(see the pro forma financial information included elsewhere in this prospectus)
as adjusted to reflect the net proceeds of $105.6 million from this offering and
the use of those proceeds.

The table should be read in conjunction with the consolidated financial
statements and related notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------
(UNAUDITED)
PRO FORMA
AS
ACTUAL ADJUSTED
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1)............................... $ 1,669 $ 27,503
======== =========
Current portion of obligations under lease................. $ 1,277 $ 1,277
Obligations under lease, net of current portion............ 4,078 4,078
Long-term debt:
Revolving credit facility(2)............................. 39,400 --
Bridge loan(2)........................................... 15,000 --
10 7/8% senior discount notes............................ 153,357 153,357
12% senior secured notes................................. 44,913 44,913
Convertible debentures(3)................................ 24,756 --
-------- ---------
Total long-term debt.................................. 277,426 198,270
-------- ---------
Minority interest(3)....................................... 830 --
Members' capital (deficit) / stockholders' equity(3):
Members' capital(3)...................................... 41,532 --
Preferred stock, $0.01 par value; 10,000,000 shares
authorized; no shares issued and outstanding actual
and as adjusted....................................... -- --
Common stock, $0.01 par value; 50,000,000 shares
authorized; no shares issued and outstanding actual;
16,750,000 shares issued and outstanding as pro forma
adjusted(2)(3)........................................ -- 168
Additional paid-in capital(2)(3)......................... -- 139,904
Accumulated deficit(3)................................... (57,818) --
-------- ---------
Total members' deficit / stockholders' equity......... (16,286) 140,072
-------- ---------
Total capitalization............................. $267,325 $ 343,697
======== =========
</TABLE>

- -------------------------
(1) Cash and cash equivalents pro forma as adjusted includes net proceeds of
$105.6 million offset by the following uses:

- $39.4 million to repay revolving credit facility borrowings at June 30,
1999;

- $24.0 million to fund the $25.0 million acquisition price for KASY, net
of $1.0 million paid to the seller in August 1999; and

- $15.0 million to repay the bridge loan plus $366,000 of interest payable.

(2) Adjusted to reflect the issuance of common stock with net proceeds of $105.6
million, and the use of proceeds as discussed in (1) above. 16,750,000
shares will be outstanding upon completion of the offering.

(3) Adjusted to reflect the reorganization as disclosed in the pro forma
financial statements.

17
<PAGE> 18

DILUTION

Our pro forma net tangible book deficit as of June 30, 1999 was $247.1
million or a deficit of $21.03 per share of common stock. Pro forma net tangible
book deficit per share represents the amount of our total pro forma tangible
assets reduced by the amount of our total pro forma liabilities, divided by the
number of shares of common stock outstanding on a pro forma basis. Our pro forma
net tangible book deficit, as adjusted for the sale of 5,000,000 shares of
common stock to be issued in this offering and the application of the net
proceeds from the sale, and after deducting underwriting discounts and estimated
offering expenses, would have been $141.5 million or a deficit of $8.45 per
share. This represents an immediate decrease in pro forma net tangible book
deficit of $12.58 per share to stockholders immediately before this offering and
an immediate dilution of $31.45 per share to new investors. The following table
illustrates this dilution on a per share basis:

<TABLE>
<S> <C> <C>
Initial public offering price per share................. $23.00
Net tangible book deficit per share before the
offering........................................... $(21.03)
Decrease per share attributable to new investors...... 12.58
-------
Pro forma net tangible book deficit per share after the
offering.............................................. (8.45)
------
Dilution per share to new investors..................... $31.45
======
</TABLE>

The following table summarizes, after giving effect to the offering, the
differences between existing stockholders and new investors with respect to the
number of shares of common stock purchased from us, the total consideration paid
to us and the average price per share paid, based on the initial public offering
price:

<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1)......... 11,750,000 70.1% $ 60,839,000 34.6% $ 5.18
New investors............. 5,000,000 29.9% 115,000,000 65.4% 23.00
---------- ----- ------------ ----- ------
Total................... 16,750,000 100.0% $175,839,000 100.0% $10.50
========== ===== ============ ===== ======
</TABLE>

- -------------------------
(1) Reflects total consideration of issuance of units, issuance of convertible
debentures, accrued interest payable on convertible debentures, and issuance
of minority interest.

18
<PAGE> 19

PRO FORMA FINANCIAL INFORMATION

The following pro forma consolidated financial statements of ACME
Communications, Inc. are presented to reflect the acquisition of Koplar
Communications, Inc. and the reorganization of ACME Communications, Inc. The
accompanying pro forma financial information includes:

1. Pro forma balance sheet as of June 30, 1999 for ACME
Communications, Inc., prepared as if the reorganization related
transactions were effective as of that date;

2. Pro forma statement of operations for ACME Communications, Inc. for
the year ended December 31, 1998, prepared as if the Koplar acquisition and
the reorganization had occurred at the beginning of the period; and

3. Pro forma statement of operations for ACME Communications, Inc. for
the six months ended June 30, 1999 for ACME Communications, Inc., prepared
as if the reorganization had occurred at the beginning of the period.

The pro forma balance sheets were derived from the combined unaudited
balance sheet of ACME Communications, Inc. and the unaudited balance sheet of
ACME Television Holdings, LLC as of June 30, 1999.

The pro forma statement of operations for the year ended December 31, 1998
was derived from the audited consolidated statement of operations for ACME
Television Holdings, LLC for the year then ended.

The pro forma statement of operations for the six months ended June 30,
1999 was derived from the unaudited consolidated statement of operations for
ACME Television Holdings, LLC for the period then ended.

The pro forma data are based upon available information and certain
assumptions that management believe are reasonable. The pro forma adjustments
are described in the footnotes to the pro forma financial statements. The
compensation expense related to the conversion of management carry units into
shares of common stock and the acquisition of minority interest in exchange for
shares of common stock is based on the fair value of securities to be issued in
the offering. The pro forma consolidated financial statements do not purport to
represent what ACME Communication, Inc.'s results of operations or financial
condition would actually have been had the transactions occurred on such dates
or to project ACME Communication, Inc.'s results of operations or financial
condition for any future period or date.

The pro forma financial information should be read in conjunction with the
historical financial statements for ACME Television Holdings, LLC and the
historical balance sheet of ACME Communications, Inc. at June 30, 1999, which
were used to prepare the pro forma financial information. The historical
financial statements of ACME Television Holdings, LLC and the historical balance
sheet of ACME Communications, Inc. are included in this document.

19
<PAGE> 20

ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED ADJUSTED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACME
ACME TELEVISION COMMUNICATIONS,
HOLDINGS, LLC REORGANIZATION INC.
--------------- -------------- ---------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,669 $ -- $ 1,669
Accounts receivable....................................... 13,151 -- 13,151
Current portion of program rights......................... 6,508 -- 6,508
Prepaid expenses and other current assets................. 798 -- 798
-------- -------- --------
Total current assets................................ 22,126 -- 22,126
Property and equipment, net................................. 25,002 -- 25,002
Program rights, net of current portion...................... 5,757 -- 5,757
Deposits.................................................... 536 -- 536
Deferred income taxes....................................... 3,971 -- 3,971
Intangible assets, net...................................... 261,156 20,421(1) 281,577
Other assets................................................ 11,734 -- 11,734
-------- -------- --------
Total assets........................................ 330,282 20,421 350,703
======== ======== ========
Current liabilities:
Accounts payable.......................................... 4,951 -- 4,951
Accrued liabilities....................................... 7,851 -- 7,851
Current portion of program rights payable................. 6,082 -- 6,082
Current portion of obligations under lease................ 1,277 -- 1,277
-------- -------- --------
Total current liabilities........................... 20,161 -- 20,161
Program rights payable, net of current portion.............. 4,964 -- 4,964
Obligations under lease, net of current portion............. 4,078 -- 4,078
Other liabilities........................................... 5,670 (4,751)(2) 919
Deferred income taxes....................................... 33,439 -- 33,439
Revolving credit facility................................... 39,400 -- 39,400
Bridge loan................................................. 15,000 -- 15,000
Convertible debt............................................ 24,756 (24,756)(2) --
10 7/8% senior discount notes............................... 153,357 -- 153,357
12% senior secured notes.................................... 44,913 -- 44,913
-------- -------- --------
Total liabilities................................... 345,738 (29,507) 316,231
Minority interest........................................... 830 (830)(1) --

Members' capital (deficit) / stockholders' equity:
Members' capital.......................................... 41,532 (41,532)(3) --
Preferred stock........................................... -- -- --
$.01 par value; 10,000,000 shares authorized no shares
issued and outstanding
Common stock............................................ -- -- --
$.01 par value; 0 shares outstanding on a historical
basis; 11,750,000 shares outstanding on a pro forma
basis................................................. 118(4) 118
29,507(2)
21,251(1)
28,856(5)
(118)(4)
41,532(3)
Additional paid in capital................................ -- (86,674)(6) 34,354
(28,856)(5)
Accumulated deficit....................................... (57,818) 86,674(6) --
-------- -------- --------
Total members' deficit / stockholders' equity....... (16,286) 50,758 34,472
-------- -------- --------
Total liabilities and members'
capital / stockholders' equity.................... $330,282 $ 20,421 $350,703
======== ======== ========
</TABLE>

- -------------------------
(1) In conjunction with the reorganization, we will acquire the minority
interest of ACME Intermediate Holdings, LLC. The excess of the fair value of
the securities issued to acquire the minority interest over the book value
of minority interest of $20.4 million will be allocated to the fair value of
the assets acquired, primarily broadcast licenses and goodwill. For pro
forma purposes, the entire excess has been allocated to broadcast licenses
and goodwill, with an amortization period of 20 years.

20
<PAGE> 21

(2) Reflects the conversion of the convertible debt and its accrued interest of
$4.8 million into shares of common stock, pursuant to the original
conversion terms, in conjunction with the reorganization.

(3) In conjunction with the reorganization, members units will be exchanged for
common stock. Accordingly, members' capital has been reclassified to
additional paid in capital.

(4) Number of shares of our common stock outstanding immediately prior to the
consummation of the offering, including 5,180,051 shares issued in exchange
for ACME Television Holdings, LLC units, 923,938 shares issued to acquire
minority interest, 3,926,191 shares issued in the conversion of the
convertible debentures and 1,719,820 shares issued in exchange for
management carry units.

(5) Reflects compensation expense related to the conversion of management carry
units into 1,719,820 shares of common stock with a value of $39.6 million,
based on the offering price, reduced by $10.7 million expensed through June
30, 1999.

(6) Reclassification of accumulated deficit to additional paid in capital to
reflect the reorganization.

21
<PAGE> 22

ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACME
ACME TELEVISION KOPLAR COMMUNICATIONS,
HOLDINGS, LLC ACQUISITION REORGANIZATION INC.
--------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Net revenues.................... $ 43,928 $ -- $ -- $ 43,928
Operating expenses:
Station operating expenses.... 32,973 -- -- 32,973
Depreciation and
amortization................ 11,355 2,496(1) 867(2) 14,718
Corporate..................... 2,627 -- -- 2,627
-------- ------- ----------- -----------
Total operating expenses.... 46,955 2,496 867 50,318
-------- ------- ----------- -----------
Operating loss.............. (3,027) (2,496) (867) (6,390)
Other income (expenses):
Interest income............... 231 -- -- 231
Interest expense.............. (23,953) -- 2,475(3) (21,478)
Gain on sale of asset......... 1,112 -- -- 1,112
Other......................... (380) -- -- (380)
-------- ------- ----------- -----------
Income (loss) before taxes and
minority interest............. (26,017) (2,496) 1,608 (26,905)
Income tax benefit.............. 2,393 998(4) 7,371(5) 10,762
-------- ------- ----------- -----------
Income (loss) before minority
interest...................... (23,624) (1,498) 8,979 (16,143)
Minority interest............. 1,684 -- (1,684)(6) --
-------- ------- ----------- -----------
Net income (loss)............. $(21,940) $(1,498) $ 7,295 $ (16,143)
======== ======= =========== ===========
Net loss per share.............. n/a n/a n/a $ (1.37)
======== ======= =========== ===========
Weighted average shares
outstanding................... n/a n/a 11,750,000(7) 11,750,000
======== ======= =========== ===========
</TABLE>

- -------------------------
(1) Represents depreciation of $151,000 and amortization of $2.3 million for the
first three months of 1998 giving effect to the acquisition of KPLR (which
was acquired on March 13, 1998) as if it occurred on January 1, 1998. The
results of operations of KPLR have been included in our operations for the
period from January 1, 1998 to March 31, 1998 pursuant to a local marketing
agreement.

(2) In conjunction with the reorganization, we will acquire the minority
interest of ACME Intermediate Holdings, LLC. The excess of the fair value of
the securities issued to acquire the minority interest over the book value
of minority interest at January 1, 1998 of approximately $17.3 million will
be allocated to the fair value of the net assets acquired, primarily
broadcast licenses and goodwill. For pro forma purposes, the entire excess
has been allocated to broadcast licenses and goodwill, with an amortization
period of 20 years.

(3) Adjustment eliminates interest expense of $2.5 million to give effect to the
exchange of convertible debentures for shares of our common stock in
conjunction with the reorganization as if it occurred as of January 1, 1998.

(4) Tax benefit relating to additional depreciation and amortization expense
relating to KPLR, as described in footnote (1).

22
<PAGE> 23

(5) To adjust the provision for income taxes on pro forma net loss before income
taxes and minority interest, which gives effect to the change in our income
tax status to a C corporation in connection with the reorganization. In
connection with this adjustment, we estimated an effective tax rate of 40%
and recorded a deferred tax benefit based on the deferred tax liabilities on
our books as of December 31, 1998.

(6) In conjunction with the reorganization, the minority interest has been
acquired by us and the allocation of loss to minority interest has been
eliminated.

(7) Number of shares of our common stock outstanding immediately prior to the
consummation of the offering, including 5,180,051 shares issued in exchange
for ACME Television Holdings, LLC units, 923,938 shares issued to acquire
minority interest, 3,926,191 shares issued in the conversion of the
convertible debentures and 1,719,820 shares issued in exchange for the
management carry units.

23
<PAGE> 24

ACME COMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED ADJUSTED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999

(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ACME
ACME TELEVISION COMMUNICATIONS,
HOLDINGS, LLC REORGANIZATION INC.
--------------- -------------- ---------------
<S> <C> <C> <C>
Net revenues............................. $ 26,635 $ -- $ 26,635
Operating expenses
Station operating expenses............. 19,990 -- 19,990
Depreciation and amortization.......... 8,159 475(1) 8,634
Corporate.............................. 1,483 -- 1,483
Equity-based compensation.............. 10,700 -- 10,700
-------- ----------- -----------
Total operating expenses............ 40,332 475 40,807
-------- ----------- -----------
Operating income (loss)............. (13,697) (475) (14,172)
Other income (expenses)
Interest income........................ 27 -- 27
Interest expense....................... (14,068) 1,228(2) (12,840)
Gain on sale of assets................. -- -- --
Other.................................. -- -- --
-------- ----------- -----------
Income (loss) before taxes and
minority interest................. (27,738) 753 (26,985)
Income tax benefit (expense)...... (2,064) 12,858(3) 10,794
-------- ----------- -----------
Income (loss) before minority
interest.......................... (29,802) 13,611 (16,191)
Minority interest................. 1,403 (1,403)(4) --
-------- ----------- -----------
Net income (loss)................. $(28,399) $ 12,208 $ (16,191)
======== =========== ===========
Net loss per share....................... $ n/a $ n/a $ (1.38)
======== =========== ===========
Weighted average shares outstanding...... n/a 11,750,000(5) 11,750,000
======== =========== ===========
</TABLE>

- -------------------------
(1) In conjunction with the reorganization, we will acquire the minority
interest of ACME Intermediate Holdings, LLC. The excess of the fair value of
the securities issued to acquire the minority interest over the book value
of minority interest at January 1, 1999 of approximately $19.0 million will
be allocated to the fair value of the assets acquired, primarily broadcast
licenses and goodwill. For pro forma purposes, the entire excess has been
allocated to broadcast licenses and goodwill, with an amortization period of
20 years.

(2) Adjustment eliminates interest expense, $1.2 million for the six months
ended June 30, 1999, to give effect to the exchange of convertible
debentures for shares of our common stock in conjunction with the
reorganization as if this occurred as of January 1, 1998.

(3) To adjust the provision for income taxes on pro forma net loss before income
taxes and minority interest, which gives effect to the change in our income
tax status to a C corporation in connection with the reorganization. In
connection with this adjustment, we estimated an effective tax rate of 40%
and recorded a deferred benefit based on the deferred tax liabilities on its
books.

(4) In conjunction with the reorganization, the minority interest has been
acquired by us and the allocation of loss to minority interest has been
eliminated.

(5) Number of shares of our common stock outstanding immediately prior to the
consummation of the offering, including 5,180,051 shares issued in exchange
for ACME Television Holdings, LLC units, 923,938 shares issued to acquire
minority interest, 3,926,191 shares issued in the conversion of the
convertible debentures and 1,719,820 shares issued in exchange for
management carry units.

24
<PAGE> 25

SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA

The following selected financial data should be read in conjunction with
our consolidated financial statements and accompanying notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in the prospectus. The selected consolidated financial data
presented below as of and for the years ended December 31, 1997 and 1998 are
derived from our consolidated financial statements, which have been audited by
KPMG LLP, independent auditors. The selected consolidated financial data
presented below as of June 30, 1999 and for the six months ended June 30, 1998
and 1999 are derived from the unaudited financial statements of ACME Television
Holdings, LLC, which in the opinion of our management, contain all necessary
adjustments of a normal recurring nature, to present the financial statements in
conformity with generally accepted accounting principles. Our results for the
six month period ended June 30, 1999 are not necessarily indicative of the
results for the year ended December 31, 1999. Our selected financial data is not
comparable from period to period because of our acquisition of television
broadcast stations. The pro forma statement of operations data for ACME
Communications, Inc., gives effect to the acquisition of Koplar Communication
Inc. and to our reorganization at the beginning of each period indicated,
whereas the pro forma ACME Communication, Inc. balance sheet data gives effect
only to the reorganization as of the date presented.

<TABLE>
<CAPTION>
PRO FORMA
ACME
PRO FORMA COMMUNICATIONS,
ACME TELEVISION ACME ACME TELEVISION INC.(1)
HOLDINGS, LLC COMMUNICATIONS, HOLDINGS, LLC ---------------
-------------------- INC.(1) ---------------------
YEARS ENDED --------------- SIX MONTHS ENDED SIX MONTHS
DECEMBER 31, YEAR ENDED JUNE 30, ENDED
-------------------- DECEMBER 31, --------------------- JUNE 30,
1997 1998 1998 1998 1999 1999
-------- --------- --------------- --------- --------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............................. $ 11,347 $ 43,928 $ 43,928 $ 19,327 $ 26,635 $ 26,635
Operating expenses:
Station operating expenses............. 10,158 32,973 32,973 15,165 19,990 19,990
Depreciation and amortization.......... 1,215 11,355 14,718 4,181 8,159 8,634
Corporate.............................. 1,415 2,627 2,627 1,194 1,483 1,483
Equity-based compensation.............. -- -- -- -- 10,700 10,700
-------- --------- ---------- --------- --------- ----------
Operating loss........................... (1,441) (3,027) (6,390) (1,213) (13,697) (14,172)
Other income (expenses):
Interest income........................ 287 231 231 188 27 27
Interest expense....................... (6,562) (23,953) (21,478) (11,472) (14,068) (12,840)
Gain on sale of asset.................. -- 1,112 1,112 -- -- --
Other.................................. -- (380) (380) 10 -- --
-------- --------- ---------- --------- --------- ----------
Loss before taxes and minority
interest............................... (7,716) (26,017) (26,905) (12,487) (27,738) (26,985)
Income tax benefit (expense)............. -- 2,393 10,762 365 (2,064) 10,794
-------- --------- ---------- --------- --------- ----------
Loss before minority interest............ (7,716) (23,624) (16,143) (12,122) (29,802) (16,191)
Minority interest........................ 237 1,684 -- 868 1,403 --
-------- --------- ---------- --------- --------- ----------
Net loss................................. $ (7,479) $ (21,940) $ (16,143) $ (11,254) $ (28,399) $ (16,191)
======== ========= ========== ========= ========= ==========
Pro forma basic and diluted net loss per
share.................................. n/a n/a $ (1.37) n/a n/a $ (1.38)
Basic and diluted weighted average shares
outstanding(1)......................... n/a n/a 11,750,000 n/a n/a 11,750,000
BALANCE SHEET DATA:
Total assets............................. $220,475 $ 288,082 n/a $ 290,439 $ 330,282 $ 350,703
Long-term debt(2)........................ 192,452 220,256 n/a 214,074 277,426 252,670
Total members' capital................... 16,306 1,413 n/a 12,488 (16,286) n/a
Total shareholders' equity............... n/a n/a n/a n/a n/a 34,472
</TABLE>

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<PAGE> 26

<TABLE>
<CAPTION>
ACME TELEVISION HOLDINGS, LLC
---------------------------------------------
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------- --------------------
1997 1998 1998 1999
--------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
SUPPLEMENTAL FINANCIAL DATA:
Broadcast cash flow and adjusted EBITDA(3):
Operating loss....................................... $ (1,441) $ (3,027) $ (1,213) $(13,697)
Add back:
Equity-based compensation.......................... -- -- -- 10,700
Depreciation and amortization...................... 1,215 11,355 4,181 8,159
Time brokerage fees................................ -- 228 228 --
Amortization of program rights..................... 1,433 5,321 2,195 3,250
Corporate expenses................................. 1,415 2,627 1,194 1,483
Adjusted program payments(3)....................... (1,598) (5,124) (2,152) (3,379)
--------- -------- -------- --------
Broadcast cash flow.............................. $ 1,024 $ 11,380 $ 4,433 $ 6,516
Less:
Corporate expenses................................. 1,415 2,627 1,194 1,483
--------- -------- -------- --------
Adjusted EBITDA.................................. $ (391) $ 8,753 $ 3,239 $ 5,033
Broadcast cash flow margin(3).......................... 9.0% 25.9% 22.9% 24.5%
Adjusted EBITDA margin(3).............................. n/m 19.9% 16.8% 18.9%
Cash flows provided by (used in) operations:
Operating activities................................. $ (599) $ 319 $ (89) $ 3,731
Investing activities................................. (191,730) (15,504) (20,790) (48,841)
Financing activities................................. 201,153 7,362 13,949 45,778
Deficiency of earnings to fixed charges(4)............. $ 7,716 $ 23,624 $ 12,122 $ 29,802
</TABLE>

- -------------------------
(1) Reflects the acquisition of Koplar Communications, Inc. and our
reorganization as explained in the pro forma financial information included
elsewhere in this prospectus.

(2) Includes amounts outstanding under our bridge loan, convertible debentures,
10 7/8% senior discount notes and 12% senior secured notes.

(3) We define:

- adjusted EBITDA as broadcast cash flow less corporate expenses;

- broadcast cash flow margin as broadcast cash flow as a percentage of net
revenues; and

- adjusted EBITDA margin as adjusted EBITDA as a percentage of net
revenues.

We have included broadcast cash flow, broadcast cash flow margin, adjusted
EBITDA and adjusted EBITDA margin data because management believes that
these measures are useful to an investor to evaluate our ability to service
debt and to assess the earning ability of our stations' operations.
However, you should not consider these items in isolation or as substitutes
for net income, cash flows from operating activities and other statement of
operations or cash flows data prepared in accordance with generally
accepted accounting principles. These measures are not necessarily
comparable to similarly titled measures employed by other companies.

(4) Earnings are defined as earnings or loss before minority interest and fixed
charges. Fixed charges are the sum of:

- interest costs, including estimated interest within rental expense; and

- amortization of deferred financing costs.

We have disclosed the deficiency of earnings to fixed charges as earnings
were not adequate to cover fixed charges in each of the periods presented.

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<PAGE> 27

OUR PREDECESSOR'S SUMMARY CONSOLIDATED FINANCIAL DATA

27
<PAGE> 28

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

The following discussion should be read in conjunction with ACME Television
Holdings, LLC's consolidated financial statements and related notes included
elsewhere in this prospectus.

OVERVIEW

We derive our revenues primarily from the sale of advertising time to
local, regional and national advertisers. Our revenues depend on our ability to
provide popular programming that attracts audiences in the demographic groups
targeted by advertisers, thereby allowing us to sell advertising time at
satisfactory rates. Our revenues also depend significantly on factors such as
the national and local economy and the level of local competition.

Our revenues are generally highest during the fourth quarter of each year,
primarily due to increased expenditures by advertisers in anticipation of
holiday season consumer spending and an increase in viewership during this
period. We generally pay commissions to advertising agencies on local, regional
and national advertising and to national sales representatives on national
advertising. Our revenues reflect deductions from gross revenues for commissions
payable to advertising agencies and national sales representatives.

Our primary operating expenses are programming costs, employee
compensation, advertising and promotion expenditures and depreciation and
amortization. Programming expense consists primarily of amortization of
broadcast rights relating to syndicated programs as well as news production and
sports rights fees. Changes in employee compensation expense result primarily
from increases in total staffing levels, from adjustments to fixed salaries
based on individual performance and inflation and from changes in sales
commissions paid to our sales staff based on levels of advertising revenues.
Advertising and promotion expenses consist primarily of media and related
production costs resulting from the promotion of our stations and programs. This
amount is net of any reimbursement received or due for such advertisement and
promotion from any network, including The WB Network, or other program provider.

The carrying value of long-lived assets, consisting of tangible,
identifiable intangible, and goodwill, is reviewed if the facts and
circumstances suggest that they might be impaired. For purposes of this review,
assets are grouped at the operating company level, which is the lowest level for
which there are identifiable cash flows. If this review indicates that an
asset's carrying value will not be recoverable, as determined based on future
expected, undiscounted cash flows, the carrying value is reduced to fair market
value. There are neither facts nor circumstances that would lead management to
believe that any of our long-lived assets are impaired.

RESULTS OF OPERATIONS

Six Months Ended June 30, 1999 compared to Six Months Ended June 30, 1998

Net revenues increased 38% to $26.6 million for the first half of 1999
compared to the first half of 1998. This gain reflects solid growth at our
flagship station KPLR and significant increases in net revenues at our stations
in Portland, Oregon (KWBP), Salt Lake City (KUWB) and Knoxville (WBXX). The
revenue gains in these markets have been driven by improved audience ratings and
market revenue shares at these stations.

Station operating expenses increased 32% to $20.0 million for the first
half of 1999 compared to the first half of 1998. This increase is primarily
related to increased

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<PAGE> 29

programming and staffing related costs at our developing stations, KWBP, KUWB,
KWBQ, WBXX and WTVK.

Depreciation and amortization expense increased 95% to $8.2 million during
the first half of 1999 compared to the first half of 1998. This significant
increase primarily relates to the March 1998 acquisition of KPLR and the
resulting amortization of the intangible assets of that station.

Corporate expenses increased 24% to $1.5 million for the first half of 1999
compared to the first half of 1998. This increase relates primarily to increased
staffing to support the growing operations of our station group.

Equity-based compensation expense during the first half of 1999 totaled
$10.7 million. There was no corresponding expense in the first half of 1998.
This non-cash charge relates to an estimated increase in the value of the
management carry units that were issued in June 1997 to our senior management
members. The increase in the estimated value is in part a result of the
increasing success of The WB Network, our recent operating results and the
increased number of the stations under our ownership and management.

Interest expense for first half of 1999 was $14.1 million, an increase of
23% over the first half of 1998. This increase relates primarily to the
continued increased principal balance of our 10 7/8% senior discount notes and
our 12% senior secured notes, and the April 1999 borrowings under our revolving
credit facility in connection with the acquisition of WBDT, WIWB and WBUI from
Paxson Communications.

We recorded a net income tax expense of $2.1 million during the first half
of 1999 compared to a $365,000 net income tax benefit recorded for the first
half of 1998. The tax expense for the first half of 1999 includes a $3.0 million
accrual relating to the merger of two of the Company's subsidiaries offset by a
benefit of $936,000 relating to a net operating loss carryforward at KPLR and a
reduction of a deferred tax liability primarily related to KPLR'S FCC license.
The merger transaction was rescinded and the accrual will be reversed in the
third quarter of 1999.

Minority interest represents the allocation of the loss for the respective
periods to the minority interest holders of our subsidiary ACME Intermediate
Holdings, LLC.

Our net loss for the six months ended June 30, 1999 was $28.4 million
compared to a net loss for the first half of 1998 of $11.3 million. This $17.1
million increase in our net loss is attributable primarily to increased interest
expense, increased amortization of intangible assets, exclusive of depreciation
and amortization, increased income tax expense and the equity-based compensation
expense, net of improved operating results.

Broadcast cash flow for the first half of 1999 increased 47% to $6.5
million. This increase was driven by significant revenue gains and improved
operating margins at all of our stations. Adjusted EBITDA increased 55% for the
first half of 1999 due to increased broadcast cash flow and a lower rate of
growth of corporate expenses compared to our rate of broadcast cash flow growth.

Year Ended December 31, 1998 compared to Year Ended December 31, 1997

Net revenues for the year ended December 31,1998 increased $32.6 million,
or 287%, to $43.9 million as compared to $11.3 million for the year ended
December 31, 1997. The most significant reason for this increase is that our
1997 net revenues included only the fourth quarter results of KPLR, which we
began managing on October 1, 1997, compared to 1998, which included KPLR's full
year results. Also favorably impacting the 1998 comparison

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<PAGE> 30

to 1997 was our fourth quarter 1997 launch of WBXX, the second quarter 1998
launch of KUWB, increased revenues at KWBP and our acquisition of WTVK, which we
began operating in March 1998.

Operating expenses increased to $47.0 million compared to the prior year's
operating expenses of $12.8 million, or 267%. Station operating and corporate
expenses increased significantly in 1998 due to the significant increase in the
number of stations we added or launched since the third quarter of 1997.

Depreciation and amortization expense for the year includes $9.4 million in
the amortization of intangible assets. As of December 31, 1997, only KWBP and
WBXX stations had been acquired and, accordingly, there was only $874,000 in
amortization expense for that period.

Interest expense for 1998 was $24.0 million, primarily representing the
amortization of original issuance discount of our 10 7/8% senior discount notes,
12% senior secured discount notes and interest on our 10% convertible
debentures, along with related amortization of prepaid financing costs. The
interest expense of $6.6 million for 1997 represents primarily the interest
expense on the 10 7/8% senior discounted notes and 12% senior secured notes,
which were outstanding only during the fourth quarter of the year and interest
on the convertible debentures, which were issued in June 1997 and therefore were
outstanding for only a little more than six months during 1997.

Station KPLR is our only operating C corporation. During 1993, KPLR, after
deduction of allocable interest charges, generated a net taxable loss. The
deferred tax benefit corresponding to that loss was $2.4 million.

Our net loss for 1998 was $21.9 million compared to a net loss of $7.5
million for 1997. This increased net loss is due primarily to the increased
amortization of intangible assets relating to our newly acquired and launched
stations and the substantially increased interest expense incurred in connection
with the September 1997 issuance of long-term debt to finance our acquisitions.
These increased expenses were offset by improved operating performance which is
attributable to the inclusion of the full year operating results of KPLR.

Our broadcast cash flow for 1998 was $11.4 million, compared to a $1.0
million broadcast cash flow in 1997. This increase is primarily attributable to
the profitable operations of KPLR -- only the fourth quarter operating results
of KPLR are included in our full year 1997 results, whereas KPLR's full year
results are included in our 1998 results. To a lesser extent, the increase in
broadcast cash flow is due to significantly reduced losses at KWBP for 1998.

INCOME TAXES

Historically, we and all of our operating subsidiaries, other than our
subsidiary related to KPLR which is a C corporation, have been organized as
limited liability companies. Accordingly, although we have been subject to
various minimum state taxes, all federal tax attributes have been passed through
to our members. Upon our reorganization into a C corporation, we will be subject
to federal and state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Our revolving credit facility allows for borrowings up to a maximum of
$40.0 million, which are dependent upon our meeting certain financial ratio
tests as delineated in the credit agreement. The revolving credit facility can
be used to fund future acquisitions of broadcast stations and for general
corporate purposes. At June 30, 1999, $39.4 million was
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<PAGE> 31

outstanding and $600,000 was available under the revolving credit facility.
Amounts outstanding under our revolving credit facility bear interest at a base
rate, that at our option is either the bank's prime rate or LIBOR, plus a
spread. We will repay all amounts outstanding under our revolving credit
facility with a portion of the net proceeds of this offering.

Cash provided by our operating activities during 1998 was $319,000 and for
the six months ended June 30, 1999 was $3.7 million due to significantly
improved broadcast cash flow.

Cash used in our investing activities during 1998 was $15.5 million and
related partially to the acquisition of WTVK and the purchase of property and
equipment, offset by the net gain related to the acquisition and subsequent sale
of a construction permit in the Springfield, Missouri market. Cash used in
investing activities during the first six months of 1999 was $48.8 million and
related primarily to our acquisitions of WBDT, WIWB and WBUI, the final payment
in connection with our acquisition of KUPX, our investment in a digital tower
joint venture in the Portland, Oregon market and the purchase of property and
equipment.

Cash provided by our financing activities during 1998 was $7.4 million and
related primarily to net borrowings under our revolving credit facility in
connection with our acquisition of WTVK offset by repayments of capital leases.
Cash provided by financing activities during the first six months of 1999 was
$45.8 million consisting of revolving credit borrowings in connection with our
acquisitions of WBDT, WIWB and WBUI, the completion of our acquisition of KUPX,
our digital tower joint venture investment in Portland and capital expenditures.

Cash interest on ACME Intermediate's 12% senior secured notes due 2005,
$71.6 million fully accreted principal amount, will begin accruing in 2002 and
is payable starting in 2003. Cash interest on ACME Television's 10 7/8% senior
discount notes due 2004, $175.0 million fully accreted principal amount, will
begin accruing in 2000 and is payable starting in 2001.

We expect that we will incur approximately $14 million in capital
expenditures over the next twelve months in connection with the build-out,
upgrade and initial digital conversion of our current facilities.

We believe that funds generated from operations will be sufficient to
satisfy our cash requirements for our existing operations for at least the next
twelve months. We expect that any future acquisitions of television stations
would be financed through proceeds from this offering, funds generated from
operations, through borrowings under our revolving credit facility, and through
additional debt and equity financings. However, we cannot guarantee the offering
will be completed or that such additional debt and/or equity financing will be
available or available at rates acceptable to us.

YEAR 2000

We are in the process of evaluating potential year 2000 issues for both our
information technology and non-information technology systems such as telephone
systems, fax

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<PAGE> 32

machines, editing equipment, cameras, microphones, etc. All of our internal
software and hardware is purchased, leased or licensed from third party vendors.
Most of our station facilities are new or have been recently upgraded and we
have polled all of our significant software vendors and have been advised by
them that their software is year 2000 compliant.

We have completed the assessment, planning and testing phases and have
commenced the final phase of our year 2000 project implementation. During this
phase, we will fix, retest and implement critical applications that were
discovered to be year 2000 deficient during the preceding phases.

We are not aware of any additional significant upgrades or changes that
will need to be made to our internal software and hardware to become year 2000
ready or any material supplier with year 2000 readiness problems. This is
subject to change as the compliance testing process continues. We expect to be
able to implement the systems and programming changes necessary to address year
2000 information technology and non-information technology readiness issues and,
based on preliminary estimates, we do not believe that the costs of doing so
will have a material effect on our results of operations or financial condition.
As of June 30, 1999, we have spent less than $100,000 on year 2000 activities
and our budgeted expenditures for the remainder of 1999 are less than $75,000 in
total. As we obtain the results of compliance testing, there might be a delay
in, or increased costs associated with the implementation of changes.

RECENT DEVELOPMENTS

On February 19, 1999, we entered into an asset purchase agreement with
Ramar Communications II, Ltd. to acquire the television broadcast assets of
KASY, serving the Albuquerque-Santa Fe, New Mexico market, for approximately
$27.3 million, $25.0 million of which will be paid at closing, less $500,000
which has been deposited into escrow and $1.0 million paid to the seller in
August, 1999. On July 30, 1999, we amended the agreement and paid $1.0 million
of the purchase price to Ramar. In a related transaction, we are selling KWBQ,
our existing station serving the Albuquerque - Santa Fe market, to Ramar for
$100,000. At the closing, Ramar will grant Montecito Communications, LLC, a
limited liability company owned entirely by members of our senior management, an
option to purchase KWBQ for an exercise price of $100,000. We anticipate that
Montecito will assign the option to us immediately after the closing of the sale
of KWBQ. The closings of both the KASY and the KWBQ transactions, which have
been approved by the FCC, are subject to various conditions and are expected to
occur shortly after the completion of this offering. Under the KASY purchase
agreement we are required to close the transaction by October 31, 1999, or the
purchase price will increase by a rate of 10% per annum, retroactive to August
13, 1999 through the actual date of closing. If the transaction does not close
before February 1, 2000, Ramar may keep the $1.0 million and will receive the
$500,000 in escrow as liquidated damages. We also would be required to pay an
additional $1.7 million as liquidated damages pursuant to a local marketing
agreement relating to KASY to which Ramar is a party. After the closing, we
intend to operate KWBQ under a local marketing agreement with Ramar, which was
filed with the FCC prior to the adoption of the new ownership rules on August 5,
1999. Subject to FCC approval, we may purchase the station if Montecito assigns
the option to us. We believe this transaction will allow us to enhance revenues
and cash flows in this market through cross-promotion and achieving operating
efficiencies, including operating both stations from one studio and office
facility.

In September 1999, we closed the swap of Station KUWP in Salt Lake City,
which we operated but did not own, for Station KUPX, which we owned and did not
operate.

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FUTURE NON-RECURRING CHARGES

We expect to incur approximately $31.9 million of non-recurring
compensation expense related charges in connection with this offering. Of these
charges, a $3.0 million cash bonus to be paid in first quarter 2000 will be
earned by senior management upon completion of this offering. In addition, a
non-cash charge of approximately $28.9 million will be incurred in connection
with the exchange of the management carry units for shares of our common stock.

PENDING ADOPTION OF ACCOUNTING STANDARD

The FASB (Financial Accounting Standards Board) has issued FASB statement
No. 133 "Accounting for Derivative Instruments and Hedging Activities" which we
will be required to adopt for its year ending December 31, 2000. This
pronouncement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, which are collectively referred to as derivatives, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. This pronouncement is not expected to have a
significant impact on our financial statements since we currently have no
derivative instruments.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our revolving credit facility has a variable interest rate and our interest
expense can therefore be materially affected by future fluctuations in the
applicable interest rate. At June 30, 1999, a hypothetical 100 basis point
increase in the prime rate would result in additional interest expense of
approximately $394,000 on an annualized basis.

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<PAGE> 34

INDUSTRY OVERVIEW

Commercial television broadcasting. Commercial television broadcasting
began in the United States on a regular basis in the 1940s over a portion of the
broadcast spectrum commonly know as the VHF Band, which consists of very high
frequency broadcast channels numbered 2 through 13. Additional television
channels were later assigned by the FCC under broadcast spectrum commonly known
as the UHF Band, which consists of ultra-high frequency broadcast channels
numbered 14 through 83; channels 70 through 83 have been reassigned to
non-broadcast services. Currently, there are a limited number of channels
available for broadcasting in any one designated market area, and the license to
operate a broadcast station in a designated market area is granted by the FCC.

Although UHF and VHF stations compete in the same market, UHF stations have
historically suffered a competitive disadvantage, as UHF signals are more
subject to obstructions such as terrain than VHF signals and VHF stations are
able to provide higher quality signals to a wider area. Over time, the
disadvantage of UHF stations has gradually declined through UHF stations'
carriage on local cable systems and improved receivers and transmitters.

A majority of the commercial television stations in the United States are
affiliated with NBC, CBS or ABC -- the traditional networks -- or with Fox. Each
traditional network provides the majority of its affiliates' programming each
day without charge in exchange for a substantial majority of the available
advertising time in the programs supplied. Fox has operating characteristics
similar to ABC, CBS and NBC, although the hours of network programming provided
for Fox affiliates is less than that provided by the traditional networks. Each
of the traditional networks and Fox sell this advertising time and retain the
revenues. The affiliate typically receives compensation from the traditional
network and retains the revenues from advertising time sold in and between
network programs and in programming the affiliate produces or purchases from
non-network sources.

Stations not affiliated with one of the traditional networks were
historically considered independent stations. Independent stations generally
rely on and broadcast syndicated programming, which is acquired by the station
for cash or occasionally barter. Through the acquisition of syndicated
programming the acquiring station generally obtains exclusive rights to
broadcast a program in the market for a specified period of time or number of
episodes agreed upon between the independent station and the distributor of the
syndicated programming. Types of syndicated programming include feature films,
popular television series previously shown on network television and current
television series produced for direct distribution to television stations.
Through barter and cash-plus-barter arrangements, a national syndicated program
distributor typically retains and sells a portion of the available advertising
time for programming it supplies, in exchange for reduced fees to the station
for such programming.

Like Fox, United Paramount Network and The WB Network have each established
affiliations predominantly with formerly independent stations, and in some
cases, with newly constructed stations. These networks supply their affiliates
with significantly less programming than ABC, CBS and NBC. As a result, these
stations retain a significantly higher portion of their available inventory of
advertising time for their own use than do traditional network affiliates. In
August 1998, Pax Net, an affiliate of Paxson Communications and a seventh
broadcast network, was launched. Unlike the other networks, Pax Net provides
substantially all of the programming to its affiliates, most of which were
previously independent or religious broadcasters or are newly built television
stations.

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<PAGE> 35

Ratings. All television stations in the United States are grouped into 210
television markets that are ranked by size according to the number of households
with televisions in each market. Almost all commercial television stations, and
all of our stations, subscribe to Nielsen Media Research, which periodically
publishes reports on the estimated audience for television stations in the
various television markets throughout the country. These audience reports, which
are based on a randomly selected sample of homes in each market, provide
audience data on the basis of total television households and selected
demographic groupings in 15-minute or half-hour increments for each program and
market. The audience estimates are expressed in terms of the number of
households or demographic groups watching a given program:

- as a percentage of all households or demographic groups in the
market -- the program's rating; and

- as a percentage of households or demographic groups actually viewing
television during that program's time period -- the program's share.

For example, a program generating a 3.5 household rating and a 6 household
share means that 3.5% of the total homes with televisions were watching that
show and of the homes watching television at that time, 6% were watching that
program.

Each specific geographic television market is called a designated market
area. A designated market area is determined as an exclusive geographic area
consisting of all counties in which the home-market commercial stations receive
the greatest percentage of total viewing hours.

In larger markets, Nielsen measures audience viewing through a combination
of meters connected directly to selected television sets which report the
household rating and share results on a daily basis and weekly diaries of
television viewing that are periodically prepared over a four-week period by the
actual viewers. Nielsen refers to these markets as metered markets. In smaller
markets, only weekly diaries are completed periodically by the actual viewers
and Nielsen refers to these markets as diary markets. The periodic four-week
diary periods are commonly known as sweeps periods and are critical to stations
since they provide independent information to advertisers about the viewing
level of a given station's programming to a multitude of demographic age and
gender groups. Due to the underlying costs of installing meters in a market, the
monthly Nielsen subscription fees for each station in a metered market are
significantly higher than those for diary markets.

While meters do not provide daily demographic ratings, the daily reported
household ratings and shares give the stations in metered markets key
information about the general performance of a given show. Also, results in
metered markets tend to more accurately reflect viewing since measurement is not
totally dependent on the memory of the viewer and timeliness of the diary entry.

Currently, we operate in three metered markets: St. Louis, Portland and
Salt Lake City. All of our other markets are diary markets. Over the past five
years, Nielsen has expanded the number of metered markets from 32 to 46, and we
believe that they will continue to convert markets from diary to metered
markets. In most cases where such conversions have taken place, affiliates of
The WB Network and Fox show immediate increases in ratings and share, which we
believe are related to a number of factors, including more accurate reporting
and a shift in the audience sample to those, usually younger households, more
comfortable with electronic measurement devices.

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<PAGE> 36

Advertising. The advertising rates charged by competing stations within a
designated market depend primarily on four factors:

- the station's ratings of households viewing its programs as a percentage
of total households with televisions in that designated market area;

- audience share of households viewing its programs as a percentage of
households actually watching television at a specific time;

- the time of day the advertising is aired; and

- the demographic qualities of the program's viewers, primarily age and
gender.

Additional factors include:

- the size of the designated market area in which the station operates;

- the number of advertisers competing for available advertising time;

- demographic characteristics of the designated market area served by the
station, the availability and pricing of alternative advertising media in
the designated market area;

- relative ability of competing sales forces; and

- the development of projects and marketing programs that tie advertiser
messages to programming.

All network affiliated stations, including those affiliated with Fox, UPN,
The WB Network and Pax Net are required to carry national and regional spot
advertising sold by their networks. This reduces the amount of advertising time
available for sale directly by the network-affiliated stations.

Advertisers wishing to reach a national audience usually purchase time
directly from the traditional networks, Fox, UPN, The WB Network, Pax Net and
cable networks, or advertise nationwide on an ad hoc basis. National advertisers
who wish to reach a particular regional or local audience buy advertising time
directly from local stations through national advertising sales representative
firms, or in the cases of some large stations groups, from the station group
itself. Local businesses purchase advertising time directly from the station's
local sales staff.

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BUSINESS

COMPANY OVERVIEW

We currently own and operate nine broadcast television stations in
medium-sized markets across the United States. Each of our stations is a network
affiliate of The WB Network, making us the third largest WB Network affiliated
station group in the country. Our television stations broadcast in markets that
cover in aggregate approximately 5.4% of the total U.S. television households.
Mr. Kellner, our Chairman and Chief Executive Officer, is also a founder, Chief
Executive Officer and partner of The WB Network, and was President of Fox
Broadcasting Company from its inception in 1986 through 1993. Mr. Kellner and
our other founders formed our company to capitalize on the opportunity to
affiliate with The WB Network, the fastest growing English-language broadcast
television network in the country. We will continue to expand our station group
by selectively acquiring and building primarily WB Network affiliated stations
in medium-sized markets.

Since our formation in 1997, we have focused primarily on acquiring
independently-owned stations, under-performing stations and construction permits
for new stations in markets that we believe have the growth potential and
demographic profile to support the successful launch of a new WB Network
affiliate. We believe that medium-sized markets provide advantages such as fewer
competitors and lower operating costs compared to large markets. Our strategy is
to capitalize on these advantages and to grow our revenues and cash flow by
focusing on generating local sales. Since we centralize many of our stations'
administrative functions and primarily provide entertainment programming, our
station general managers are able to focus on increasing sales and improving
operating margins. We have experienced significant revenue and broadcast cash
flow growth and we anticipate further growth because many of our stations are
newly launched. For the six months ended June 30, 1999, we generated $26.6
million in revenues and $6.5 million in broadcast cash flow, representing an
increase of 37.8% in revenues and 47.0% in broadcast cash flow over the six
months ended June 30, 1998.

Like The WB Network, we target our programming to younger audiences, in
particular, young adults, teens and kids. We believe that these younger
audiences are a growing and increasingly important demographic target for
advertisers, and that our affiliation with The WB Network affords us a
significant competitive advantage over other network affiliated television
broadcasters in attracting these younger audiences. Since its launch in 1995,
The WB Network is the only English-language broadcast network in the United
States to increase its audience share in these key target demographic groups. To
build and retain our audience share during non-network hours, we also acquire
the broadcast rights to popular syndicated programming that we believe
complements The WB Network programming. In addition, we broadcast local
programming such as news in St. Louis, local weather updates and local and
regional sports programming in selected markets. We believe this programming
will enhance our ability to sell advertising time to local and regional
advertisers and increase audience awareness of our newly launched stations.

OUR STRATEGY

The principal components of our business and growth strategy are:

- Our WB Network Affiliation. Our WB Network affiliation provides our
stations with popular prime time and kids programming and the opportunity
to co-brand our stations with the Warner Bros. brand, which is one of the
most recognized brands in the entertainment industry. We believe that
affiliating and co-branding a start up station with The WB Network gives
that station immediate brand recognition and

37
<PAGE> 38

audience awareness. In addition, we believe our stations' affiliation
with The WB Network provides us with a significant competitive advantage
in attracting the younger audiences we believe are a growing and
increasingly important demographic target for advertisers. The
traditional networks attract viewers with a median age ranging from 42 to
53. Fox attracts viewers with a median age of 34 years while the median
age of The WB Network viewers is 27 years of age. We expect that stations
we acquire in new markets will enter into affiliation agreements with The
WB Network.

- Strength of Our Senior Management Team. Our senior management team is one
of the most experienced in the industry with an average of over 20 years
of experience owning and operating broadcast television stations and
selling television advertising time. Mr. Kellner, our Chairman and Chief
Executive Officer, is also a founder, Chief Executive Officer and partner
of The WB Network, and was President of Fox Broadcasting Company from its
inception in 1986 through 1993. Mr. Gealy, our President and Chief
Operating Officer, began his broadcast television career in sales and
since then has held various management positions, including station
general manager and group executive responsible for eight stations. Mr.
Allen, our Executive Vice President and Chief Financial Officer, has
spent 13 years as an executive in the entertainment industry, including
seven years as Chief Financial Officer of Fox Broadcasting Company.

- Popular and Proven Syndicated Programming. While The WB Network
programming provides the foundation of our programming, we also acquire
popular syndicated programming, which is an important part of building
our stations' audience and revenue share. We believe that broadcasting
popular and targeted programming before and after The WB Network prime
time programs builds and retains our audience share during these critical
dayparts. We seek to acquire programming that targets demographic groups
similar to those targeted by The WB Network during its prime time
programming. Our syndicated programming for the 1999 and 2000 seasons
includes newly syndicated programming such as The Drew Carey Show,
Suddenly Susan, Caroline in the City and Spin City, as well as proven
programs such as Friends, Seinfeld and Star Trek: The Next Generation.

- Focus on Sales. To grow our revenues, we aggressively market our
advertising time to local advertisers and also sell advertising time to
regional and national advertisers. We believe that our focus on local
sales enables us to capture existing local advertising revenues and to
create new television advertising revenues by selling to first-time
buyers of television advertising time. Since we centralize many of our
stations' administrative functions and primarily provide entertainment
programming, our station general managers are able to focus on increasing
sales and improving operating margins. Our station general managers have
an average of over 18 years of experience selling television advertising
time and are directly involved in their stations' sales management. When
we acquire or build a station, we focus on building the station's sales
force and provide on-going in-house sales training and development.

- Selective and Opportunistic Expansion in Medium-Sized Markets. We will
continue to expand our group of television stations selectively and
opportunistically by acquiring independently-owned stations,
under-performing stations and construction permits for new stations.
Since our inception in 1997, we have acquired six stations, built three
stations and entered into joint services agreements with two other
stations. We target medium-sized markets because they are typically
characterized by fewer and less sophisticated competing television
station operators and other media, and lower operating costs than larger
markets.

38
<PAGE> 39

- Focus on a Young and Growing Audience. We target our programming
primarily to young adults, teens and kids, demographic groups that are
growing in size and purchasing power. For example, in 1998 teens spent
and/or influenced $140 billion in purchases, up from $120 billion in
1997. As a population, teens are growing at approximately twice the rate
of the rest of the U.S. population. Kids also exert indirect influence
over approximately $400 billion each year in purchases such as cars,
vacations and household goods. We believe that our programming strategy
enhances our ability to sell advertising time by providing direct access
to these attractive demographic groups.

- Significant Economic and Operating Efficiencies. We believe that we
benefit from significant economic and operating efficiencies as a result
of the size of our station group. We centralize our graphic design and
production, scheduling, purchasing, national sales and some accounting
and treasury functions at our corporate headquarters. For example,
because we buy syndicated programming on a centralized basis, we believe
that we have access to higher quality syndicated programming at
attractive prices.

PROGRAMMING

We broadcast programs to attract young adults, teens and kids. Our
programming includes:

- The WB Network prime time programming;

- Kids' WB!;

- syndicated programming; and

- local programming.

Prime Time Programming. In prime time, The WB Network is currently ranked
number one among teens. Prime time programming includes: 7th Heaven, Buffy the
Vampire Slayer, Dawson's Creek, Charmed and Felicity. When The WB Network began
broadcasting in 1995, it provided two hours of prime time programming per week.
In the 1999/2000 season, The WB Network will provide 13 hours of prime time
programming Sunday through Friday and has announced plans to provide two hours
of prime time programming on Saturday for the 2000/2001 season.

The bar graphs below present ratings information for The WB Network prime
time programming as reported by Nielsen Television Index and for each of the
broadcast seasons indicated.

[Adult Share Performance Graph]

<TABLE>
<CAPTION>
ADULTS 18-34
------------
<S> <C>
94-95 1.2
95-96 1.3
96-97 1.4
97-98 1.8
98-99 2.0
</TABLE>

[Teen Share Performance Graph]

<TABLE>
<CAPTION>
TEENS 12-17
-----------
<S> <C>
94-95 1.9
95-96 2.6
96-97 3.1
97-98 4.5
98-99 4.2
</TABLE>

39
<PAGE> 40

[BAR GRAPH -- The bar graph on the left side presents rating data for adults 18
to 34 years of age for the 1994/1995 through the 1998/1999 broadcast seasons.
The growth achieved in ratings points in the five year period among adults 18 to
34 is included above the bar representing the 1998/1999 broadcast season. The
bar graph on the right side presents rating data for teens 12 to 17 years of age
for the 1994/1995 through the 1998/1999 broadcast seasons. The growth achieved
in ratings points over in the five year period among teens 12 to 17 is included
above the bar representing the 1998/1999 broadcast season.]

Kids' WB! Programming. The WB Network launched Kids' WB! in September 1995
with three hours of programming on Saturdays, and currently provides 19 hours of
kids' programming Monday through Saturday. Kids' WB! programming includes
Pokemon, the number one rated kids animated program. Kids' WB! currently airs
three episodes of Pokemon on Saturday and this fall, will air two episodes on
Saturday and two episodes each day, Monday through Friday. Based on the high
ratings for Pokemon, we believe the significant increase in Pokemon airings will
increase Kids' WB! weekday ratings this fall. Kids' WB! also airs Warner Bros.
produced shows such as Batman Beyond, Animaniacs, Pinky and the Brain and
Superman. Warner Bros.' animated programs also feature popular Looney Toons
characters such as Bugs Bunny, Daffy Duck, Tazmanian Devil, Tweety Bird,
Sylvester, Road Runner and Wile E. Coyote.

The bar graph below presents ratings information for The WB Network's Kids'
WB! Saturday programming as reported by Nielsen Television Index and for each of
the broadcast seasons indicated.
[Kids Share Performance Graph]

<TABLE>
<CAPTION>
SATURDAY: KIDS 2-11
-------------------
<S> <C>
95-96 2.0
96-97 1.7
97-98 2.1
</TABLE>

[BAR GRAPH -- The bar graph presents ratings data for the Kids' WB! Saturday
programming from the 1995/1996 through the 1998/1999 broadcast season. The
growth achieved in ratings points in the three year period among kids 2-11 is
included above the bar representing the 1998/1999 broadcast season.]

Syndicated Programming. In addition to The WB Network programming, our
stations air syndicated programs. Generally, our most profitable programming
time periods are those immediately before and after The WB Network programming.
Consequently, during these time periods, we air programs that are targeted to
the audiences similar in demographics as those that watch The WB Network prime
time programs. These important syndicated programs include Friends, Star Trek:
Next Generation, and Seinfeld, and we have acquired the broadcast rights to The
Drew Carey Show, Suddenly Susan, Caroline in the City, and Spin City. We have
multi-year contracts to air most of our syndicated programming.

Local Programming. Each of our stations airs programming of local interest,
which we believe creates immediate viewership at our start-up stations,
increases local awareness of our stations and expands our advertiser base. At
KWBP, our station in Portland, we air weather updates throughout each evening, a
format we intend to replicate at our other stations. At many of our stations, we
acquire broadcast rights and air certain regional and local sporting events
including games of the St. Louis Cardinals and the St. Louis Blues at KPLR, the
Seattle Mariners and the University of Oregon Ducks at KWBP, the Atlanta Braves
and the Atlanta Hawks at WBXX and the Colorado Rockies at KUWB. In addition,
KPLR airs a nightly 30-minute local newscast.

40
<PAGE> 41

OUR STATIONS

The following table provides general information concerning our
stations(1):

<TABLE>
<CAPTION>
MAY 1999 AUDIENCE SHARE
-----------------------------------
TV HOUSEHOLDS(2) ADULTS 18-34 TEENS 12-17
-------------------- ---------------- ---------------- BEGINNING OF
STATION - CHANNEL MARKET PRIME SIGN-ON/ PRIME SIGN-ON/ ACME
MARKETPLACE RANKING NUMBER TIME SIGN-OFF TIME SIGN-OFF OPERATION
----------------- -------- --------- ----- -------- ----- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
KPLR - 11
St. Louis, MO............. 21 1,110,000 14 16 21 23 October 1997
KWBP - 32
Portland, OR.............. 23 994,000 4 4 5 4 February 1997
KUWB - 30
Salt Lake City, UT........ 36 707,000 2 3 4 7 April 1998
KWBQ - 19
Albuquerque-Santa Fe,
NM(3)................... 49 566,000 n/a n/a n/a n/a March 1999
WBDT - 26
Dayton, OH(4)............. 54 504,000 n/a n/a n/a n/a June 1999
WBXX - 20
Knoxville, TN............. 63 447,000 5 6 3 3 October 1997
WIWB - 14
Green Bay-Appleton,
WI(4)................... 69 385,000 n/a n/a n/a n/a June 1999
WBUI - 23
Champaign-Springfield-
Decatur, IL(4).......... 82 335,000 n/a n/a n/a n/a June 1999
WTVK - 46
Ft. Myers-Naples, FL...... 83 330,000 3 3 8 5 March 1998
</TABLE>

- -------------------------
(1) All ownership and statistical information is from BIA Publishing, Inc. and
Nielsen Media Research.

(2) All television stations throughout the United States are grouped into 210
markets that are ranked in size according to the number of households with
televisions in the market for the 1998/1999 season.

(3) KWBQ will be sold once we acquire KASY, also in the Albuquerque-Santa Fe
market. We intend to operate KWBQ under a local marketing agreement. KWBQ
was not reportable in the market in May 1999.

(4) We acquired and began operating these stations in June 1999. Prior to our
acquisition they did not carry The WB Network programming and did not
generate any measurable audience shares in May 1999.

KPLR: ST. LOUIS, MISSOURI

Designated Market Area: 21 TV Households: 1,110,000

Total Age 2+ Population: 2,819,000

Market Description. Thirty-three percent of the total population of St.
Louis is under 25 years of age. The estimated average household income in the
St. Louis market is approximately $45,000 per year. Major employers in the
market include Emerson Electric, May Department Stores, Anheuser-Busch,
Monsanto, Ralston Purina and TWA. The television advertising revenue in the St.
Louis marketplace was estimated at $219.9 million in 1998 and has grown at a
compound annual rate of approximately 6.1% over the past five years.

Station Overview. We began operating KPLR under a local marketing agreement
in October 1997 and acquired the station in March 1998. KPLR signed on the air
in 1959 and has been affiliated with The WB Network since the network's launch.
In addition to carrying The WB Network prime time programming and Kids8 WB!, the
station broadcasts a daily 9pm, half-hour local newscast and also has the
exclusive broadcast rights to air games of the

41
<PAGE> 42

St. Louis Cardinals and the St. Louis Blues. In addition, the station's
syndicated programming currently includes Friends, Seinfeld, Sister Sister,
Martin and Cheers. The station has contracted for the future exclusive market
broadcast rights to popular shows such as The Drew Carey Show (9/99), Spin City
(9/00) and Sabrina (9/00). In the May 1999 sweeps period, KPLR was the first or
second most watched station in the market during the Monday through Sunday 5
p.m. to 1 a.m. time period in important demographic audiences such as teens,
persons 12 - 24 years of age, adults 18 - 34 years of age and adults 18 - 49
years of age. On an adults 18 - 49 years of age share basis, the station is
regularly one of the top three performing WB Network affiliates in the country
in prime time. The station has also been the number one ranked WB affiliate in
kids ratings during the last two seasons.

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the St. Louis designated
market area:

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
--------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
ACME................. KPLR - 11 WB 18 (LOGO)3
Belo Corporation..... KMOV - 4 CBS 9 -1
Fox.................. KTVI - 2 FOX 11 0
Gannett.............. KSDK - 5 NBC 19 -5
Sinclair Broadcast... KDNL - 30 ABC 11 (LOGO)1
</TABLE>

KWBP: PORTLAND, OREGON

<TABLE>
<S> <C>
Designated Market Area: 23 TV Households: 994,000
Total Age 2(LOGO) Population:
2,493,000
</TABLE>

Market Description. Thirty-two percent of the total population of Portland
is under 25 years of age. The estimated average household income in the Portland
market is approximately $42,000 per year. Major employers in the market include
Intel, Fred Meyer, Providence Health System, U.S. Bank of Oregon, Tektronix and
Safeway. The television advertising revenue in the Portland marketplace was
estimated at $179.8 million in 1998 and has grown at a compound annual rate of
approximately 8.4% over the past five years.

Station Overview. We began operating KWBP under a local marketing agreement
in February 1997 and acquired the station in June 1997. KWBP signed on the air
in 1989 and has been affiliated with The WB Network since the network's launch.
In addition to carrying The WB Network prime time programming and Kids' WB!, the
station's syndicated programming currently includes Star Trek: The Next
Generation, Full House, Xena: Warrior Princess and America's Funniest Home
Videos. To date, the audience share at KWBP has been adversely affected
primarily by the lack of available quality syndicated programming for that
market and, to a lesser extent, due to a transmission site located further away
from the market's population center than our competitors' sites. We have
recently acquired a transmission site that will improve our signal coverage. In
addition, the station has contracted for the future exclusive market broadcast
rights to popular shows such as The Drew Carey Show (9/99), Caroline in the City
(9/99) and King of the Hill (9/01). In the May 1999 sweeps period, KWBP
delivered an average weekly cumulative number of 438,000 households from sign-on
to sign-off, representing an 11% increase over May 1998.

42
<PAGE> 43

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the Portland designated
market area:

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
-------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
ACME................... KWBP - 32 WB 3 +1
Belo Corporation....... KGW - 8 NBC 18 -1
BHC Corporation........ KPTV - 12 UPN 8 -4
Fisher Broadcasting.... KATU - 2 ABC 13 +2
Lee Enterprises........ KOIN - 6 CBS 8 +1
Meredith Corporation... KPDX - 49 FOX 16 +1
Paxson
Communications....... KPXG - 22 PAX 1 +1
</TABLE>

KUWB: SALT LAKE CITY, UTAH

<TABLE>
<S> <C>
Designated Market Area: 36 TV Households: 707,000
Total Age 2+ Population: 2,131,000
</TABLE>

Market Description. Forty-four percent of the total population of Salt Lake
City is under 25 years of age. The estimated average household income in the
Salt Lake City market is approximately $43,000 per year. Major employers in the
market include Intermountain Health Care, Brigham Young University, IOMEGA, ICON
Health and Fitness and Smith Food & Drug Centers. Salt Lake City is the site of
the 2002 winter Olympic Games. The television advertising revenue in the Salt
Lake City marketplace was estimated at $155.2 million in 1998 and has grown at a
compound annual rate of approximately 8.6% over the past five years.

Station Overview. We began operating KUWB in April 1998 under a local
marketing agreement and acquired the station in September 1999. KUWB has been
affiliated with The WB Network since the network's launch. When we began
operating the station, we replaced the primarily religious paid programming and
infomercials that were being run on the station in all non-WB Network time
periods with syndicated programming. This station's syndicated programming
currently includes The Fresh Prince, Cheers, Roseanne and Full House. It also
carries the NBC-affiliated Saturday Night Live and the daytime drama Sunset
Beach. The station has contracted for the future exclusive market broadcast
rights to popular shows such as The Drew Carey Show (9/99), Caroline in the City
(9/99), Spin City (9/00) and Sabrina (9/00). In the May 1999 sweeps period, KUWB
delivered an average weekly cumulative number of 293,000 households from sign-on
to sign-off, an increase of 144,000 homes compared to May 1998. The WB Network
prime time programming contributed significantly to KUWB's success in the
market. In The WB Network prime time, KUWB increased its share of the teen
audience by five share points compared to May 1998 and its adult demographics
gained approximately two share points during the same time period.

43
<PAGE> 44

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the Salt Lake City
designated market area:

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
--------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ----------------- ------------------
<S> <C> <C> <C> <C>
ACME.................. KUWB - 30 WB 4 13
CBS................... KUTV - 2 CBS 8 0
Fox................... KSTU(1) - 13 FOX 17 -2
KSL - International... KSL - 5 NBC 19 -2
Larry Miller
Broadcasting........ KJZZ - 14 UPN 10 -4
Paxson
Communications...... KUPX - 16 PAX 0 0
United Television..... KTVX - 4 ABC 10 -1
</TABLE>

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

(1) The ratings reported by Nielsen for this station include information for
total satellite stations. These satellite stations are fully licensed for
broadcasting on a regular channel assignment but they carry only programming
which duplicates entirely the programming and commercial content of a parent
station. Nielsen viewing credit is generally given to the total satellite
station.

KWBQ: ALBUQUERQUE - SANTA FE, NEW MEXICO

<TABLE>
<S> <C>
Designated Market Area: 49 TV Households: 566,000
Total Age 21 Population: 1,513,000
</TABLE>

Market Description. Thirty-six percent of the total population of
Albuquerque - Santa Fe is under 25 years of age. The estimated average household
income in the Albuquerque - Santa Fe market is approximately $37,000 per year.
Major employers in the market include Intel, Motorola, General Electric, General
Mills, Philips and Levi Strauss. The television advertising revenue in the
Albuquerque - Santa Fe marketplace was estimated at $94.4 million in 1998 and
has grown at a compound annual rate of approximately 9.1% over the past five
years.

Station Overview. We launched KWBQ in March 1999 with The WB Network prime
time programming and Kids' WB!. In addition, the station's syndicated
programming currently includes Full House, Step By Step, The Fresh Prince,
America's Funniest Home Videos and Roseanne. The station has contracted for the
future exclusive market broadcast rights to popular shows such as Star Trek:
Voyager (9/99), Caroline in the City (9/99) and Spin City (9/00). After only two
months of broadcast time, KWBQ entered its first major sweeps period in May
1999. From sign-on to sign-off, KWBQ reached an average of 41,000 households, or
7% of the total designated market area. However, in the Albuquerque - Santa Fe
metropolitan statistical area, KWBQ reached 13% of the households.

Shortly after the completion of this offering, we will acquire KASY, a UPN
affiliated station serving the Albuquerque - Santa Fe market, from Ramar and
sell the KWBQ broadcast license to Ramar. At the closing of these transactions,
Ramar will grant Montecito an option to purchase KWBQ which we anticipate that
Montecito will assign to us. We will continue to operate KWBQ as a WB Network
affiliate under a separate local marketing agreement with Ramar, therefore
allowing us to manage two stations in the market. We plan to aggressively
cross-promote the two stations and operate them from a single studio and office
facility. Subject to FCC approval, we may purchase the station if Montecito
assigns the option to us.

44
<PAGE> 45

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the Albuquerque - Santa Fe
designated market area:

<TABLE>
<CAPTION>
SIGN-ON/ SIGN-OFF: MON - SUN 7AM - 1AM
---------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/-SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C>
ACME................... KWBQ - 19 WB 0 0
Belo Corporation....... KASA - 2 FOX 10 +1
Hubbard Broadcasting... KOB(1) - 4 NBC 16 -3
Lee Enterprises........ KRQE(1) - 13 CBS 7 +1
Pulitzer
Broadcasting......... KOAT(1) - 7 ABC 12 0
Ramar Communications... KASY(1) - 50 UPN 2 -1
Univision Television
Group................ KLUZ - 41 UNI 4 +1
</TABLE>

- -------------------------
(1) The ratings reported by Nielsen for this station include information for
total satellite stations. These satellite stations are fully licensed for
broadcasting on a regular channel assignment but they carry only programming
which duplicates entirely the programming and commercial content of a parent
station. Nielsen viewing credit is generally given to the total satellite
station.

WBDT: DAYTON, OHIO

<TABLE>
<S> <C>
Designated Market Area: 54 TV Households: 504,000
Total Age 2+ Population: 1,268,000
</TABLE>

Market Description. Thirty-three percent of the total population of Dayton,
Ohio is under 25 years of age. The estimated average household income in the
Dayton market is approximately $43,000 per year. Major employers in the market
include Chrysler Corp/ Acustar Inc., General Motors, Bank One Dayton, American
Matsushita and BF Goodrich. The television advertising revenue in the Dayton
marketplace was estimated at $88.4 million in 1998 and has grown at a compound
annual rate of approximately 5.9% over the past five years.

Station Overview. We acquired WBDT in June 1999 after the May 1999 sweeps
period. WBDT signed on the air in October 1980 and has been affiliated with The
WB Network since our acquisition of the station. WBDT, former Pax Net station,
currently carries a combination of Pax Net and WB Network programming. Pax Net
programming including Dr. Quinn, Diagnosis Murder and Touched by an Angel is
shown during the morning and prime access time periods. The WB Network prime
time programming and Kids' WB! is shown at The WB Network scheduled times. In
addition, the station has contracted for the future exclusive market broadcast
rights to popular shows such as Full House (9/99), Family Matters (9/00), Fresh
Prince (9/99), America's Funniest Home Videos (9/99), Sabrina (9/00), Clueless
(9/00) and Everybody Loves Raymond (9/01). We believe that our programming
changes, in particular the airing of The WB Network and new syndicated programs,
will improve WBDT's ratings.

45
<PAGE> 46

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the Dayton designated market
area, prior to our purchase of WBDT, formerly WDPX.

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
-------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
Cox Broadcasting....... WHIO - 7 CBS 16 +1
Glencairn Ltd.......... WRGT - 45 FOX 10 +1
Paxson
Communications....... WDPX - 26 PAX 1 +1
Sinclair Broadcast..... WKEF - 22 NBC 12 0
STC Broadcasting....... WDTN - 2 ABC 11 -1
Trinity Broadcasting
Network.............. WKOI - 43 Ind. 0 0
</TABLE>

WBXX: KNOXVILLE, TENNESSEE

<TABLE>
<S> <C>
Designated Market Area: 63 TV Households: 447,000
Total Age 2+ Population: 1,098,000
</TABLE>

Market Description. Thirty-one percent of the total population of Knoxville
is under 25 years of age. The estimated average household income in the
Knoxville market is approximately $37,000 per year. Major employers in the
market include the University of Tennessee, TVA, Oakridge National Laboratories,
Alcoa and Nippondenso. The television advertising revenue in the Knoxville
marketplace was estimated at $68.0 million in 1998 and has grown at a compound
annual rate of approximately 7.9% over the past five years.

Station Overview. We launched WBXX in October 1997. In addition to carrying
The WB Network prime time programming and Kids' WB!, the station has broadcast
rights to air games of the Atlanta Braves. In addition, the station's syndicated
programming currently includes Friends, Sister Sister, Full House and Cheers.
The station has contracted for the future exclusive market broadcast rights to
popular shows such as The Drew Carey Show (9/99), Caroline in the City (9/99),
Sabrina (9/00), Spin City (9/00) and Suddenly Susan (9/00). In the May 1999
sweeps period, WBXX delivered an average weekly cumulative number of 135,000
households from sign-on to sign-off, an increase of 3,000 households compared to
May 1998. From May 1998 to May 1999, WBXX was the only station in the market to
increase its average weekly number of households.

In April 1999, we entered into a ten year joint services agreement with
Paxson Communications under which we provide certain sales and operational
services to WPXK, serving the Knoxville, Tennessee market. Through April 2009,
WPXK will carry solely the Pax Net supplied programming and we will share
equally with Paxson Communications the excess of station revenues over certain
operating expenses.

46
<PAGE> 47

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the Knoxville designated
market area:

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
-------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
ACME................... WBXX - 20 WB 5 0
Gannett................ WBIR - 10 NBC 16 -4
Gray Communications.... WVLT - 8 CBS 7 -2
Paxson Communications.. WPXK - 54 PAX 0 0
Raycom Media........... WTNZ - 43 FOX 6 -2
Young Broadcasting..... WATE - 6 ABC 13 +4
</TABLE>

WIWB: GREEN BAY - APPLETON, WISCONSIN

<TABLE>
<S> <C>
Designated Market Area: 69 TV Households: 385,000
Total Age 2+ Population: 982,000
</TABLE>

Market Description. Thirty-four percent of the total population of Green
Bay - Appleton is under 25 years of age. The estimated average household income
in the Green Bay - Appleton market is approximately $41,000 per year. Major
employers in the market include Fort James Corporation, the Oneida Tribe of
Indians of Wisconsin, Schneider National, Humana, Shopko Stores, American
Medical Security, Bellin Memorial Hospital and Procter & Gamble Paper Products.
The television advertising revenue in the Green Bay - Appleton marketplace was
estimated at $53.9 million in 1998 and has grown at a compound annual rate of
approximately 7.4% over the past five years.

Station Overview. We acquired WIWB in June 1999 after the May 1999 sweeps
period. WIWB signed on the air in August 1998 and has been affiliated with The
WB Network since our acquisition of the station. WIWB, a former Pax Net station,
currently carries a combination of Pax Net and WB Network programming. Pax Net
programming including Dr. Quinn, Diagnosis Murder and Touched by an Angel is
shown during the morning and prime access time periods. The WB Network prime
time and Kids' WB! is shown at The WB Network scheduled times. The station has
contracted for the future exclusive market broadcast rights to popular shows
such as Step by Step (9/99), Fresh Prince (9/99), Jerry Springer (9/99), Sabrina
(9/00), Clueless (9/00), Suddenly Susan (9/00), Jamie Foxx (9/00) and Everybody
Loves Raymond (9/01). We believe that our programming changes, in particular the
airing of the WB Network programming and new syndicated programs, will improve
WIWB's ratings.

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<PAGE> 48

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the Green Bay - Appleton
designated market area, prior to our purchase of WIWB, formerly WPXG.

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
-------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
Ace TV................. WACY - 32 UPN 4 -2
Aires
Telecommunications... WGBA - 26 NBC 16 -2
CBS.................... WFRV - 5 CBS 8 -3
Paxson Communications.. WPXG - 14 PAX 1 +1
SF Broadcasting........ WLUK - 11 FOX 12 +1
Young Broadcasting..... WBAY - 2 ABC 15 -1
</TABLE>

WBUI: CHAMPAIGN - SPRINGFIELD - DECATUR, ILLINOIS

<TABLE>
<S> <C>
Designated Market Area: 82 TV Households: 335,000
Total Age 2+ Population: 814,000
</TABLE>

Market Description. Thirty-three percent of the total population of
Champaign - Springfield - Decatur is under 25 years of age. The estimated
average household income in the Champaign - Springfield - Decatur market is
approximately $42,000 per year. Major employers in the market include ADM,
Staley's, Caterpillar, Mueller, Illinois Power, Kraft and the University of
Illinois. The television advertising revenue in the Champaign - Springfield -
Decatur marketplace was estimated at $42.7 million in 1998 and has grown at a
compound annual rate of approximately 6.6% over the past five years.

Station Overview. We acquired WBUI in June 1999 after the May 1999 sweeps
period. WBUI signed on the air in May 1984 and has been affiliated with The WB
Network since our acquisition of the station. WBUI, a former Pax Net station,
currently carries a combination of Pax Net and WB Network programming. Pax Net
programming including Dr. Quinn, Diagnosis Murder and Touched by an Angel is
shown during the morning and prime access time periods. The WB Network prime
time and Kids' WB! is shown at The WB Network scheduled times. The station has
contracted for the future exclusive market broadcast rights to popular shows
such as Full House (9/99), Star Trek: Voyager (9/99), Fresh Prince (9/99),
Entertainment Tonight (9/99), Sabrina (9/00), Suddenly Susan (9/00), Spin City
(9/00) and Clueless (9/00). We believe that our programming changes, in
particular the airing of The WB Network and new syndicated programs, will
improve WBUI's ratings.

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<PAGE> 49

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the
Champaign - Springfield - Decatur designated market area, prior to our purchase
of WBUI, formerly WPXU.

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
---------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
Bahakel
Communications..... WRSP(1) - 55 FOX 11 +3
Gannett.............. WICS(1) - 20 NBC 20 -3
LIN Television....... WAND - 17 ABC 12 0
Midwest Television... WCIA(1) - 3 CBS 11 -2
Paxson
Communications..... WPXU - 23 PAX 1 +1
</TABLE>

WTVK: FT. MYERS - NAPLES, FLORIDA

<TABLE>
<S> <C>
Designated Market Area: 83 TV Households: 330,000
Total Age 2+ Population: 782,000
</TABLE>

Market Description. Twenty-five percent of the total population of Ft.
Myers - Naples is under 25 years of age. The estimated average household income
in the Ft. Myers - Naples market is approximately $45,000 per year. Major
employers in the market include The Lee County School District, Lee Memorial
Health System, Columbia Healthcare and Publix SuperMarkets. The television
advertising revenue in the Ft. Myers - Naples marketplace was estimated at $56.2
million in 1998 and has grown at a compound annual rate of approximately 7.4%
over the past five years.

Station Overview. We began operating WTVK in March 1998 under a local
marketing agreement and acquired the station in June 1998. WTVK signed on the
air in October 1990 and has been affiliated with The WB Network since our
acquisition of the station. In addition to carrying The WB Network prime time
programming and Kids' WB!, the station's syndicated programming currently
includes Sister Sister, The Nanny, Mad About You, NewsRadio, X-Files and
Stargate. The station has contracted for the future exclusive market broadcast
rights to popular shows such as Star Trek: Voyager (9/99), Drew Carey (9/99),
Sabrina (9/00), Suddenly Susan (9/00), Spin City (9/00) and Caroline in the City
(9/00). In the May 1999 sweeps period WTVK delivered a two household share from
sign-on to sign-off for the third consecutive sweeps period. WTVK delivered an
average weekly household cumulative number of 76,000 in May 1999, an increase of
3,000 households since May 1998. WTVK has increased its share of the teen
audience significantly Monday through Wednesday 8pm to 10pm. In May 1999, WTVK
held an 18 share of the teen audience making it the number one station in the
time period in that demographic.

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<PAGE> 50

Competition. The following table outlines summary information regarding the
commercially-rated broadcast television stations in the Ft. Myers - Naples
designated market area:

<TABLE>
<CAPTION>
SIGN-ON/SIGN-OFF: MON - SUN 7AM - 1AM
-------------------------------------
CALL LETTERS - MAY '99 SHARE OF +/- SHARE POINTS
OWNER CHANNEL AFFILIATION PERSONS 12 - 34 MAY '99 VS MAY '98
----- -------------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C>
ACME................... WTVK - 46 WB 3 +1
Emmis Communications... WFTX - 36 FOX 13 0
Ft. Myers
Broadcasting......... WINK - 11 CBS 11 +1
Montclair
Communications....... WZVN - 26 ABC 6 -3
Waterman Broadcasting.. WBBH - 20 NBC 14 -3
West Coast Christian
TV................... WRXY - 49 Ind. 0 0
</TABLE>

WZPX: GRAND RAPIDS, MICHIGAN

In addition to the nine stations described above, in April 1999, we entered
into a joint sales agreement with DP Media for WZPX, serving the Grand Rapids,
Michigan market. WZPX is a primary affiliate of Pax Net. In connection with this
agreement, WZPX will enter into a secondary affiliation agreement with The WB
Network for five years. Under our joint sales agreement, we sell certain
advertising time for WZPX, and as compensation, we retain a portion of the
excess of station revenues over station operating expenses, if any. We are
obligated to pay any expenses which are not covered by advertising revenues and
40% of all interest expense owed by DP Media with respect to WZPX. DP Media has
the right to sell the station to us at any time during the next four years for
$30.0 million. We have limited rights to acquire the station for that same
amount if DP Media chooses to sell the station.

OUR AFFILIATION AGREEMENTS

Each of our stations has entered into a station affiliation agreement with
The WB Network that provides each station with the exclusive right to broadcast
The WB Network programming in its respective market. These affiliate agreements
generally have three to ten year terms.

Under the affiliation agreements, The WB Network retains the right to
program and sell approximately 75% of the advertising time available during The
WB Network prime time schedule with the remaining 25% available for sale by our
stations. The WB Network retains approximately 50% of the advertising time
available during Kids' WB! programs aired in other dayparts.

In addition to the advertising time retained for sale by The WB Network,
each station is also required to pay annual compensation to The WB Network. The
amount of compensation is determined by taking into account the station's
average ratings among adults ages 18 - 49 during The WB Network prime time
programming, as well as the number of prime time programming hours provided per
week by The WB Network. We participate in cooperative marketing efforts with The
WB Network whereby the network reimburses up to 50% of certain approved
advertising expenditures by a station to promote network programming. Our
affiliation agreements for KPLR, KWBP and WBXX, also entitle those stations to
the most favorable terms agreed to by The WB Network and any affiliate, except
for superstation WGN, during the term of the affiliation agreements, and any
subsequent modifications.

In addition, as part of our acquisition of WBDT, WIWB and WBIU, we entered
into a five-year secondary affiliation agreement with Pax Net at these stations.
We are generally

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<PAGE> 51

obligated to run the Pax Net prime time programming in certain morning dayparts.
We retain a portion of the advertising time during this programming for local
sales, and Pax Net retains the balance.

ADVERTISING/SALES

Virtually all of our revenues for 1997 and 1998 and the first six months of
1999 consisted of advertising revenues, and no single advertiser accounted for
more than 10% of our gross advertising revenues in these periods. Our
advertising revenues are generated both by local advertising and national spot
advertising.

Local Advertising. Local advertising revenues are generated by both local
merchants and service providers and by regional and national businesses and
advertising agencies located in a particular designated market area. Local
advertising revenues represented 42% of our net advertising revenues in 1997,
54% in 1998 and 58% in the first six months of 1999.

National Spot Advertising. National spot advertising represents time sold
to national and regional advertisers based outside a station's designated market
area. National spot advertising revenues represented 58% of our net advertising
revenues in 1997, 46% in 1998 and 45% in the first six months of 1999. National
spot advertising primarily comes from:

- new advertisers wishing to test a market;

- advertisers who are regional retailers and manufacturers without national
distribution;

- advertisers who need to enhance network advertising in given markets; and

- advertisers wishing to place more advertisements in specified geographic
areas.

OUR COMPETITION

Broadcast television stations compete for advertising revenues primarily
with other broadcast television stations in their respective markets and, to a
lesser but an increasing extent, with radio stations, cable television system
operators, newspapers, billboard companies, direct mail and internet sites.
Traditional network and Fox programming generally achieves higher household
audience levels than that of The WB Network and syndicated programming aired by
independent stations which is attributable to a number of factors, including:

- the traditional networks' efforts to reach a broader audience;

- historically, less competition;

- generally better channel positions;

- more network programming being broadcast weekly;

- the traditional networks' cross-promotions; and

- the traditional networks' more established market presence than The WB
Network.

However, because The WB Network provides fewer hours of programmings per
week than the traditional networks, we have a significantly higher inventory of
advertising time for our own use and our programs therefore achieve a share of
television market advertising revenues greater than their share of the market's
audience. We believe that this available advertising time, combined with our
efforts to attract audiences with our programming

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<PAGE> 52

which are key targets of advertisers and our focus on advertising sales allows
us to compete effectively for advertising revenues within our stations' markets.

The broadcasting industry is continuously faced with technical changes and
innovations, the popularity of competing entertainment and communications media,
changes in labor conditions, and governmental restrictions or actions of federal
regulatory bodies, including the FCC, any of which could possibly have a
material adverse effect on a television station's operations and profits.
Sources of video service other than conventional television stations, the most
common being cable television, can increase competition for a broadcast
television station by bringing distant broadcasting signals not otherwise
available to the station's audience, serving as a distribution system for
national satellite-delivered programming and other non-broadcast programming
originated on a cable system and selling advertising time to local advertisers.
Other principal sources of competition include home video exhibition,
direct-to-home broadcast satellite television, entertainment services and
multichannel multipoint distribution services. Currently, two FCC permitees,
DirecTV and Echostar, provide subscription DBS services via high-power
communications satellites and small dish receivers, and other companies provide
direct-to-home video service using lower powered satellites and larger
receivers.

Other technology advances and regulatory changes affecting programming
delivery through fiber optic telephone lines and video compression could lower
entry barriers for new video channels and encourage the development of
increasingly specialized niche programming. The Telecommunications Act of 1996
permits telephone companies to provide video distribution services via radio
communication, on a common carrier basis, as cable systems or as open video
systems, each pursuant to different regulatory schemes. We cannot predict the
effect that these and other technological and regulatory changes will have on
the broadcast television industry and on the future profitability and value of a
particular broadcast television station.

Broadcast television stations compete with other television stations in
their designated market areas for the acquisition of programming. Generally,
cable systems do not compete with local stations for programming, but various
national cable networks do from time to time and on an increasing basis acquire
programming that could have been offered to local television stations. Public
broadcasting stations generally compete with commercially-rated broadcasters for
viewers, but do not compete for advertising revenues. Historically, the cost of
programming has increased because of an increase in the number of independent
stations and a shortage of quality programming.

FEDERAL REGULATION OF TELEVISION BROADCASTING

Television broadcasting is a regulated industry and is subject to the
jurisdiction of the FCC under the Communications Act of 1934, as amended from
time to time. The Communications Act prohibits the operation of television
broadcasting stations except under a license issued by the FCC. The
Communications Act empowers the FCC, among other things:

- to issue, revoke and modify broadcast licenses;

- to decide whether to approve a change of ownership or control of station
licenses;

- to regulate the equipment used by stations; and

- to adopt and implement regulations to carry out the provisions of the
Communications Act.

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<PAGE> 53

Failure to observe FCC or other governmental rules and policies can result
in the imposition of various sanctions, including monetary forfeitures, the
grant of short, or less than maximum, license renewal terms or, for a
particularly egregious violations, the denial of a license renewal application,
the revocation of a license or denial of FCC consent to acquire additional
broadcast properties.

License Grant, Renewal, Transfer and Assignment. A party must obtain a
construction permit from the FCC to build a new television station. Once a
station is constructed and commences broadcast operations, the permittee will
receive a license which must be renewed by the FCC at the end of each eight-year
license term. The FCC grants renewal of a broadcast license if it finds that the
station has served the public interest, convenience, and necessity and the
licensee has not seriously violated the Communications Act or FCC rules and
policies. If the FCC finds that a licensee has failed to meet these standards,
the FCC may deny renewal or condition renewal. Any other party with standing may
petition the FCC to deny a broadcaster's application for renewal. However, only
if the FCC issues an order denying renewal will the FCC accept and consider
applications from other parties for a construction permit for a new station to
operate on that channel. The FCC may not consider any applicant in making
determinations concerning the grant or denial of the licensee's renewal
application. Although renewal of licenses is granted in the majority of cases
even when petitions to deny have been filed, we cannot be sure our station
licenses will be renewed for a full term or without modification.

Our current licenses expire as follows:

<TABLE>
<CAPTION>
STATION EXPIRATION DATE
------- ----------------
<S> <C>
KPLR.......................................... February 1, 2006
KWBP.......................................... February 1, 2007
KUWB.......................................... October 1, 2006
KWBQ(1)....................................... October 1, 2006
WBDT.......................................... October 1, 2005
WBXX.......................................... August 1, 2005
WIWB.......................................... December 1, 2005
WBUI.......................................... December 1, 2005
WTVK.......................................... February 1, 2005
</TABLE>

- -------------------------
(1) We currently operate under a construction permit. We expect the license to
be granted during the second half of 1999.

The Communications Act prohibits the assignment of a broadcast license or
the transfer of control of a broadcast licensee without the prior approval of
the FCC. In determining whether to permit the assignment or transfer of control
of, or the grant or renewal of, a broadcast license, the FCC considers a number
of factors pertaining to the licensee, including:

- compliance with various rules limiting common ownership of media
properties;

- the character of the licensee and those persons holding attributable
interests therein; and

- compliance with the Communications Act's limitations on alien ownership.

Character generally refers to the likelihood that the licensee or applicant
will comply with applicable law and regulation. Attributable interests generally
refers to the level of ownership or other involvement in station operations
which would result in the FCC

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<PAGE> 54

attributing ownership of that station or other media outlet to the person or
entity in determining compliance with FCC ownership limitations.

To obtain the FCC's prior consent to assign a broadcast license or transfer
control of a broadcast licensee, an application must be filed with the FCC. If
the application involves a substantial change in ownership or control, the
application must be placed on public notice for a period of no less than 30 days
during which petitions to deny the application may be filed by interested
parties, including certain members of the public. If the FCC grants the
application, interested parties have no less than 30 days from the date of
public notice of the grant to seek reconsideration or review of that grant by
the full commission or, as the case may be, a court of competent jurisdiction.
The full FCC commission has an additional 10 days to set aside on its own motion
any action taken by the FCC's staff. When passing on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer to any party other than the
assignee or transferee specified in the application.

The FCC staff informed us that, so long as we have an interim voting
agreement, our reorganization from a limited liability company into a
corporation and our issuance of shares to the public in the offering will be
deemed to result in a non-substantial change of ownership requiring a short-form
application to the FCC. Accordingly, we applied for FCC approval to complete the
reorganization and offering conditioned on our entry into the interim voting
agreement. The FCC staff granted that application on September 2, 1999.
Interested parties will have 30 days from the date of public notice of that
grant to seek FCC reconsideration or review of the grant of the full commission
or a court. The full commission also has an additional 10 days to reconsider the
grant on its own motion. We cannot predict how long the FCC would take to act
upon a request for reconsideration or review. We expect the period to request
FCC reconsideration to expire in mid-October, 1999. Until the FCC order
approving our short-form application becomes final, we are at risk to third
party challenges to and FCC reconsideration of that initial approval.

The FCC staff has also informed us that, without the required interim
voting agreement, our reorganization and our issuance of shares to the public in
the offering will result in a substantial change of control requiring a
long-form application to the FCC. Accordingly, in addition to our short-form
application, we have made a long-form application to the FCC to go forward from
the reorganization and offering without the interim voting agreement. We must
receive the final order of the FCC approving the long-form application before we
can terminate the interim voting agreement. That long-form application must be
open to the public for challenge or other comment for 30 days before the FCC
staff can act on it. Interested parties may file petitions to deny the
application on or before that date. The 30-day period expired September 27,
1999. If the FCC grants the long-form application, interested parties will have
another 30 days from public notice of the grant to seek FCC reconsideration or
review of the grant of the full commission or a court. The full commission also
has an additional 10 days to reconsider the grant on its own motion. We will go
forward with our reorganization and the offering whether or not the FCC has
granted our long-form application. Until the FCC order granting our long-form
application becomes final, we are at risk to third party challenges to and FCC
reconsideration of that initial approval.

Although we believe that it is likely we will receive final FCC orders
approving our reorganization and this offering, third party challenges to or FCC
reconsideration of our applications may require changes to permit approval to
become final. Nor can we assure you that the interim voting agreement will
remain in effect as required by the FCC. If the FCC or a court reconsiders or
reviews the grant of our short-form application and the grant of our short-form
application is rescinded, or if the interim agreement terminates without
approval

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<PAGE> 55

of our long-form application, the FCC could force us to divest our FCC licenses,
pay fines, deny renewal of our license, refuse to approve of any of our
acquisitions, order us to restructure our reorganization or order us to take any
other action necessary to come into compliance with an FCC order.

Ownership Restrictions. The officers, directors and equity owners of 5% or
more of our outstanding voting stock or the voting stock of a company holding
one or more broadcast licenses are deemed to have attributable interests in the
broadcast company. However, minority voting stock interests generally will not
be attributable if there is a single holder of more than 50% of the outstanding
voting power of the corporation. Also, specified institutional investors,
including mutual funds, insurance companies and banks acting in a fiduciary
capacity, may own up to 10% of the outstanding voting stock without being
subject to attribution if they exercise no control over the management or
policies of the broadcast company.

Under the rules currently in effect, the FCC will not grant a license to
operate a television station, unless established waiver standards are met, to
any party, or parties under common control, that has an attributable interest in
another television station with an overlapping service contour. FCC regulations
also prohibit one owner from having attributable interests in television
broadcast stations that reach in the aggregate more than 35% of the nation's
television households. For purposes of this calculation, stations in the UHF
band which covers channels 14 - 69 are attributed with only 50% of the
households attributed to stations in the VHF band, which covers channels 2 - 13.
Subject to certain exceptions, the rules generally prohibit, the holder of an
attributable interest in a television station from also having an attributable
interest in a radio station, daily newspaper or cable television system serving
a community located within the relevant coverage area of that television
station. Separately, the FCC's cross-interest policy may prohibit the common
ownership of an attributable interest in one media outlet and a non-attributable
equity interest in another media outlet, among other significant interests, in
the same market.

The FCC recently adopted amendments to its ownership rules. Among other
things, the new rules:

- determine whether stations are in the same market by reference to a
Nielsen designated market area rather than through a signal overlap among
stations;

- permit common ownership of two television stations in the same designated
market area under certain circumstances;

- permit some radio-television ownership combinations;

- eliminate the cross-interest policy;

- attribute the ownership of a station to parties whose debt and/or equity
holdings in the company exceed 33% of the station's total assets if
certain other factors are present;

- increase the benchmark for certain passive investors from 10% to 20%; and

- treat some local marketing agreements or time brokerage agreements with
television stations as an attributable interest.

Those amendments are not yet effective, nor are the FCC's actions final. We do
not know whether the new rules will become effective in their present form or be
modified in future proceedings.

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<PAGE> 56

Restrictions on Foreign Ownership. The Communications Act prohibits the
issuance of broadcast licenses to, or the holding of a broadcast license by
foreign citizens or any corporation of which more than 20% of the capital stock
is owned of record or voted by non-U.S. citizens or their representatives or by
a foreign government or a representative thereof, or by any corporation
organized under the laws of a foreign country. The Communications Act also
authorizes the FCC to prohibit the issuance of a broadcast license to, or the
holding of a broadcast license by, any corporation controlled by any other
corporation of which more than 25% of the capital stock is owned of record or
voted by aliens. The FCC has interpreted these restrictions to apply to other
forms of business organizations, including partnerships. As a result of these
provisions, the licenses granted to our subsidiaries that hold FCC licenses
could be revoked if more than 25% of our stock were directly or indirectly owned
or voted by aliens. Our certificate of incorporation contains limitations on
alien ownership and control substantially similar to those contained in the
Communications Act. Pursuant to our certificate of incorporation, we have the
right to refuse to sell shares to aliens or to repurchase alien-owned shares at
their fair market value to the extent necessary, in the judgment of our board of
directors, to comply with the alien ownership restrictions.

Programming and Operation. The Communications Act requires broadcasters to
serve the public interest, convenience and necessity. The FCC has gradually
restricted or eliminated many of the more formalized procedures it had developed
to promote the broadcast of programming responsive to the needs of the station's
community of license. Licensees continue to be required, however, to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming will be considered by the FCC when
it evaluates the licensee's renewal application, but these complaints may be
filed and considered at any time.

Stations must also pay regulatory and application fees and follow various
FCC rules that regulate, among other things:

- political advertising;

- children's programming;

- the broadcast of obscene or indecent programming;

- sponsorship identification; and

- technical operations and equal employment opportunity requirements.

Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
short, less than the maximum, renewal terms, or for particularly egregious
violations, the denial of a license renewal application or the revocation of a
license.

Review of Must Carry Rules. FCC regulations implementing the Cable
Television Consumer Protection and Competition Act of 1992 require each
television broadcaster to elect, at three year intervals beginning October 1,
1993, to either:

- require carriage of its signal by cable systems in the station's market
which is referred to as must carry rules; or

- negotiate the terms on which such broadcast station would permit
transmission of its signal by the cable systems within its market which
is referred to as retransmission consent.

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<PAGE> 57

The United States Supreme Court upheld the must-carry rules in a 1997
decision. These must carry rights are not absolute, and their exercise is
dependent on a variety of factors such as:

- the number of active channels on the cable system;

- the location and size of the cable system; and

- the amount of programming on a broadcast station that duplicates the
programming of another broadcast station carried by the cable system.

Therefore under certain circumstance, a cable system may choose to decline
to carry a given station. We have elected must carry with respect to each of our
stations which are each carried on the related cable system.

Local Marketing Agreements. We have, from time to time, entered into local
marketing agreements, generally in connection with pending station acquisitions.
By using local marketing agreements, we can provide programming and other
services to a station proposed to be acquired before we receive all applicable
FCC and other governmental approvals.

FCC rules and policies generally permit local marketing agreements if the
station licensee retains ultimate responsibility for and control of the
applicable station, including finances, personnel, programming and compliance
with the FCC's rules and policies. We cannot be sure that we will be able to air
all of our scheduled programming on a station with which we have local marketing
agreements or that we will receive the anticipated revenue from the sale of
advertising for such programming.

Under the rules currently in effect, the licensee of a television station
providing programming on another television station under a local marketing
agreement is not considered to have an attributable interest in the other
station. However, the FCC recently adopted rules provide that the licensee of a
television station which provides programming for more than 15% of the time on
another television station serving the same market would be deemed to have an
attributable interest in the latter station for purposes of the national and
local multiple ownership rules. The FCC also adopted a grandfathering policy
providing that local marketing agreements that are in compliance with existing
FCC rules and policies and were entered into before November 5, 1996 would be
permitted to continue in force until the FCC conducts its biennial review of
regulations in 2004. Local marketing agreements entered into after that date but
prior to the FCC action will be grandfathered until August 2001.

None of our local marketing agreements were in existence on the date of
enactment of the Telecommunications Act or on November 5, 1996. Therefore we may
be forced to terminate the KWBQ local marketing agreement in August 2001 if it
has not been previously terminated, unless holding an attributable interest in
KWBQ and KASY would comply with the television duopoly rule or a waiver of the
rule was granted.

Digital Television Services. The FCC has adopted rules for implementing
digital television service in the United States. Implementation of digital
television will improve the technical quality of television signals and provide
broadcasters the flexibility to offer new services, including high-definition
television and data broadcasting.

The FCC has established service rules and adopted a table of allotments for
digital television. Under the table, all eligible broadcasters with a full-power
television station are allocated a separate channel for digital television
operation. Stations will be permitted to phase in their digital television
operations over a period of years following the adoption of a final table of
allotments, after which they will be required to surrender their license to

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<PAGE> 58

broadcast the analog, or non-digital television, signal. Affiliates of the top
four networks in the top ten markets are already required to be on the air with
a digital signal. Affiliates of the top four networks in the next twenty largest
markets must be on the air with a digital signal by November 1, 1999. Our
stations must be on the air with a digital signal by May 1, 2002. Under
applicable law and regulation, television broadcasters must return their analog
license to the government by 2006 unless specified conditions exist, that in
effect, affect the public's limited access to digital television transmissions
in a particular market.

The Communications Act and the FCC's rules impose certain conditions on the
FCC's implementation of digital television service. Among other requirements,
the FCC must:

- limit the initial eligibility for licenses to existing television
broadcast licensees or permittees;

- allow digital television licensees to offer ancillary and supplementary
services; and

- charge appropriate fees to broadcasters that supply ancillary and
supplementary services for which such broadcasters derive certain
nonadvertising revenues.

Equipment and other costs associated with the digital television
transition, including the necessity of temporary dual-mode operations, will
impose some near-term financial costs on television stations providing the
services. The potential also exists for new sources of revenue to be derived
from digital television. We cannot predict the overall effect the transition to
digital television might have on our business.

Children's Television Act. FCC rules limit the amount of commercial matter
that a television station may broadcast during programming directed primarily at
children 12 years old and younger. FCC rules further require television stations
to serve the educational and informational needs of children 16 years old and
younger through the stations' own programming as well as through other means.
Television broadcasters must file periodic reports with the FCC to document
their compliance with foregoing obligations.

Other Pending FCC and Legislative Proceedings. In 1995, the FCC issued
notices of proposed rulemaking proposing to modify or eliminate most of its
remaining rules governing the broadcast network-affiliate relationship. The
network-affiliate rules were originally intended to limit networks' ability to
control programming aired by affiliates or to set station advertising rates and
to reduce barriers to entry by networks. The dual network rule, which generally
prevents a single entity from owning more than one broadcast television network,
is among the rules under consideration in these proceedings. Although the
Telecommunications Act substantially relaxed the dual network rule by providing
that an entity may own more than one television network, none of the four major
national television networks may merge with each other or acquire certain other
networks in existence on February 8, 1996. We cannot predict how or when the FCC
proceeding will be resolved or how those proceedings or the relaxation of the
dual network rule may affect our business.

The Satellite Home Viewer Act allows satellite carriers to deliver
broadcast programming to subscribers who are unable to obtain television network
programming over the air from local television stations. Congress is currently
considering legislation to amend the act to facilitate the ability of satellite
carriers to provide subscribers with programming from a non-local television
station. We cannot predict whether any such legislation will be enacted or what,
if any, impact such legislation may have on us.

The FCC has also initiated a proceeding to reexamine rules that previously
required broadcast licensees to provide equal employment opportunities. If the
FCC does adopt new rules governing equal employment opportunities we may have
additional administrative burdens. However, adoption of any new rules will not
affect our continuing obligation to comply with other federal and state laws
concerning equal employment opportunities.
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<PAGE> 59

Federal regulatory agencies and Congress from time to time consider
proposals for additional or revised rules. We cannot predict the resolution of
these issues or other issues discussed above, although their outcome could, over
a period of time, affect, either adversely or favorable, the broadcasting
industry generally or us specifically.

The foregoing summary of FCC and other governmental regulations is not
intended to be comprehensive. For further information concerning the nature and
extent of federal regulation of broadcast stations, you should refer to the
Communications Act, the Telecommunications Act, other Congressional acts, FCC
rules and the public notices and rulings of the FCC.

EMPLOYEES

At June 30, 1999, we had 309 employees, including 44 at KPLR in St. Louis
who were subject to collective bargaining agreements. We believe that our
relationships with our employees and the unions representing our unionized
employees are good.

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<PAGE> 60

PROPERTIES AND FACILITIES

All of our leased studio, office and tower facilities are leased pursuant
to long-term leases. We believe that all facilities and equipment are adequate,
with minor changes and additions, for conducting operations as presently
contemplated. Set forth below is information with respect to our existing
studios and other facilities. Information as to tower size reflects the height
above average terrain of the antenna radiation center.

<TABLE>
<CAPTION>
MARKET APPROXIMATE SIZE OWNERSHIP
------ ---------------- ---------
<S> <C> <C>
St. Louis, Missouri
Studio and office facilities(1).................. 36,000 sq. ft. Owned
Tower............................................ 1,011 ft. Leased
Portland, Oregon
Studio and office facilities..................... 15,255 sq. ft. Owned
Tower............................................ 1,785 ft. Leased
Knoxville, Tennessee
Studio and office facilities..................... 8,000 sq. ft. Leased
Tower............................................ 2,399 ft. Owned(2)
Salt Lake City, Utah
Studio and office facilities..................... 9,500 sq. ft. Leased
Tower............................................ 3,839 ft. Leased
Ft. Myers - Naples, Florida
Studio and office facilities..................... 5,000 sq. ft. Leased
Tower............................................ 1,000 ft. Leased
Albuquerque - Santa Fe, New Mexico
Studio and office facilities..................... 9,000 sq. ft. Owned
Tower............................................ 1,234 ft. Leased
Dayton, Ohio
Studio and office facilities..................... 14,150 sq. ft Owned
Tower............................................ 485 ft. Owned
Green Bay - Appleton, Wisconsin
Studio and office facilities..................... 2,640 sq. ft. Leased
Tower............................................ 660 ft. Leased
Champaign - Springfield - Decatur, Illinois
Studio and office facilities..................... 9,600 sq. ft. Owned
Tower............................................ 1,030 ft. Owned
</TABLE>

- -------------------------
(1) Excludes 30,000 square feet of apartment space located above the studio and
office facilities.

(2) Tower owned on leased property.

LEGAL PROCEEDINGS

We are currently in a dispute with Edward Koplar in connection with Mr.
Koplar's resignation in the fall of 1998 from his position as Chief Executive
Officer of ACME Television of Missouri, Inc., formerly Koplar Communications,
Inc. Mr. Koplar has claimed that we breached his management agreement, and under
the terms of that agreement has claimed that we owe him $4 million and has
threatened to bring suit against us. We believe that Mr. Koplar's claim is
without merit and that the resolution of this matter will not have a material
adverse effect on our financial condition or results of operations. We have
accrued $350,000 as a reserve relating to this matter.

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<PAGE> 61

In addition, we are currently and from time to time involved in litigation
incidental to the conduct of our business. We maintain comprehensive general
liability and other insurance which we believe to be adequate for the purpose.
We are not currently a party to any lawsuit or proceeding that we believe would
have a material adverse effect on our financial condition or results of
operations.

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<PAGE> 62

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth information about our executive officers and
directors as of August 31, 1999.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jamie Kellner...... 52 Chairman of the Board and Chief Executive Officer
Doug Gealy......... 39 President, Chief Operating Officer and Director
Tom Allen.......... 46 Executive Vice President, Chief Financial Officer
and Director
Edward Danduran.... 47 Vice President, Controller
James Collis(1).... 36 Director
Thomas Embrescia... 53 Director
Brian McNeill(1)... 43 Director
Michael Roberts.... 50 Director
Darryl Schall(1)... 38 Director
</TABLE>

- -------------------------
(1) Will resign from his position after the pricing of this offering but before
our reorganization and in accordance with our short-term application to the
FCC and has agreed to become a director again after final FCC approval of
our long-form application.

Jamie Kellner is a founder of ACME and has served as our Chief Executive
Officer and Chairman of the Board since 1997. Mr. Kellner is also a founder,
Chief Executive Officer and partner of The WB Network since 1993. Previously,
Mr. Kellner was President of Fox Broadcasting Company since its inception in
1986 to 1993. He currently serves on the board of directors of NELVANA LTD., a
Canadian company internationally recognized for its children's and family
programming, worldwide distribution and merchandise licensing.

Doug Gealy is a founder of ACME and has served as our President and Chief
Operating Officer and as a member of our Board since 1997. Since December of
1996, Mr. Gealy has been involved in development activities for ACME. Before
founding ACME, Mr. Gealy served for one year as Executive Vice President of
Benedek Broadcasting Corporation. From 1991 to 1996, Mr. Gealy was a Vice
President and General Manager of WCMH and its local marketing agreement, WWHO,
both in Columbus, Ohio, and following the acquisition of these stations by NBC,
served as President and General Manager of these stations.

Tom Allen is a founder of ACME and has served as our Executive Vice
President and Chief Financial Officer and as a member of our Board since 1997.
Since June 1996, Mr. Allen has been involved in development activities for ACME.
From August 1993 to May 1996, Mr. Allen was the Chief Operating Officer and
Chief Financial Officer for Virgin Interactive Entertainment. Before that Mr.
Allen served as the Chief Financial Officer of the Fox Broadcasting Company from
1986 to 1993.

Edward Danduran has been our Vice President and Controller since July 1997.
From November 1995 until April 1997, Mr. Danduran was a Financial Consultant for
Virgin Interactive Entertainment, Inc. From 1989 to 1995, Mr. Danduran was the
Chief Financial Officer of Phoneby, a business communications company.

James Collis has served as a member of our Board since July 1999. Mr.
Collis is an Executive Vice President of CEA Management Corp., a corporation
formed to manage CEA Capital Partners USA, L.P. and CEA Capital Partners USA CI,
L.P. Mr. Collis has served in this role since 1997. Before joining CEA
Management Corp., Mr. Collis was a Principal at Chase

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<PAGE> 63

Manhattan Bank beginning in December 1996. Before becoming a Principal, Mr.
Collis was a Vice President of Chase Manhattan Bank beginning in June 1995 and
an associate before that beginning in June 1991. Mr. Collis has also been an
investor in the media and communications industry for nine years and serves on
the board of directors for numerous private media and communication companies.

Thomas Embrescia has served as a member of our Board since we acquired WTVK
from Second Generation Television, Inc. in June 1998. Mr. Embrescia is the
Chairman and principal investor of Second Generation Television, a company he
formed in 1993. In addition, he also serves as chairman or Chief Executive
Officer and is a principal investor in several other media and marketing related
businesses. Mr. Embrescia has over 31 years of experience in the broadcasting
and media industry.

Brian McNeill has served as a member of our Board since July 1999. Since
1996, he has been the managing general partner of Alta Communications, a private
venture capital firm he co-founded, which specializes in the communications
industry. Since 1986, Mr. McNeill has been a general partner of various funds
affiliated with Burr, Egan, Deleage & Co., a major private equity firm which
specializes in investments in the communications and technology industries. He
has served as a director in many private radio and television broadcasting
companies such as Tichenor Media Systems, OmniAmerica Group, Panache
Broadcasting and Shockley Communications and a publicly traded company, Radio
One, Inc.

Michael Roberts has served as a member of our Board since April 1999. Mr.
Roberts is a co-founder of Roberts Broadcasting which owns several television
stations in medium-sized markets in the U.S. and has served as its Chairman and
Chief Executive Officer since 1981. Mr. Roberts is also the founder of companies
active in commercial real estate development, construction program management
and corporate management consulting. Mr. Roberts is also a Managing Member for
Roberts Wireless Communications, a Sprint affiliate serving Missouri, Southern
Illinois and Kansas.

Darryl Schall has served as a member of our Board since July 1999. Mr.
Schall has been a Senior Vice President of Trust Company of the West since
November 1995. Mr. Schall was Director of Research at Crescent Capital
Corporation from July 1994 until its acquisition by Trust Company of the West in
1995.

COMMITTEES OF OUR BOARD OF DIRECTORS

The board of directors has established an audit committee and a
compensation committee. The audit committee currently consists of Messrs. Schall
and Collis. As required by the FCC, Messrs. Schall and Collis will not serve as
members of our board until final approval of our long-form application. Messrs.
Schall and Collis will resign as board members immediately after pricing but
before our reorganization. During this period, Messrs. Embrescia and Roberts
will serve as the members of the audit committee until Messrs. Schall and Collis
rejoin the board and replace them on the audit committee. The audit committee
will make recommendations to the board of directors regarding the selection of
independent auditors, review the results and scope of the audit and other
services provided by our independent auditors and will review and evaluate our
audit and control functions.

The compensation committee consists of Messrs. Embrescia and McNeill. As
with Messrs. Schall and Collis, Mr. McNeill will not serve as a member of our
board until final approval of our long-form application. During this period Mr.
Roberts will serve as a member of the compensation committee until Mr. McNeill
rejoins the board and replaces him on the compensation committee. The
compensation committee makes recommendations

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<PAGE> 64

regarding our equity compensation plans and makes decisions concerning salaries
and incentive compensation for our employees.

DIRECTOR COMPENSATION

Our directors do not currently receive any cash compensation for services
on our board of directors or any committee of our board. However, directors may
be reimbursed for expenses they incur in attending board and committee meetings.
All directors are eligible to participate in our 1999 Stock Incentive Plan.

EXECUTIVE COMPENSATION

The following table sets forth compensation earned for the years ended
December 31, 1998 and 1997, the year of our formation, by our Chief Executive
Officer, and our next three most highly paid executive officers.

SUMMARY COMPENSATION TABLE(1)

<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION(3) COMPENSATION(4)
- --------------------------- ---- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Jamie Kellner.............. 1998 $175,000(5) $100,000 $ -- $ --
Chairman of the Board and 1997 -- -- -- --
Chief Executive Officer

Doug Gealy................. 1998 300,000 25,000 5,351 93,870
President and Chief 1997 227,083 50,000 -- 2,406
Operating Officer

Tom Allen.................. 1998 300,000 25,000 -- 6,334
Executive Vice President 1997 145,833 50,000 105,000 2,171
and Chief Financial
Officer

Edward Danduran............ 1998 106,016 20,000 -- 3,000
Vice President,
Controller 1997 67,017 -- -- --
</TABLE>

- -------------------------
(1) We did not have restricted stock, stock appreciation rights or payouts on
long term incentive compensation plans during the periods covered.

(2) Amounts disclosed in the column reflect payments under the incentive
provisions of employment agreements which are described under "Employment
Agreements and Arrangements."

(3) Amounts disclosed in this column include:
(a) For Mr. Gealy, a company leased automobile; and
(b) For Mr. Allen, a signing bonus that was paid upon the closing of
acquisitions of KPLR, KWPB, WBXX and KWBQ.

(4) Amounts disclosed in this column include:
(a) Our contributions under our 401K Savings Plan, a defined contribution
plan;
(b) Reimbursements of COBRA expenses;
(c) Payments on behalf of the named executives for life insurance; and
(d) For Mr. Gealy, reimbursement of moving expenses in the amount of
$86,251.

(5) For Mr. Kellner, this amount is his consulting fee.

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<PAGE> 65

EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

We have entered into a non-exclusive consulting agreement with Mr. Kellner
and full-time exclusive employment agreements with each of Messrs. Gealy and
Allen. Each of the agreements expires on June 16, 2002. We will have the option
to extend the term of these senior management members' employment until
September 29, 2003. If we exercise the extension option, the senior management
member's then current base salary would be increased by 10% for the period of
the extension. If we do not exercise an extension option, vesting of all of the
senior management member's options granted as of the closing of this offering
will accelerate and become immediately exercisable on June 16, 2002. The
employment agreements provide for annual compensation reviews by our
compensation committee, with stipulated minimum annual adjustments equal to
increases in the Consumer Price Index. Mr. Kellner's consulting compensation is
set annually on a discretionary basis by the compensation committee.

As of August 31, 1999, Mr. Kellner's annual consulting fee is $175,000. For
the year, beginning January 1, 2000, Mr. Kellner's annual consulting fee will be
$250,000. Mr. Kellner is entitled to annual cash bonuses as determined by our
compensation committee. In addition, in January 2000, we will pay Mr. Kellner a
$1,070,000 cash bonus.

The employment and consulting agreements require the compensation committee
to recommend to our board of directors for adoption no later than November 30,
1999 a cash incentive plan under which Messrs. Kellner, Gealy and Allen will be
eligible to receive awards. No later than January 1, 2000, each executive will
be awarded cash incentives under such plan if they meet performance targets
during fiscal 2000.

As of August 31, 1999, each of Mr. Gealy's and Mr. Allen's base salary is
$300,000. For the year beginning January 1, 2000, each of Mr. Gealy's and Mr.
Allen's base salary will be $375,000. Mr. Gealy and Mr. Allen are entitled to
annual cash bonuses as determined by our compensation committee. In addition, in
January 2000, we will pay each of Mr. Gealy and Mr. Allen a $802,500 cash bonus.

Mr. Danduran is employed by us pursuant to a full-time exclusive employment
agreement that expires December 31, 2002. Mr. Danduran's base salary is $115,000
and will increase by $10,000 each January 1. Mr. Danduran is entitled to an
annual cash bonus of up to 20% of his current base salary.

1999 STOCK INCENTIVE PLAN

Before this offering, we had long-term incentive compensation plans in
which all general managers and non-founder corporate office executives
participated. The awards generally vested in equal thirds on the third, fourth
and fifth anniversaries of the effective date of the awards. For 1998, we
recorded an expense of $399,000 representing the estimated awards earned during
1998 related to this plan. No awards granted under our long-term incentive
compensation plans have vested and such awards have been converted to discounted
stock options. See "Certain Specific Awards" below for a description of the
discounted options.

In September 1999, we adopted our 1999 Stock Incentive Plan to provide an
additional means to attract, motivate, reward and retain key personnel. The plan
gives the administrator the authority to grant different types of stock and cash
incentive awards and to select participants. While only stock options and
restricted stock awards are contemplated at this time, the other forms of awards
that may be granted give us flexibility to structure future incentives. Our
employees, officers, directors, and consultants may be selected to receive

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<PAGE> 66

awards under the plan. The following summary is qualified by reference to the
complete plan, which is on file with the Securities and Exchange Commission.

Share Limits. A maximum of 4,200,000 shares of our common stock may be
issued under the plan, or approximately 25.08% of our outstanding shares after
giving effect to the public offering. The aggregate number of shares subject to
stock options and stock appreciation rights granted under the plan to any one
person in a calendar year can not exceed 1,000,000 shares. The aggregate number
of shares subject to all awards granted under the plan to any one person in a
calendar year cannot exceed 1,000,000 shares. Performance-based awards payable
solely in cash that are granted under the plan to any one person in a calendar
year cannot provide for payment of more than $1,000,000.

Each share limit and award under the plan is subject to adjustment for
certain changes in our capital structure, reorganizations and other
extraordinary events. Shares subject to awards that are not paid or exercised
before they expire or are terminated are available for future grants under the
plan.

Awards. Awards under the plan may be in the form of:

- nonqualified stock options;

- incentive stock options;

- stock appreciation rights;

- limited stock appreciation rights, which are stock appreciation rights
limited to specific events, such as in a change of control or other
special circumstances;

- restricted stock;

- performance shares;

- stock units;

- stock bonuses; or

- cash bonuses based on performance.

Awards may be granted individually or in combination with other awards. Any
cash bonuses and certain types of stock-based performance awards under the plan
will depend upon the extent to which performance goals set by the administrator
are met during the performance period.

Awards under the plan generally will be nontransferable, subject to such
exceptions such as a transfer to a family member or to a trust, as authorized by
the administrator.

Nonqualified stock options and other awards may be granted at prices below
the fair market value of the common stock on the date of grant. Restricted stock
awards can be issued for nominal or the minimum lawful consideration. Incentive
stock options must have an exercise price that is at least equal to the fair
market value of the common stock, or 110% of fair market value of the common
stock for any owner of more than 10% of our common stock, on the date of grant.
These and other awards may also be issued solely or in part for services.

Administration. The plan will be administered by our board of directors or
a committee of directors appointed by the board. Currently, our board has
delegated general administrative authority over the plan to our compensation
committee.

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<PAGE> 67

The administrator of the plan has broad authority to:

- designate recipients of awards;

- determine or modify, subject to any required consent, the terms and
provisions of awards, including the price, vesting provisions, terms of
exercise and expiration dates;

- approve the form of award agreements;

- determine specific objectives and performance criteria with respect to
performance awards;

- construe and interpret the plan; and

- reprice, accelerate and extend the exercisability or term, and establish
the events of termination or reversion of outstanding awards.

Change of Control. Upon a change of control event, each option and stock
appreciation right will become immediately exercisable, restricted stock will
immediately vest free of restrictions, and the number of shares, cash or other
property covered by each performance award will be issued to the holder of the
award, unless our board of directors determines to the contrary. Generally
speaking, a change of control event will be triggered under the plan:

- upon our dissolution or liquidation;

- in connection with certain mergers or consolidations of ACME
Communications, Inc. into or with, or upon a sale of all or substantially
all of our assets to another entity other than one of our affiliates
where our stockholders before the transaction own less than 50% of the
surviving entity;

- if a change in ownership of more than 50% of our outstanding common stock
occurs; or

- if a majority of our board of directors changes, other than through
normal appointments and succession, over a period of two years or less.

The administrator of the plan may also provide for alternative settlements of
awards, the assumption or substitution of awards, or other adjustments of
awards, in connection with a change of control or other reorganization of ACME
Communications, Inc.

Plan Amendment, Termination and Term. Our board of directors may amend,
suspend or discontinue the plan at any time, but no such action will affect any
outstanding award in any manner materially adverse to a participant without the
consent of the participant. Plan amendments will generally not be submitted to
stockholders for their approval unless such approval is required by applicable
law.

The plan will remain in existence as to all outstanding awards until such
awards are exercised or terminated. The maximum term of options, stock
appreciation rights and other rights to acquire common stock under the plan is
10 years after the initial date of award, subject to provisions for further
deferred payment in certain circumstances. No award can be granted ten years
after adoption of the plan by our board of directors.

Payment for Shares. The exercise price of options or other awards may
generally be paid in cash or, subject to certain restrictions, shares of common
stock. Subject to any applicable limits, we may finance or offset shares to
cover any minimum withholding taxes due in connection with an award.

Federal Tax Consequences. The current federal income tax consequences of
awards authorized under the plan follow certain basic patterns. Generally,
awards under the plan that are includable in the income of the recipient at the
time of exercise, vesting or

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<PAGE> 68

payment, such as nonqualified stock options, stock appreciation rights,
restricted stock and performance awards, are deductible by us, and awards that
are not required to be included in the income of the recipient, such as
incentive stock options, are not deductible by us.

Generally speaking, Section 162(m) of the Internal Revenue Code provides
that a public company may not deduct compensation, except for compensation that
is commission or performance-based paid to its chief executive officer or to any
of its four other highest compensated officers to the extent that the
compensation paid to such person exceeds $1 million in a tax year. The
regulations exclude from these limits compensation that is paid pursuant to a
plan in effect before the time that a company is publicly held. We expect that
compensation paid under the plan will not be subject to Section 162(m) in
reliance on this transition rule, as long as such compensation is paid or stock
options, stock appreciation rights, and/or restricted stock awards are granted
before the earlier of a material amendment to the plan or our annual
stockholders meeting in the year 2003.

In addition, we may not be able to deduct certain compensation attributable
to the acceleration of payment and/or vesting of awards in connection with a
change of control event should that compensation exceed certain threshold limits
under Section 280G of the Internal Revenue Code.

Non-Exclusive Plan. The plan is not exclusive. Our board of directors (or
its delegate), under Delaware law, may grant stock and performance incentives or
other compensation, in stock or cash, under other plans or authority.

Specific Awards. Approximately 2,834,091 shares are subject to options that
will be outstanding before the consummation of this offering, and the balance of
1,365,909 shares remain available for grant purposes.

The shares covered by currently outstanding options represent the 10-year
stock option grants authorized by our compensation committee in late August
1999. The outstanding option grants consist of:

- Options to acquire 283,500 shares upon conversion of our long-term
incentive compensation plan awards. These options were granted at an
exercise price of $15.00 per share and vest in equal thirds on December
31, 2000, 2001 and 2002.

- Options to acquire approximately an additional 341,500 shares granted as
incentives to employees and other eligible persons. Of these grants,
options to acquire 58,500 shares were granted at an exercise price of
$18.00 per share and options to acquire 283,000 shares were granted at an
exercise price equal to the initial public offering price of our shares
of common stock. These options vest in equal installments over five
years.

- Options to acquire an additional 2,209,091 shares, or approximately 13%
of our common stock after giving effect to this offering, were granted to
Messrs. Kellner, Gealy, and Allen. Of this number, options to acquire
838,635 shares were granted to Mr. Kellner, options to acquire 685,228
shares were granted to Mr. Gealy, and options to acquire 685,228 shares
were granted to Mr. Allen. These options were granted at an exercise
price equal to the initial public offering price of our shares of common
stock and vest in four equal annual installments with the first
installment vesting on the first anniversary of this offering. Vesting of
these options accelerate upon change of control, death, disability and
termination without cause.

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401(K) PLAN

In 1998, we established a 401(k) defined contribution plan which covers all
eligible employees. Participants in the 401(k) are allowed to make
nonforfeitable contributions up to 15% of their annual salary, but may not
exceed the annual maximum contribution limitations established by the Internal
Revenue Service. We currently match 50% of the amounts contributed by each
participant but do not match participant's contributions in excess of 6% of
their contribution per pay period. We contributed and expensed $200,000 to the
401(k) in 1998.

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<PAGE> 70

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following contains information regarding the beneficial ownership of
our common stock for:

- certain holders or groups of related holders who, individually or as a
group, are the beneficial owners of 5% or more of our common stock;

- the executive officers;

- each director who beneficially owns shares of our common stock;

- our executive officers and directors as a group; and

- those stockholders who will sell shares to the extent the over-allotment
option is exercised.

Unless otherwise noted, the address for each person or entity named below
is c/o ACME Communications, Inc. 2101 E. Fourth Street, Suite 202, Santa Ana,
California 92705.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table
below have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them.

Because this table assumes no exercise of the underwriters' over-allotment
option and because our existing stockholders will only sell to the extent the
option is exercised, the table below does not reflect any shares they may sell.

<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON
STOCK BENEFICIALLY
NUMBER OWNED
OF SHARES ----------------------
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------- ------------ -------- -----------
<S> <C> <C> <C>
Jamie Kellner............................................... 765,191 6.51% 4.57%
Doug Gealy.................................................. 558,576 4.75 3.33
Tom Allen................................................... 555,911 4.73 3.32
Edward Danduran............................................. -- * *
James Collis(1)(2).......................................... 1,535,360 13.07 9.17
Thomas Embrescia(3)......................................... 320,008 2.72 1.90
Brian McNeill(1)(4)......................................... 1,535,360 13.07 9.17
Michael Roberts............................................. 471,700 4.01 2.82
Darryl Schall(1)(5)......................................... 1,479,869 12.59 8.84
BancBoston Ventures Inc.(6)................................. 1,544,418 13.14 9.22
Alta Communications, Inc./Burr, Egan, Deleage & Co.,
Inc.(4)................................................... 1,535,360 13.07 9.17
CEA ACME, Inc.(2)........................................... 1,535,360 13.07 9.17
TCW Asset Management Company(5)............................. 1,479,869 12.59 8.84
Peregrine Capital, Inc.(7).................................. 705,050 6.00 4.21
Continental Casualty Company/Loews Corporation(8)........... 851,701 7.25 5.08
American High-Income Trust(9)............................... 269,104 2.29 1.61
ACME Capital Partners(10)................................... 201,056 1.71 1.20
The Lincoln National Life Insurance Company(11)............. 201,821 1.72 1.21
American Variable Insurance Series-High-Yield Bond.......... 134,560 1.15 *
1994 Embrescia FITrust f/b/o F.M. Embrescia(12)............. 65,941 * *
1994 Embrescia FITrust f/b/o M.M. Embrescia(13)............. 65,941 * *
1994 Embrescia FITrust f/b/o A.M. Embrescia(14)............. 65,941 * *
The Value Realization Fund, L.P.(15)........................ 15,128 * *
The Canyon Value Realization Fund (Cayman) Ltd.(15)......... 45,412 * *
Jonathan Pinch & Linda Pinch(16)............................ 48,486 * *
Larry S. Blum Living Trust(17).............................. 19,394 * *
Post Total Return Fund, L.P.(18)............................ 20,195 * *
All directors and executive officers as a group (9
persons).................................................. 7,221,975 61.46 43.12
</TABLE>

- -------------------------
* Represents beneficial ownership of less than 1%.
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(1) Will resign from his position after the pricing of this offering but before
our reorganization in accordance with our short-form application to the FCC
and has agreed to become a director again after FCC approval of our
long-form application.

(2) Includes 28,443 shares held by CEA ACME, Inc. and 1,151,737 shares held by
CEA Capital Partners USA, L.P. and 355,180 shares held by CEA Capital
Partners USA CI, L.P., two limited partnerships which own CEA ACME, Inc.
Mr. Collis, one of our directors, is an Executive Vice President of CEA
Management Corp., a corporation formed to manage CEA Capital Partners USA,
L.P. and CEA Capital Partners USA CI, L.P. and therefore may be deemed to
having voting and investment power over the shares. Mr. Collis and CEA
Management Corp. have no pecuniary interest in and disclaim beneficial
ownership of these shares. The address for CEA Management Corp. is 17 State
Street, 35th Floor, New York, NY 10004.

(3) Includes 65,941 shares held by each of three trusts, 1994 Embrescia FITrust
f/b/o F.M. Embrescia, 1994 Embrescia FITrust f/b/o M.M. Embrescia and 1994
Embrescia FITrust f/b/o A.M. Embrescia, of which Mr. Embrescia is trustee.
Mr. Embrescia is deemed to be the beneficial owner of these shares. The
address for Mr. Embrescia is 1228 Euclid Avenue, Suite 860, Cleveland, OH
44115. Mr. Embrescia has granted the underwriters an option to purchase up
to 25,408 shares of his common stock pursuant to the underwriters'
over-allotment option.

(4) Includes 28,443 shares held by Alta ACME, Inc., and 376,729 shares held by
Alta Subordinated Debt Partners III, LP, 1,105,035 shares held by Alta
Communications VI, LP, and 25,153 shares held by Alta Comm S by S, LLC.,
entities which own Alta ACME, Inc. Alta Subordinated Debt Partners III,
L.P. is managed by Burr, Egan, Deleage & Co., Inc. and Alta Communications
VI, L.P. and Alta Comm S By S, LLC are indirectly managed by Alta
Communications, Inc. which may be deemed to have investment powers with
respect to the shares held by these partnerships. Mr. McNeill is the
general partner of the general partner of Alta Subordinated Debt Partners
III and of Alta Communications VI and is a member of Alta Comm S by S, and
may be deemed to have investment power with respect to the shares owned by
these funds. Mr. McNeill disclaims beneficial ownership of the shares held
by these funds, except to the extent of his proportionate pecuniary
interest therein. The address for both Alta Communications, Inc. and Burr,
Egan, Deleage & Co., Inc., which have common ownership, is One Post Office
Square, Suite 3800, Boston, MA 02109.

(5) Includes 21,186 shares held by LINC ACME, 987,105 shares held by TCW
Leveraged Income Trust, LP, and 471,578 shares held by TCW Shared
Opportunity Fund II LP, investment funds for which TCW Asset Management
provides investment advisory services. LINC ACME is a subsidiary of TCW
Leveraged Income Trust, LP. Mr. Schall is a Senior Vice President of TCW
Asset Management and may be deemed to have investment powers with respect
to the shares owned by these funds. Mr. Schall has no pecuniary interest in
and disclaims beneficial ownership of these shares. The address for TCW
Asset Management Company is 11100 Santa Monica Boulevard, Suite 2000, Los
Angeles, CA 90025. Affiliates of TCW Asset Management Company have granted
the underwriters an option to purchase up to 307,731 shares of its common
stock pursuant to the underwriters' over-allotment option.

(6) BankBoston Corporation directly or indirectly has voting control with
respect to the stock of BancBoston Ventures. The address for BancBoston
Ventures Inc. is 100 Federal Street, Boston, MA 02110.

(7) Linda D. Rose and Daniel J. Alderman directly or indirectly have voting
control with respect to the stock of Peregrine Capital, Inc. The address
for Peregrine Capital, Inc. is 9725 SW Beaverton-Hillsboro Hwy., Suite 350,
Beaverton, OR 97005-3366.

(8) Lawrence A. Tisch and Preston R. Tisch directly or indirectly have voting
control with respect to the stock of the Loews Corporation, the parent
corporation of Continental Casualty Company. The address for Continental
Casualty/Loews is 667 Madison Ave., 7th Fl., New York, NY 10021.
Continental Casualty has granted the underwriters an option to purchase up
to 177,106 shares of its common stock pursuant to the underwriters'
over-allotment option.

(9) American High-Income Trust has granted the underwriters an option to
purchase up to 55,959 shares of its common stock pursuant to the
underwriters' over-allotment option. American Variable Insurance
Series-High-Yield Bond has granted the underwriters an option to purchase
up to 27,981 shares of its common stock pursuant to the underwriters'
over-allotment option. The address for both American High-Income Trust and
American Variable Insurance Series-High-Yield Bond is 667 Madison Avenue,
7th Floor, New York, NY 10021.

(10) ACME Capital Partners has granted the underwriters an option to purchase up
to 41,808 shares of its common stock pursuant to the underwriters'
over-allotment option. The address for ACME Capital Partners is 101 E.
Kennedy Blvd., Suite 3300, Tampa, FL 33602.

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(11) Lincoln National has granted the underwriters an option to purchase up to
41,968 shares of its common stock pursuant to the underwriters'
over-allotment option. The address for Lincoln National is 200 East Berry
Street 2R02, Fort Wayne, IN 46802.

(12) 1994 Embrescia FITrust f/b/o F.M. Embrescia has granted the underwriters an
option to purchase up to 13,712 shares of its common stock pursuant to the
underwriters' over-allotment option. The address for 1994 Embrescia FITrust
f/b/o F.M. Embrescia is c/o Mr. Embrescia, 1228 Euclid Avenue, Suite 860,
Cleveland, OH 44115.

(13) 1994 Embrescia FITrust f/b/o M. M. Embrescia has granted the underwriters
an option to purchase up to 13,712 shares of its common stock pursuant to
the underwriters' over-allotment option. The address for 1994 Embrescia
FITrust f/b/o M.M. Embrescia is c/o Mr. Embrescia, 1228 Euclid Avenue,
Suite 860, Cleveland, OH 44115.

(14) 1994 Embrescia FITrust f/b/o A. Embrescia has granted the underwriters an
option to purchase up to 13,712 shares of its common stock pursuant to the
underwriters' over-allotment option. The address for 1994 Embrescia FITrust
f/b/o A. Embrescia is c/o Mr. Embrescia, 1228 Euclid Avenue, Suite 860,
Cleveland, OH 44115.

(15) The Value Realization Fund, L.P. has granted the underwriters an option to
purchase up to 3,146 shares of its common stock pursuant to the
underwriters' over-allotment option. The Canyon Value Realization Fund
(Cayman) Ltd. has granted the underwriters an option to purchase up to
9,443 shares of its common stock pursuant to the underwriters'
over-allotment option. The address for both The Value Realization Fund,
L.P. and The Canyon Value Realization Fund (Cayman) Ltd. is 9665 Wilshire
Blvd., Suite 200, Beverly Hills, CA 90212.

(16) Jonathan Pinch & Linda Pinch have granted the underwriters an option to
purchase up to 10,082 shares of their common stock pursuant to the
underwriters' over-allotment option. The address for Jonathan Pinch & Linda
Pinch is 1228 Euclid Avenue, Suite 860, Cleveland, OH 44115.

(17) Larry S. Blum Living Trust has granted the underwriters an option to
purchase up to 4,033 shares of its common stock pursuant to the
underwriters' over-allotment option. The address for Larry S. Blum Living
Trust is 1228 Euclid Avenue, Suite 860, Cleveland, OH 44115

(18) Post Total Return Fund, L.P. has granted the underwriters an option to
purchase up to 4,199 shares of its common stock pursuant to the
underwriters' over-allotment option. The address for Post Advisory Group is
18880 Century Park East, Suite 820, Los Angeles, CA 90067.

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CERTAIN TRANSACTIONS

THE WB TELEVISION NETWORK

Our stations have entered into affiliation agreements and, from time to
time, related marketing arrangements with The WB Network. Mr. Kellner is an
owner and the Chief Executive Officer of The WB Network. We believe that the
terms of each of these affiliation agreements or marketing agreements are or
were at least as favorable to us or our affiliates as those that could be
obtained from an unaffiliated party.

AGREEMENTS WITH VARIOUS SELLERS OF STATIONS

Pursuant to June 1995 agreements among Koplar Communications, Inc. the
company from which we acquired KPLR, Roberts Broadcasting, and its owners,
Michael Roberts and his brother Steven Roberts, Roberts Broadcasting cannot:

- transfer its license for WHSL, East St. Louis, Missouri;

- commit any programming time of the station for commercial programming or
advertising; or

- enter into a local marketing agreement with respect to such station until
June 1, 2000.

If the current affiliation agreement for WHSL is terminated, the substitute
format must be substantially similar to the current home shopping network format
or, in the alternative, an infomercial format. Annual payments from KPLR under
the agreements were $200,000 in each of 1995, 1996 and 1997 and subsequent to
our acquisition of KPLR, we paid a total of $300,000 in each of 1998 and 1999.
Both Michael and Steven Roberts are stockholders of our Company and Michael
Roberts is one of our directors.

In connection with our stations in Utah and New Mexico, we entered into
long-term agreements to lease studio facilities and/or transmission tower space
from an affiliate of Michael and Steven Roberts. These leases have terms of
approximately fifteen years and provide for monthly payments aggregating
approximately $25,000, subject to adjustment based on the Consumer Price Index.
In addition, upon consummation of this offering, entities affiliated with
Michael and Steven Roberts have the option to purchase the studio building in
Albuquerque from us at its original cost and to lease it back to us at fair
market value. In October 1998, we paid Michael Roberts an $60,000 finder's fee
in connection with our purchase of the property.

In connection with our purchase of KWBP in June 1997, Peregrine Capital,
Inc., one of our stockholders, acquired 4,400 membership units in our
predecessor, ACME Television Holdings, LLC as part of the purchase price for
KWBP. In addition, we loaned the seller of KWBP, an affiliate of Peregrine
Capital, approximately $119,000. This loan was repaid in July 1999. In January
1998, we purchased the construction permit for KWBQ, formerly KAOU, from an
affiliate of Michael Roberts and Steven Roberts for $10,000. In connection with
our purchase of WTVK in June 1998, Thomas Embrescia one of our directors and
stockholders and his affiliates, collectively acquired 2,062.5 membership units
in our predecessor, ACME Television Holdings, LLC, as part of the purchase price
for WTVK. In connection with our purchase of KUPX, one of our directors, Michael
Roberts and Steven Roberts, each acquired 3,000 membership units in our
predecessor, ACME Television Holdings, LLC, as part of the purchase price for
KUPX in December 1997. In addition, in December 1997, we loaned Michael Roberts
and Steven Roberts $4.0 million, in connection

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with the purchase of KUPX. This loan was repaid in connection with the closing
of the KUPX sale in February 1999.

VOTING AGREEMENTS

To satisfy FCC requirements until our pending long-form change of control
application is approved by the FCC and becomes final, we have entered into an
interim voting agreement with Messrs. Kellner, Gealy, Allen, Embrescia and
Roberts, and certain investment funds managed by or affiliated with Alta
Communications, BancBoston, CEA Capital and TCW Asset Management Company, all of
whom are current stockholders. Under the interim voting agreement, the
stockholders have agreed to vote their common stock to permit Messrs. Kellner,
Gealy and Allen to elect our board of directors but retain approval rights over
some corporate actions. In addition, these stockholders are parties to a
long-term voting agreement that takes effect when we receive the final order by
the FCC for our long-term application. Pursuant to the long-term voting
agreement, if it takes effect, Messrs. Kellner, Gealy, Allen, Embrescia and
Roberts and affiliates of Alta Communications, BancBoston, CEA Capital and TCW
Asset Management Company will be able to elect at least a majority of our board.
If it takes effect, the long-term voting agreement will expire two years from
the closing of this offering. In addition to being stockholders, Messrs.
Kellner, Gealy, Allen, Embrescia and Roberts are all directors.

AGREEMENTS WITH OTHER STOCKHOLDERS AND DIRECTORS

On October 1, 1997, in connection with our acquisition of KWBP, we paid
CEA, Inc., an affiliate of one of our stockholders, CEA Capital Partners, a
broker's fee of approximately $176,000. On the same day, we paid CEA, Inc.,
$132,000 in connection with the purchase of WBXX, $25,000 in connection with the
purchase of the construction permit for KWBQ (formerly KAOU), $45,000 in
connection with the purchase of the construction permit for KUPX (formerly KZAR)
and $889,000 in connection with the purchase of KPLR, as broker's fees in each
of the transactions. Additionally, in connection with the recent acquisition of
WBUI, WIWB and WBDT, we paid CEA, Inc. a broker's fee of $125,000. CEA, Inc.
also received compensation from the seller in connection with the purchase of
WBUI, WIWB and WBDT. One of our directors, Mr. Collis, is an officer of an
affiliate of CEA Capital Partners.

In June and September 1997, we issued 10% convertible debentures with the
right to convert into 24,775,970 membership units to affiliates of Alta
Communications, Banc Boston, CEA Capital Partners and TCW Asset Management
Company, each of which are stockholders. Another of our directors, Mr. Schall,
is an officer of an affiliate of TCW Asset Management Company and Mr. McNeill,
also one of our directors, is an officer of an affiliate of Alta Communications.

In connection with the sale of the 12% senior secured notes in September
1997, we paid CEA, Inc. $165,622 in financing fees and $527,378 in connection
with the sale of the 10 7/8% senior discount notes. Additionally, in connection
with each of the June and September 1997 issuances of membership units and 10%
convertible debentures, we paid CEA, Inc. a financing fee of $440,000 and $1.1
million.

In February 1999, we exercised our option to purchase the property where
KWBP is located for $1.5 million from an affiliate of Peregrine Capital. Before
the purchase, we leased the property from the same affiliate.

We believe that the terms of each of the foregoing transactions are or were
at least as favorable to us or our affiliates as those that could be obtained
from an unaffiliated party.

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FORMATION TRANSACTIONS

In June 1997, we issued to each of Mr. Kellner, Mr. Gealy and Mr. Allen
membership units all at $1,000 per unit with a preferential return at 2.0 times
the rate of return on all non-founder membership units as follows:

- Mr. Kellner acquired 290 membership units;

- Mr. Gealy acquired 160 membership units; and

- Mr. Allen acquired 150 membership units.

In June and September 1997, we issued 1,342.5 membership units, all at
$1,000 per unit, to affiliates of BancBoston, CEA Capital Partners, Alta
Communications, ACME Capital Partners and TCW Asset Management Company with a
preferential return at 1.5 times the rate of return on all of these membership
units.

Also in connection with our formation, we issued to Mr. Kellner an
additional 40 management carry units, to Mr. Gealy 30 management carry units and
to Mr. Allen 30 management carry units in consideration for their founding of,
and services, to us.

BRIDGE LOAN

On April 23, 1999, to finance in part the acquisition of WBDT, WIWB and
WBUI affiliates of certain of our stockholders, Alta Communications, TCW Asset
Management Company, BancBoston and CEA Capital Partners agreed to make a $15.0
million loan to us, $7 million of which was paid on April 23, 1999 and $8
million of which was paid on June 23, 1999. Interest on the loan accrues
beginning at 22.5% per year and escalates quarterly after six months and is due
on the earlier of April 2002 or consummation by us of any debt or equity
financings generating net proceeds greater than the outstanding loan balance. We
anticipate that we will use the proceeds of this offering to repay the investors
in full for the loan. Three of our directors are officers of entities making the
loans. Brian McNeill is an officer of an affiliate of Alta Communications,
Darryl Schall is an officer of an affiliate of TCW Asset Management Company and
James Collis is an officer of an affiliate of CEA Capital Partners.

KWBQ OPTION

In connection with the closing of the KASY purchase and the KWBQ sale, we
anticipate that Ramar Communications will grant Montecito Communications, LLC, a
limited liability company owned entirely by Messrs. Kellner, Gealy and Allen, an
option to purchase KWBQ for an exercise price of $100,000. We anticipate that
Montecito will assign the option to us immediately after the closing of the sale
of KWBQ. We anticipate that the closing of these transactions will take place in
the fourth quarter of 1999.

REGISTRATION RIGHTS

Rights of ACME Television Holdings, LLC Unitholders

We have entered into a registration rights agreement with some of our
existing investors. At any time after the earlier to occur of June 30, 2002 or
180 days after the consummation of this offering, a majority in interest of
these holders may demand that we file a registration statement under the
Securities Act covering all or a portion of the securities of ours held by them.
However, the securities to be registered must have an

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anticipated aggregate public offering price of at least $7.5 million. These
holders can effect two such demand registrations.

When we are eligible to use a Registration Statement on Form S-3 to
register an offering of our securities, these stockholders may request that we
file a registration statement on Form S-3, covering all or a portion of
securities of ours held by them, provided that the aggregate public offering
price is at least $2.0 million. These stockholders can request that we file one
S-3 registration statement per year.

These registration rights will be subject to our right to delay the filing
of a registration statement, not more than once in any 12-month period, for not
more than 90 days.

In addition, these stockholders will have certain piggyback registration
rights. If we propose to register any common stock under the Securities Act,
other than pursuant to the registration rights noted above, these stockholders
may require us to include all or a portion of their securities in such
registration. However, the managing underwriter, if any, of any such offering
has certain rights to limit the number of registrable securities proposed to be
included in such registration.

We would bear all registration expenses incurred in connection with these
registrations. The stockholders would pay all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of its securities.

The registration rights of these stockholders under the registration rights
agreement terminate when that entity may transfer its securities under rule 144
promulgated under the Securities Act or have otherwise been transferred.

Rights of Holders of Membership Units Issued September 1997

In September 1997, ACME Intermediate privately placed 71,634 units
consisting of the 12% senior secured notes and membership units in ACME
Intermediate, pursuant to which certain investors acquired approximately 6% of
the membership interests of ACME Intermediate. Concurrently, an affiliate of TCW
Asset Management Company acquired convertible debentures and preferred
membership units issued by one of our subsidiaries which are convertible into
membership units representing approximately 2% of the membership interests in
ACME Intermediate. In conjunction with the September 1997 private placement, we
entered into the membership unitholders agreement, dated September 30, 1997 with
CIBC Wood Gundy Securities Corp. which provides the purchasers of the membership
units and convertible securities with certain registration rights. As described
in the section entitled "The Reorganization" we will exchange shares of our
common stock for these interests in ACME Intermediate. At any time after the
consummation of this offering, holders of 25% of the common stock issued in
exchange for the securities related to ACME Intermediate may demand that we file
a registration statement under the Securities Act covering all or a portion of
their shares of our common stock. These holders can effect two such demand
registrations.

In addition, these holders will have certain piggyback registration rights.
If we propose to register any common stock under the Securities Act, other than
pursuant to the registration rights noted above, these holders may require us to
include all or a portion of their securities in such registration. However, the
managing underwriter, if any, of such offering has certain rights to limit the
number of registrable securities proposed to be included in such registration.

The holders making the demand would bear all registration expenses incurred
in connection with any demand registrations and we would bear all registration
expenses

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incurred with any other registrations. The holders would pay all underwriting
discounts, selling commissions and stock transfer taxes applicable to the sale
of its securities.

Rights of Certain Acme Communication, Inc. Stockholders

In connection with our reorganization, we intend to enter into a
registration rights agreement with all of our stockholders immediately before
the offering. This agreement will supersede both of the ACME Television Holdings
registration rights agreement and the ACME Intermediate registration rights
agreement. The rights of our current stockholders under the new registration
rights agreement will be substantially similar to the rights of the parties to
the ACME Television Holdings registration rights agreement described above.

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THE REORGANIZATION

Immediately before the closing of the offering, we will complete the
reorganization described below. The FCC granted approval of our short-form
application to complete the reorganization subject to our entry into an interim
voting agreement. We expect the period to request FCC reconsideration of the
grant of our short-form application to expire in mid-October 1999.

First, ACME Communications will issue common stock in exchange for all of
the convertible debentures of ACME Television Holdings, LLC.

Second, ACME Communications will exchange shares of its common stock for

- membership units representing approximately 6% of ACME Intermediate;
and

- all of the convertible debentures and preferred convertible membership
units of ACME Subsidiary Holdings IV, LLC.

Third, ACME Communications Merger Subsidiary, LLC, a wholly-owned
subsidiary of ACME Communications, will merge into ACME Television Holdings,
LLC. In this merger, ACME Television Holdings, LLC's membership units will be
exchanged for shares of common stock of ACME Communications.

Fourth, ACME Subsidiary Holdings, LLC, a wholly-owned subsidiary of ACME
Television Holdings, LLC, will dissolve and its sole asset, a 0.49146% interest
in ACME Intermediate, will be distributed to ACME Television Holdings, LLC.

Last, ACME Subsidiary Holdings IV, LLC will dissolve and its sole asset, a
1.99037% interest in ACME Intermediate, will be distributed to ACME Television
Holdings, LLC. After this dissolution, ACME Communications will own directly or
indirectly 100% of the membership units of each of ACME Television Holdings, LLC
and of ACME Intermediate.

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[Pre-Reorg. Corporate Structure Flow Chart]

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[Post-Reorg. Corporate Structure Flow Chart]

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DESCRIPTION OF CAPITAL STOCK

GENERAL

Immediately before the closing of this offering, our authorized capital
stock will consist of 50,000,000 shares of common stock, $0.01 par value and
10,000,000 shares of preferred stock, $0.01 par value.

As of June 30, 1999, assuming the conversion of our business form into a C
corporation, there were outstanding 11,750,000 shares of common stock, each with
a par value of $0.01, held of record by 31 stockholders.

COMMON STOCK

Subject to the preferences of any preferred stock outstanding at the time,
the holders of our common stock are entitled to receive dividends out of legally
available assets as and when determined by our board. Holders of our common
stock are entitled to one vote for each share held on all matters submitted to a
vote of stockholders. Our certificate of incorporation does not authorize
cumulative voting for the election of our directors, which means that the
holders of a majority of the shares voted can elect all of our directors then
standing for election. Our common stock is not entitled to preemptive rights and
is not subject to conversion or redemption. Upon liquidation, dissolution or
winding-up, the assets legally available for distribution to our stockholders
are distributable ratably among the holders of our common stock after payment of
liquidation preferences, if any, on any outstanding preferred stock and payment
of other claims of creditors. Each outstanding share of our common stock is, and
all shares of our common stock to be outstanding upon completion of this
offering will be upon payment therefore, duly and validly issued, fully paid and
nonassessable.

PREFERRED STOCK

Our board is authorized, subject to any limitations prescribed by Delaware
law, to issue preferred stock in one or more series. Our board can fix the
rights, preferences and privileges of the shares of each series and any
qualifications, limitations or restrictions thereon.

Our board may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of our common stock. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes could, among other things, under certain circumstances, have
the effect of delaying, deferring or preventing a change of control. We have no
current plan to issue any shares of preferred stock.

CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS

Advance Notice. Our bylaws provide that advance notice of all director
nominations or other business matters proposed to be brought before an annual
meeting of our stockholders be delivered to our secretary at our corporate
office not later than 90 nor more than 120 days prior to the first anniversary
of the preceding year's annual meeting. This provision may make it more
difficult for stockholders to nominate or elect directors or take action opposed
by the board.

Special Meetings. Our bylaws provide that special meetings of the
stockholders may be called only by the board of directors, the chairman of the
board of directors or the

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president. This provision may make it more difficult for stockholders to take
action opposed by the board.

No Stockholder Action by Written Consent. Our certificate of incorporation
provides that stockholders can take action only at an annual or special meeting
of stockholders duly called in accordance with our bylaws. Accordingly, our
stockholders will not be able to take action by written consent in lieu of a
meeting. This provision may have the effect of deterring hostile takeovers or
delaying changes in control or management.

Indemnification of Directors and Officers. Our certificate of incorporation
and bylaws provide indemnification to the fullest extent permitted by law for
expenses, attorney's fees, damages, punitive damages, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by any
threatened, pending or completed proceeding by or in our right by reason of the
fact that the person is or was serving as one of our directors or officers. If
we request any of these indemnitees to act as a director, officer, partner,
venturer, proprietor, employee, agent, or trustee of another enterprise, we will
also indemnify that person. Our certificate of incorporation and bylaws provide
for the advancement of expenses to an indemnified party if the party agrees to
repay those amounts if it is finally determined that the indemnified party is
not entitled to indemnification. In addition, we have entered into
indemnification agreements with each of our directors and executive officers.

Our bylaws authorize us to take steps to ensure that all persons entitled
to the indemnification are properly identified and indemnified, including, if
the board of directors so determines, purchasing and maintaining insurance.

FOREIGN OWNERSHIP RESTRICTIONS

Our certificate of incorporation includes provisions designed to ensure
that our control and management remains with citizens of the United States
and/or corporations formed under the laws of the United States or any of the
states of the United States, as required by the Communications Act.

These provisions include restrictions on transfers of our capital stock by
an alien. For the purpose of these restrictions, an alien is:

- a person who is a citizen of a country other than the United States;

- any entity organized under the laws of a government other than the
government of the United States or any state, territory, or possession of
the United States;

- a government other than the government of the United States or of any
state, territory, or possession of the United States; or

- a representative of, or an individual or entity controlled by, any of the
foregoing.

Specifically, our foreign ownership restrictions provide:

- We cannot issue to an alien any shares of our capital stock if such
issuance would result in the total number of shares of such capital stock
held or voted by aliens, or for or by the account of aliens, to exceed
25% of:

- the total number of all shares of such capital stock outstanding at any
time and from time to time; or

- the total voting power of all shares of such capital stock outstanding
and entitled to vote at any time and from time to time.
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- We cannot permit the transfer on our books of any capital stock to any
alien that would result in the total number of shares of such capital
stock held or voted by aliens, or for or by the account of aliens,
exceeding such 25% limits.

- No alien or aliens, individually or collectively, shall be entitled to
vote or direct or control the vote of more than 25% of:

- the total number of all shares of our capital stock outstanding at any
time and from time to time; or

- the total voting power of all shares of our capital stock outstanding
and entitled to vote at any time and from time to time.

Issuance or transfer of our capital stock in violation of this provision is
prohibited.

Our board of directors have all powers necessary to implement these
provisions and ensure compliance with the alien ownership restrictions of the
Communications Act, including the power to prohibit the transfer of any shares
of our capital stock to any alien and to take or cause to be taken any action it
deems appropriate to implement this prohibition. We will place a legend
regarding restrictions on foreign ownership of the capital stock on certificates
representing our capital stock.

In addition, any shares of our capital stock determined by the board of
directors to be owned beneficially by an alien or aliens will always be subject
to redemption by us by action of the board of directors or any other applicable
provision of law, to the extent necessary, in the judgment of the board of
directors, to comply with the alien ownership restrictions. The terms and
conditions of redemption are as follows:

- the redemption price will be equal to the lower of:

- the fair market value of the shares to be redeemed, as determined by
the board of directors in good faith;

- the alien's purchase price for such shares;

- the redemption price may be paid in cash, securities or any combination
thereof;

- if less than all the shares held by aliens are to be redeemed, the shares
to be redeemed will be selected in any manner determined by the board of
directors to be fair and equitable;

- at least 10 days' prior written notice of the redemption date will be
given to the holders of record of the shares selected to be redeemed
unless waived in writing by any such holder, but the redemption date may
be the date we give written notice to holders if the cash or securities
necessary to effect the redemption have been deposited in trust for the
benefit of those holders and subject to immediate withdrawal by them upon
proper surrender;

- from and after the redemption date, the shares to be redeemed will cease
to be regarded as outstanding and any rights of the holders in respect of
the shares to be redeemed or attaching to such shares of whatever nature,
including any rights to vote or participate in dividends declared on
capital stock of the same class or series as such shares, will cease and
those holders thereafter will be entitled only to receive the cash or
securities payable upon redemption; and

- other terms and conditions as the board of directors determines.

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CERTAIN PROVISIONS OF DELAWARE LAW

We are a Delaware corporation and are subject to the provisions of Section
203 of the Delaware General Corporation Law, an anti-takeover law. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
business combination with an interested stockholder for a period of three years
after the date of the transaction by which that person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a business combination includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an interested stockholder is a person who, together with
affiliates and associates, owns, or within three years prior did own, 15% or
more of our voting stock.

VOTING AGREEMENTS

Interim Voting Agreement. To satisfy FCC requirements until our pending
long-form change of control application with the FCC is approved and becomes
final, we will enter into an interim voting agreement with Messrs. Kellner,
Gealy, Allen, Roberts, Embrescia and our initial institutional investors,
certain investment funds managed by or affiliated with Alta Communications,
BancBoston, CEA Capital and TCW Asset Management Company. During the term of
this interim voting agreement, our board of directors will be comprised of five
members.

The parties to this interim voting agreement have agreed to vote their
shares to elect Messrs. Kellner, Gealy and Allen to the board of directors.
Additionally, these institutional investors have also agreed to vote their
shares to elect to our board of directors two individuals designated by Messrs.
Kellner, Gealy and Allen. Those two designees must be qualified under the
Communications Act and the FCC's rules and not be in privity with Messrs.
Kellner, Gealy or Allen. Messrs. Roberts and Embrescia are the two designees and
their qualifications have been approved by the FCC. The parties to the interim
voting agreement have agreed that their shares will be voted in the same manner
as a majority of Messrs. Kellner, Gealy and Allen in their capacities as
stockholders.

In consideration for their agreement to cast their votes as described
above, these institutional investors will retain their approval rights under
existing agreements entered into with respect to their investments in ACME
Television Holdings.

At least 60% in interest of the institutional investors must approve the
following actions:

- redemption of our shares;

- authorization or issuance of additional shares of our common stock;

- payment or declaration of dividends;

- our merger or consolidation;

- the reorganization or sale of us, our subsidiaries, or any of our
material assets;

- entry into new businesses;

- our consent to enter into bankruptcy;

- incurrence of substantial debt;

- significant capital expenditures;

- any change of control requiring FCC approval;

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- significant acquisitions; and

- changes in senior management or senior management compensation.

Long-Term Voting Agreement. Messrs. Kellner, Gealy, Allen, Embrecia and
Roberts and certain investment funds managed by or affiliated with Alta
Communications, BancBoston, CEA Capital and TCW Asset Management Company will
enter into a voting agreement that will become effective upon FCC approval of
our pending long-term change of control application becoming a final order.
Under this agreement, the parties will vote for the election to our board of
three individuals designated by Messrs. Kellner, Gealy and Allen, three
individuals designated by the institutional investors who are parties to that
agreement and each of Messrs. Embrecia and Roberts. In each case, the
designations are subject to reasonable approval of the groups that have not made
the designations. The parties to the agreement will collectively hold more than
50% of our common stock, and the institutional investors as a separate group
will own approximately 34% of our common stock following completion of this
offering. As the institutional investors' aggregate percentage ownership
decreases, and as Messers. Embrescia's and Roberts' percentage ownership
decreases, the number of board members they will be able to designate will
decline. In any event, this agreement will expire two years from the closing of
this offering.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock is U.S. Stock
Transfer Corporation.

LISTING

Our common stock has been approved for listing on the Nasdaq National
Market under the trading symbol "ACME."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have 16,750,000 shares of common
stock outstanding. The 5,000,000 shares of common stock to be sold by us in this
offering will be freely tradeable without restriction or limitation under the
Securities Act, except for shares held by our affiliates, as defined under Rule
144 of the Securities Act. Shares of common stock held by our affiliates may be
sold only if registered under the Securities Act or sold in accordance with an
applicable exemption from registration, such as Rule 144. Our directors,
executive officers and our existing stockholders have agreed not to sell,
directly or indirectly, any shares owned by them for a period of 180 days after
the date of this prospectus without the prior written consent of Deutsche Bank
Securities Inc. See "Underwriting." Upon the expiration of this 180 day lock-up
period, substantially all of these shares will become eligible for sale, subject
to the restrictions of Rule 144.

RULE 144

In general, under Rule 144, a person, or persons whose shares are
aggregated, who has beneficially owned shares for at least one year, including
our affiliates, would be entitled to sell, within any three-month period, that
number of shares that does not exceed the greater of 1% of the then-outstanding
shares of common stock and the average weekly trading volume in the common stock
during the four calendar weeks immediately preceding the date on which the
notice of sale is filed with the Securities and Exchange Commission,

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provided certain manner of sale and notice requirements and requirements as to
the availability of current public information about us are satisfied. A holder
of restricted securities who is not deemed an affiliate of the issuer and who
has beneficially owned shares for at least two years would be entitled to sell
shares under Rule 144(k) without regard to these limitations. Our affiliates
must comply with the restrictions and requirements of Rule 144, other than the
one-year holding period requirement, in order to publicly sell shares of common
stock. As defined in Rule 144, an affiliate of an issuer is a person who,
directly or indirectly, through the use of one or more intermediaries controls,
or is controlled by, or is under common control with, such issuer.

RULE 701

In general, under Rule 701, any of our employees, consultants or advisors
who purchases or receives shares from us in connection with a compensatory
option plan will be eligible to resell their shares beginning 90 days after the
date of this prospectus. Non-affiliates will be able to sell their shares
subject only to the manner-of-sale provisions of Rule 144. Affiliates will be
able to sell their shares without compliance with the holding period
requirements of Rule 144.

REGISTRATION RIGHTS

Upon completion of this offering, the holders of 11,750,000 shares of our
common stock will be entitled to rights with respect to the registration of
their shares under the Securities Act. See "Certain Transactions -- Registration
Rights." Except for shares purchased by affiliates, registration of their shares
under the Securities Act would result in such shares becoming freely tradable
without restriction under the Securities Act immediately upon the effectiveness
of the registration.

STOCK OPTIONS

Immediately after this offering, we intend to file a registration statement
under the Securities Act covering the shares of common stock reserved for
issuance upon exercise of outstanding options. The registration statement is
expected to be filed and become effective as soon as practicable after the
closing of this offering. Accordingly, shares registered under the registration
statement will, subject to Rule 144 volume limitations applicable to affiliates,
be available for sale in the open market beginning 180 days after the effective
date of the registrant statement of which this prospectus is a part.

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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of common stock by a
beneficial owner thereof that is a non-U.S. holder. A non-U.S. holder is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership, or a foreign
estate or trust.

This discussion is based on the Internal Revenue Code of 1986, as amended,
and administrative interpretations as of the date hereof, all of which are
subject to change, including changes with retroactive effect. This discussion
does not address all aspects of U.S. federal income and estate taxation that may
be relevant to Non-U.S. Holders in light of their particular circumstances and
does not address any tax consequences arising under the laws of any state, local
or foreign jurisdiction. You should consult your own tax advisor with respect to
the particular tax consequences to you of owning and disposing of common stock,
including the consequences under the laws of any state, local or foreign
jurisdiction.

DIVIDENDS

Subject to the discussion below, dividends paid to a non-U.S. holder of
common stock generally will be subject to withholding tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. For purposes
of determining whether tax is to be withheld at a 30% rate or at a reduced rate
as specified by an income tax treaty, we ordinarily will presume that dividends
paid on or before December 31, 1999 to an address in a foreign country are paid
to a resident of such country absent knowledge that such presumption is not
warranted.

Under United States Treasury Regulations issued on October 6, 1997, which
are applicable to dividends paid after December 31, 2000, to obtain a reduced
rate of withholding under a treaty, a non-U.S. holder will generally be required
to provide an Internal Revenue Service Form W-8 certifying such non-U.S.
holder's entitlement to benefits under a treaty. The new regulations also
provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a non-U.S. holder that is an
entity should be treated as paid to the entity or those holding an interest in
that entity.

There will be no withholding tax on dividends paid to a non-U.S. holder
that are effectively connected with the non-U.S. holder's conduct of a trade or
business within the United States if a Form 4224 stating that the dividends are
so connected is filed with us. Instead, the effectively connected dividends will
be subject to regular U.S. income tax in the same manner as if the non-U.S.
holder were a U.S. resident. A non-U.S. corporation receiving effectively
connected dividends may also be subject to an additional branch profits tax that
is imposed, under certain circumstances, at a rate of 30%, or such lower rate as
may be specified by an applicable treaty, of the non-U.S. corporation's
effectively connected earnings and profits, subject to certain adjustments.
Under the new regulations, Form W-8 will replace Form 4224.

Generally, we must report to the U.S. Internal Revenue Service the amount
of dividends paid, the name and address of the recipient, and the amount, if
any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
such reports available to tax authorities in the recipient's country of
residence.

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Dividends paid to a non-U.S. holder at an address within the United States
may be subject to backup withholding imposed at a rate of 31% if the non-U.S.
holder fails to establish that it is entitled to an exemption or to provide a
correct taxpayer identification number and certain other information.

Under current United States federal income tax law, backup withholding
imposed at a rate of 31% generally will not apply to dividends paid on or before
December 31, 2000 to a non-U.S. holder at an address outside the United States
unless the payer has knowledge that the payee is a U.S. person. Under the new
regulations, however, a non-U.S. holder will be subject to backup withholding
unless applicable certification requirements are met.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of common stock
unless

- the gain is effectively connected with a trade or business of such holder
in the United States;

- in the case of certain non-U.S. holders who are non-resident alien
individuals and hold the common stock as a capital asset, such
individuals are present in the United States for 183 or more days in the
taxable year of the disposition;

- the non-U.S. holder is subject to a tax pursuant to the provisions of the
Internal Revenue Code regarding the taxation of U.S. expatriates; or

- we are or have been a U.S. real property holding corporation within the
meaning of Section 897(c)(2) of the Internal Revenue Code at any time
within the shorter of the five-year period preceding such disposition or
such holder's holding period. We are not, and do not anticipate becoming,
a U.S. real property holding corporation.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK

Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of common stock by a non-corporate holder through a U.S. office of a
broker unless the disposing holder certifies as to its non-U.S. status or
otherwise establishes an exemption. Generally, U.S. information reporting and
backup withholding will not apply to a payment of disposition proceeds where the
transaction is effected outside the United States through a non-U.S. office of a
non-U.S. broker. However, unless the broker has documentary evidence that the
holder is a non-U.S. holder, U.S. information reporting requirements, but not
backup withholding, will apply to a payment of disposition proceeds where the
transaction is effected outside the United States by or through an office
outside the United States of a broker that is either

- a U.S. person;

- a foreign person which derives 50% or more of its gross income for
certain periods form the conduct of a trade or business in the United
States

- a controlled foreign corporation for U.S. federal income tax purposes; or

- in the case of payments made after December 31, 2000, a foreign
partnership with connections to the United States, unless such broker has
documentary evidence in its

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files of the holder's non-U.S. status and has no actual knowledge to the
contrary or unless the holder establishes an exemption.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.

FEDERAL ESTATE TAX

An individual non-U.S. holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in the common stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.

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UNDERWRITING

We intend to offer our common stock through a number of underwriters.
Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and CIBC World Markets Corp. are
acting as representatives of each of the underwriters named below. Subject to
the terms and conditions set forth in an underwriting agreement among us and the
representatives on behalf of the underwriters, we have agreed to sell to the
underwriters, and each of the underwriters severally and not jointly has agreed
to purchase from us, the number of shares of common stock set forth opposite its
name below.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Deutsche Bank Securities Inc................................ 1,307,200
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 963,200
Morgan Stanley & Co. Incorporated........................... 963,200
CIBC World Markets Corp..................................... 206,400
Bear, Stearns & Co. Inc..................................... 100,000
Credit Suisse First Boston Corporation...................... 100,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 100,000
A.G. Edwards & Sons, Inc.................................... 100,000
Goldman, Sachs & Co......................................... 100,000
ING Barings LLC............................................. 100,000
Prudential Securities Incorporated.......................... 100,000
Salomon Smith Barney Inc.................................... 100,000
Wasserstein Perella Securities, Inc......................... 100,000
Thomas Weisel Partners LLC.................................. 100,000
Gabelli & Company, Inc...................................... 70,000
Janney Montgomery Scott LLC................................. 70,000
Brad Peery Inc.............................................. 70,000
Pennsylvania Merchant Group................................. 70,000
Sands Brothers & Co., Ltd................................... 70,000
Suntrust Equitable Securities Corporation................... 70,000
Sutro & Co. Incorporated.................................... 70,000
First Security Van Kasper................................... 70,000
---------
Total..................................................... 5,000,000
=========
</TABLE>

In the underwriting agreement, the several underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of common stock being sold pursuant to the underwriting agreement if any
of the shares of common stock being sold under the terms of such agreement are
purchased. In a default by an underwriter, the underwriting agreement provides
that, in certain circumstances, the purchase commitments of the nondefaulting
underwriters may be increased or the underwriting agreement may be terminated.

Our shares may not be offered or sold in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding, managing,
or disposing of investments, as principal or agent, for the purposes of their
businesses or otherwise in circumstances which will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995.

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Buyers of the shares offered hereby may be required to pay stamp taxes and
other charges in accordance with the laws and practices of the country of
purchase in addition to the initial public offering price.

We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including certain liabilities under the Securities
Act, or to contribute to payments the underwriters may be required to make in
respect of those liabilities.

The shares of common stock are being offered by the underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
consummation of the reorganization, approval of certain legal matters by counsel
for the underwriters and certain other conditions. The underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part.

COMMISSIONS AND DISCOUNTS

The representatives have advised us that the underwriters propose initially
to offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus, and to certain dealers at
such price less a concession not in excess of $0.95 per share of common stock.
The underwriters may allow, and such dealers may reallow, a discount not in
excess of $0.10 per share of common stock on sales to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may change.

The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of the over-allotment option.

<TABLE>
<CAPTION>
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- ------------
<S> <C> <C> <C>
Public offering price...................... $23.00 $115,000,000 $132,250,000
Underwriting discount...................... $ 1.61 $ 8,050,000 $ 9,257,500
Proceeds, before expenses, to ACME......... $21.39 $106,950,000 $106,950,000
Proceeds, before expenses, to the selling
stockholders............................. $21.39 $ 0 $ 16,042,500
</TABLE>

The expenses of the offering, exclusive of underwriting discounts, include
the Securities and Exchange Commission registration fee, the National
Association of Securities Dealers filing fee, the Nasdaq National Market listing
fee, printing expenses, legal fees and expenses, accounting fees and expenses,
road show expenses, Blue Sky fees and expenses, transfer agent and registrar
fees and other miscellaneous fees. The expenses of the offering, exclusive of
the underwriting discount, are estimated at $1,350,000 and are payable by us.

OVER-ALLOTMENT OPTION

The selling stockholders have granted an option to the underwriters,
exercisable for 30 days after the date of this prospectus, to purchase up to an
aggregate of 750,000 additional shares of our common stock at the public
offering price set forth on the cover page of this prospectus, less the
underwriting discount. The underwriters may exercise this option solely to cover
over-allotments, if any, made on the sale of our common stock offered hereby. To
the extent that the underwriters exercise this option, each underwriter will be
obligated, subject to certain conditions, to purchase a number of additional
shares of our common stock proportionate to such underwriter's initial amount
reflected in the foregoing table.

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RESERVED SHARES

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 8% of the shares offered hereby to be sold to some
of our directors, officers, employees, business associates and related persons.
The number of shares of our common stock available for sale to the general
public will be reduced to the extent that those persons purchase the reserved
shares. Any reserved shares that are not orally confirmed for purchase within
one day of the pricing of the offering will be offered by the underwriters to
the general public on the same terms as the other shares offered by this
prospectus.

LOCK-UP

We and our executive officers and directors and all existing stockholders
have agreed, for a period of 180 days after the date of this prospectus, not to
offer, sell, contract to sell, loan, pledge, grant any option to purchase, make
any short sale or otherwise dispose of (a) any shares of our common stock, (b)
any options or warrants to purchase any shares of our common stock or (c) any
securities convertible into, exchangeable for or that represent the right to
receive shares of our common stock. Certain gifts, transfers to trusts, and
distributions to partners or shareholders of a stockholder are permitted where
the transferee agrees to be similarly bound. Transfers may also be made where
Deutsche Bank Securities Inc. on behalf of the underwriters consents in advance.

Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations among
us and the representatives. The factors considered in determining the initial
public offering price, in addition to prevailing market conditions, include:

- the valuation multiples of publicly traded companies that the
representatives believe to be comparable to us;

- certain of our financial information;

- our history and our prospects;

- the industry in which we compete;

- an assessment of our management and its past and present operations;

- the prospects for, and timing of, our future revenue;

- the present state of our development; and

- the market values and various valuation measures of other companies
engaged in activities similar to ours.

We cannot be sure that an active trading market will develop for our common
stock or that our common stock will trade in the public market subsequent to the
offering at or above the initial public offering price.

PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS

Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of our

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common stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of our common stock.

If the underwriters create a short position in our common stock in
connection with the offering, that is, if they sell more shares of our common
stock than are set forth on the cover page of this prospectus, the
representatives may reduce that short position by purchasing our common stock in
the open market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option described above.

The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
our common stock in the open market to reduce the underwriters' short position
or to stabilize the price of our common stock, they may reclaim the amount of
the selling concession from the underwriters and selling group members who sold
those shares.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.

Neither any of the underwriters nor we make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
any of the underwriters nor we make any representation that the representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.

CERTAIN RELATIONSHIPS AND ARRANGEMENTS

Canadian Imperial Bank of Commerce, an affiliate of CIBC World Markets
Corp., is a primary lender and the agent under our credit agreement. We pay CIBC
a commitment fee on the unused portion of its commitment as a lender under our
credit agreement; CIBC also receives a fee for its services as administrative
agent. As a lender, CIBC may receive more than 10% of the net proceeds of this
offering to repay debt under our credit agreement. Under the Conduct Rules of
the National Association of Securities Dealers, Inc., special considerations
apply where a member or person associated with a member participating in an
offering is paid more than 10% of the net proceeds. Accordingly, this offering
is being made pursuant to Rule 2710(c)(8) of the NASD's Conduct Rules, in
conjunction with which Deutsche Bank Securities Inc., a representative, is
acting as a qualified independent underwriter in pricing this offering,
preparing this prospectus and conducting due diligence.

The representatives have informed us that the underwriters will not execute
any sales to any account to which they exercise discretionary authority without
prior specific written approval of the trade and will advise all participating
dealers of the same restriction.

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LEGAL MATTERS

O'Melveny & Myers LLP, Newport Beach, California will pass upon the
validity of the shares of common stock offered by this prospectus. Irell &
Manella LLP, Los Angeles, California will pass upon certain legal matters for
the underwriters.

EXPERTS

The consolidated financial statements and schedules of our predecessor ACME
Television Holdings, LLC as of December 31, 1998 and 1997, and for each of the
years in the two-year period ended December 31, 1998, have been included herein
and in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

The consolidated financial statements of Koplar Communications, Inc. for
each of the years in the two-year period ended December 31, 1998, have been
included herein and in the registration statement in reliance upon the report of
KPMG LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.

The financial statements of Channel 32, Incorporated for each of the years
in the two-year period ended June 30, 1996, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act of 1933 with respect to the
common stock offered by this prospectus. As permitted by the rules and
regulations of the SEC, this prospectus, which is part of the registration
statement, omits certain information included in the registration statement and
the exhibits, schedules and undertakings set forth in the registration
statement. For further information pertaining to us and the common stock offered
by this prospectus, reference is made to our registration statement and its
exhibits and schedules. Statements contained in this prospectus concerning the
contents of any contract or any other document referred to in the prospectus are
not necessarily complete. In each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.

We file reports and other information with the Securities and Exchange
Commission. Such reports and other information, as well as a copy of the
registration statement may be inspected without charge at the SEC's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
regional offices located at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of all or any part of the registration
statement may be obtained from such offices upon the payment of the fees
prescribed by the SEC. In addition, registration statements and certain other
filings made with the SEC through its Electronic Data Gathering, Analysis and
Retrieval system, including our registration statement and all exhibits and
amendments to our registration statement, are publicly available through the
SEC's Web site at http://www.sec.gov.

94
<PAGE> 95

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ACME COMMUNICATIONS, INC.
Balance Sheet as of July 23, 1999 (unaudited)............... F-2
Notes to Balance Sheet (unaudited).......................... F-3

ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES
Report of KPMG LLP, Independent Auditors.................... F-4
Consolidated Balance Sheets as of December 31, 1997 and 1998
and June 30, 1999 (unaudited)............................. F-5
Consolidated Statements of Operations for each of the years
in the two-year period ended December 31, 1998 and the six
months ended June 30, 1998 and 1999 (unaudited)........... F-6
Consolidated Statements of Members' Capital (Deficit) for
each of the years in the two-year period ended December
31, 1998 and the six months ended June 30, 1999
(unaudited)............................................... F-7
Consolidated Statements of Cash Flows for each of the years
in the two-year period ended December 31, 1998 and the six
months ended June 30, 1998 and 1999 (unaudited)........... F-8
Notes to Consolidated Financial Statements.................. F-9

KOPLAR COMMUNICATIONS, INC. AND SUBSIDIARY
Report of KPMG LLP, Independent Auditors.................... F-26
Consolidated Statements of Operations for each of the years
in the two-year period ended December 31, 1997............ F-27
Consolidated Statements of Cash Flows for each of the years
in the two-year period ended December 31, 1997............ F-28
Notes to Financial Statements............................... F-29

CHANNEL 32 INCORPORATED
Report of KPMG LLP, Independent Auditors.................... F-38
Statements of Operations for each of the years in the
two-year period ended June 30, 1996 and the period from
July 1, 1996 to June 17, 1997 (unaudited)................. F-39
Statements of Cash Flows for each of the years in the
two-year period ended June 30, 1996 and the period from
July 1, 1996 to June 17, 1997 (unaudited)................. F-40
Notes to Financial Statements............................... F-41
</TABLE>

F-1
<PAGE> 96

ACME COMMUNICATIONS, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
AS OF
JULY 23,
1999
-----------
(UNAUDITED)
<S> <C>
ASSETS
Due from affiliates......................................... $1,000
------
Total assets........................................... $1,000
======
STOCKHOLDER'S EQUITY
Stockholder's equity
Common stock, $.01 par value; 1,000 shares authorized;
100 shares issued and outstanding......................... $ 1
Additional paid-in capital.................................. 999
------
Total stockholder's equity............................. $1,000
======
</TABLE>

See accompanying notes to the balance sheet.

F-2
<PAGE> 97

ACME COMMUNICATIONS, INC.

NOTES TO UNAUDITED BALANCE SHEET

(1) DESCRIPTION OF THE BUSINESS AND FORMATION

FORMATION AND PRESENTATION

ACME Communications, Inc. was formed as a wholly-owned subsidiary of ACME
Television Holdings, LLC ("Parent") on July 23, 1999. On September 8, 1999, the
Company received $1,000 from its Parent which represents its contributed
capital. With the exception of the initial nominal capitalization of the
company, the Company has not had any operations or other activities.

ACME Communications, Inc., is contemplating the issuance of common stock in
an initial public offering. Immediately before the closing, ACME Communications,
Inc., will complete a reorganization with ACME Television Holdings, LLC and will
become the successor entity. ACME Communications, Inc. does not guarantee that
it will be able to successfully complete the issuance of common stock in an
initial public offering.

F-3
<PAGE> 98

INDEPENDENT AUDITORS' REPORT

The Board of Advisors
ACME Television Holdings, LLC:

We have audited the accompanying consolidated balance sheets of ACME
Television Holdings, LLC and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations and members' capital and cash
flows for the years ended December 31, 1998 and 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 ACME
Television Holdings, LLC and subsidiaries as of December 31, 1998 and 1997 and
the results of operations and cash flows for each of the years then ended, in
conformity with generally accepted accounting principles.

/s/ KPMG LLP

Los Angeles, California
July 28, 1999

F-4
<PAGE> 99

ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
-------------------- JUNE 30,
1997 1998 1999
-------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 8,824 $ 1,001 $ 1,669
Accounts receivable, net.................................. 888 10,840 13,151
Current portion of program rights......................... 614 6,357 6,508
Prepaid expenses and other current assets................. 3,121 416 798
-------- -------- --------
Total current assets................................... 13,447 18,614 22,126
Property and equipment, net................................. 7,346 16,441 25,002
Program rights, net of current portion...................... 587 8,046 5,757
Deposits.................................................... 143,000 37 536
Deferred income taxes....................................... -- 3,811 3,971
Intangible assets, net...................................... 36,004 222,987 261,156
Other assets................................................ 20,091 18,146 11,734
-------- -------- --------
Total assets........................................... $220,475 $288,082 $330,282
======== ======== ========
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable.......................................... $ 3,363 $ 4,425 $ 4,951
Accrued liabilities....................................... 651 4,210 7,851
Current portion of program rights payable................. 653 7,649 6,082
Current portion of obligations under lease................ 292 1,273 1,277
-------- -------- --------
Total current liabilities.............................. 4,959 17,557 20,161
Program rights payable, net of current portion.............. 1,351 6,512 4,964
Obligations under lease, net of current portion............. 443 4,199 4,078
Other liabilities........................................... 1,047 4,671 5,670
Deferred income taxes....................................... -- 31,241 33,439
Revolving credit facility................................... -- 8,000 39,400
Bridge loan................................................. -- -- 15,000
Convertible debentures...................................... 24,756 24,756 24,756
10 7/8% senior discount notes............................... 130,833 145,448 153,357
12% senior secured notes.................................... 36,863 42,052 44,913
-------- -------- --------
Total liabilities...................................... 200,252 284,436 345,738
-------- -------- --------
Minority interest........................................... 3,917 2,233 830
Members' capital:
Members' capital.......................................... 23,785 30,832 41,532
Accumulated deficit....................................... (7,479) (29,419) (57,818)
-------- -------- --------
Total members' capital (deficit)....................... 16,306 1,413 (16,286)
-------- -------- --------
Total liabilities and members' capital (deficit)....... $220,475 $288,082 $330,282
======== ======== ========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-5
<PAGE> 100

ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------- -----------------------
1997 1998 1998 1999
------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues........................ $11,347 $ 43,928 $ 19,327 $ 26,635

Operating expenses:
Station operating expenses........ 10,158 32,973 15,165 19,990
Depreciation and amortization..... 1,215 11,355 4,181 8,159
Corporate......................... 1,415 2,627 1,194 1,483
Equity-based compensation......... -- -- -- 10,700
------- -------- -------- --------
Total operating expenses....... 12,788 46,955 20,540 40,332
------- -------- -------- --------
Operating loss............... (1,441) (3,027) (1,213) (13,697)

Other income (expenses):
Interest income................... 287 231 188 27
Interest expense.................. (6,562) (23,953) (11,472) (14,068)
Gain on sale of asset............. -- 1,112 -- --
Other............................. -- (380) 10 --
------- -------- -------- --------
Loss before taxes and minority
interest.......................... (7,716) (26,017) (12,487) (27,738)
Income tax benefit (expense)........ -- 2,393 365 (2,064)
------- -------- -------- --------
Loss before minority interest....... (7,716) (23,624) (12,122) (29,802)
Minority interest.............. 237 1,684 868 1,403
------- -------- -------- --------
Net loss..................... $(7,479) $(21,940) $(11,254) $(28,399)
======= ======== ======== ========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-6
<PAGE> 101

ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF MEMBERS' CAPITAL (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL
MEMBERS'
MEMBERS' ACCUMULATED CAPITAL
CAPITAL DEFICIT (DEFICIT)
-------- ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1996.................... $ -- $ -- $ --
Issuance of units, net........................ 23,785 -- 23,785
Net loss...................................... -- (7,479) (7,479)
------- -------- --------
Balance at December 31, 1997.................... 23,785 (7,479) 16,306
Issuance of units, net........................ 7,047 7,047
Net loss...................................... -- (21,940) (21,940)
------- -------- --------
Balance at December 31, 1998.................... 30,832 (29,419) 1,413
Equity-based compensation..................... 10,700 -- 10,700
Net loss...................................... -- (28,399) (28,399)
------- -------- --------
Balance at June 30, 1999 (unaudited)............ $41,532 $(57,818) $(16,286)
======= ======== ========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-7
<PAGE> 102

ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
--------------------- --------------------
1997 1998 1998 1999
--------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (7,479) $(21,940) $(11,254) $(28,399)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization............................. 1,215 11,355 4,181 8,159
Amortization of program rights............................ 1,433 5,321 2,195 3,250
Amortization of debt issuance costs....................... 445 989 247 337
Amortization of discount on 10 7/8% senior discount
notes................................................... 3,463 14,170 6,934 7,909
Amortization of discount on 12% senior secured notes...... 1,213 5,189 2,503 2,861
Minority interest allocation.............................. (237) (1,684) (868) (1,403)
Equity-based compensation................................. -- -- -- 10,700
Deferred taxes............................................ -- (2,393) (345) (962)
Gain on sale of assets.................................... -- (1,112) -- --
Changes in assets and liabilities:
Increase in accounts receivables, net..................... (888) (5,479) (4,023) (2,311)
(Increase) decrease in prepaid expenses................... (3,060) 364 (691) (353)
(Increase) decrease in due from affiliates................ (7) 7 -- --
Increase in other assets.................................. -- (576) -- --
Increase in accounts payable.............................. 3,363 59 102 526
Increase in deferred tax liability........................ -- -- -- 3,000
Increase in accrued expenses.............................. 651 2,639 5,532 5,215
Payments on programming rights payable.................... (1,758) (6,588) (2,853) (4,227)
Increase (decrease) in other liabilities.................. 1,047 (2) (1,749) (571)
--------- -------- -------- --------
Net cash provided by (used in) operating activities..... (599) 319 (89) 3,731
--------- -------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment....................... (6,077) (2,945) (3,934) (4,493)
Purchases of and deposits for station interests........... (175,129) (16,675) (17,635) (41,765)
Cash acquired in acquisition -- St. Louis................. -- 779 779 --
Proceeds from sale of station interest.................... -- 3,337 -- --
Purchase of Sylvan Tower interest......................... -- -- -- (2,583)
Other..................................................... (10,524) -- -- --
--------- -------- -------- --------
Net cash used in investing activities................... (191,730) (15,504) (20,790) (48,841)
--------- -------- -------- --------
Cash flows from financing activities:
Increase in revolving credit facility..................... -- 11,000 12,000 31,400
Increase in bridge loan................................... -- -- -- 15,000
Payments on revolving credit facility..................... -- (3,000) -- --
Payments on capital leases................................ (97) (638) 1,935 (572)
Issuance of members' capital.............................. 19,385 -- -- --
Issuance of convertible debentures........................ 24,756 -- -- --
Issuance of 10 7/8% senior discount notes................. 127,370 -- -- --
Issuance of 12% senior secured notes...................... 35,650 -- -- --
Debt issuance costs....................................... (10,065) -- 14 (50)
Minority interest......................................... 4,154 -- -- --
--------- -------- -------- --------
Net cash provided by financing activities............... 201,153 7,362 13,949 45,778
--------- -------- -------- --------
Net increase (decrease) in cash........................... 8,824 (7,823) (6,930) 668
Cash at beginning of period............................... -- 8,824 8,824 1,001
--------- -------- -------- --------
Cash at end of period..................................... $ 8,824 $ 1,001 $ 1,894 $ 1,669
========= ======== ======== ========
Supplemental disclosures of cash flow information:
Cash payments for:
Interest................................................ $ 514 $ 864 $ 121 $ 630
Taxes................................................... -- 70 18 70
Non-cash transactions:
Purchases of property and equipment in exchange for
capital lease obligations............................. $ -- $ 5,375 $ 2,036 438
Issuance of equity in connection with station
acquisitions.......................................... 4,400 7,047 7,047 --
Use of deposit as consideration for purchase
transaction........................................... -- 143,000 -- --
Exchange of note receivable and option deposit as
purchase consideration for station interest........... $ -- $ -- $ -- $ 7,000
========= ======== ======== ========
</TABLE>

See accompanying notes to the consolidated financial statements.
F-8
<PAGE> 103

ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998
(INFORMATION AT JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1999 IS UNAUDITED)

(1) DESCRIPTION OF THE BUSINESS AND FORMATION

FORMATION AND PRESENTATION

The accompanying consolidated financial statements are presented for ACME
Television Holdings, LLC ("ACME" or the "Company") and its majority and
wholly-owned subsidiaries. Segment information is not presented since all of the
Company's revenues are attributed to a single reportable segment.

Information with respect to the six months ended June 30, 1999 and 1998 is
unaudited. The accompanying unaudited consolidated financial statements have
been prepared on the same basis as the audited financial statements and, in the
opinion of management contain all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the financial position, results
of operations and cash flows of the Company and subsidiaries, for the periods
presented. The results of operations for the six month period are not
necessarily indicative of the results of operations for the full year.

NATURE OF BUSINESS

The Company is a holding company with no assets or independent operations
other than its investment in it's majority-owned subsidiary, ACME Intermediate
Holdings LLC ("ACME Intermediate"). As of June 30, 1999, ACME Intermediate,
through its wholly-owned subsidiary, ACME Television, LLC ("ACME Television"),
owns and/or operates nine commercially licensed broadcast television stations
(the "Stations" or "Subsidiaries") located throughout the United States.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions have been
eliminated.

REVENUE RECOGNITION

Revenue from the sale of airtime related to advertising and contracted time
is recognized at the time of broadcast. The Company generally receives such
revenues net of commissions deducted by the advertising agencies and national
sales representatives.

CASH AND CASH EQUIVALENTS

For purposes of reporting the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.

F-9
<PAGE> 104
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1998
(INFORMATION AT JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
1999 IS UNAUDITED)

ACCOUNTS RECEIVABLE

Accounts receivable are presented net of the related allowance for doubtful
accounts which totaled $696,000, $555,000 and $51,000 at June 30, 1999, December
31, 1998 and 1997, respectively.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of accounts receivable and cash. Due to the
short-term nature of these instruments, the carrying value approximates the fair
market value. The Company believes that concentrations of credit risk with
respect to accounts receivable, which are unsecured, are limited due to the
Company's ongoing relationship with its clients. The Company provides its
estimate of uncollectible accounts. The Company has not experienced significant
losses relating to accounts receivable.

PROGRAM RIGHTS

Program rights represent costs incurred for the right to broadcast certain
features and syndicated television programs. Program rights are stated, on a
gross basis, at the lower of amortized cost or estimated realizable value. The
cost of such program rights and the corresponding liability are recorded when
the initial program becomes available for broadcast under the contract.
Generally, program rights are amortized over the life of the contract on a
straight-line basis related to the usage of the program. The portion of the cost
estimated to be amortized within one year and after one year are reflected in
the balance sheets as current and noncurrent assets, respectively. The gross
payments under these contracts that are due within one year and after one year
are similarly classified as current and noncurrent liabilities.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. The cost of maintenance is
expensed when incurred. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the respective assets.
When property is retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the appropriate accounts and any gain or loss is
included in the results of current operations. The principal lives used in
determining depreciation rates of various assets are as follows:

<TABLE>
<S> <C>
Buildings and Improvements.......................... 20 - 30 years
Broadcast and other equipment....................... 3 - 20 years
Furniture and fixtures.............................. 5 - 7 years
Vehicles............................................ 5 years
</TABLE>

F-10
<PAGE> 105
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

INTANGIBLE ASSETS

Intangible assets consist of broadcast licenses and goodwill, both of which
are amortized on a straight-line basis over a 20-year life.

<TABLE>
<CAPTION>
AS OF
DECEMBER 31, AS OF
------------------- JUNE 30,
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Broadcast licenses....................... $24,338 $154,351 $184,011
Goodwill................................. 12,427 78,808 93,799
------- -------- --------
Total intangible assets............. 36,765 233,159 277,810
Less: accumulated amortization........... (761) (10,172) (16,654)
------- -------- --------
Net intangible assets............... $36,004 $222,987 $261,156
======= ======== ========
</TABLE>

BARTER AND TRADE TRANSACTIONS

Revenue and expenses associated with barter agreements in which broadcast
time is exchanged for programming rights are recorded at the estimated average
rate of the airtime exchanged. Trade transactions, which represent the exchange
of advertising time for goods or services, are recorded at the estimated fair
value of the products or services received. Barter and trade revenue is
recognized when advertisements are broadcast. Merchandise or services received
from airtime trade sales are charged to expense or capitalized when used or
received.

LOCAL MARKETING AGREEMENTS

In connection with station acquisitions, and pending FCC approval of the
transfer of license assets, we generally enter into local marketing agreements
with the sellers. Under the terms of these agreements, we obtain the right to
program and sell advertising time on 100% of the station's inventory of
broadcast time, incur certain operating expenses and may make payments to the
sellers. As the holder of the FCC license, the seller/licensee retains ultimate
control and responsibility for all programming broadcast on the station. We, in
turn, record revenues from the sale of advertising time and operating expenses
for costs incurred. Included in the accompanying consolidated statements of
operations for the years ended December 31, 1997 and 1998, are net revenues of
$9.5 million and $6.8 million, respectively, that relate to local marketing
agreements. For the period ended June 30, 1999, $125,000 relating to local
marketing agreements is included in net revenue. Payments to the sellers for the
years ended December 31, 1997 and 1998 and for the six months ended June 30,
1998 and 1999 were $0, $228,000, $228,000 and $0, respectively. At June 30,
1999, the Company was not obligated for any future payments to sellers.

CARRYING VALUE OF LONG-LIVED ASSETS

The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived

F-11
<PAGE> 106
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

Assets to be Disposed Of." The carrying value of long-lived assets (tangible,
identifiable intangible, and goodwill) is reviewed if the facts and
circumstances suggest that they may be impaired. For purposes of this review,
assets are grouped at the operating company level, which is the lowest level for
which there are identifiable cash flows. If this review indicates that an
asset's carrying value will not be recoverable, as determined based on future
expected, undiscounted cash flows, the carrying value is reduced to fair market
value.

INCOME TAXES

The Company is a limited liability company, therefore, no income taxes have
been provided for its operations other than at its subsidiary ACME Television of
Missouri, Inc. which is a C Corporation subject to federal and state taxation.
Any liability or benefit from the Company's non-taxable entities' consolidated
income or loss is the responsibility of, or benefit to, the individual members.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates include the allowance for doubtful accounts
net of the realizable value of programming rights and the evaluation of the
recoverability of intangible assets. Actual results could differ from those
estimates.

RECLASSIFICATIONS

Certain amounts previously reported for 1997 and 1998 have been
reclassified to conform to the 1999 financial statement presentation.

F-12
<PAGE> 107
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

(3) PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------------- ---------
1997 1998 1999
------ ------- ---------
<S> <C> <C> <C>
Land........................................ $ -- $ 553 $ 1,158
Buildings and improvements.................. 365 2,529 5,002
Broadcast and other equipment............... 7,201 13,163 21,105
Furniture and fixtures...................... 60 287 703
Vehicles.................................... 61 185 204
Construction in process..................... -- 1,935 702
------ ------- -------
Total.................................. $7,687 $18,652 28,874
Less: accumulated depreciation.............. (341) (2,211) (3,872)
------ ------- -------
Net property and equipment.................. $7,346 $16,441 $25,002
====== ======= =======
</TABLE>

Included in property and equipment are assets acquired under capital leases
with a total cost of $6,645,000 and the associated accumulated depreciation of
$1,121,000 at June 30, 1999.

(4) ACQUISITIONS

On June 17, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Channel 32, Incorporated, relating to the
operations of KWBP, in exchange for $18,675,000 in cash and $4,400,000 of
membership units in the Company. The acquisition was accounted for using the
purchase method. The excess of the purchase price plus the fair value of net
liabilities assumed of approximately $23,478,000, has been recorded as an
intangible broadcast license and is being amortized over a period of 20 years.
In addition, the results of operations (excluding depreciation and amortization)
of KWBP were recorded by the Company beginning January 1, 1997 pursuant to a
local marketing agreement whereby ACME Oregon effectively operated the station
and funded the station's losses during the period from January 1, 1997 to June
17 1997 (the acquisition date).

On July 29, 1997, the Company entered into a stock purchase agreement to
acquire Koplar Communications, Inc. (KCI). On September 30, 1997, the Company
placed $143 million in to an escrow account (classified as a deposit on the
December 31, 1997 consolidated balance sheet). In connection with this
acquisition, the Company entered into a long-term local marketing agreement with
KPLR and filed the requisite applications with the FCC for the transfer of the
Station's license to the Company.

Pursuant to the local marketing agreement, the Company retained all
revenues generated by the station, bore substantially all operating expenses
(excluding depreciation and amortization) of the station and was obligated to
pay a local marketing agreement fee. These revenues and expenses for the period
October 1 through December 31, 1997 are included in the Company's operating
results for the year ended December 31, 1997.

F-13
<PAGE> 108
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

On March 13, 1998, the Company completed its acquisition of Koplar
Communications, Inc. ("KCI") and acquired all of the outstanding stock of KCI
for a total consideration of approximately $146.3 million. The acquisition was
accounted for using the purchase method. Pursuant to the local marketing
agreement referred to above, all revenues and operating expenses of the station
(excluding depreciation and amortization) for the period from September 30, 1997
to March 31, 1998 (the effective date of the purchase transaction) are included
in the Company's operating results. The purchase transaction was recorded on the
consolidated balance sheet of the Company effective March 31, 1998 and the
Company's results of operations includes revenues and expenses (including
amortization of intangible assets) beginning April 1, 1998.

The fair value of the assets acquired and liabilities assumed relating to
the acquisition of KPLR (in thousands):

<TABLE>
<S> <C>
Assets acquired:
Cash and cash equivalents................................. $ 779
Accounts receivables, net................................. 1,703
Program broadcast rights.................................. 8,490
Property and equipment.................................... 2,233
Prepaid expenses and other current assets................. 416
FCC license............................................... 82,563
Goodwill.................................................. 93,775
Other assets.............................................. 395
--------
Total assets acquired.................................. $190,354
========
Liabilities assumed:
Accounts payable.......................................... $ (1,005)
Accrued liabilities....................................... (1,332)
Program broadcast rights payable.......................... (8,258)
Deferred income taxes..................................... (29,889)
Other liabilities......................................... (3,531)
--------
Total liabilities assumed.............................. $(44,015)
--------
Total purchase price................................... $146,339
========
</TABLE>

On October 7, 1997, the Company acquired Crossville Limited Partnership,
the owner of WINT, in exchange for $13,200,000 in cash. Subsequent to the
acquisition, the Company changed the call letters of the station to WBXX. The
acquisition was accounted for using the purchase method. The excess of the
purchase price over the fair value of net assets acquired of approximately
$13,287,000, has been recorded as an intangible broadcast license and is being
amortized over a period of 20 years.

During 1997, the Company entered into an agreement that provided it with
the right to: (i) acquire 49% of the licensee of KUPX (formerly KZAR) in
exchange for membership units valued at $6 million, and (ii) pay $3 million for
an option to acquire the remaining 51% interest in the licensee of KUPX for $5
million, exercisable immediately after the station commences on-air operations.
On December 15, 1997, the Company acquired the 49%

F-14
<PAGE> 109
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

interest in the licensee of KUPX, paid $3 million to acquire the option and
loaned the sellers $4 million (to be applied to the subsequent majority interest
purchase price). On January 22, 1998, the Company issued $6 million of its
member units to the sellers for the 49% interest in the license of KUPX in
connection with the above transaction. The amount of the issuance was based upon
a fixed dollar amount of consideration. The Company accounted for the 49%
investment using the equity method of accounting. On February 16, 1999, the
Company acquired the remaining 51% interest in KUPX. The $4.0 million loan was
applied against the remaining purchase price of $5 million.

In May 1998 the Company and the majority owners of KUPX entered into an
agreement with another broadcaster in Salt Lake City to (i) swap KUPX for KUWB,
subject to FCC approval (ii) enable the Company to operate KUWB under a local
marketing agreement and (iii) enable the owner of KUWB to operate KUPX under a
local marketing agreement. Pursuant to the LMA's, the Company retains all
operating revenues and expenses (excluding depreciation and amortization) of
KUWB and the owner of KUWB retains all operating revenues and expenses
(excluding depreciation and amortization) of KUPX. In March 1999, the FCC
approved the swap of KUPX for KUWB and the transaction closed during the third
quarter of 1999. The Company intends to account for the swap as a business
combination using fair market value. The Company will record KUPX at its fair
value and a difference between its fair value and the carrying amount of KUWB
will result in a gain or loss. However, the Company believes that the fair value
of KUWB approximates the historical cost of KUPX.

On August 22, 1997, the Company entered into an agreement with affiliates
of the sellers of KZAR to acquire 100% of the interests in the construction
permit for KAUO for a consideration of $10,000. This agreement was consummated
on January 22, 1998. Subsequently, the call letters of KAUO were changed to
KWBQ. Construction of KWBQ was completed and the station commenced broadcasting
in March 1999.

On June 30, 1998, the Company acquired substantially all the assets and
assumed certain liabilities of WTVK-Channel 46 serving the Fort Myers-Naples,
Florida marketplace for approximately $14.5 million in cash and 1,047 membership
units (valued at approximately $1.0 million). The acquisition was accounted for
using the purchase method. The excess of the purchase price over the fair value
of the net assets assumed of approximately $15.5 million has been recorded as an
intangible broadcast license and goodwill, both of which are being amortized
over a period of 20 years. The Company had entered into a local marketing
agreement with WTVK wherein the Company, effective March 3, 1998, retained all
revenues generated by the station, bore all operating expenses of the station
(excluding depreciation and amortization) and had the right to program the
station (subject to WTVK's ultimate authority for programming) and the station's
existing programming commitments. The local marketing agreement terminated upon
the consummation of the acquisition. Consequently, under the local marketing
agreement the revenues and operating expenses (excluding depreciation and
amortization) of the station are included in the Company's results of operations
from March 3, 1998 to June 30, 1998. The purchase transaction was recorded on
the consolidated balance sheet of the Company on June 30, 1998 and the

F-15
<PAGE> 110
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

Company's results of operations includes revenues and expenses (including
amortization of intangible assets) beginning July 1, 1998.

On April 23, 1999, the Company acquired the non-FCC license assets of three
Paxson Communication Corporation stations serving the Dayton, OH, Green Bay, WI
and Champaign-Decatur, IL markets for $32 million. On June 23, 1999, following
FCC approval of the transfer of the FCC licenses to ACME, the Company acquired
the licenses and completed the acquisition of the three stations by making to
PCC a final payment of $8.0 million. The Company financed this $40 million
transaction by a $25 million borrowing under its Loan Agreement and a $15
million loan from certain of its members (the "Bridge Loan"). The Bridge Loan
bears interest at 22.5% per annum, is unsecured, may be prepaid at any time
without penalty and is due, along with all accrued interest, on April 23, 2002.

On February 19, 1999, the Company entered into an agreement in principle
with Ramar Communications ("Ramar") to acquire Ramar's KASY TV-50, serving the
Albuquerque market for approximately $27 million. In a related transaction, the
Company will concurrently sell to Ramar its station KWBQ, also serving the
Albuquerque market. The Company will also enter into a 10-year local marketing
agreement with Ramar to operate KWBQ. This transaction has been approved by the
FCC and is expected to close in the fourth quarter of 1999.

The unaudited pro forma financial information for the year ended December
31, 1998 and 1997, set forth below reflects the net revenues and net loss
assuming the KWBP, WBXX, KPLR, WTVK and KWBQ transactions had taken place at the
beginning of each respective year. This unaudited pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the acquisitions occurred on January 1, 1998 and 1997.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Net revenues.......................................... $35,410 $44,275
Net loss.............................................. (24,044) (24,173)
</TABLE>

(5) UNIT OFFERING

On September 30, 1997, ACME Intermediate issued 71,634 Units (the Unit
Offering) consisting of 71,634 membership units (representing 8% of the ACME
Intermediate's outstanding membership equity) and $71,635,000 (par value at
maturity) in 12% senior secured discount notes due 2005 (Intermediate Notes).
Cash interest on the Intermediate Notes is payable semi-annually in arrears,
commencing with the six-month period ending March 31, 2003. The net proceeds
from the Unit Offering, after the deduction of underwriter fees and other
related offering costs, were $38.3 million and were received by the Company on
September 30, 1997. The Company has allocated approximately $4.2 million of such
net proceeds to minority interest, $35.6 million to the discounted note payable
and $1.5 million to prepaid financing costs -- the latter which is being
amortized over the eight year term of the notes. The Intermediate Notes contain
certain covenants and

F-16
<PAGE> 111
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

restrictions including restrictions on future indebtedness and restricted
payments, as defined, and limitations on liens, investments, transactions with
affiliates and certain asset sales. The Company was in compliance with all such
covenants and restrictions at June 30, 1999, December 31, 1998 and 1997.

The Intermediate Notes are secured by a first priority lien on the limited
liability company interests in ACME Television and ACME Subsidiary Holdings II,
LLC, both of which are direct wholly-owned subsidiaries of ACME Intermediate.
ACME Subsidiary Holdings II, LLC was formed solely to own a 0.5% interest in
ACME Television, has no other assets or operations and does not constitute a
substantial portion of the collateral for the Intermediate Notes.

(6) 10 7/8% SENIOR DISCOUNT NOTES

On September 30, 1997, ACME Television issued 10.875% senior discount notes
due 2004 (Notes) with a face value of $175,000,000 and received $127,370,000 in
gross proceeds from such issuance. These Notes provide for semi-annual cash
interest payments beginning in the fourth year with the first interest payment
due on March 31, 2001. The Notes are subordinated to ACME Television's bank
revolver (see Note 7) and to the ACME Television's capital equipment finance
facilities (see Note 10). The Notes mature on September 30, 2004 and may not be
prepaid without penalty.

The Notes contain certain covenants and restrictions including restrictions
on future indebtedness and limitations on investments, and transactions with
affiliates. ACME Television was in compliance with all such covenants and
restrictions at June 30, 1999, December 31, 1998 and December 31, 1997.

Costs associated with the issuance of these notes, including the
underwriters fees and related professional fees are included in long-term other
assets and will be amortized over the seven year term of the notes.

ACME Television's subsidiaries (hereinafter referred to in this section
collectively as Subsidiary Guarantors) are fully, unconditionally, and jointly
and severally liable for ACME Television's notes. The Subsidiary Guarantors are
wholly owned and constitute all of ACME Television's direct and indirect
subsidiaries except for ACME Finance Corporation, a wholly owned finance
subsidiary of ACME Television with essentially no independent operations that is
jointly and severally liable with the Company on the Notes. ACME Television has
not included separate financial statements of the aforementioned subsidiaries
because (i) ACME Television is a holding company with no assets or independent
operations other than its investments in its subsidiaries and (ii) the separate
financial statements and other disclosures concerning such subsidiaries are not
deemed material to investors.

Various agreements to which ACME Television and/or the Subsidiary
Guarantors are parities restrict the activity of the Subsidiary Guarantors to
make distributions to the Company. The Investment and Loan Agreement (the
Investment Agreement), dated June 17, 1997, as amended, among the Company and
the parties thereto and the Limited Liability Company Agreement (the LLC
Agreement), dated June 17, 1997, as amended, among the

F-17
<PAGE> 112
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

Company and the parties thereto each contain certain restrictions on the ability
of the Subsidiary Guarantors to declare or pay dividends to ACME Television in
the absence of the consent of certain parties thereto. The Indenture governing
the Notes prevents the Subsidiary Guarantors from declaring or paying any
dividend or distribution to ACME Television unless certain financial covenants
are satisfied and there has been no default thereof. The revolving credit
facility with Canadian Imperial Bank Corporation (see Note 7) also prohibits
distributions from the Subsidiary Guarantors to ACME Television except in
certain circumstances during which default has not occurred thereunder.

(7) BANK REVOLVER

On August 15, 1997, ACME Television entered into a $22.5 million revolving
credit facility (the Loan Agreement) with Canadian Imperial Bank Corporation
(CIBC), as agent and lead lender. Under the terms of the Loan Agreement,
advances bear interest at a base rate, that at our option, is either the bank's
prime rate or LIBOR, plus a spread. Commitment fees are charged at a rate of .5%
per annum, paid quarterly, on the unused portion of the facility. On December 2,
1997, the Loan Agreement was amended to provide ACME Television with an
increased credit line to $40 million, more favorable interest rates and a
lengthened term. As of June 30, 1999 there was an outstanding balance of $39.4
million and $600,000 was available under the Loan Agreement. As of December 31,
1998 there was an outstanding balance of $8.0 million and $32.0 million was
available under the Loan Agreement. There was no outstanding balance due at
December 31, 1997.

The Loan Agreement contains certain covenants and restrictions including
restrictions on future indebtedness and limitations on investments and
transactions with affiliates. ACME Television was in compliance with all such
covenants and restrictions at June 30, 1999, December 31, 1998 and December 31,
1997.

Costs associated with the procuring of bank credit facilities, including
loan fees and related professional fees, are included in long-term other assets
and are amortized over the term of the Loan Agreement.

(8) CONVERTIBLE DEBENTURES

On June 30, 1997 and on September 30, 1997 the Company issued convertible
debentures to certain investors in the aggregate amount of $24,756,000. The
debentures bear interest at the rate of 10% per annum, compounded annually.
Accrued interest, along with the principle balance is due and payable on June
30, 2008, or earlier in the event of certain specified events of default or in
connection with a change of control of the Company.

Pursuant to the terms of the debentures, the holders may elect at any time
prior to maturity to convert a portion or all of the then outstanding principal
and accrued interest into membership units of the Company. The conversion rate
is fixed by contract and represents, in the aggregate, and assuming the entire
original principal and interest were converted, an additional 24,756 units of
membership. As of June 30, 1999, December 31, 1998 and 1997, the amount of
accrued interest due to the holders of the convertible debt is

F-18
<PAGE> 113
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

$4,751,000, $3,523,000 and $1,048,000, respectively, and is included in other
liabilities on the Company's balance sheets.

(9) BRIDGE LOAN

On April 23, 1999, the Company entered into a $15.0 million loan agreement
(the Bridge Loan) with Alta Communications VI, L.P., Alta Com S by S, LLC, Alta
Subordinated Debt Partners III, L.P., BANCBOSTON Investments, Inc., CEA Capital
Partners USA, L.P., CEA Capital Partners USA CI, L.P., TCW Shared Opportunity
Fund III, L.P., Shared Opportunity Fund IIB, LLC and TCW Leveraged Income Trust
II, L.P. (the Lenders); the proceeds of which were used solely to invest in ACME
Intermediate. ACME Intermediate funded the acquisition of the property and
equipment assets of Stations WBDT, WBWI and WBUI, with the proceeds.

Of the aggregate $15.0 million, $7.0 million was drawn on April 23, 1999
and the remaining $8.0 million was drawn on June 23, 1999.

The loan bears interest at 22.5%, compounded semi-annually. The interest
rate increases 250 basis points on October 23, 1999 and every 90 days
thereafter, not to exceed 35% per annum. The Company can prepay the loan without
penalty. All principal and interest is due on the earlier of April 23, 2002 or
consummation by the Company of any debt or equity financing generating net
proceeds greater than the outstanding loan balance.

(10) COMMITMENTS AND CONTINGENCIES

OBLIGATIONS UNDER OPERATING LEASES

The Company is obligated under noncancelable operating leases for office
space and its transmission sites. Future minimum lease payments as of the year
ended December 31, 1998, under noncancelable operating leases with initial or
remaining terms of one year or more are:

<TABLE>
<S> <C>
1999................................................. $ 1,125,000
2000................................................. 1,118,000
2001................................................. 1,068,000
2002................................................. 970,000
2003................................................. 916,000
Thereafter........................................... 4,806,000
-----------
Total.............................................. $10,003,000
===========
</TABLE>

Total future minimum lease payments under non-cancelable operating leases
were $10,003,000 and $6,615,000 at December 31, 1998 and 1997, respectively.

Total rental expense under operating leases for the six months ended June
30, 1999 and the twelve months ended December 31, 1998 and 1997 was
approximately $562,000, $967,463 and $166,000, respectively.

F-19
<PAGE> 114
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

OBLIGATIONS UNDER CAPITAL LEASES

As of December 31, 1998, approximately $5.5 million of equipment was leased
under capital equipment facilities. These obligations are reflected as current
obligations under capital leases of $1,273,000 and $292,000, and as non-current
liabilities under capital lease of $4,199,000 and $443,000 at December 31, 1998
and 1997 respectively. These capital lease obligations expire over the next five
years. Future minimum lease payments as of December 31, 1998 under capital
leases are:

<TABLE>
<S> <C>
1999.................................................. $ 1,638,000
2000.................................................. 1,431,000
2001.................................................. 1,371,000
2002.................................................. 1,351,000
2003.................................................. 931,000
-----------
Total............................................... $ 6,722,000
Less: interest:..................................... (1,250,000)
-----------
Present value of minimum lease payments.......... $ 5,472,000
===========
</TABLE>

PROGRAM RIGHTS PAYABLE

Commitments for program rights that have been executed, but which have not
been recorded in the accompanying financial statements, as the underlying
programming is not yet available for broadcast, were approximately $28,265,000
and $7,010,000 as of December 31, 1998 and December 31, 1997, respectively.

Maturities on the Company's program rights payables (including commitments
not recognized in the accompanying financial statements due to the lack of
current availability for broadcast) for each of the next five years are:

<TABLE>
<S> <C>
1999................................................. $ 9,316,000
2000................................................. 9,903,000
2001................................................. 8,897,000
2002................................................. 6,322,000
2003................................................. 3,838,000
Thereafter........................................... 4,150,000
-----------
Total.............................................. $42,426,000
===========
</TABLE>

CERTAIN COMPENSATION ARRANGEMENTS

In June 1997, the Company issued an aggregate of 100 management carry units
to certain members of management, which remain outstanding as of June 30, 1999.
These units entitle holders to certain distribution rights upon achievement of
certain returns by non-management investors and are subject to forfeiture or
repurchase by the Company in the event of termination of each individual's
employment by the Company under certain specified circumstances. These
management carry units are accounted for as a variable plan

F-20
<PAGE> 115
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

resulting in an expense when it is probable that any such distributions will be
made. The Company determined the value of these at the issuance date to be
immaterial. During the six months ended June 30, 1999, the Company recorded an
expense of $10.7 million relating to the units. No expense was recorded relating
to these units in 1998 or 1997

LEGAL PROCEEDINGS

We are currently in a dispute with Edward Koplar in connection with Mr.
Koplar's resignation in the fall of 1998 from his position as Chief Executive
Officer of ACME Television of Missouri, Inc., formerly Koplar Communications,
Inc. Mr. Koplar has claimed that the Company breached his management agreement,
and under the terms of that agreement has claimed that we owe him $4 million and
has threatened to bring suit against us. We believe that Mr. Koplar's claim is
without merit and that the resolution of this matter will not have a material
adverse effect on our financial condition or results of operations. We have
accrued $350,000 as a reserve relating to this matter.

In addition, the Company is party to routine claims and suits brought
against it in the ordinary course of business. In the opinion of management, the
outcome of such routine claims will not have a material adverse effect on the
Company's business, financial condition, results of operations or liquidity.

OTHER

In January 1999, the Company mistakenly merged ACME Television Holdings of
Missouri, Inc. ("Holdings"), a C corporation owning KPLR, into ACME Television,
LLC. The Company accrued a tax liability of approximately $3.0 million relating
to this merger, based on an independent valuation of Holdings' assets. In
September 1999, the merger was rescinded and the Company will reverse the
accrual during the quarter ended September 30, 1999.

(11) INCOME TAXES

The income tax benefit consists of the following:

<TABLE>
<CAPTION>
(IN THOUSANDS) 1998
-------------- -------
<S> <C>
Current
Federal income taxes...................................... $ --
State income taxes........................................ --
-------
Total current tax expense................................... --
Deferred tax benefit........................................ (2,393)
-------
Total income tax benefit.................................... $(2,393)
=======
</TABLE>

F-21
<PAGE> 116
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

The differences between the income tax benefit and income taxes computed
using the U.S. Federal statutory income tax rates (35%) consist of the
following:

<TABLE>
<CAPTION>
(IN THOUSANDS) 1998
-------------- -------
<S> <C>
Tax benefit at U.S. Federal rate............................ $(3,471)
State income taxes, net of Federal tax benefit.............. (261)
Nondeductible expenses...................................... 1,430
Other....................................................... $ (91)
-------
Income tax benefit........................................ $(2,393)
=======
</TABLE>

DEFERRED INCOME TAXES

The Company's subsidiary, ACME Television Holdings of Missouri, Inc. is a
"C" Corporation and is subject to state and federal income taxes (see Note 2
"Income Taxes"). The deferred tax asset of $3,811,000 and liability of
$31,241,000 for the year ended December 31, 1998, were related to the following:

<TABLE>
<CAPTION>
1998
---------
LONG
TERM
---------
<S> <C>
Assets:
Allowances and reserves................................... $ 2,211
Net operating loss carryforwards.......................... 1,255
Other..................................................... 345
---------
Deferred tax asset........................................ $ 3,811
Liabilities:
Program Amortization...................................... $ (944)
Intangibles............................................... (30,297)
---------
Deferred tax liability.................................... $ (31,241)
---------
Net deferred tax liability............................. $ (27,430)
=========
</TABLE>

The primary difference in the book basis and tax basis of the Company's
non-taxable entities relates to intangible assets. Intangible assets of the
non-taxable entities had a book and tax basis of approximately $59 million and
$58 million at December 31, 1998, respectively.

(12) RELATED PARTY TRANSACTIONS

The Company's stations have entered into affiliation agreements and, from
time to time, related marketing arrangements with The WB Network. Jamie Kellner
is an owner and the chief executive officer of The WB Network.

Pursuant to June 1995 agreements among Koplar Communications, Inc., Roberts
Broadcasting, Michael Roberts and Steven C. Roberts, Roberts Broadcasting cannot

F-22
<PAGE> 117
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

(i) transfer its license for WHSL, East St. Louis, Illinois, (ii) commit any
programming time of the station for commercial programming or advertising or
(iii) enter into a local marketing agreement with respect to such station until
June 1, 2000. In the event that the current affiliation agreement for WHSL is
terminated, the substitute format must be substantially similar to the current
home shopping network format or, in the alternative, an infomercial format. The
annual payment from KPLR for these agreements was $200,000 during the first
three years. The Company paid $300,000 in 1998 and will pay $300,000 in 1999
under this agreement.

In connection with our Salt Lake City and New Mexico stations, the Company
has entered into long-term agreements to lease studio facilities and/or
transmission tower space for KUWB, KUPX and KWBQ from an affiliate of Michael
and Steven Roberts. Both Michael and Steven C. Roberts are members of the
Company and Michael Roberts serves on the Company's Board of Advisors. These
leases have terms of approximately fifteen years and provide for monthly
payments aggregating approximately $25,000, subject to adjustment based on the
Consumer Price Index.

On October 1, 1997, in connection with our acquisition of KWBP, we paid
CEA, Inc., an affiliate of one of our stockholders, CEA Capital Partners, a
broker's fee of approximately $176,000. On the same day, we paid CEA, Inc.,
$132,000 in connection with the purchase of WBXX, $25,000 in connection with the
purchase of the construction permit for KWBQ (formerly KAUO), $45,000 in
connection with the purchase of the construction permit for KUPX (formerly KZAR)
and $889,000 in connection with the purchase of KPLR, as broker's fees in each
of the transactions. Additionally, in connection with the recent acquisition of
WBUI, WIWB and WBDT, we paid CEA, Inc. a broker's fee of $125,000. CEA, Inc.
also received compensation from the seller in connection with the purchase of
WBUI, WIWB and WBDT. One of our directors, Mr. Collis, is an officer of an
affiliate of CEA Capital Partners.

In June and September 1997, we issued 10% convertible debentures with the
right to convert into 24,775,970 membership units to affiliates of Alta
Communications, Banc Boston, CEA Capital Partners and TCW Asset Management
Company, each of which are stockholders of our company. Another of our
directors, Mr. Schall, is an officer of an affiliate of TCW Asset Management
Company.

In connection with our purchase of KWBP in June 1997, we loaned the seller
of KWBP approximately $119,000. This loan was repaid in July 1999.

(13) DEFINED CONTRIBUTION PLAN

In 1998, the Company established a 401(k) defined contribution plan (the
Plan) which covers all eligible employees (as defined in the Plan). Participants
are allowed to make nonforfeitable contributions up to 15% of their annual
salary, but may not exceed the annual maximum contribution limitations
established by the Internal Revenue Service. The

F-23
<PAGE> 118
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

Company currently matches 50% of the amounts contributed by each participant but
does not match participants' contributions in excess of 6% of their contribution
per pay period. The Company contributed and expensed $200,000 to the Plan for
the year ended December 31, 1998, $97,000 for the six months ended June 30, 1998
and $94,000 for the six months ended June 30, 1999.

(14) MEMBERS' CAPITAL

The Company's membership units are held in various classes, each class of
which entitles the holders to differing levels of distribution. As of December
31, 1997 and 1998, the Company's membership units outstanding were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
----------------- -----------------
CLASS UNITS $000'S UNITS $000'S
----- ------- ------ ------- ------
<S> <C> <C> <C> <C>
Management capital......................... 600 600 600 600
Founders Class A........................... 943 943 943 943
Founders Class B........................... 533 533 533 533
Investor................................... 18,210 18,210 16,757 16,757
Sellers.................................... 4,400 4,400 4,400 4,400
Less: Issuance costs....................... -- (901) -- (901)
------- ------ ------- ------
Total.................................... 24,686 23,785 31,733 30,832
======= ====== ======= ======
</TABLE>

Excludes management carry units issued by the Company to its senior management
team.

(15) SUBSEQUENT EVENT -- REORGANIZATION

ACME Communications, Inc. was incorporated on July 23, 1999 and other than
its initial nominal capitalization has had no operations. ACME Communications,
Inc. is contemplating the issuance of common stock in an initial public
offering.

Immediately before the closing of the offering, we will complete the
reorganization described below. Before the following steps may be completed, we
must receive FCC approval, for which we have filed an application. The Company
does not guarantee the offering of common stock or reorganization transactions
will be completed.

First, ACME Communications will issue common stock in exchange for all of
the convertible debentures of ACME Television Holdings, LLC. The convertible
debentures will be converted pursuant to their original conversion terms and as
such, there will not be a gain or loss related to this transaction.

Second, ACME Communications will exchange shares of its common stock for
(a) membership units representing approximately 6% of ACME Intermediate and (b)
all of the convertible debentures and preferred convertible membership units of
ACME Subsidiary Holdings IV, LLC. These transaction will be treated as
acquisitions of minority interests. The fair value of the stock issued to
acquire the minority interests will be allocated to the net assets acquired.
F-24
<PAGE> 119
ACME TELEVISION HOLDINGS, LLC AND SUBSIDIARIES

Also ACME Communications issued options to acquire 283,500 shares of its
common stock upon conversion of the Company's long-term incentive compensation
plan awards granted in 1998. These options were issued at an exercise price of
$15 per share and vest in equal thirds on December 31, 2000, 2001 and 2002.
These options will be valued using the closing price of the offering. The
difference between the accrual under the Company's long-term compensation plan
at the date of the closing and the pro-rata vested portion of the options (using
the original long-term incentive plan award date as the beginning of the vesting
period) will be recorded as an adjustment to equity-based compensation expense.
The remaining value of the options will be recorded on a straight-line basis
over the remaining vesting period. ACME Communications also issued options to
acquire 58,500 shares of its common stock at an exercise price of $18 per share
prior to the offering. The value of these options will also be based on the
closing offering price and will be expensed on a straight-line basis over the
five-year vesting period of the options.

F-25
<PAGE> 120

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Koplar Communications, Inc.:

We have audited the consolidated statements of operations and cash flows of
Koplar Communications, Inc. and subsidiary for 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 consolidated results of operations and cash flows
of Koplar Communications, Inc. and subsidiary for the years ended December 31,
1996 and 1997 in conformity with generally accepted accounting principles.

/s/ KPMG LLP

St. Louis, Missouri
July 23, 1999

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<PAGE> 121

KOPLAR COMMUNICATIONS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997
------- ---------
<S> <C> <C>
Revenues, net............................................. $27,381 $ 21,488
Operating expenses:
Programming............................................. 11,385 8,458
Selling, general and administrative..................... 11,455 13,896
Depreciation and amortization........................... 702 556
------- ---------
Total operating expenses............................. 23,542 22,910
------- ---------
Operating income (loss).............................. 3,839 (1,422)
------- ---------
Other expense:
Interest expense........................................ 2,155 1,200
Other expense........................................... 663 2,006
------- ---------
Total other expense.................................. 2,818 3,206
------- ---------
Income (loss) before income taxes and extraordinary
item.................................................... 1,021 (4,628)
Provision (benefit) for income taxes...................... 462 (1,081)
------- ---------
Net income (loss) before extraordinary item.......... 559 (3,547)
------- ---------
Extraordinary item:
Loss on early extinguishment of debt, net of taxes of
$868 and $93, respectively........................... (1,359) (146)
------- ---------
Net loss............................................. $ (800) $ (3,693)
======= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-27
<PAGE> 122

KOPLAR COMMUNICATIONS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (800) $ (3,693)
Adjustments to reconcile net loss to net cash:
Deferred income taxes................................... (173) (361)
Amortization of programming rights...................... 5,360 4,514
Adjustment to carrying value of programming rights...... 1,500 --
Amortization of deferred financing costs................ 411 47
Loss on early extinguishment of debt.................... 2,227 239
Depreciation and amortization........................... 702 556
Changes in operating assets and liabilities:
Receivables............................................. 643 (544)
Prepaid expenses and other current assets............... (142) 150
Other assets............................................ 44 350
Accounts payable and accrued expenses................... (561) 5,247
Accrued interest........................................ (301) (76)
Income taxes receivable/payable......................... (773) (694)
Other long-term liabilities............................. (182) (58)
-------- --------
Net cash provided by operating activities............ 7,955 5,677
-------- --------
Cash flows from investing activities:
Purchases of property and equipment..................... (687) (293)
Deposits for PCS Auction................................ (468) --
Return of deposits for PCS Auction...................... 468 468
Investment in affiliate................................. (100) (384)
-------- --------
Net cash used in investing activities................ (787) (209)
-------- --------
Cash flows from financing activities:
Repayment of notes payable officer/shareholder.......... (1,168) --
Payment on other debt and obligations under capital
leases............................................... (21) (195)
Payment on programming obligations...................... (5,515) (5,567)
Cash overdraft, net..................................... 1,244 (678)
Repayment of long-term debt............................. (11,640) (13,950)
Proceeds from long-term debt............................ 14,159 --
Proceeds from short-term ACME advances.................. -- 14,899
Payments on revolver, net............................... (4,130) --
Payment on deferred financing costs..................... (318) --
-------- --------
Net cash used in financing activities................ (7,389) (5,491)
-------- --------
Net decrease in cash................................. (221) (23)
Cash, beginning of year................................... 244 23
-------- --------
Cash, end of year......................................... $ 23 $ --
======== ========
Cash paid for interest.................................... $ 1,575 $ 1,216
======== ========
Cash paid for income taxes................................ $ 120 $ --
======== ========
Non-cash transactions:
Programming rights purchased under installment
obligations.......................................... $ 3,430 $ 3,205
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-28
<PAGE> 123

KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

(1) ORGANIZATION

The Company operates an independent television station in St. Louis,
Missouri (KPLR-TV). The broadcasting license of KPLR-TV is owned by Koplar
Television Co., L.L.C., a 99.9%-owned subsidiary of Koplar Communications, Inc.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the significant accounting policies
followed in the preparation of these financial statements:

USE OF ESTIMATES

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

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of Koplar
Communications, Inc. and subsidiary (collectively, the Company). Accordingly,
all references herein to Koplar Communications, Inc. include the consolidated
results of its subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.

CASH AND CREDIT CONCENTRATIONS

The Company maintains several cash accounts, including a lockbox account,
in a financial institution. The cash balances in these accounts may at times
exceed insured limits. The majority of the Company's receivables are due from
local and national advertising agencies and are not collateralized.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation expense is
computed using the straight-line method over the estimated useful lives of the
related assets. The accelerated cost recovery system and modified accelerated
cost recovery system are used for income tax purposes. Renewals and betterments
are capitalized to the related asset accounts, while repair and maintenance
costs, which do not improve or extend the lives of the respective assets, are
charged to operations as incurred.

When assets are retired or otherwise disposed of, the assets and related
accumulated depreciation are eliminated from the accounts and any resulting gain
or loss is recorded in operations.

F-29
<PAGE> 124
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

PROGRAMMING RIGHTS

Programming rights are recorded at cost when the program is available to
the Company for broadcasting. Programming rights and related obligations are
recorded at cost without recognition of any imputed interest charges. Agreements
define the lives of the rights and the number of showings. The cost of
programming rights is charged against earnings either on the straight-line basis
over the term of the agreement or per play for certain syndicated contracts
based on the number of plays specified in the contract. Programming rights for
programs which management expect to be broadcast in the succeeding fiscal year
are shown as a current asset.

The Company assesses the valuation of its programming rights on an ongoing
basis by evaluating the unamortized rights and future programming rights
commitments and comparing the anticipated future number of plays and related
revenue potential with the related unamortized cost. When unamortized cost
exceeds the undiscounted estimated future revenue, the Company will recognize an
adjustment to the related carrying value. During 1996, the Company recorded an
adjustment to the carrying value of certain programming rights totaling
approximately $1,500,000.

DEFERRED FINANCING COSTS

Financing costs incurred in connection with obtaining financing are
deferred and amortized on a straight-line basis over the term of the borrowings.
Amortization of deferred financing costs, included in interest expense, totaled
approximately $411,000 and $47,000, for the years ended December 31, 1996 and
1997, respectively. In addition, the Company expensed approximately $2,227,000
and $239,000 of deferred financing costs during 1996 and 1997, respectively, as
a result of the Company's refinancing of its long-term debt (see note 6).
Accordingly, the expense related to these transactions has been reflected as an
extraordinary item, net of tax effects, in the consolidated statements of
operations.

INCOME TAXES

Deferred income taxes are recognized for the tax consequences in future
years of temporary differences between the tax basis of assets and liabilities
and their financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the temporary
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.

INTEREST RATE HEDGE AGREEMENTS

The Company enters into interest rate swap agreements which involve the
exchange of fixed and floating rate interest payments periodically over the life
of the agreement without the exchange of the underlying principal amounts. All
agreements entered into by the Company relate to outstanding debt obligations.
Accordingly, the Company accounts for these instruments similar to a hedge
agreement and the differential to be paid or received is

F-30
<PAGE> 125
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

accrued as interest rates change and recognized over the life of the agreements
as an adjustment to interest expense.

REVENUE RECOGNITION

Revenues from advertisements are recognized as commercials are broadcast.
The Company receives such revenues net of commissions deducted for advertising
agencies.

BARTER REVENUES

Barter transactions in which the Company accepts products or services in
exchange for commercial airtime are recorded at the estimated fair values of the
products or services received. Barter revenues are recognized when commercials
are broadcast. The assets or services received in exchange for broadcast time
are recorded when received or used. Certain of the Company's programming
agreements involve the exchange of advertising time for programming. The Company
does not record revenues and cost of revenues related to these arrangements,
which have no impact on earnings. The Company estimates that revenues and costs
associated with these agreements were approximately $2,612,000 and $2,800,000
for 1996 and 1997, respectively.

LOCAL MARKETING AGREEMENTS

The Company entered into a local marketing agreement upon its acquisition
by ACME Television Holdings, LLC (see note 15). As of December 31, 1997,
regulatory approval of the transfer of the Company's License Assets was pending.
Under the terms of the agreement, the Company receives specified periodic
payments to operate KPLR-TV in exchange for the grant to ACME of the right to
program and sell advertising on a specified portion of the station's inventory
of broadcast time. In addition, ACME assumes the obligation to pay all operating
expenses subsequent to September 30, 1998. Accordingly, ACME has recorded all
operating revenues and expenses during the local marketing agreement period from
October 1, 1997 through December 31, 1997. All other non-operating results are
recorded by the Company during the local marketing agreement period.

(3) PREPAID EXPENSES AND OTHER CURRENT ASSETS

In 1995, the Company placed a refundable deposit of $1,235,000 with the FCC
in order to bid on the regional rights for a personal communications system. The
Company expects this product to replace cell phones, beepers and other portable
communications technology. The Company was the successful bidder on a number of
personal communications system licenses. During 1996, $468,000 of the initial
deposit was returned to the Company.

In fourth quarter 1996, another round of personal communications system
bidding was opened by the FCC. The auction was concluded and the deposit was
returned in the first quarter of 1997.

F-31
<PAGE> 126
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

(4) PROPERTY AND EQUIPMENT

A summary of property and equipment at December 31, 1996 and 1997 is as
follows (dollars in thousands):

<TABLE>
<CAPTION>
ESTIMATED
1996 1997 USEFUL LIVES
------- ------- --------------
<S> <C> <C> <C>
Land............................................... $ 464 $ 464 --
Buildings and improvements......................... 1,780 1,705 15 to 40 years
Equipment, furniture and fixtures.................. 6,463 6,311 3 to 15 years
------- -------
8,707 8,480
Less accumulated depreciation...................... (6,069) (6,105)
------- -------
$ 2,638 $ 2,375
======= =======
</TABLE>

Depreciation expense for the years ended December 31, 1996 and 1997 was
approximately $702,000 and $556,000, respectively.

(5) NOTE PAYABLE -- REVOLVER

The note payable - revolver was repaid in July 1996 as part of a debt
refinancing with a financial institution (see note 6).

(6) LONG-TERM DEBT

The Company's long-term debt at December 31, 1996 totaled $13,650,000.
Based upon the borrowing rates available to the Company for bank loans with
similar terms and average maturities, the fair value of long-term debt
approximated carrying value.

On July 10, 1996, the Company refinanced certain existing debt and received
a revolving commitment totaling $19,000,000 (the Loan Agreement), of which
approximately $14,266,000 was drawn from the commitment to satisfy certain
existing obligations and refinancing costs.

At December 31, 1996, the Company had borrowed $13,650,000 against the
revolving commitment agreement. Under the terms of the Loan Agreement, the
Company was required to repay the loan and all unpaid interest thereon on July
1, 2001. The loan interest was based on either the alternative base rate or the
adjusted LIBOR rate, as defined in the Loan Agreement.

In order to limit interest rate risk, the Company entered into a five-year
interest rate swap for $5,000,000 of the borrowings, which locked in an interest
rate of approximately 10%. The Company also entered into a three-year interest
rate swap for $2,000,000 of the borrowings, which locked in an interest rate of
approximately 10%. In addition, the Company entered into a 30-day interest rate
swap for $5,000,000 of the outstanding borrowings, which locked in an interest
rate of approximately 8.87% at December 31, 1996. The remaining borrowings
accrued interest, payable monthly at the prime interest rate plus 0.25% - 0.75%
per annum based on certain criteria. In addition, the Company is required to

F-32
<PAGE> 127
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

pay quarterly a commitment fee of 0.5% per annum of the unused portion of the
revolving commitment.

During 1997, in conjunction with the acquisition by ACME, the outstanding
loan balances were paid in full and certain short-term advances were extended to
the Company by ACME. The total of outstanding advances at December 31, 19997 was
approximately $14,899,000.

(7) PROGRAMMING OBLIGATIONS

Programming obligations are generally classified as current or noncurrent
liabilities according to the payment terms of the various contracts.

At December 31, 1997, future minimum payments based on contractual
agreements are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $5,030
1999........................................................ 3,295
2000........................................................ 1,373
------
$9,698
======
</TABLE>

(8) NOTE PAYABLE -- PROGRAMMER

Note payable -- programmer represents an additional amount owed to Warner
Bros. ("WB") in connection with the restructuring of certain programming
obligations in 1994. During 1996, the Company entered into a Stock Purchase,
Option and Repurchase Agreement with WB, under which the Company had an
obligation in the amount of $3,692,000 to WB in addition to the liability
recorded as programming obligations.

Under this agreement, the Company issued a promissory note for $3,092,000
to WB (payable in even installments over 36 months, plus interest at 1% over the
prime rate per annum, payments to begin upon notification by WB to the Company),
and also transferred to WB stock in an entity which is partially owned by the
shareholder of the Company (see note 14). However, the agreement granted the
programmer a "Put Right" under which the stock may be transferred by WB to the
Company at any time until either June 28, 1997 or the exercise of the First
Option (see below). In 1995, $100,000 was paid on the Put Right.

The Company replaced the note payable-programmer with a restructured
agreement on December 31, 1996. The previous note payable and the related
accrued interest were replaced with Note A and Note B. Note A was in the amount
of $2,000,000 and at December 31, 1996 and 1997, $1,900,000 was outstanding.
Interest accrues at prime plus 0.5%. Principal of $100,000 plus accrued interest
to date are payable quarterly until the note is satisfied. There was no accrued
interest on Note A at December 31, 1996 and 1997.

Note B was an option note for $2,250,000. At December 31, 1996 and 1997,
$2,250,000 was outstanding on Note B. The programmer was granted an option
callable between
F-33
<PAGE> 128
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

January 1, 2000 and December 31, 2001. If called, WB would receive 12% of a
related entity's stock instead of cash payments on the $2,250,000 promissory
note. The Company's "Put Right" was exercisable between January 1, 1997 and
December 31, 2001. If exercised, WB would receive 12% of the related entity's
stock instead of cash payments on the $2,250,000 promissory note. Interest
accrues at prime. There was no accrued interest on Note B at December 31, 1996
and 1997.

(9) COMMITMENTS

In conjunction with obtaining new programming and other related
considerations, the Company's commitments amounted to approximately $5,395,000
as of December 31, 1997.

The aggregate payments for these commitments over the next five years are
as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $ 298
1999........................................................ 1,250
2000........................................................ 1,731
2001........................................................ 1,476
2002........................................................ 640
------
$5,395
======
</TABLE>

In January 1995 KPLR-TV became an affiliate of the WB Network. Under the
affiliation agreement, the Company was required to make an annual payment to
Warner Brothers if the ratings and revenue in prime time broadcasts of WB
Network programming for the current year exceed ratings and revenues achieved by
the Company in the preceding year. No such payments were payable to Warner
Brothers for the years ended December 31, 1996 and 1997.

The Company had an operating lease for certain equipment that requires
annual payments of approximately $42,000 for a remaining period of twelve years.
Total rent expense under operating leases for the years ended December 31, 1996
and 1997 was approximately $123,000 and $115,000, respectively.

(10) NOTES PAYABLE -- OFFICER/SHAREHOLDER

Indebtedness to a shareholder of the Company consists of a promissory note
for $1,023,000 and debentures payable for approximately $145,000, totaling
$1,168,000 at December 31, 1995. The notes and interest were repaid in July 1996
when the Company refinanced certain debt with a financial institution (see note
6).

F-34
<PAGE> 129
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

(11) INCOME TAXES

The provisions for income taxes on continuing operations for the years
ended December 31, 1996 and 1997 consists of the following (in thousands):

<TABLE>
<CAPTION>
1996 1997
----- -------
<S> <C> <C>
Current:
Federal................................................... $ 552 $ (557)
State..................................................... 83 (163)
Deferred:
Federal................................................... (150) (315)
State..................................................... (23) (46)
----- -------
Provision for income tax............................... $ 462 $(1,081)
===== =======
</TABLE>

The difference between the actual tax provision and the amounts obtained by
applying the statutory U.S. federal income tax rate of 34% to income before
income taxes and extraordinary items for the years ended December 31 is as
follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1996 1997
------ -------
<S> <C> <C>
Income before income taxes and extraordinary items.......... $1,021 $(4,628)
------ -------
Tax provision computed at statutory rate.................... $ 347 $(1,574)
Increases (reductions) in taxes due to:
State income taxes (net of federal tax benefit)........... 40 (138)
Investment in affiliate................................... -- 570
Other..................................................... 75 61
------ -------
Actual tax provision........................................ $ 462 $(1,081)
====== =======
</TABLE>

The tax effect of temporary differences between the tax basis of assets and
liabilities and their corresponding amounts for financial statement reporting
purposes at the tax rates expected to be in effect when such differences reverse
are as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Current deferred income tax asset:
Allowance for doubtful accounts........................... $ (83) $ (97)
Accrued vacation payable.................................. (64) (61)
Bonus payable............................................. (195) --
Charitable contributions carryforward..................... -- (40)
Option Agreement.......................................... -- (175)
Noncurrent deferred income tax liability:
Book over tax basis of fixed assets....................... 22 3
Book over tax basis of programming rights................. 1,918 1,607
------ ------
Net deferred income tax liability......................... $1,598 $1,237
====== ======
</TABLE>

F-35
<PAGE> 130
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

(12) 401(K) PLAN

Substantially all employees are eligible to participate in a 401(k) Plan
sponsored by the Company. The plan provides that the Company may match a
specified percentage of an employee's contribution up to a defined limit at its
discretion. The amount charged to expense by the Company for the years ended
December 31, 1996 and 1997 was approximately $55,000 and $60,000, respectively.

(13) INVESTMENT IN AFFILIATE

In 1995, the Company entered into an agreement with another television
station in St. Louis which provides that the Company make annual payments of
$200,000 to the owners of the station (the Owners) for three years, in return
for programming and other considerations over a three-year period. The agreement
may be extended by the Owners for an additional two years. Under a separate
agreement, the Company has agreed to make up to $3,500,000 in capital
contributions to a limited liability company, owned by the Company and the
Owners, formed to acquire television stations and invest in other communications
opportunities, as approved by the Company. No such additional contributions had
been made as December 31, 1997.

(14) RELATED PARTY TRANSACTIONS

During previous years, the Company advanced funds under a loan agreement to
ISW, Inc. (ISW), a company which is partially owned by a shareholder of the
Company. In 1996 and 1997, the Company advanced approximately $443,000 and
$1,200,000, respectively, to ISW. This amount was included in a loan receivable
balance and is fully reserved.

At December 31, 1996, the remaining balance of loans and interest
receivable by the Company from ISW was approximately $3,251,000 with a
corresponding allowance. Both amounts were written off and removed from the
records in 1997.

During 1996 and 1997, the Company was charged approximately $139,000 in
rent and parking charges by Koplar Properties, Inc., an entity owned by a
shareholder of the Company.

(15) SALE OF COMPANY

On July 29, 1997, the shareholders of the Company (Shareholders) agreed to
sell all of their shares of the Company's common and preferred stock to ACME
Television Holdings, LLC (ACME) for $146,000,000. On September 30, 1997,
pursuant to the stock purchase agreement between ACME and the Shareholders, ACME
placed $143,000,000 into an escrow account and ACME and the Shareholders filed
with the FCC a request to transfer the Company's broadcast license. The Company
has also entered into a local marketing agreement with ACME under the terms of
which ACME received the economic benefit of the Company's earnings, effective
October 1, 1997. As a result, the consolidated statements of operations reflect
the operating results of the Company through September 30, 1997, as well as any
other non-operating results from October 1, 1997 through December 31, 1997. On

F-36
<PAGE> 131
KOPLAR COMMUNICATIONS, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

March 13, 1998, ACME acquired all of the outstanding common and preferred stock
of the Company and the local marketing agreement was terminated.

In connection with the ACME transaction, the Company recorded at December
31, 1997 approximately $5,900,000 in non-recurring bonus expense paid to a
certain executive and other employees of the Company. This amount is included in
other selling, general and administrative expense for the year ending December
31, 1997.

F-37
<PAGE> 132

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Channel 32, Incorporated:

We have audited the accompanying statements of operations and cash flows of
Channel 32, Incorporated (a wholly owned subsidiary of Peregrine Communications,
Ltd. effectively as of July 1, 1995) for the years ended June 30, 1995
(Predecessor) and 1996 (Successor). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards required 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 financial statements referred to above present fairly,
in all material respects, the results of Channel 32 Incorporated's operations
and its cash flows for the years ended June 30, 1995 (Predecessor) and 1996
(Successor) in conformity with generally accepted accounting principles.

As discussed in Note 2 to the financial statements, effective July 1, 1995,
Peregrine Communications, Ltd. acquired all of the outstanding stock of Channel
32, Incorporated in a business combination accounted for as a purchase. As a
result of the acquisition, the financial information for periods after the
acquisition is presented on a different cost basis than for periods before the
acquisition and, therefore is not comparable.

/s/ KPMG LLP

Los Angeles, California
November 13, 1997

F-38
<PAGE> 133

CHANNEL 32 INCORPORATED

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1996
JUNE 30, JUNE 30, TO
1995 1996 JUNE 17, 1997
------------- ----------- -------------
(SUCCESSOR)
(PREDECESSOR) (SUCCESSOR) (UNAUDITED)
<S> <C> <C> <C>
Broadcast revenues, net............... $ 288,178 $ 2,728,857 $ 1,305,886
Operating expenses:
Programming and production.......... 622,688 3,273,608 1,303,808
Selling, general and
administrative................... 273,422 1,462,360 1,060,497
Depreciation and amortization....... 234,498 541,878 346,469
----------- ----------- -----------
Total operating expenses......... 1,130,608 5,277,846 2,710,774
----------- ----------- -----------
Operating loss................. (842,430) (2,548,989) (1,404,888)
----------- ----------- -----------
Other income (expense):
Interest expense.................... (200,112) (3,252,202) (2,221,688)
Interest income..................... -- 44,821 --
Write-off of due from parent........ -- (188,586) --
Other expenses, net................. -- (70,254) (10,181)
----------- ----------- -----------
Other expense, net............... (200,112) (3,466,221) (2,231,869)
----------- ----------- -----------
Loss before income taxes.............. (1,042,542) (6,015,210) (3,636,757)
Income taxes.......................... -- -- --
----------- ----------- -----------
Net Loss....................... $(1,042,542) (6,015,210) $(3,636,757)
=========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-39
<PAGE> 134

CHANNEL 32 INCORPORATED

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1996
JUNE 30, JUNE 30, TO
1995 1996 JUNE 17, 1997
------------- ----------- -------------
(SUCCESSOR)
(PREDECESSOR) (SUCCESSOR) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $(1,042,542) $(6,015,210) $(3,636,757)
Adjustments to reconcile net loss to net
cash:
Depreciation and Amortization......... 288,083 951,377 1,322,513
Changes in assets and liabilities:
Increase in programming rights........ (122,500) (401,559) (380,400)
Increase in accounts receivable....... (59,470) (167,353) 23,242
Increase (decrease) in due from
related
party.............................. -- 14,700 (692,301)
Increase in other assets.............. (5,000) (82,646) (357,606)
Increase (decrease) in due to related
party.............................. -- 63,887 (63,887)
Increase (decrease) in accounts
payable............................ 252,704 (56,523) 651,014
Increase in accrued expenses.......... 179,117 184,414 182,932
Increase in programming rights
payable............................ 97,437 249,377 308,612
----------- ----------- -----------
Net cash used in operating
activities.................... (412,171) (5,259,536) (2,642,638)
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of property and
equipment.......................... (978,711) (998,429) (355,717)
Disposal of property and equipment.... -- 236,910 --
Increase in broadcast licenses........ (243,785) (315,000) --
----------- ----------- -----------
Net cash used in investing
activities.................... (1,222,496) (1,076,519) (355,717)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings.............. 1,793,519 8,038,056 3,110,138
Payment of borrowings................. (159,417) (1,793,519) (2,635)
Payments of obligations under capital
lease.............................. -- -- (10,217)
Proceeds from issuance of common
stock.............................. 1,600 100,108 --
----------- ----------- -----------
Net cash provided by financing
activities.................... 1,635,702 6,344,645 3,097,286
----------- ----------- -----------
Net increase in cash............. 1,035 8,590 98,931
Cash, beginning of period............... -- 1,035 9,625
----------- ----------- -----------
Cash, end of period..................... $ 1,035 $ 9,625 $ 108,556
=========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest.............................. 51,845 732,582 370,095
Income taxes.......................... 120 -- --
Non-cash transactions:
Acquisition of property and equipment
in exchange for capital lease
obligations........................ 650,000 185,000 --
</TABLE>

See notes to financial statements

F-40
<PAGE> 135

CHANNEL 32 INCORPORATED (NOTE 1)

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)

(1) DESCRIPTION OF BUSINESS AND FORMATION

Channel 32, Incorporated was incorporated under the laws of the state of
Oregon on December 16, 1993. Channel 32, Incorporated (the Company) owns and
operates KWBP-TV Channel 32, a television station (and The WB Network affiliate)
in Portland, Oregon. The Company is a wholly owned subsidiary of Peregrine
Communications, Ltd. (Peregrine) subsequent to Peregrine's acquisition of the
Company effective July 1, 1995.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Effective July 1, 1995, Peregrine acquired Channel 32, Incorporated, for
approximately $350,000. The Company paid $315,000 of this amount on behalf of
Peregrine. The acquisition was accounted for using the purchase method of
accounting. The Company has applied push-down accounting reflecting the full
acquisition cost and resulting equity in the accompanying financial statements
subsequent to the acquisition date. As a result of the acquisition, the
financial information for periods after the acquisition (Successor) is presented
on a different cost basis than for the periods prior to the acquisition
(Predecessor) and, therefore, is not comparable. The purchase price has been
allocated to the tangible assets of the Company acquired and liabilities assumed
based on their estimated fair market value at the acquisition date. The net
liabilities assumed plus the purchase price totaled approximately $1,400,000 and
was allocated to broadcast licenses.

The financial statements are presented as if the acquisition occurred on
July 1, 1995, rather than the actual purchase dates which occurred between March
and November 1995. The impact of recording the purchase as of July 1, 1995,
instead of the actual acquisition dates, is not material to the accompanying
financial statements.

LOCAL MARKETING AGREEMENT

Effective January 1, 1997, the operations of KWBP-TV were transferred to
ACME Television of Oregon, LLC pursuant to a local marketing agreement.
Accordingly, the Company's financial statements subsequent to December 31, 1996
only include the Company's net activity pursuant to such local marketing
agreement.

REVENUE RECOGNITION

Revenue related to the sale of airtime related to advertising and
contracted time is recognized at the time of broadcast. The Company receives
such revenues net of commissions deducted by advertising agencies and national
sales representatives.

F-41
<PAGE> 136
CHANNEL 32 INCORPORATED (NOTE 1)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)

CASH AND CASH EQUIVALENTS

For purposes of reporting the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.

PROGRAMMING RIGHTS

Programming rights represent costs incurred for the right to broadcast
certain features and syndicated television programs. Programming rights are
stated at the lower of amortized cost or estimated realizable value. The cost of
such programming rights and the corresponding liability are recorded when the
initial program becomes available for broadcast under the contract. Programming
rights are amortized over the life of the contract on an accelerated basis
related to the usage of the program. Programming rights expected to be amortized
during the next fiscal year are classified as current in the balance sheets. The
payments under these contracts that are due within one year and after one year
are reflected in the balance sheets as current and noncurrent liabilities,
respectively.

Commitments for programming rights that have been executed, but which have
not been recorded in the accompanying financial statements, as the underlying
programming is not available for broadcast, were approximately $0, $222,249 and
$262,500 as of June 30, 1995, 1996 and March 31, 1997, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. The cost of maintenance is
expensed.

Depreciation and amortization is computed using the straight-line method
over the estimated useful lives of the respective assets. The principal lives
used in determining depreciation and amortization rates of various assets are as
follows:

<TABLE>
<S> <C>
Buildings................................................... 39 years
Broadcasting equipment...................................... 5 - 15 years
Furniture and fixtures...................................... 5 - 7 years
Vehicles.................................................... 5 years
Equipment under capital leases.............................. 5 - 15 years
</TABLE>

BARTER TRANSACTIONS

Revenue and expenses associated with barter agreements in which broadcast
time is exchanged for programming rights are recorded at the average rate of the
airtime exchanged. Barter transactions, which represent the exchange of
adverting time for goods or services, are recorded at the estimated fair value
of the products or services received. Barter revenue is recognized when
advertisements are broadcast. Merchandise or services received from airtime
trade sales are charged to expense or capitalized when used or received.

F-42
<PAGE> 137
CHANNEL 32 INCORPORATED (NOTE 1)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)

Revenues and expenses include approximately $1,267,600 of barter
transaction for the year ended June 30, 1996. The Company did not record
revenues and expenses associated with barter transactions for the year ended
June 30, 1995. The Company does not believe the omission of such barter
transactions for the year ended June 30, 1995 is material to the Financial
Statements taken as a whole.

CARRYING VALUE OF LONG-LIVED ASSETS

The Company has adopted 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." The carrying value of long-lived assets
(tangible and intangible) is reviewed if the facts and circumstances suggest
that they may be impaired. If this review indicates that an asset's carrying
value will not be recoverable, as determined based on future expected
undiscounted cash flows, the carrying value is reduced to fair market value.

INCOME TAXES

The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes. Under SFAS
No. 109 deferred income taxes are recognized for tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between financial statement carrying amounts and the tax basis of
existing assets and liabilities.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of accounts receivable. The
Company believes that concentrations of credit risk with respect to accounts
receivable, which are unsecured, are limited due to the Company's ongoing
relationship with its clients. The Company provides for its estimate of
uncollectible accounts on a periodic basis. The Company has not experienced
significant losses relating to accounts receivable. For periods ended June 30,
1994, 1995, 1996 and March 31, 1997 and 1996 no customer accounted for more than
10% of revenues.

(3) INTANGIBLE ASSETS

Intangible assets are stated at cost, less accumulated amortization, and
are comprised of broadcast licenses. Broadcast licenses are being amortized on a
straight-line basis over

F-43
<PAGE> 138
CHANNEL 32 INCORPORATED (NOTE 1)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)

15 years. The amount of amortization related to broadcast licenses was
approximately $0, $11,000, $97,567, and $93,000 for the periods ended June 30,
1994, 1995 and 1996 and June 17, 1997, respectively.

(4) STOCKHOLDERS' EQUITY

At June 30, 1995, the Company had 2,000 shares of authorized common stock
with 1,000 shares issued to its four original stockholders and an option to
purchase 818 shares representing 45% of the Company, with an exercise price of
$452,000 held by Peregrine (Peregrine Option).

In November 1995, the stockholders approved an increase in the number of
authorized shares to 4,000 shares of common stock. The Company sold 250 shares
of common stock for $100,000 to Aspen TV, LLC and sold an option for $108 to
purchase 51% of the outstanding common stock, or 791 shares, for an exercise
price of $150,000. This option is automatically cancelled and the Company will
be obligated to repurchase the stock sold to Aspen TV, LLC for the sale price
plus interest upon the Company's timely repayment of its debt obligation to
Aspen TV, LLC. The Peregrine Option was cancelled at this time.

(5) RELATED PARTY TRANSACTIONS

Due (to) from related party represent temporary advances in the form of
expenses paid by or on behalf of the Company by Peregrine. The following is a
summary of these amounts:

<TABLE>
<CAPTION>
JUNE 30,
------------------- MARCH 31,
1995 1996 1997
------- -------- ---------
<S> <C> <C> <C>
Due from related party -- Peregrine.............. $14,700 $ -- $ --
Due from related party -- ACME Television of
Oregon......................................... -- -- 692,301
Due to related party -- Peregrine................ -- (63,887) --
------- -------- --------
Total.......................................... $14,700 $(63,887) $692,301
======= ======== ========
</TABLE>

Due from related party, ACME Television of Oregon, LLC relates to the
balance due to the Company pursuant to the local marketing agreement effective
January 1, 1997.

(6) INCOME TAXES

The Company did not record any tax benefit during the period from December
16, 1993 (inception) to June 30, 1994, the years ended June 30, 1995 and 1996
and the nine months ended March 31, 1996 and 1997.

F-44
<PAGE> 139
CHANNEL 32 INCORPORATED (NOTE 1)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1995 AND 1996
(INFORMATION RELATING TO THE PERIOD FROM
JULY 1, 1996 TO JUNE 17, 1997 IS UNAUDITED)

The provision for income taxes differs from the amount computed by applying
the Federal statutory income tax rate of 34% to income before income taxes as
shown below:

<TABLE>
<CAPTION>
1994 1995 1996
------- --------- -----------
<S> <C> <C> <C>
Computed "expected" income tax benefit......... $(8,000) $(355,000) $(2,100,000)
Increase in valuation allowance................ 8,000 355,000 2,100,000
------- --------- -----------
Income tax expense (benefit)................. $ -- $ -- $ --
======= ========= ===========
</TABLE>

Deferred income tax assets and liabilities result from temporary
differences. Temporary differences are differences in the recognition of income
and expenses for income tax and financial reporting purposes that will result in
taxable or deductible amounts in future years. At June 30, 1996 and March 31,
1997, the net deferred income tax assets, related primarily to net operating
loss carryforwards, were approximately $1,158,000 and $6,177,000, respectively.
In 1995, the Company experienced an ownership change as defined in Section 382
of the Internal Revenue Code. This change in ownership restricts the utilization
of the Company's net operating loss (NOL) carryforwards to offset future taxable
income. NOL carryforwards arising subsequent to the change of control are not
subject to the limitation. The amount of NOL carryforwards subject to the
limitation is approximately $1,000,000 with an annual limitation of $75,000. The
carryforwards available at June 30, 1996 expire in 2011.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment. At June 30, 1995, 1996 and March 31, 1997, based on the level of
historical taxable income and projections for future taxable losses over the
periods in which the level of deferred tax assets are deductible, management
believes that it is not more likely than not that the Company will not realize
the benefits of these deductible differences.

(7) SALE

On June 17, 1997, ACME Television Holdings, LLC (ACME) acquired certain of
the Company's assets, including the broadcast license of KWBP-TV and assumed
certain liabilities, including all of the Company's programming commitments and
the Company's equipment leases, in exchange for $18,675,000 in cash and
$4,400,000 in ACME Parent membership interests.

In addition, pursuant to a local marketing agreement, ACME effectively
operated the station and funded the losses from January 1, 1997 through June 17,
1997 (the acquisition date). Accordingly, there were no operating revenues or
expenses incurred by the Company subsequent to January 1, 1997.

F-45
<PAGE> 140

INSIDE BACK COVER

[ACME COMMUNICATIONS LOGO]

[LOGO'S OF SOME OF THE KIDS' WB PROGRAMMING AND PHOTOGRAPHS OF SEVERAL CARTOON
CHARACTERS]
<PAGE> 141

You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common stock
means that information contained in this prospectus is correct after the date of
this prospectus. This prospectus is not an offer to sell or solicitation of an
offer to buy these shares in any circumstances under which the offer or
solicitation is unlawful.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY.................... 3
RISK FACTORS.......................... 8
DISCLOSURE REGARDING
FORWARD-LOOKING STATEMENTS.......... 15
USE OF PROCEEDS....................... 16
DIVIDEND POLICY....................... 16
CAPITALIZATION........................ 17
DILUTION.............................. 18
PRO FORMA FINANCIAL INFORMATION....... 19
SELECTED CONSOLIDATED AND PRO FORMA
FINANCIAL DATA...................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 28
INDUSTRY OVERVIEW..................... 34
BUSINESS.............................. 37
MANAGEMENT............................ 62
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.... 70
CERTAIN TRANSACTIONS.................. 73
THE REORGANIZATION.................... 78
DESCRIPTION OF CAPITAL STOCK.......... 81
SHARES ELIGIBLE FOR FUTURE SALE....... 85
CERTAIN U.S. FEDERAL TAX
CONSIDERATIONS FOR NON-U.S. HOLDERS
OF COMMON STOCK..................... 87
UNDERWRITING.......................... 90
LEGAL MATTERS......................... 94
EXPERTS............................... 94
ADDITIONAL INFORMATION................ 94
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS.......................... F-1
</TABLE>

Dealer Prospectus Delivery Obligation:

Until October 24, 1999 (25 days after the date of this prospectus), all dealers
that buy, sell or trade in these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. Dealers
are also obligated to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.

[ACME Communications Logo]

ACME
Communications, Inc.
5,000,000 Shares
Common Stock
Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Morgan Stanley Dean Witter
CIBC World Markets

Prospectus

September 29, 1999