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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 2000
REGISTRATION NO. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NEXT GENERATION NETWORK, INC.
(Exact Name of Registrant as Specified in Its Charter)

DELAWARE 7319 41-1670450
(State or Other Jurisdiction of (Primary standard industrial (I.R.S. Employer
Incorporation or Organization) classification code number) Identification Number)

------------------------------------
11010 PRAIRIE LAKES DRIVE, SUITE 300
MINNEAPOLIS, MINNESOTA 55344-3854
TELEPHONE : (612) 944-7944
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)

GERARD P. JOYCE
CHAIRMAN OF THE BOARD AND PRESIDENT
11010 PRAIRIE LAKES DRIVE, SUITE 300
MINNEAPOLIS, MINNESOTA 55344-3854
TELEPHONE : (612) 944-7944
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------------
With a copy to:

BRUCE S. MENDELSOHN, ESQ. WILLIAM M. HARTNETT, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. CAHILL GORDON & REINDEL
1333 NEW HAMPSHIRE AVENUE, N.W., SUITE 400 80 PINE STREET
WASHINGTON, D.C. 20036 NEW YORK, NEW YORK 10005
TELEPHONE: (202) 887-4000 TELEPHONE: (212) 701-3000

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

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

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

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

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

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

CALCULATION OF REGISTRATION FEE

===============================================================================================
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------

Common Stock, par value $0.01 per share .... $115,000,000 $30,360
===============================================================================================

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933, as amended.

================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED , 2000.

[LOGO]

NEXT GENERATION NETWORK, INC.

Common Stock

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

Prior to this offering, there has been no public market for
our common stock. The initial public offering price of our common stock is
expected to be between $ and $ per share. We will apply to list our
common stock on The Nasdaq Stock Market's National Market under the symbol
" ".

The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
STARTING ON PAGE 8.

UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS
PUBLIC COMMISSIONS TO NGN
------ ----------- ------

Per Share $ $ $
Total $ $ $

Delivery of the shares of common stock will be made on or about
, 2000.

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

CREDIT SUISSE FIRST BOSTON
BANC OF AMERICA SECURITIES LLC
CIBC WORLD MARKETS
FRIEDMAN BILLINGS RAMSEY

The date of this prospectus is , 2000.
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TABLE OF CONTENTS

PAGE
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PROSPECTUS SUMMARY ...................................................... 1
RISK FACTORS ............................................................ 8
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ....................... 13
USE OF PROCEEDS ......................................................... 14
DIVIDEND POLICY ......................................................... 14
CAPITALIZATION .......................................................... 15
DILUTION ................................................................ 16
SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING INFORMATION.... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ............................................. 20
BUSINESS ................................................................ 26
MANAGEMENT .............................................................. 34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................... 40
PRINCIPAL STOCKHOLDERS .................................................. 41
DESCRIPTION OF CAPITAL STOCK ............................................ 43
DESCRIPTION OF INDEBTEDNESS ............................................. 46
SHARES ELIGIBLE FOR FUTURE SALE ......................................... 47
UNDERWRITING ............................................................ 49
NOTICE TO CANADIAN RESIDENTS ............................................ 51
LEGAL MATTERS ........................................................... 52
EXPERTS ................................................................. 52
WHERE YOU CAN FIND MORE INFORMATION ..................................... 52
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS .............................. F-1

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED
WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY
ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.

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

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PROSPECTUS SUMMARY

This summary contains basic information about us and the offering.
Because it is a summary, it does not contain all the information that you should
consider before investing. You should read the entire prospectus carefully,
including the risk factors and our financial statements and the related notes to
those statements included in this prospectus. Except as otherwise required by
the context, references in this prospectus to "we," "our," "us" and "NGN" refer
to Next Generation Network, Inc. A Designated Market Area, known as a DMA, is a
measure of market size in the U.S. based on population as reported by the
Nielsen Rating Service and is a standard market measure used in the media
industry. Unless otherwise indicated, all information in this prospectus
reflects the exercise of all outstanding warrants for an aggregate of 1,442,159
shares of common stock and assumes no exercise of the underwriters option to
purchase additional shares of common stock.

OUR COMPANY

We are the leader in the emerging digital out-of-home advertising
industry. We are currently implementing a rapid build-out of the world's largest
network of digital video advertising displays, which we call E*billboards.
E*billboards are high resolution digital monitors, located in high traffic,
frequently-visited places, that offer sequences of advertising and up-to-date
programming such as news, weather, financial data, sports, trivia and community
service announcements. All of our E*billboards are connected to a central hub in
Minneapolis which enables us to manage and transmit our advertising and
programming on a continuous basis. As of December 31, 1999, we have installed
E*billboards in 5,031 sites and secured long-term site rights for an additional
5,000 sites that are pending installation. Our E*billboards are currently seen
by an audience of more than 39 million people each week in 17 major U.S.
markets, including eight of the ten largest markets in the country.

Our strategy is to increase our leadership position by continuing to
amass a significant E*billboard footprint both nationally and internationally.
We intend to accomplish this by targeting major operators who control multiple
sites in high traffic venues such as elevators, fast food restaurants, transit
hubs, movie theatres, pharmacies, gas stations, ATM kiosks, convenience stores
and lobby shops where customers wait in line. We have established agreements
with site operators such as 7-Eleven, Inc. (5,327 sites), Cumberland Farms (934
sites) and the New Jersey Transit Authority (203 sites). Consistent with our
global expansion strategy, in January 2000, we formed an alliance with Otis
Elevator Company. Currently, Otis has agreements to maintain more than 1.2
million elevators worldwide. Initially, Otis will focus its E*billboard
marketing efforts on the largest media markets such as London, New York, Paris
and Sydney. As we expand our network of E*billboards, we believe that we will
increase our ability to attract a broad range of advertisers.

We were founded to capitalize on the dramatic impact digital technology
is expected to have on the out-of-home advertising industry. To date, we have
raised more than $96 million, including a $30 million equity investment made by
a subsidiary of Otis' parent, United Technologies Corporation, in January 2000.
We have used the proceeds of these financings to develop our proprietary
technology delivery platform, establish our sales and marketing organization and
begin installation of our network of E*billboards.

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COMPETITIVE ADVANTAGES

Digital technology is ushering in an era of dramatic change for the
media industry by providing advertisers with new forums and formats through
which they can connect with and impact their target audiences. The strengths of
outdoor advertising include its ability to build product awareness and reach
large audiences at a relatively low cost. We believe that our digital technology
enhances these strengths by increasing the targetibility, flexibility and
overall effectiveness of out-of-home advertising. Our ability to capture an
increasing share of the total advertising market is enhanced by the following
competitive advantages.

Large and expanding footprint. We currently hold long-term site rights
for more than 10,000 sites, including 5,031 that have already been installed,
representing a potential weekly audience of approximately 79 million. Unlike
traditional billboards, we are not constrained by real estate zoning or other
site restrictions. As a result, we believe that there are significant
opportunities to place our E*billboards in a significant number of high traffic
venues throughout our target markets, including convenience stores, fast food
restaurants, transit hubs and gas stations. Furthermore, we are able to reach
highly appealing, upscale demographic locations where traditional billboards
have been restricted.

Ability to precisely target audiences. E*billboards are individually
addressable and programmable and are profiled based on specific characteristics
of their audience, including age, gender, race and income. As a result, our
network offers advertisers the ability to target specific demographics on a site
by site basis. This allows us to appeal to both local advertisers targeting a
small geographic area within a major city, as well as national advertisers
targeting a wide range of demographic groups.

Proprietary network technology. Built upon Internet-enabled networking
and database technologies, our network of E*billboards is managed using
proprietary software that we developed expressly for an out-of-home advertising
application. Our technology and operating platform have the ability to support a
global network for selling, creating, distributing and tracking digital
advertisements and content. In addition, whereas traditional outdoor advertising
takes days or weeks to update, our technology reduces the lead times for
advertising or programming changes to hours or minutes. Our clients are able,
therefore, to target specific parts of the day and feed in advertising updates
at any time, which provides them with the ability to improve the timeliness of
their message at little incremental cost.

High impact appeal. Our technology allows us to deliver high
resolution, full video advertisements and programming content. The effectiveness
of E*billboards is enhanced by positioning them in prominent locations where
people are waiting or standing in line and by offering relevant and interesting
programming. E*billboards typically impact viewers at locations where they
generally have limited exposure to other media. As a result, E*billboards have
demonstrated a high level of impact and recall rates with little or no
competition from other media.

Significant benefits to site operators. E*billboards have been
well-received by site operators due to the economic and other benefits that they
provide. The E*billboard installation process is quick and simple and typically
requires no investment by the site operator. Typically, E*billboard site
agreements provide site operators with a small percentage of advertising
revenues generated by that site in return for a five to ten year commitment. In
addition, E*billboards improve the shopping experience for retail outlet
customers by providing a source of entertainment and information. Often, we
provide site operators with the ability to promote their own products and
services on the E*billboards within their establishments.

Highly scalable technology platform. We designed our technology and
infrastructure platform to support a rapid build-out of our network. Due to the
relatively fixed cost nature of our operating platform, our cost structure
allows for economies of scale and significant margin expansion as our revenues
increase in line with a larger installed base of sites.

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OUR PORTFOLIO OF E*BILLBOARD SITES

As of December 31, 1999, we operated our E*billboards in seventeen
major markets as follows:

DMA MARKET NO. OF ESTIMATED
RANK MARKET(1) POPULATION SITES WEEKLY VIEWERS
- ---- ---------------- ---------- ----- --------------

1 New York 14,643,600 1,317 10,400,000
2 Los Angeles 11,522,935 578 4,600,000
3 Chicago 6,543,815 172 1,400,000
4 Philadelphia 5,511,985 307 2,400,000
5 San Francisco 4,952,195 245 1,900,000
6 Boston 4,529,755 241 1,900,000
7 Dallas 3,818,990 306 2,400,000
8 Washington, DC 4,012,095 519 4,000,000
14 Tampa 2,804,345 165 1,300,000
16 Miami 2,888,755 117 900,000
20 Sacramento 2,508,585 64 500,000
22 Orlando 2,107,275 257 2,000,000
24 Baltimore 2,034,360 204 1,600,000
26 San Diego 2,081,930 157 1,200,000
40 Norfolk 1,308,230 237 1,900,000
44 West Palm Beach 1,175,090 67 500,000
81 Ft. Myers 746,188 54 400,000
Developmental 24
Markets(2)
---------- ----- ----------
TOTALS 73,190,128 5,031 39,300,000

(1) In contiguous markets, such as Washington, D.C. and Baltimore, San
Francisco and Sacramento, Miami and West Palm Beach and Tampa and Ft.
Myers, we have a single sales office that supports both markets.

(2) Developmental markets consist of markets in which we have installed 10
or less E*billboards.

OUR STRATEGY

In 1998, the U.S. out-of-home advertising industry generated more than
$19 billion of revenue. We intend to capture an increasing share of this market
by offering advertisers a new out-of-home digital distribution channel that can
more precisely target and effectively impact their intended audience than
traditional media. We are using the following strategies to rapidly expand our
network and consolidate our leadership position in the developing digital
out-of-home advertising industry.

Rapidly expand our network footprint. Our strategy is to rapidly expand
our network worldwide. In addition to installing our current backlog of 5,000
secured but uninstalled sites, we will continue to broaden our presence
throughout the U.S. by securing and installing additional sites within the most
important advertising markets. We position our E*billboards in multiple
locations and in various types of venues in order to increase the likelihood
that viewers will encounter E*billboards several times each day. We have

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identified several categories of high traffic, frequently visited venues that
have a high level of advertising appeal. We intend to attract significant site
operators within each of these venues:

- elevators
- fast food restaurants
- movie theatres
- pharmacies
- gas stations
- ATM kiosks
- convenience stores
- transit hubs
- lobby shops

Our domestic geographic expansion is initially focused on the ten
largest U.S. markets, with the intention of having a significant presence in the
25 largest U.S. markets by 2002. We also intend to expand internationally by
developing networks either directly or through alliances with local partners.
Local partners will be chosen primarily for their ability to secure quality real
estate sites or source advertising on a national, regional and local level
within their particular area. For example, our alliance with Otis provides us
with potential access to more than 1.2 million elevators in major markets
throughout the world.

Focus on local and national advertisers. Traditionally, the area of
strength for out-of-home advertising has been local advertising. We will
continue to develop local sales forces to work closely with advertisers as we
expand into each new market. We believe that once we have established an
extensive network of sites, we will also become more attractive to large
national advertisers seeking to reach a significant portion of the population.
Furthermore, we also intend to target national advertisers by organizing our
sales force initiatives around key product advertising categories and their
respective agencies.

Leverage our proprietary technology. We seek to continually improve our
proprietary technology to further enhance our operating efficiency and the
functionality and usability of our product. For example, we are developing
software that will allow our advertisers to manage their advertising program for
E*billboards in-house over the Internet. In a Web-based and interactive
environment, advertisers will be able to review advertising slots available on a
site by site basis, develop national, regional or local advertising programs,
generate automatic quotes and submit orders.

Continually improve programming. As our footprint expands, we intend to
develop our programming content production capabilities to maintain and enhance
the local relevancy and appeal of our digital programming. Our programming
focuses on national, regional and local topics of interest such as news, sports,
weather and entertainment. Because we gather and distribute our programming
digitally, we are not required to maintain editorial staff in all regions in
which we have a presence. Instead, we have a centralized editorial team that
receives content from various sources, repackages that content and transmits it
to any location on our network. We may establish additional relationships with
new local or national programming content providers as we expand.

CORPORATE INFORMATION

We were incorporated under the laws of the State of Delaware in 1990.
Our corporate headquarters are located at 11010 Prairie Lakes Drive, Suite 300,
Minneapolis, Minnesota 55344-3854, and our telephone number is (612) 944-7944.

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

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THE OFFERING

Common stock offered ............. shares

Common stock to be outstanding
after the offering(1) ............ shares

Use of proceeds .................. We will use the net proceeds from this
offering to fund capital expenditures of at
least $30 million, related to the purchase
and installation of our E*billboards, over
the next two years, as well as for working
capital and general corporate purposes.

Listing .......................... We will apply to list our common stock on
The Nasdaq National Market, subject to
official notice of issuance, under the
symbol " ".

- ------------
(1) Assumes the exercise of all outstanding warrants, representing
1,442,159 shares, and excludes 2,240,000 shares of common stock
reserved for issuance under our stock option plans, pursuant to which
options to purchase 1,705,810 shares of common stock have been granted.

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SUMMARY FINANCIAL INFORMATION

The following table sets forth our summary historical and pro forma
financial information for the periods ended and as of the dates indicated. We
derived the summary historical financial information below as of and for each of
the fiscal years from our audited financial statements. You should read the
following financial information along with the information contained throughout
this prospectus, including "Management's Discussion and Analysis of Financial
Position and Results of Operations" and the financial statements and related
notes that are included in this prospectus. The pro forma adjustments to the
information for the year ended, and as of, December 31, 1999 are for the sale of
3,025,017 shares of our common stock for consideration of $30 million to a
wholly owned subsidiary of United Technologies Corporation, the issuance of
2,715,699 shares of common stock upon the conversion of preferred stock and the
purchase of $18.1 million aggregate face amount of our 12% senior secured PIK
notes after that date. Statement of operations and other data pro forma amounts
are as if the transactions occurred on January 1, 1999 and balance sheet data
pro forma amounts are as if the transactions occurred on December 31, 1999.

Historical Pro Forma
Fiscal Year Ended December 31, Fiscal Year Ended
1997 1998 1999 December 31, 1999
------------ ------------ ------------ -----------------
(in dollars except share, per share and operating data)

STATEMENT OF OPERATIONS:
Net revenues ....................... $ 1,827,121 $ 2,589,690 $ 5,501,269 $ 5,501,269

Operating expenses:
Network operating expenses ......... 2,256,387 4,140,918 6,936,130 6,936,130
Cost of network equipment
sales(1) .................... 60,893 9,996 1,526 1,526
Selling expenses ................... 1,757,523 6,062,770 8,980,846 8,980,846
General and administrative
expenses(2) ................. 1,850,775 3,643,005 5,448,175 5,448,175
Corporate overhead(3) .............. 1,408,366 2,093,299 3,618,305 3,618,305
Depreciation and amortization(4) ... 713,892 1,371,959 2,764,005 2,764,005
------------ ------------ ------------ ------------
Total operating expenses ......... 8,047,836 17,321,947 27,748,987 27,748,987
------------ ------------ ------------ ------------

Operating loss ..................... (6,220,715) (14,732,257) (22,247,718) (22,247,718)
Interest expense, net .............. 167,769 4,930,720 7,680,354 5,085,460
Other expense(5) ................... -- -- 67,175 67,175
------------ ------------ ------------ ------------
Net loss before preferred
stock dividends .................. (6,388,484) (19,662,977) (29,995,247) (27,400,353)
Preferred stock dividends .......... 1,630,836 2,515,590 2,871,619 133,650
------------ ------------ ------------ ------------

Net loss ........................... $ (8,019,320) $(22,178,567) $(32,866,866) $(27,534,003)
============ ============ ============ ============
Earnings (loss) per share:
Basic and diluted(6) ............... $ (3.01) $ (8.33) $ (12.34) $ (3.28)
Weighted average common shares
Outstanding:
Basic and diluted(6) ............... 2,662,680 2,662,680 2,662,680 8,403,396

OTHER DATA:
Billboard Cash Flows(7) ............ (4,098,457) (11,266,999) (15,865,408) (15,865,408)
EBITDA(7) .......................... (5,506,823) (13,360,298) (19,483,713) (19,483,713)
Capital expenditures ............... 1,278,775 7,899,479 5,733,059 5,733,059
Number of markets(8) ............... 9 17 17 17
Number of sites .................... 1,769 3,630 5,031 5,031
Weekly audience(9) ................. 39,679,497 39,679,497

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Cash flows from:
Operating activities ............. $ (4,652,255) $(10,491,372) $(18,416,882) $(18,416,882)
Investing activities ............... (1,388,291) (7,832,727) (5,868,456) (5,868,456)
Financing activities .............. 5,008,493 40,245,170 (21,440) 26,845,346
BALANCE SHEET DATA (at period end):
Cash and cash equivalents .......... 24,710,213 403,435 27,476,026
Total assets ....................... 38,453,371 17,715,969 44,124,560
Total long-term debt (including
current maturities) .............. 42,136,586 49,580,598 32,915,598(10)
Mandatory redeemable preferred
stock ............................ 16,772,830 19,396,949 --
Total shareholders' equity (deficit) (26,391,499) (59,054,883) 3,261,852

- ----------
(1) Includes the costs of hardware and the costs to install the equipment
sold to third-parties. Prior to 1997 these sales were a part of our
business of selling E*billboards to local media companies with which we
had license and network operating agreements. In 1997, we reacquired
all the equipment and terminated these agreements with local media
companies. After 1997, we sold small amounts of equipment to various
purchasers. In the future we do not expect equipment sales to be
significant.

(2) Includes rent and compensation and related benefits for personnel
involved in corporate development, field operations, network
operations, marketing, creative services, management information
systems and accounting.

(3) Includes compensation and related benefits for senior management and
administrative personnel, legal, accounting and other professional
fees, travel, insurance and telecommunications.

(4) Includes $543,000, $1.1 million and $2.2 million of depreciation and
amortization of capital costs associated with the installation of
E*billboards for 1997, 1998 and 1999, respectively. The remainder
represents depreciation and amortization on other assets.

(5) Represents the loss on our investment in Next Generation Network
International, LLC, which was formed for the purpose of researching the
development of markets for E*billboards in several countries outside
the U.S. We own 50% of NGN International and one of our directors
controls the remaining 50% .

(6) Excludes the effect of all outstanding warrants for an aggregate of
1,411,159 and 31,000 shares of common stock exercisable immediately at
per share prices of $.01 and $7.143, respectively.

(7) Billboard cash flow consists of operating loss before depreciation,
amortization, and corporate overhead. EBITDA consists of operating loss
before depreciation and amortization. Although billboard cash flow and
EBITDA are not measures of performance or liquidity calculated in
accordance with generally accepted accounting principles, we believe
that these measures are useful to any investor in evaluating the
company because these measures are widely used in the out-of-home
advertising industry as a measure of a company's performance.
Nevertheless, billboard cash flow and EBITDA should not be considered
in isolation from or as a substitute for net income or loss, cash flows
from operations and other statement of operations or statement of cash
flows prepared in accordance with generally accepted accounting
principles, or as a measure of profitability or liquidity. Moreover,
because billboard cash flow and EBITDA are not measures calculated in
accordance with generally accepted accounting principles, these
performance measures are not necessarily comparable to similarly titled
measures employed by other companies. Billboard cash flow for 1997 is
not directly comparable with billboard cash flows presented for 1998
and 1999 because some of our revenues in 1997 were from network
equipment sales and network operating fees and royalties.

(8) Excludes developmental markets in which there are 10 or less
E*billboard sites.

(9) Equals the number of sites multiplied by 7,887, which is the average
weekly traffic per site as estimated by Audits & Surveys.

(10) Based upon the actual amount of senior secured notes repurchased on
February 25, 2000, the date of the transaction. The pro forma
adjustment includes accrued interest and additional senior secured
notes issued as an interest payment after December 31, 1999.

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RISK FACTORS

Before making an investment decision, you should carefully consider the
following risks. The risks described below are not the only ones that we face.
Any of the following risks could have a material adverse effect on our business,
financial condition and operating results. Additional risks and uncertainties of
which we are unaware or currently believe are immaterial may also impair our
business operations. The trading price of our common stock could decline due to
any of these risks, and you could lose all or part of your investment in our
common stock. Before making an investment decision, you should also read the
other information included in this prospectus, including our financial
statements and the related notes.

RISKS RELATED TO OUR BUSINESS

We have a history of net losses and may not be profitable in the future.

We have incurred significant losses and have experienced substantial
negative cash flow from operations. For the fiscal years ended December 31,
1999, 1998 and 1997, we incurred net losses of $(29,995,247), $(19,662,977) and
$(6,388,484), respectively, and we expect losses to continue in the future. We
had an accumulated deficit of $(68,655,777) as of December 31, 1999,
representing the effect of losses incurred since our inception. Our ability to
incur debt, if necessary to fund our operations or a continued build-out of our
network, may depend significantly on our ability to generate cash-flow from
operations. Furthermore, our inability to generate positive cash flow in the
future would have a material adverse effect on us and could adversely affect the
market price of our common stock.

E*billboards are a new product that may not achieve market acceptance from
advertisers or generate sufficient revenue to support us.

Although the out-of-home advertising industry is over 125 years old,
digital advertising such as our E*billboards is a relatively new method of
providing out-of-home advertising. Because we are using new technology and the
market is rapidly developing, the ultimate level of demand for and continued
market acceptance of our network and our E*billboards are uncertain.
Technological change and trends in the out-of-home advertising industry may lead
to the emergence of other new cost-effective advertising products and services
which may make our E*billboards less attractive to the public and to
advertisers. If a market for advertising on E*billboards does not develop as we
expect, our business, financial condition and operating results will be
materially adversely affected.

We are dependent on our agreements with site operators.

We have agreements with operators representing approximately 10,000
sites. Our profitability and the success of our growth plans will be
significantly affected by our ability to renew these agreements and enter into
new contracts for high traffic sites for the installation of E*billboards. Site
operators who currently have or in the future will have E*billboards installed
may not retain them at their sites beyond the expiration of existing agreements
or we may not be able to continue to increase the number of sites in which
E*billboards are installed or for which commitments have been made. We are
especially dependent on our agreements with each of 7-Eleven and Otis.

As of December 31, 1999, the 7-Eleven agreement covered 3,262 of the
5,031 sites at which we have installed E*billboards and 2,065 of the
approximately 5,000 additional sites for which we have agreements (representing,
in the aggregate, approximately 53% of the sites currently covered by
agreements). If we fail to complete installations of E*billboards in at least
4,800 7-Eleven stores by November 30, 2000, we are required to pay them
liquidated damages of $150,000 on or before December 31, 2000. Furthermore,
7-Eleven has the right to terminate the agreement on 30 days notice if we do not
have 4,800 E*billboards installed in 7-Eleven stores by May 30, 2001.

In addition, our agreement with Otis provides that Otis will secure
rights to place E*billboards in elevators of major buildings throughout the
world. Otis currently has agreements to maintain more than 1.2 million elevators
in such buildings. Under the agreement, either we or Otis may terminate
operations in a particular market if, among other things, the operation of the
agreement within a market is no longer consistent with their respective business
requirements. Either party may terminate the entire agreement if, among other
things, operations are terminated in more than four markets during any calendar
year or based on a deadlock in the steering committee. In addition, Otis may
terminate the entire agreement if a competitor of Otis acquires more than 19% of
our voting equity.

8
12
Because we are highly leveraged, we may not be able to obtain additional capital
to fund our operations and finance our growth on terms acceptable to us or at
all.

As of February 25, 2000, we had outstanding total face amount of
indebtedness of $40.5 million, including $38.4 million of senior secured PIK
notes (reflected in our financial statements net of related discounts for GAAP),
and our net interest expense for the fiscal year ended December 31, 1999 was
$7.7 million. This high level of debt and our debt service obligations could
have material adverse consequences, including:

- increasing our vulnerability to general adverse economic and
industry conditions;

- requiring us to dedicate a substantial portion of our future
cash flow, if any, to the servicing of debt;

- making it difficult for us to obtain additional financing for
working capital, capital expenditures, acquisitions and
general corporate purposes in the future;

- limiting flexibility in planning for, or reacting to, changes
in our business and industry; and

- being disadvantaged when compared to those of our competitors
which have less debt.

Beginning on February 1, 2001, we will be required to make semi-annual
cash interest payments on our senior secured notes in the amount of $2.4 million
until the notes mature in 2003, assuming all interest payments through August
2000 are paid in additional notes. Timely payment of the interest on and
principal of our senior secured notes will require positive cash flow from
operations. Our cash flow depends upon our future performance and financial,
economic and other factors, some of which are beyond our control. Unless we
realize these increases, we may be unable to meet obligations under our senior
secured notes.

If we are unable to generate cash flow from operations in amounts
sufficient for us to be able to pay our debts as they become due, we may be
required to refinance all or a portion of our debt, sell some or all of our
assets or sell additional equity securities at prices that may be dilutive to
existing investors. We may not be able to refinance all or a portion of our debt
or sell our equity securities or assets on a timely basis, on acceptable terms
or at all.

We anticipate incurring additional debt in the future to fund the
expansion, maintenance and upgrade of our systems. If new debt is added to our
current debt levels, the related risks that we now face could intensify. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and "Description of Debt."

Our outstanding debt and restrictive terms of our indenture may make it more
difficult for us to implement our strategy.

Our business strategy will likely require us to incur additional debt
to support our growth. This strategy may not be achievable because of our high
level of debt and the restrictions imposed by the indenture governing our senior
secured notes. The indenture restricts our ability to incur debt, make
distributions, sell assets, create liens, make investments or engage in mergers
and acquisitions. The indenture also restricts our ability to sell a minority
interest in our subsidiaries or operate through joint ventures. These
restrictions reduce our operating flexibility and may prevent us from expanding
our existing business or developing or acquiring new businesses.

Banks or other financial institutions may not be willing to lend to us,
particularly in light of the significant amount and terms of our senior secured
notes. Further, they may not be willing to lend on terms that are acceptable to
us. Our inability to obtain bank or other financing could negatively affect our
ability to meet our cash needs and could limit our ability to implement our
business strategy.

We may be unable to generate sufficient revenue from the sale of advertising on
our E*billboards.

All or substantially all of our revenue for the foreseeable future is
expected to be derived from the sale of advertising on E*billboards. To date, we
have not achieved sufficient revenue from this source to achieve overall

13
profitability. Accordingly, our success is dependent on our efforts to increase
advertising sales. Because the utility and the ultimate attractiveness of
E*billboards to advertisers is in large part dependent on our ability to offer
advertising in a wide array of local, regional and national markets, a
significant reduction in the number of our installed E*billboards or our
inability to install E*billboards in such locations in a rapid and orderly
manner may significantly affect our revenue generation potential.

In addition, advertising revenue can be adversely affected by many
conditions that are beyond our control, including:

- a general decline in economic conditions;

- a decline in economic conditions in particular markets where
we conduct business; or

- a reallocation of advertising expenditures to other available
media by significant users of our E*billboards.

We may be unable to maintain our existing advertisers or attract
additional advertisers in the future. A decrease in demand for advertising space
or our inability to generate revenue from the sale of advertising on our
E*billboard sites would materially and adversely affect us.

We rely on outside sources to assemble, install and maintain our E*billboards.

All of our E*billboards are assembled and tested by a third party
contractor. In addition, we have an agreement with an independent contractor for
the nationwide installation and maintenance of most of our E*billboards.
However, we do not have any arrangements with contractors for the installation
and maintenance of E*billboards outside of the U.S. Because we employ third
parties to assemble and install our E*billboards, the success of our business
and the expected growth of our network is dependent on, among other things, the
work of these third parties. Our failure to maintain suitable arrangements with
third parties, and the failure of these third parties to perform, may have a
material adverse effect on us. The failure of our outside sources to sustain
production and satisfy demand for the installation and maintenance of finished
E*billboards would have a material adverse effect on our business, financial
condition and results of operations.

If we cannot retain our key personnel and hire additional qualified management
and technical personnel, we may not be able to successfully manage our
operations and pursue our strategic objectives.

We are highly dependent on the services of certain key executives and
technical employees and on our ability to recruit, retain and motivate high
quality executive, sales and technical personnel. Competition for such personnel
is intense, and the inability to attract and retain additional qualified
employees required to expand our activities or the loss of current key employees
could materially and adversely affect us.

Our continued growth could place strains on our management, which may adversely
impact our business and the value of your investment.

Over the past several years, we have experienced significant growth and
change in our business activities and operations, including expansion in the
number of E*billboard sites. Our past expansion has placed, and any future
expansion will place, significant demands on our administrative, operational,
financial and other resources. Any failure to manage growth effectively could
seriously harm our business. To be successful, we will need to continue to
implement management information systems and improve our operating,
administrative, financial and accounting systems and controls. We will also need
to train new employees and maintain close coordination among our executive,
accounting, finance, marketing, sales and operations organizations. These
processes are time consuming and expensive, will increase management
responsibilities and will divert management attention.

Our competitors may have greater resources and name recognition than us.

Many of our competitors in the media business are larger, possess
significantly greater financial resources, have greater name recognition and
have longer operating histories than us. Moreover, many of our competitors have
more extensive customer bases, broader customer relationships and industry
alliances that they can use to their advantage in competitive situations. An
increase in competition could result in price and revenue reductions and lower
profit margins as a result of a loss of clients. We may fail, therefore, to
compete effectively against other media companies. Our failure to successfully
compete would have a material adverse effect on us.

10
14
We will face risks inherent in international operations as we expand abroad.

As we expand our operations internationally, we face the risks
associated with general economic conditions and regulatory uncertainties
inherent in conducting business abroad. Potential foreign government regulation
of our technology, political and economic instability, as well as changes in
foreign countries' laws affecting our international operations generally may
have a material adverse effect on us. Exchange controls or other currency
restrictions imposed by foreign governmental authorities may restrict our
ability to convert local currency into U.S. dollars or other currencies, or to
take those dollars or other currencies out of those countries. Fluctuations in
currency exchange rates, including possible currency devaluations, may adversely
affect our revenue stream from those countries. We may experience substantial
losses due to these and other risks related to international operations.

We depend on the proper functioning and security of our network and computer
systems.

Our business depends on providing our clients with uninterrupted
service. Therefore, we must protect the infrastructure of our system against
damage from human error, physical or electronic security breaches, fire,
earthquakes, floods and other natural disasters, power outages, sabotage,
vandalism, technological failures beyond our control and other similar events.
The occurrence of any system failure, service interruption or breach of security
could cause:

- an inability to meet our obligations under our advertising
agreements;

- decreased revenues from advertising; and

- harm to our reputation.

A significant degradation, service interruption or failure of our
network and computer systems or telephone lines or breach of security could
affect our ability to transmit information to E*billboards and lead to a
substantial decrease in our advertising revenues and erosion in our client base.
Despite all precautions we have taken, the occurrence of any event described
above could have a material adverse effect on us.

Possible infringement of intellectual property rights could harm our business.

We view the computer software technology that we have developed as
proprietary and attempt to protect our technology and trade secrets through the
use of confidentiality and non-disclosure agreements and by other security
measures. Trade secret law and confidentiality agreements, however, offer only
limited protection in comparison to patent protection. Confidentiality and
non-disclosure agreements may be difficult to enforce, and our products might be
subject to reverse engineering. If substantial unauthorized use of our software
technology were to occur, our results of operations could be negatively
affected. We cannot assure you that our means of protecting our proprietary
rights will be adequate or that our competitors will not independently develop
similar software technology. In addition, we cannot assure you that third
parties will not claim that our technology infringes on the propriety rights of
others.

The out-of-home advertising industry may be subject to increased government
regulation.

Our operations may be subject to increased federal, state and local
government regulation of the out-of-home advertising business. Currently, our
in-store advertising is subject to compliance with the Robinson-Patman Act,
which prohibits price discrimination, discriminatory promotional allowances and
services between different purchasers of commodities of like grade and quality,
the effect of which may be substantially to lessen competition in any line of
commerce. In addition, the use of telephone lines to transmit messages to our
E*billboards subjects us to regulation by the Federal Communications Commission,
as well as laws and regulations affecting the advertising industry in general.

11
15
The FCC may attempt to prohibit us from transmitting tobacco or other kind of
advertisements to our E*billboards. Moreover, certain state laws restrict
advertising of alcoholic beverages on our E*billboards. Additional regulations
or changes in the current laws regulating and affecting out-of-home advertising
at the federal, state or local level, such as zoning regulations or building
code, may have a material adverse effect on us.

RISKS RELATED TO THIS OFFERING

Shares eligible for public sale by existing stockholders after this offering
could hurt our stock price.

Sales of our common stock in the public market after the offering could
adversely affect the market price of our common stock. Upon completion of this
offering, we will have outstanding shares of common stock (excluding (i)
shares of common stock issuable upon the exercise of the underwriters'
over-allotment option, (ii) 1,679,060 shares of common stock issuable upon the
exercise of options outstanding as of February 23, 2000, of which 42,810 will be
immediately exercisable upon consummation of the offering, and (iii) 590,940
shares reserved under our Stock Incentive Plans. Of these shares, shares
( shares if the underwriters' over-allotment option is exercised in full) of
common stock sold in this offering will be freely tradable without restriction
under the Securities Act of 1933, except for any shares purchased by our
"affiliates," as that term is defined in the Securities Act. The remaining
shares are "restricted securities" within the meaning of Rule 144 adopted under
the Securities Act. These shares generally may not be sold unless they are
registered under the Securities Act or are sold pursuant to an exemption from
registration, such as the exemption provided by Rule 144 under the Securities
Act. Approximately 1,391,900 shares of common stock will become eligible for
sale in 2001 pursuant to Rule 144, subject to volume and manner of sale
restrictions.

Certain of our stockholders and all of our executive officers and
directors, with the power to dispose of a total of shares, have agreed not
to offer, sell or otherwise dispose of any shares of common stock for a period
of 180 days after the date of this prospectus without the prior written consent
of Credit Suisse First Boston on behalf of the underwriters. In addition, we
intend to file a registration statement on Form S-8 under the Securities Act to
register shares to be issued upon exercise of options outstanding on the date
hereof and options granted pursuant to any of our stock option plans.

After the offering, our management and a major shareholder will control our
company and their interests may conflict with yours.

Upon the completion of the offering, our management, including Gerard
P. Joyce, our Chairman and President, and Thomas M. Pugliese, our Vice Chairman,
Chief Executive Officer and Secretary, will beneficially own 2,313,658 shares of
our common stock or approximately % of the voting power of our company. In
addition, a wholly-owned subsidiary of United Technologies Corporation will own
3,025,017 shares of our common stock or % of the voting power of our
company. If the underwriters exercise their over-allotment in full, our
management will own shares of our common stock representing % of the
voting power of all the outstanding shares of our common stock, while United
Technologies will represent % of our total voting power. The investment
considerations that are important to our management or United Technologies
may be different from those that are important to our other stockholders.
For example, the time period over which these parties expects to realize
the benefit of their investments may differ from that of other shareholders,
and their evaluation of possible strategic alliances could be affected by the
possible dilutive impact on their voting power.

Provisions in our charter and bylaws may affect the market price of our common
stock.

Our board of directors has the authority to issue up to 500,000 shares
of preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by our
stockholders. The rights of the holders of common stock will be subject to, and
may be adversely affected by, the rights of the holders of preferred stock.
Although we have no present intention to issue shares of preferred stock other
than our currently existing series A preferred stock, such issuance could have
the effect of delaying, deferring or preventing a change in control and
entrenching existing management.

16
We are also subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which restricts certain "business
combinations" with "interested stockholders" for three years following the date
the person becomes an interested stockholder, unless the board of directors
approves the business combination. The provisions of Section 203 may encourage
companies interested in acquiring us to negotiate in advance with our board of
directors since the stockholder approval requirement would be avoided if a
majority of the directors then in office approve either the business combination
or the transaction which resulted in the stockholder's becoming an interested
stockholder. These provisions may also have the effect of deterring hostile
takeovers or delaying changes in our control, which could depress the market
price of our common stock or could deprive stockholders of opportunities to
realize a premium on shares of our common stock held by them. In addition, other
provisions of our charter or bylaws, including advance notice for stockholder
proposals and director nominations, may have the effect of delaying or
preventing changes of control or management, which could adversely affect the
market price of our common stock.

There has been no prior public market for our stock.

Prior to this offering, there was no public market for our common
stock. Following this offering, an active trading market for our common stock
may fail to develop or be sustained or the market price of the common stock may
decline below the initial public offering price. The initial public offering
price will be determined by our negotiations with the representatives of the
underwriters and will not necessarily be indicative of the market price of the
common stock after this offering. From time to time, the stock market
experiences significant price and volume volatility, which may affect the market
price of the common stock for reasons unrelated to us.

Investors will suffer immediate and substantial dilution.

The initial public offering price per share is significantly higher
than our net tangible book value per share. Accordingly, investors purchasing
shares in this offering will suffer immediate and substantial dilution of their
investment. See "Dilution."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and the documents included or incorporated by reference
in this prospectus may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward looking statements are not statements of
historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project"
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management's beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this
prospectus.

If one or more of these or other risks or uncertainties materialize, or
if our underlying assumptions prove to be incorrect, actual results may vary
materially from what we projected. Any forward-looking statements you read in
this prospectus reflect our current views with respect to future events and are
subject to these and other risks, uncertainties and assumptions relating to our
operations, results of operations, growth strategy and liquidity. All subsequent
written and oral forward-looking statements attributable to us or individuals
acting on our behalf are expressly qualified in their entirety by this
paragraph. You should specifically consider the factors identified in this
prospectus which could cause actual results to differ before making an
investment decision.

13
17
USE OF PROCEEDS

The net proceeds from this offering will be approximately $
million, or $ million if the underwriters exercise their over-allotment
option in full, after deducting estimated underwriting discounts and commissions
and estimated offering expenses. We intend to use the net proceeds to fund our
capital expenditures, which we anticipate to be at least $30 million related to
the purchase and installation of our E*billboards, over the next two years. To
the extent we are successful at securing more sites than anticipated, our
capital expenditures could be significantly larger than anticipated. We also
intend to use the net proceeds for working capital and general corporate
purposes. Our management will have broad discretion in the application of the
net proceeds. Pending use, we intend to invest the net proceeds in
interest-bearing, investment-grade instruments, certificates of deposit or
direct or guaranteed obligations of the U.S.

DIVIDEND POLICY

We have never declared or paid any dividends on our common stock. We do
not anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of the board of directors and will be dependent upon our
financial condition, operating results, capital requirements and other factors
that the board deems relevant. In addition, under the terms of our indenture,
our ability to declare or pay dividends or return capital to our stockholders is
limited.

14
18

CAPITALIZATION

The table below shows our capitalization as of December 31, 1999 as
follows:

- - on an actual basis;

- - on a pro forma basis to reflect the sale of 3,025,017 shares of common
stock subsequent to December 31, 1999 to a wholly-owned subsidiary of
United Technologies Corporation, the conversion of all series B and C
preferred stock and a portion of series A preferred stock into
2,715,699 shares of common stock and the repurchase of $18.1 million
aggregate face amount of our senior secured notes; and

- - on a pro forma as adjusted basis to give effect to the sale of the
shares of our common stock in this offering at an assumed
initial public offering price of $ per share and the application
of the net proceeds from the sale, having deducted underwriting
discounts and commissions and estimated offering expenses.

You should read this table in conjunction with the financial statements
and related notes that are included or incorporated by reference in this
prospectus. The information shown in this table does not reflect the exercise of
all outstanding warrants for an aggregate of 1,442,159 shares of common stock.

AT DECEMBER 31, 1999
-----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------

Cash and cash equivalents ............................ $ 403,435 $ 27,476,026 $
============ ============ ===========

Long-term debt, including current maturities:
Senior secured notes ............................. 48,112,225 31,447,225
Other notes ...................................... 1,468,373 1,468,373
Mandatory redeemable preferred stock ................. 19,396,949 --
Stockholders' equity (deficit):
preferred stock, $1.00 par value; 20,000 shares
authorized; 6,000 shares issued and
outstanding, actual; 3,240 issued and outstanding,
pro forma and as adjusted ........................ 3,000,000 1,620,000
Common stock, $0.01 par value; 20,000,000 shares
authorized; 2,662,680 shares issued and
outstanding, actual; 8,403,396 shares issued and
outstanding, pro forma; shares issued and
outstanding, as adjusted ......................... 26,627 84,034
Additional paid-in capital ........................... 6,574,267 70,213,595
Accumulated deficit .................................. (68,655,777) (68,655,777)
------------ ------------ -----------
Total stockholders' equity (deficit) ............. (59,054,883) 3,261,852
------------ ------------ -----------
Total capitalization ......................... $ (9,922,664) $ 36,177,450 $
============ ============ ===========

We expect there to be shares of common stock outstanding after this
offering. In addition to the shares of common stock to be outstanding after this
offering, we may issue additional shares of common stock.

15
19
DILUTION

Purchasers of common stock offered by this prospectus will suffer an
immediate and substantial dilution in net tangible book value per share. Our pro
forma net tangible book value as of January 31, 2000 was approximately $
million, or approximately $ per share of common stock. Pro forma net
tangible book value per share represents the amount of tangible assets less
total liabilities, divided by the number of shares of common stock outstanding.

Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of our common stock in this
offering and the pro forma net tangible book value per share of our common stock
immediately after is offering. After giving effect to our sale of shares of
common stock in this offering at an assumed initial public offering price of
$ per share and after deduction of the estimated underwriting discounts
and commissions and estimated offering expenses payable by us, our pro forma net
tangible book value as of December 31, 1999 would have been approximately
$ million, or $ per share. This represents an immediate
increase in net tangible book value of $ per share of common stock to
existing shareholders and an immediate pro forma dilution of $ per share
to purchasers of common stock in this offering.

Initial public offering price per share ............................
Pro forma net tangible book value per share before offering ...
Increase per share attributable to new investors ..............
----------
Pro forma net tangible book value per share after the offering .....
----------
Net tangible book value dilution per share to new investors ........
==========

The following table sets forth as of January 31, 2000, the total
consideration paid and the average price per share paid by our existing
stockholders and by new investors, before deducting estimated underwriting
discounts and commissions and estimated offering expenses payable by us at an
assumed initial public offering price of $ per share.

SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- ---------

Existing stockholders 9,845,555 % $ 65,602,567 % $ 6.66
New investors
---------- ----- ------------ ----- ------
Total $ 100.0% $ 100.0% $
========== ===== ============ ===== ======

This table assumes warrants representing 1,411,159 shares were exercised at
a price of $0.01 per share and 31,000 warrants, representing 31,000 shares were
exercised at a price of $7.143 per share. This table also assumes that no
options were exercised after January 31, 2000. As of January 31, 2000, there
were outstanding options to purchase a total of 761,810 shares of common stock
at a weighted average exercise price of approximately $7.45 per share and
178,190 shares of common stock reserved for issuance under our stock option
plans, and warrants to purchase 1,442,159 shares of our common stock. If all of
these options had been exercised on January 31, 2000, our net tangible book
value on that date would have been $ million or $ per share, the
increase in net tangible book value per share attributable to new investors
would have been $ per share and the dilution in net tangible book value
to new investors would have been $ per share. To the extent that
outstanding options or warrants are exercised in the future, there may be
further dilution to new stockholders.

16
20
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL AND OPERATING INFORMATION

The following table sets forth our selected historical and pro forma
financial and operating information for the periods ended and as of the dates
indicated. We derived the selected historical financial and operating
information below as of and for each of the fiscal years from our audited
financial statements. You should read the following financial information along
with the information contained throughout this prospectus, including
"Management's Discussion and Analysis of Financial Position and Results of
Operations" and the financial statements and related notes that are included in
this prospectus. The pro forma adjustments to the information for the year
ended, and as of, December 31, 1999 are for the sale of 3,025,017 shares of our
common stock for consideration of $30 million to a wholly owned subsidiary of
United Technologies Corporation, the issuance of 2,715,699 shares of common
stock upon the conversion of preferred stock and the purchase of $18.1 million
aggregate face amount of our 12% senior secured PIK notes after that date.
Statement of operations and other data pro forma amounts are as if the
transactions occurred on January 1, 1999 and balance sheet data pro forma
amounts are as if the transactions occurred on December 31, 1999.

Historical Pro Forma
Fiscal Year Ended December 31, Fiscal Year Ended
1995 1996 1997 1998 1999 December 31, 1999
----------- ----------- ----------- ------------ ------------ -----------------
(in dollars except share, per share and operating data)

STATEMENT OF OPERATIONS:
Net revenues ..................... $ -- $ 3,177,967 $ 1,827,121 $ 2,589,690 $ 5,501,269 $ 5,501,269

Operating expenses:
Network operating expenses ....... -- 362,889 2,256,387 4,140,918 6,936,130 6,936,130
Cost of network equipment
sales(1) .................. -- 2,213,772 60,893 9,996 1,526 1,526
Selling expenses ................. -- -- 1,757,523 6,062,770 8,980,846 8,980,846
General and administrative
expenses(2) ............... 1,002,889 1,355,591 1,850,775 3,643,005 5,448,175 5,448,175
Corporate overhead(3) ............ 908,564 940,175 1,408,366 2,093,299 3,618,305 3,618,305
Depreciation and amortization(4).. 191,767 211,368 713,892 1,371,959 2,764,005 2,764,005
----------- ----------- ----------- ------------ ------------ ------------

Total operating expenses ....... 2,103,220 5,083,795 8,047,836 17,321,947 27,748,987 27,748,987
----------- ----------- ----------- ------------ ------------ ------------

Operating loss ................... (2,103,220) (1,905,828) (6,220,715) (14,732,257) (22,247,718) (22,247,718)
Interest expense, net ............ 231,356 149,676 167,769 4,930,720 7,680,354 5,085,460
Other expense(5) ................. -- -- -- -- 67,175 67,175
----------- ----------- ----------- ------------ ------------ ------------
Net loss before preferred
stock dividends ................ (2,334,576) (2,055,504) (6,388,484) (19,662,977) (29,995,247) (27,400,353)

Preferred stock dividends ........ 247,500 540,802 1,630,836 2,515,590 2,871,619 133,650
----------- ----------- ----------- ------------ ------------ ------------

Net loss ......................... $(2,582,076) $(2,596,306) $(8,019,320) $(22,178,567) $(32,866,866) $(27,534,003)
=========== ============ =========== ============ ============ ============
Earnings (loss) per share:
Basic and diluted(6) ............. $ (1.12) $ (1.02) $ (3.01) $ (8.33) $ (12.34) $ (3.28)
Weighted average common shares
Outstanding:
Basic and diluted(6) ............. 2,305,210 2,555,380 2,662,680 2,662,680 2,662,680 8,403,396

17
21

OTHER DATA:
Billboard Cash Flows(7) ........ -- (754,285) (4,098,457) (11,266,999) (15,865,408) (15,865,408)
EBITDA(7) ...................... (1,911,453) (1,694,460) (5,506,823) (13,360,298) (19,483,713) (19,483,713)
Capital expenditures ........... 91,756 2,140,886 1,278,775 7,899,479 5,733,059 5,733,059
Number of markets(8) ........... -- 9 9 17 17 17
Number of sites ................ -- 1,139 1,769 3,630 5,031 5,031
Weekly audience(9) 39,679,497 39,679,497
Cash flows from:
Operating activities ......... $(1,656,473) $(1,451,580) $(4,652,255) $(10,491,372) $(18,416,882) $(18,416,882)

Investing activities ......... (91,303) (2,142,999) (1,388,291) (7,832,727) (5,868,456) (5,868,456)
Financing activities ....... 1,985,885 7,023,097 5,008,493 40,245,170 (21,440) 26,845,346

BALANCE SHEET DATA (at period end):
Cash and cash equivalents ...... 24,710,213 403,435 27,476,026
Total assets ................... 38,453,371 17,715,969 44,124,560
Total long-term debt (including
current maturities) .......... 42,136,586 49,580,598 32,915,598(10)
Mandatory redeemable preferred
Stock ........................ 16,772,830 19,396,949 --
Total shareholders' equity
(deficit) .................... (26,391,499) (59,054,883) 3,261,852

- ------------
(1) Includes the costs of hardware and the costs to install the equipment
sold to third-parties. Prior to 1997 these sales were a part of our
business of selling E*billboards to local media companies with which we
had license and network operating agreements. In 1997, we reacquired
all the equipment and terminated these agreements with local media
companies. After 1997, we sold small amounts of equipment to various
purchasers. In the future we do not expect equipment sales to be
significant.

(3) Includes compensation and related benefits for senior management and
administrative personnel, legal, accounting and other professional
fees, travel, insurance and telecommunications.

(5) Represents the loss on our investment in Net Generation Network
International, LLC, which was formed for the purpose of researching the
development of markets for E*billboards in several countries outside of
the U.S. We own 50% of NGN International and one of our directors
controls the remaining 50%.

(6) Excludes the effect of all outstanding warrants for an aggregate of
1,411,159 and 31,000 shares of common stock exercisable immediately at
per share prices of $.01 and $7.143, respectively.

(7) Billboard cash flow consists of operating loss before depreciation,
amortization, and corporate overhead. EBITDA consists of operating loss
before depreciation and amortization. Although billboard cash flow and
EBITDA are not measures of performance or liquidity calculated in
accordance with generally accepted accounting principles, we believe
that these measures are useful to any investor in evaluating the
company because these measures are widely used in the out-of-home
advertising industry as a measure of a company's performance.
Nevertheless, billboard cash flow and EBITDA should not be considered
in isolation from or as a substitute for net income or loss, cash flows
from operations and other statement of operations or statement of cash
flows prepared in accordance with generally accepted accounting
principles, or as a measure of profitability or liquidity. Moreover,
because billboard cash flow and EBITDA are not measures calculated in
accordance with generally accepted accounting principles, these
performance measures are not necessarily comparable to similarly titled
measures employed by other companies. Billboard cash flow for 1995 is
not presented because we did not generate any advertising revenues that
year. Billboard cash flow for

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1996 and 1997 is not directly comparable with billboard cash flows
presented for 1998 and 1999 because some of our revenues in 1996 and
1997 were from network equipment sales and network operating fees and
royalties.

(8) Excludes developmental markets in which there are 10 or less
E*billboard sites.

(9) Equals the number of sites multiplied by 7,887, which is the average
weekly traffic per site as estimated by Audits & Surveys.

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

GENERAL

We are the leader in the emerging digital out-of-home media industry.
We are currently implementing a rapid build-out of the world's largest network
of digital video advertising displays, which we call E*billboards. Since our
inception, we have developed our proprietary technology platform to deliver
digital advertising and other media across our growing network of E*billboards
in the U.S.

We have organized our network rollout strategy on a market by market
basis, concentrating on major U.S. advertising markets. As of December 31, 1999,
we have installed E*billboards at 5,031 sites and we have secured long-term site
rights covering approximately 5,000 additional sites that are pending
installation. The historic build-out of our network is illustrated in the
following table.

INSTALLED E*BILLBOARD SITES

DMA MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC 31,
RANK MARKET(1) 1998 1998 1998 1998 1999 1999 1999 1999
- ---- ---------------- --------- -------- --------- -------- --------- -------- --------- -------

1 New York - 241 340 447 633 882 1,102 1,317
2 Los Angeles - 407 490 490 490 500 515 578
3 Chicago - - - 71 120 130 142 172
4 Philadelphia - - 244 247 269 286 291 307
5 San Francisco - - 191 197 198 202 215 245
6 Boston 21 21 154 179 177 189 217 241
7 Dallas 226 228 257 263 280 281 279 306
8 Washington DC 505 506 509 510 507 509 517 519
14 Tampa 135 139 140 141 150 158 159 165
16 Miami 86 86 86 86 91 88 98 117
20 Sacramento - - 58 62 62 62 63 64
22 Orlando 238 239 243 243 248 251 257 257
24 Baltimore 204 205 204 202 203 204 204 204
26 San Diego - - 113 133 134 140 141 157
40 Norfolk 237 236 236 238 241 240 240 237
44 West Palm Beach 63 63 63 63 64 65 65 67
83 Ft. Myers 45 45 46 46 51 51 52 54
Developmental
Markets(2) 11 12 12 12 16 16 18 24
----- ----- ----- ----- ----- ----- ----- -----
TOTAL SITES 1,771 2,428 3,386 3,630 3,934 4,254 4,575 5,031
===== ===== ===== ===== ===== ===== ===== =====

(1) In contiguous markets, such as Washington, D.C. and Baltimore,
San Francisco and Sacramento, Miami and West Palm Beach and
Tampa and Ft. Myers, we have a single sales office that
supports both markets.

(2) Developmental markets consist of markets in which we have
installed 10 or less E*billboards.

Our current geographic expansion is primarily focused on the ten
largest U.S. markets, with the intention of having a significant presence in the
25 largest U.S. markets by 2002.

We generate revenues principally through the sale of advertising on our
network. E*billboards present repeating sequences, or loops, of advertising and
programming. As currently configured, the loops consist of twelve ten-second
advertising slots and six to eight six-second programming slots, which currently
provide our network with more than 60,000 advertising slots available for sale
on a daily basis. We charge a fixed daily rate for advertising slots which,
during 1999, averaged approximately $4.00. Advertising rates are based upon the
availability of space on the network for the desired location, the size and
demographic makeup of the market served by the E*billboards and the availability
of alternative advertising media in the area. Most advertising contracts are
short-term, typically for periods of one to three months, and are with local and
regional advertisers. As the number and geographic diversity of our sites
increases, we believe we will be able to attract more national advertisers to
our network, thereby increasing the contribution of national advertising revenue
to our total advertising revenue in the future.

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We recognize advertising revenues at the time the advertisement appears
on our network. We bill advertisers monthly for contracts that exceed one month
in length, and on the first day of the month during which the advertisement
appears on our network for contracts for shorter periods. When advertising
agencies are involved, they deduct a commission, which typically is 15% of gross
revenue, and remit only the net amount to us.

Prior to and during 1997, we sold E*billboards in selected markets to local
media companies with which we had agreements and they independently obtained
advertising clients in their local and regional areas. In addition to receiving
revenues on equipment sales to these companies, we also received royalties on
advertising sales and network operating fees. In 1997, we reacquired the
equipment and terminated these agreements with the local media companies.
Network equipment and operating revenues were not significant during 1998 and
1999, and we do not expect them to be significant in the future.

Installation costs for a new site include the cost of acquiring
hardware and the cost to install the equipment, which are capitalized and
depreciated over five years. The fully installed average per site cost for a
typical site with a single E*billboard is approximately $2,500. At some sites,
more than one E*billboard is installed; at those sites, we may receive higher
advertising rates.

Network operating expenses are costs associated with the daily
operation, maintenance and depreciation of E*billboards, as well as the site
agreement fees paid to site owners. Most network operating expenses generally
increase proportionally with the number of installed sites. On a site by site
basis, telecommunication and maintenance costs remain relatively fixed,
averaging approximately $55 to $65 per month. Accordingly, we expect that these
telecommunication and maintenance expenses as a percentage of advertising
revenues will decrease as our advertising revenues increase. In addition, site
agreements generally provide the site operator with a percentage of the
advertising revenues (typically 10% per site) derived from the E*billboards at
the particular site. Some site agreements provide for a minimum annual site fee.
Based on the number of E*billboards installed on December 31, 1999, we are
committed to minimum site agreement fees of approximately $3.3 million annually
through 2003. We incur network operating expenses in connection with the
E*billboards prior to generating revenues from the sites.

Selling expenses include all costs associated with operating our sales
offices. The majority of these expenses are related to compensation and related
benefits for sales personnel. We pay our sales personnel fixed salaries and
sales commissions. During 1998 and 1999, the commission portion of the
compensation was 10.7% and 13.2% of net revenues, respectively.

General and administrative expenses include rent for our headquarters
and compensation and related benefits for personnel involved in corporate
development, field operations, network operations, marketing, creative services,
management information systems and accounting.

Corporate overhead includes compensation and related benefits for
senior management and administrative personnel, legal, accounting and other
professional fees, travel, insurance and telecommunications.

Costs of acquiring hardware and installing it in new sites are
capitalized and depreciated over five years. Other equipment and furnishings are
depreciated over their lives of three to seven years. Leasehold improvements are
amortized over the terms of the respective leases.

Consistent with our expansion strategy, we formed an alliance with Otis
in January 2000. The agreement provides that Otis has the exclusive rights to
place E*billboards in elevators, escalators, walkways and shuttles throughout
the world. Currently, Otis has agreements to maintain more than 1.2 million
elevators in such buildings. Otis is responsible for the negotiation of site
agreements and the installation and maintenance of E*billboards. We are not
responsible for any capital expenditures related to the installation of
E*billboards at any of these sites because Otis may either sell the equipment to
the site owner or may fund those expenditures. As consideration, Otis receives a
percentage of the advertising revenues that we derive from each E*billboard on a
site by site basis, a portion of which Otis may remit to the relevant site
operator. The agreement also provides Otis with incentive payments upon the
obtainment of certain installation goals. We are responsible for on-going
network operations, including advertising sales and content generation.
Typically, we intend to place an E*billboard in every elevator at each site and
as a result, we expect to charge a higher advertising rate per site than we
currently receive for a typical site with only one E*billboard.

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RESULTS OF OPERATIONS

Year Ended December 31, 1999 compared to Year Ended December 31, 1998

Net Revenues. Net revenues increased to approximately $5.5 million for
the fiscal year ended December 31, 1999, from approximately $2.6 million for the
fiscal year ended December 31, 1998, or 112.4%. The increase was attributable to
an increase in the average number of sites operating during the year (4,285 in
1999 compared to 2,598 in 1998), an increase in the average daily advertising
rate and increased occupancy levels of advertising slots sold.

Network Operating Expenses. Network operating expenses increased to
approximately $6.9 million for the fiscal year ended December 31, 1999, from
approximately $4.1 million for the fiscal year ended December 31, 1998, or
67.5%. The increase was due primarily to the increase in the average number of
installed E*billboard sites, which increased 65.0% from 1998 to 1999. Major
components of network operating expenses for the respective periods are:

Year Ended December 31,
-----------------------
1998 1999
---- ----

Site agreement expense $2,088,000 $3,465,000
Telecommunications expense 1,570,000 2,425,000
Maintenance expense 483,000 1,047,000

Selling Expenses. Selling expenses increased to approximately $9.0
million for the fiscal year ended December 31, 1999, from approximately $6.1
million for the fiscal year ended December 31, 1998, or 48.1%. The increase
resulted primarily from the addition of sales office staff (average 1999
headcount of 86 compared to 1998 average of 61), increased commissions due to
increased sales and costs associated with opening additional regional sales
offices during the second half of 1998 to support the increase in E*billboard
site installations as noted above.

General and Administrative Expenses. General and administrative
expenses increased to approximately $5.4 million for the fiscal year ended
December 31, 1999, from approximately $3.6 million for the fiscal year ended
December 31, 1998, or 49.6%. The increase was primarily attributable to employee
compensation and related costs, the largest component of general and
administrative expense, which increased to $5.1 million in 1999 compared to $3.1
million in 1998. The increases were due to the additional administrative staff
in computer operations and graphic creation to support the sales offices and
larger installed network and increased corporate development staff to assist in
securing additional venues and increased rent associated with the relocation of
our headquarters ($541,000 in 1999 compared to $220,000 in 1998). Research and
development costs decreased to $233,000 in 1999 compared to $430,000 in 1998.
The decrease in research and development costs was due to the substantial
completion of our network technology platform during 1999. We capitalized
$139,000 of software costs developed or obtained for internal use during 1999.
Prior to 1999, these costs were expensed.

Billboard Cash Flow. Billboard cash flow was $(15.9) million for the
fiscal year ended December 31, 1999 and $(11.3) million for the fiscal year
ended December 31, 1998 as a result of the above factors.

Corporate Overhead. Corporate overhead increased to approximately $3.6
million for the fiscal year ended December 31, 1999, from approximately $2.1
million for the fiscal year ended December 31, 1998, or 72.9%. This increase was
primarily due to increased legal, accounting, and other professional fees
($782,000 in 1999 compared to $329,000 in 1998) , increased compensation and
related benefits ($1.7 million in 1999 compared to $922,000 in 1998) and
increased travel expenses ($494,000 in 1999 compared to $220,000 in 1998).

EBITDA. EBITDA was $(19.5) million for the fiscal year ended December
31, 1999 and $(13.4) million for the fiscal year ended December 31, 1998 as a
result of the above factors.

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26
Depreciation and Amortization. Depreciation and amortization increased
to approximately $2.8 million for the fiscal year ended December 31, 1999, from
approximately $1.4 million for the fiscal year ended December 31, 1998, or
101.5%. Depreciation expense relating to our E*billboard equipment was $2.2
million in 1999 compared to $1.1 million in 1998.

Operating Loss. As a result of the above factors, operating loss
increased to approximately $22.2 million for the fiscal year ended December 31,
1999, from approximately $14.7 million for the fiscal year ended December 31,
1998, or 51.0%.

Net Interest Expense. Net interest expense increased to approximately
$7.7 million for the fiscal year ended December 31, 1999, from approximately
$4.9 million for the fiscal year ended December 31, 1998, or 55.8%. The increase
was primarily attributable to a full year of interest on our 12% senior secured
PIK notes as well as the increased principal amount.

Net Loss. As a result of the above factors, the net loss increased to
approximately $32.9 million for the fiscal year ended December 31, 1999, from
approximately $22.2 million for the fiscal year ended December 31, 1998, or
48.2%.

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

Net Revenues. Net revenues increased to approximately $2.6 million for
the fiscal year ended December 31, 1998, from approximately $1.8 million for the
fiscal year ended December 31, 1997, or 41.7%. The increase was attributable to
the shift in our business from owner-operator network operating fees to sales of
advertising on our own E*billboards and the opening of local sales offices.
Three offices were opened in former owner-operator markets during the first
quarter of 1998 and five new offices were opened in the remainder of 1998.
Advertising revenues from newly opened markets were minimal since efforts were
concentrated on staff hiring and training.

Network Operating Expenses. Network operating expenses increased to
approximately $4.1 million for the fiscal year ended December 31, 1998, from
approximately $2.3 million for the fiscal year ended December 31, 1997, or
83.5%. The increase was due primarily to the increase in the average number of
sites, which increased 64.6% from 1997 to 1998. Major components of network
operating expenses for the respective periods are:

Year Ended December 31,
-----------------------
1997 1998
---- ----

Site agreement expense $1,120,000 $2,088,000
Telecommunications expense 888,000 1,570,000
Maintenance expense 248,000 483,000

The increase in site agreement expense was due to the repurchase of
equipment in former owner-operator markets in August 1997, and also due to the
installation of additional E*billboards. Site agreement expense was recorded net
of reimbursement from owner-operators so our expense increased when the
owner-operators forfeited their territorial rights.

Selling Expenses. Selling expenses increased to approximately $6.1
million for the fiscal year ended December 31, 1998, from approximately $1.8
million for the fiscal year ended December 31, 1997, or 245.0%. The increase
resulted primarily from the addition of sales office staff (average 1998
headcount of 61 compared to 1997 average headcount of 17), increased commissions
due to increased sales and costs associated with opening additional regional
sales offices during the second half of 1998 to support the increase in site
installations as noted above.

General and Administrative Expenses. General and administrative
expenses increased to approximately $3.6 million for the fiscal year ended
December 31, 1998, from approximately $1.9 million for the fiscal year ended
December 31, 1997, or 96.8%. The increase was primarily attributable to employee
compensation and related costs, the largest component of general and
administrative expense, increased to $3.1 million in 1998 compared to $1.8
million in 1997. The increases were due to additional administrative staff in
computer operations and graphic creation to support the sales offices and our
larger installed network and increased corporate development staff to

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assist in securing additional venues. Research and development costs increased
to $430,000 in 1998 compared to $363,000 in 1997.

Billboard Cash Flow. Billboard cash flow was $(11.3) million for the
fiscal year ended December 31, 1998 and $(4.1) million for the fiscal year ended
December 31, 1997 as a result of the above factors.

Corporate Overhead. Corporate overhead increased to approximately $2.1
million for the fiscal year ended December 31, 1998, from approximately $1.4
million for the fiscal year ended December 31, 1997, or 48.6%. This increase was
primarily due to increased legal, accounting, and other professional fees
($329,000 in 1998 compared to $177,000 in 1997), increased compensation and
related benefits ($922,000 in 1998 compared to $674,000 in 1997) and increased
travel expenses ($220,000 in 1998 compared to $160,000 in 1997).

EBITDA. EBITDA was $(13.4) million for the fiscal year ended December
31, 1998 and $(5.5) million for the fiscal year ended December 31, 1997 as a
result of the above factors.

Depreciation and Amortization. Depreciation and amortization increased
to approximately $1.4 million for the fiscal year ended December 31, 1998, from
approximately $714,000 for the fiscal year ended December 31, 1997, or 92.2%.
Depreciation expense relating to our E*billboard equipment was $1.1 million in
1998 compared to $543,000 in 1997.

Operating Loss. As a result of the above factors, operating loss
increased to approximately $14.7 million for the fiscal year ended December 31,
1998, from approximately $6.2 million for the fiscal year ended December 31,
1997, or 136.8%.

Net Interest Expense. Net interest expense increased to approximately
$4.9 million for the fiscal year ended December 31, 1998, from $168,000 for the
fiscal year ended December 31, 1997, or 2,839%. The increase was due to the
issuance of $45 million of senior secured notes in February 1998. Interest
income increased to $1.6 million in 1998 compared to $113,000 in 1997. The
increase was due to investing the unused proceeds from the issuance of the
notes.

Net Loss. As a result of the above factors, the net loss increased to
approximately $22.2 million for the fiscal year ended December 31, 1998, from
approximately $8.0 million for the fiscal year ended December 31, 1997, or
176.6%. We expect to incur additional costs to install additional E*billboards
and for operating costs to expand our network. As we continue to build-out our
network, we expect to operate at a loss for the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

Through December 31, 1999, our primary source of liquidity has been
proceeds from the sale of equity and debt securities.

As of December 31, 1999, total cash and cash equivalents were $403,000
compared to $24.7 million as of December 31, 1998. The decrease in cash was a
result of $18.4 million of cash used in operating activities (due to the loss
from operations) and $5.9 million of cash used in investing activities
(primarily for capital expenditures related to the expansion of our network). We
expect that increasing sales volume will require the use of additional cash. In
January 2000, a subsidiary of United Technologies Corporation, the parent
company of Otis, invested approximately $30 million in cash in us and increased
our cash balance to $27.1 million as of January 31, 2000.

Interest on the senior secured notes is payable either in cash or
additional senior secured notes, at our option, through August 1, 2000. On
February 25, 2000, we purchased $18.1 million aggregate face amount of senior
secured notes from a noteholder for $2.9 million, leaving an aggregate face
amount of senior secured notes outstanding of $38.4 million. We expect to pay
interest through August 1, 2000, by issuing additional senior secured notes.
Thereafter, our semi-annual cash interest requirements will be $2.4 million
until the notes mature on February 1, 2003.

Our primary uses of cash are capital expenditures for E*billboards and
for our working capital requirements. We anticipate capital expenditures of at
least $30 million related to the purchase and installation of our E*billboards
over the next two years. To the extent we are successful at securing more sites
than anticipated, our capital expenditures and working capital requirements

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28
could be significantly larger than anticipated. Our cash flow is dependent on
our ability to increase advertising revenues and is subject to financial,
economic and other factors, some of which are beyond our control. If we are
unable to increase revenues as anticipated or operating expenses are higher than
anticipated, we may need to raise additional capital to satisfy our obligations.
We cannot assure you that the additional funds will be available, or if
available, will be available on terms acceptable to us.

SEASONALITY

Our business is in a growth phase as we continue to expand our
footprint. Consequently, we have not experienced any material seasonal factors
which have affected our advertising revenues to date. We do expect, however,
that seasonal revenue fluctuations caused by variations in advertising
expenditures by local, regional and national advertisers, may effect our
revenues in the future as we achieve a larger installed base of E*billboard
sites.

MARKET RISK AND IMPACT OF INFLATION

We do not believe we have any significant risk related to interest rate
fluctuations since we have only fixed rate debt. We believe that inflation has
not had a material impact on our results of operations for each of our fiscal
years in the three-year period ended December 31, 1999. We cannot assure you
that future inflation will not have an adverse impact on our operating results
and financial condition.

YEAR 2000 COMPLIANCE

The Year 2000 issue is the result of computer systems and programs
using two digits rather than four to identify a given year. As a result,
computer systems or programs that are not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which could result in a variety of
failures and other errors. Our business is dependent on the Year 2000 compliance
of our own computer systems and software including the software that we supply
to our customers, as well as that of third parties, such as major content
providers, and the infrastructure that supports the Internet.

In preparation for the Year 2000, we tested our software and hardware
and performed minor remedial work on our software to ensure Year 2000
compliance. Because we are a relatively new business, the majority of our own
hardware and software has been acquired or developed within the last two years,
during which time there was a high awareness of Year 2000 issues.

To date, we have not experienced any material difficulties associated
with the Year 2000 issue. To our knowledge, no third party upon which we depend
has experienced a material Year 2000 problem. However, it is still possible that
errors or defects may remain undetected, or that dates other than January 1,
such as February 29, 2000, may trigger Year 2000 problems. If this occurs with
respect to our software or computer systems, or those of third parties on which
we rely, our reputation, business, operating results and financial condition
could suffer.

As of December 31, 1999, we estimate that we incurred and expensed
approximately $30,000 on matters related to addressing Year 2000 issues. We
estimate further Year 2000 expenses to be no more than $10,000 during the fiscal
year 2000.

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BUSINESS

GENERAL

INDUSTRY OVERVIEW

The advertising industry is large and growing. Approximately $400
billion was spent on worldwide advertising in 1998, including nearly $200
billion in the U.S. alone. The out-of-home industry is defined as radio
broadcasting, billboard advertising, transit advertising, stadium signage,
wallscapes on urban buildings, and other forms of advertising that primarily
reach consumers when they are out of their homes. The out-of-home advertising
industry generated revenues of more than $19 billion in 1998. The outdoor
advertising industry is comprised of several large outdoor advertising and media
companies with operations in multiple markets, as well as many smaller and local
companies operating a limited number of structures in local markets. The Outdoor
Advertising Association of America estimated that, as of 1998, there were
approximately 396,000 traditional outdoor advertising billboards in the U.S.

Outdoor media has a number of strengths as an advertising medium,
including its ability to reach large audiences with repetitive impact at a
relatively low cost as compared to other media, including television, radio,
newspapers, magazines and direct mail marketing. However, traditional outdoor
advertising has a number of limitations, including minimal targetibility, high
cost of production, long lead times, inflexibility and significant zoning
restrictions.

In recent years, the advertising industry has undergone significant
transformations. Digital technology is ushering in an era of dramatic change by
providing advertisers with new forums and formats by which they can connect with
and impact their target audience. Industry analysts believe that the relative
importance of traditional advertising media will diminish as advertisers look

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30
for more creative solutions in response to new technologies. In addition,
digital technology addresses many of the problems faced by traditional in-home
and out-of-home advertising formats such as high production and labor costs,
long lead times, restrictions on location and difficulty in updating stale
information.

OUR MARKET OPPORTUNITY

Through our network, we have created a new advertising distribution
channel that allows advertisers to more effectively target their audience in an
out-of-home environment. By providing advertisers with a new forum and format to
reach their targeted audiences, we intend to capture an increasing share of the
total advertising market. We believe our network is appealing to both
traditional in-home and out-of-home advertisers who today employ a range of
advertising formats including television, radio, newspaper and traditional
outdoor. We believe that we will be able to attract national, regional and local
advertisers to our digital network because of the unique benefits we are able to
offer them.

Ability to precisely target audiences. Our network offers advertisers
the ability to target specific demographics on a site by site basis. We place
our E*billboards in high traffic venues, including fast food restaurants,
transit hubs, lobby shops, gas stations and convenience stores. Unlike
traditional billboards, we are not constrained by real estate zoning or other
site restrictions. As a result, we are able to target hard to reach upscale
demographic sites which are highly appealing to advertisers. E*billboards are
individually addressable and programmable and are profiled based on specific
characteristics of their audience, including age, gender, race and income. This
allows us to appeal to both local advertisers targeting a small geographic area
within a major city, as well as national advertisers targeting a wide range of
demographic groups.

High impact appeal. Our network allows advertisers to reach audiences
in new and more appealing out-of-home environments. The effectiveness of
E*billboards is enhanced by positioning them in prominent locations where people
are waiting or standing in line and by offering relevant and interesting
programming. Programming is specifically developed for each market or region in
which we have a presence, providing local relevancy and appeal to viewers. In
addition, our technology allows us to deliver high resolution, full video
advertisements and programming content. As a result, E*billboards have
demonstrated a high level of impact and recall rates with little or no
competition from other media.

Speed and flexibility. Our technology and operating platform have the
ability to support a global network for selling, creating, distributing and
tracking digital advertisements and content. Through our network, advertisers
can quickly purchase, create, place or change advertisements down the block or
across the country. Whereas traditional outdoor advertising takes days or weeks
to update, our technology reduces the lead times for advertising and programming
changes to hours or minutes. Our clients are, therefore, able to modify their
daily advertising to target specific parts of the day and feed in advertising
updates at any time, which provides them with the ability to enhance the
timeliness of their message with little incremental cost.

Low cost. Based on traffic counts at our installed base of E*billboard
sites, the present cost to our advertisers of approximately $3.50 per thousand
impressions is substantially less than television, radio and print advertising
which generally range from $7 to $20. Although our network is marginally more
expensive, on a cost per thousand impressions basis, than most forms of outdoor
advertising, E*billboards have no physical production requirements. Therefore,
advertisers can put more of their advertising budget into acquiring additional
advertising space rather than into the relatively high production charges
associated with traditional outdoor advertisements. In addition, the speed and
flexibility with which E*billboard advertisers can adjust their advertising
format and program, at little or no incremental cost, provides significant
advantages over traditional advertising media.

We believe the strength of our network and its appeal to advertisers
will increase as we expand our U.S. and global footprint. Our strategy is to
rapidly expand the scale and breadth of our network. In addition to installing
E*billboards throughout our current backlog of 5,000 secured but uninstalled
sites, we will continue to broaden our presence in the U.S. by securing and
installing additional sites in multiple locations and types of venues in order
to increase the likelihood that viewers will encounter E*billboards several
times each day. In this fashion, we intend to position our product as a common
feature within the daily lives of our audiences and provide our advertisers the

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ability to target their audience on the basis of demographics, such as age,
ethnicity, gender and income, as well as geography.

THE NETWORK

Operations. Our E*billboards are installed in over 5,000 high traffic
locations throughout the U.S. In each location, E*billboards present repeating
sequences, or loops, of advertising and programming. As currently configured,
the loops consist of twelve, ten-second advertising slots and six to eight,
six-second programming slots. Programming slots include information such as
local weather, sports, trivia, news headlines and financial information, as well
as NGN-sponsored promotional content. For example, a Baltimore, Maryland
7-Eleven customer waiting in line may view the three-day Baltimore forecast, the
Baltimore Orioles' baseball score and local news headlines interspersed with
advertisements for Haagen-Dazs ice cream, a Chrysler dealership and a local
dentist, among other messages. Our technology allows us to deliver high
resolution, full motion video ads and editorial content with animation effects
intended to capture audience attention while they are waiting or standing in
line.

We manage our E*billboards network using proprietary software that we
developed expressly for an out-of-home advertising application. Our software
technology incorporates Internet-enabled systems for selling, creating,
distributing and tracking digital advertisements and content. From our central
hub facility, we create programming and advertising that is transmitted to
E*billboard sites in multiple locations. Because each E*billboard is
individually addressable and profiled based on the demographic characteristics
of its audience, advertisers can select a customized package of E*billboard
locations that match their demographic objectives. Our digital network and
central operating capability also allows our clients to feed in advertising
updates at any time which provides them with flexibility to enhance the
timeliness of their message, promote daily events and adjust formats with little
incremental cost. The lead time for updating advertisements on E*billboards is
faster than any traditional out-of-home media advertising format.

Assembly, Installation and Maintenance. The E*billboard installation
process is relatively quick and simple and typically requires no investment by
site operators. We have a contractual arrangement with an independent contractor
for the nationwide installation and maintenance of most of our E*billboards. The
independent contractor has a network of offices throughout the U.S. and has been
able to adequately satisfy all of our installation and maintenance needs to
date. Under our agreement with the independent contractor, we pay a fee for each
installation and a fixed monthly maintenance fee based on the number of existing
E*billboard installations. The independent contractor maintains an inventory of
spare parts for E*billboards at local warehouses within the vicinity of
E*billboard sites.

Network Infrastructure. Our network is built around the Internet
protocol TCP/IP, allowing us to use various transmission methods. Currently, we
use standard telephone lines to transmit our digital advertising and programming
content. However, we have the ability to use Internet, satellite or wireless
transmission solutions. In addition, we use a client server architecture, which
Microsoft awarded the First Place Prize in the Comdex 1999 Windows World Open
Competition. Our discrete server banks provide some redundancy protection in the
case of system failures. We also have a diesel-powered generator as a backup
power source at our central hub. Furthermore, we have implemented encryption,
anti-virus and hub lock-out software to provide network security.

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MARKET PORTFOLIO

As of December 31, 1999, we operated our E*billboards in 17 major
markets as follows:

DMA MARKET NO. OF ESTIMATED
RANK MARKET(1) POPULATION SITES WEEKLY VIEWERS
- ---- --------- ---------- ----- --------------

(1) In contiguous markets, such as Washington, D.C. and Baltimore,
San Francisco and Sacramento, Miami and West Palm Beach and
Tampa and Ft. Myers, we have a single sales office that
supports both markets.

(2) Developmental markets consist of markets in which we have
installed 10 or less E*billboards.

E*BILLBOARD SITES

Our domestic geographic expansion is currently focused on the ten largest
U.S. markets, with the intention of having a significant presence in the 25
largest U.S. markets by 2002. Our site growth strategy is to enter into
exclusive alliances with three types of site owners or organizations owning,
representing or having a relationship with:

- multiple national and international sites (for example, our
agreements with 7-Eleven, Otis, Cumberland Farms and the
Korean American Grocers Association of America);

- multiple regional sites (for example, New Jersey Transit
Authority and franchisees of McDonald's, Taco Bell or Subway
restaurants); and

- local or single site operators with desirable demographic and
location attributes.

Our recently formed alliance with Otis will provide us with the
opportunity to develop the largest digital out-of-home advertising presence in
elevators across the globe. The agreement provides that Otis has the exclusive
right to secure agreements to place E*billboards in elevators, escalators,
moving walkways and shuttles throughout the world. Currently, Otis has
agreements to maintain more than 1.2 million elevators worldwide.

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In addition, we have an agreement with 7-Eleven to be the designated
exclusive provider of video-based information, entertainment and advertising to
all 7-Eleven stores. In return, we pay 7-Eleven the greater of a program fee
equal to a percentage of the operating revenues from the sales of our
advertisements which are shown on E*billboards in 7-Eleven stores and the annual
minimum amount set forth in the agreement. As of December 31, 1999, this
agreement covered 3,262 of the sites at which we have installed E*billboards and
2,065 of the additional sites for which we have agreements to install
E*billboards.

We also have an agreement with the Korean American Grocers Association
of America under which we are the designated exclusive provider of video-based
information, entertainment and advertising to E*billboards installed in stores
owned or operated by members of the association.

We intend to expand internationally by developing E*billboard networks
in the Americas, Europe, Asia and Australia. We intend to use our alliance with
Otis as the cornerstone of our global expansion strategy. In addition, we may
also form alliances with local partners or independently develop our
international network in other non-elevator venues.

ADVERTISERS

Historically, we established our network on a market by market basis in
the U.S. As we expand our network, we expect to attract more national and
regional advertisers to complement our local advertisers. In 1999, we developed
a diverse portfolio of over 500 advertising clients with varying demographic and
geographic objectives. While our advertisers continue to be predominantly local,
in the last quarter of 1999, we began attracting national advertisers including
AT&T Wireless, Business Week, El Sitio and Fox Television. For all of our
advertisers, we develop customized packages to meet their demographic
requirements and geographic targets.

As the geographic diversity of our sites increases, we believe that
additional national advertisers will be increasingly attracted to E*billboards.
Therefore, organizing our sales force around national product categories and
their respective agencies will be a key initiative. By using the reach,
flexibility and targetibility of our network, we can match specific packages
against the needs of national advertisers.

No single advertiser generates advertising revenues that are greater
than 10% of our total advertising revenues on an annual basis.

PROGRAMMING

The advertising and programming loops for each E*billboard are created
and controlled from our central hub in Minneapolis, allowing us to quickly and
cost-effectively custom-tailor both the advertising and programming content on a
regional or micro-targeted basis. We are able to customize programming
information for local markets through our network management software.

Our programming content is primarily comprised of national, regional
and local topics of interest such as local weather, sports, trivia, news
headlines and financial information. The network is designed so that programming
information, such as weather and sports information, can be provided to us via
an electronic feed from providers of such information, such as Reuters,
Accu-Weather and Associated Press. Once the feed is received at our facilities,
it is processed and distributed to relevant E*billboards across our network. As
our footprint expands, we intend to develop our content production capabilities
to maintain and further enhance the local relevancy and appeal of our digital
content. We may do so by establishing relationships with new local or national
content providers.

SALES AND MARKETING

For local sales, we direct a significant portion of our sales effort on
helping potential customers develop a targeted and effective advertising
strategy using E*billboards. While price and availability are important
competitive factors, service and customer relationships are also critical
components of local sales. We currently have 13 local sales offices serving 17
DMAs. Generally, each office is staffed with a general manager and four to ten
salespersons. The size of the sales staff depends on various factors, including
the physical size of the DMA and the number of E*billboard sites within the DMA.

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In early 1997, we realized our first operating revenues from advertising sales
in markets where we have a dedicated sales force.

All graphic design, network management, billing and other functions are
handled from our corporate headquarters. We have developed local links to ensure
that our local sales offices are able to access our central information systems
and monitor the status of our network at any time. In addition, we provide our
local sales agents with modem-equipped laptop computers so that they always have
current information on the status of the network and can access our dedicated
technical and creative staff to support local selling efforts. We developed this
software to allow a salesperson to customize advertising proposals instantly to
accommodate the stated preferences of the advertiser. For example, a salesperson
can generate proposals based on a location within a specified radius, or site by
site purchases. The proposals can specify cost (as well as other schedule
information) and can prepare maps and location lists to show the exact
E*billboard locations on which an advertisement will appear. In the future, we
intend to allow our advertisers to manage their advertising program for
E*billboards in-house, over the Internet. We are currently developing software
that will enable advertisers to review advertising slots available on a site by
site basis, develop national, regional or local advertising programs, generate
automatic quotes and submit orders in an online and interactive environment.

We are planning to develop and implement a national marketing and media
plan to further build awareness and understanding of our E*billboard product. We
will do this through a targeted media plan followed by a coordinated promotional
calendar of national, regional and local levels.

AGREEMENTS

Equity Investment. On January 28, 2000, we entered into an agreement
with Nevada Bond Investment Corp. II (NBIC), a wholly-owned subsidiary of United
Technologies Corporation (UTC), the parent company of Otis. Under the agreement,
NBIC acquired 3,025,017 newly-issued shares of our common stock for
approximately $30 million in cash. Prior to the closing of the investment, all
of the shares of our series B and series C senior preferred stock were converted
into common stock and our founders and their family members converted all of
their shares of series A preferred stock into common stock. As a result, we no
longer have any shares of series B and series C senior preferred stock
outstanding.

Otis Alliance. Also, in January 2000, we formed an alliance with Otis.
The agreement provides that Otis has the exclusive right to secure agreements to
place E*billboards in elevators, escalators, moving walkways and shuttles
throughout the world. Currently, Otis has agreements to maintain more than 1.2
million elevators worldwide. Otis is responsible for the negotiation of
contracts, processing payments, arranging for the purchase, installation and
maintenance of the E*billboards and determining the pricing for E*billboards. As
consideration, Otis receives a percentage of the advertising revenues that we
derive from each E*billboard on a site by site basis, a portion of which Otis
remits to the relevant site operator. The agreement also provides Otis with
incentive payments upon the obtainment of certain installation goals.

Under the Otis agreement, we are not responsible for any capital
expenditures related to the E*billboards in any elevator site. However, we are
responsible for ongoing network operations, including content generation and
advertising sales.

The term of the Otis agreement is for a period of ten years and is
automatically renewable for successive one year periods, unless either party
provides written notice of its intention not to renew the term to the other
party less than 120 days prior to the expiration of the then existing term. In
addition, Otis may terminate the agreement if, among other things, Otis ceases
operations in four or more markets, pursuant to its rights under the agreement,
or upon the acquisition of 19% or more of our common stock by a competitor of
Otis.

7-Eleven Agreement. We have an agreement with 7-Eleven which, as of
December 31, 1999, covered 3,262 of the sites at which we have installed
E*billboards and 2,065 of the additional sites for which we have agreements to
install E*billboards. Under the agreement, we are the designated exclusive
provider of video-based information, entertainment and advertising to all
7-Eleven stores and have the right to install, maintain and repair or replace
the E*billboards at each participating store in accordance with an agreed upon
rollout schedule. As a part of this agreement, we agreed to pay 7-Eleven the

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greater of a program fee equal to a percentage of the operating revenues from
the sales of our advertisements which are broadcast on E*billboards in 7-Eleven
stores and an annual minimum of $3.3 million per year until 2003, based on
E*billboards installed as of December 31, 1999.

Under the agreement as amended, we are required to complete the
installation of E*billboards in at least 4,800 7-Eleven stores by November 30,
2000. If these installations are not completed by the deadline, then we must pay
7-Eleven liquidated damages of $150,000 on or before December 31, 2000.
Furthermore, 7-Eleven has the right to terminate the agreement on 30 days notice
if we do not have 4,800 E*billboards installed in 7-Eleven stores by May 30,
2001.

COMPETITION

The media industry is intensely competitive. We compete for advertising
dollars directly with broadcast and cable television, the Internet, radio,
magazines, newspapers, traditional billboards and direct mail marketers. In
addition, we also compete with a wide variety of out-of-home advertising,
including highway logo signs, advertising in shopping centers and malls,
airports, stadiums, movie theaters and supermarkets, as well as on taxis,
trains, buses and subways. We believe that the out-of-home advertising industry
is attracting numerous alternative media products, many of which will compete
directly or indirectly with us. These products may be offered by companies with
greater resources and with greater industry recognition than us, such as Clear
Channel Communications and Infinity Broadcasting. We are aware of other
companies that place displays that look similar to E*billboards in specific
locations for commercial purposes, such as in stores, elevators, airports and
subways. While we believe that we are favorably differentiated from existing
media in competing for advertising, we are aware of other media that are more
established and recognized by potential advertisers and advertising agencies.

PROTECTION OF TECHNOLOGY

We view the computer software technology that we have developed as
proprietary, and we attempt to protect our technology and trade secrets through
the use of confidentiality and non-disclosure agreements and by other security
measures. Trade secret law and confidentiality agreements offer protection that
is limited in comparison to patent protection. Confidentiality and
non-disclosure agreements may be difficult to enforce, and our products might be
subject to reverse engineering. Consequently, our competitors may be able to
develop or obtain technology similar to ours and produce products similar to
those we are utilizing.

We do not have patent or registered copyright protection on any of our
proprietary software technology, and such technology might not be eligible for
patent protection. We believe that significant portions of our software are
entitled to copyright protection in the U.S. If we seek and obtain federally
registered copyright protection for any of our software in the future, no
assurance can be given that the copyright application would be accepted or that
a capable and adequately financed competitor could not lawfully develop software
that would perform the same function.

We do not believe that we are infringing on the patent rights of any other
person. A company has sent us a letter calling our attention to a patent they
have relating to displays in elevators. They have not alleged that we have
violated or infringed their patents. We believe that there is no basis for any
claim that we would be liable for infringing their patent.

We have received several federal registrations of service marks, including
"NGN," and "Out of Home That's In Your Face." In addition, we have applied for
several additional federal registrations of service marks, including "Next
Generation Network," "E*billboards," "Proposal Machine," "Look Up and Win," and
"InLine TV." While no assurance can be given that the service marks will be
issued on the pending applications, we are not aware that the service marks for
which federal registration is sought infringe on existing service marks.

GOVERNMENT REGULATION

We are not aware of any material legal or other regulatory restrictions
which may adversely affect our business, other than those that affect businesses
generally. The furnishing of in-store marketing services is subject to

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compliance with the Robinson-Patman Act. In general, the Robinson-Patman Act
prohibits price discrimination and discriminatory promotional allowances and
services between different purchasers of commodities of like grade and quality,
the effect of which may be substantially to lessen competition in any line of
commerce.

Our use of telephone lines to transmit messages to our E*billboards
subjects us to regulation by the Federal Communications Commission as well as
laws and regulations affecting the advertising industry generally. While we have
not sought determination on the issues, the FCC may attempt to prohibit us from
transmitting tobacco advertisements on our E*billboards. In addition, certain
state statutes restrict advertising of alcoholic beverages on our E*billboards.

One of our competitive advantages over other forms of out-of-home
advertising, such as billboards, is that in many desirable locations, zoning
laws and regulations prohibit the erection of billboards. These zoning laws and
regulations do not apply to our E*billboards. In the future, it is possible that
zoning laws and regulations and building codes could be expanded to limit or
prohibit our E*billboards.

EMPLOYEES

As of December 31, 1999, we had 182 employees, of which 29 were involved in
engineering, purchasing, corporate development and field operations, 25 were
involved in network operations, marketing and creative service, 12 were involved
in management and administration, 26 were involved in management information
systems and accounting, and 90 were employed in regional sales offices. Our
employees are not represented by a collective bargaining agreement. We believe
that our relationship with our employees is good.

PROPERTIES

Our headquarters is located in Eden Prairie, Minnesota, a suburb of
Minneapolis. We also lease warehouse space in Minneapolis. In addition, we have
a regional sales office in each of New York, New York; Los Angeles, California;
Philadelphia, Pennsylvania; San Francisco, California; San Diego, California;
Boston, Massachusetts; Dallas, Texas; Washington, D.C.; Norfolk, Virginia;
Orlando, Florida; Fort Lauderdale, Florida; Chicago, Illinois; and Tampa,
Florida. Our leases expire on various dates, ranging from April 30, 2000 to
December 31, 2006, and many provide for renewal options.

LEGAL PROCEEDINGS

Although we may be subject to litigation from time to time in the ordinary
course of our business, we are not party to any pending legal proceedings that
we believe will have a material adverse impact on our business.

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MANAGEMENT

The following table sets forth the name, age and positions of each of our
executive officers and directors as of January 31, 2000.

NAME AGE POSITION
------------------------------------ --- -------------------------------------------------

Gerard P. Joyce..................... 48 Chairman of the Board of Directors and President
Thomas M. Pugliese.................. 37 Vice Chairman of the Board of Directors, Chief
Executive Officer and Secretary
Stephen Nesbit...................... 48 Executive Vice President of Operations, Corporate
Development and MIS
Tracy Crocker....................... 40 Executive Vice President of Sales and Marketing
Michael J. Kolthoff................. 47 Vice President, Treasurer and Assistant Secretary
Anthony Bonacci..................... 36 Director
Ari Bousbib......................... 38 Director
Thomas J. Davis..................... 52 Director
William Grimes...................... 58 Director
Malcolm Lassman..................... 61 Director
Michael J. Marocco.................. 41 Director
Susan Molinari ..................... 41 Director
David Pecker........................ 48 Director
Alejandro Zubillaga................. 31 Director

Gerard P. Joyce. Mr. Joyce founded NGN, together with Thomas Pugliese, in
1990 and has served as our Chairman of the Board of Directors since inception
and as our President since December 1991. Prior to 1990, Mr. Joyce was Chairman
and Chief Executive Officer of the Patrick Media Group, Inc., a successor to a
company he formed in 1969. The Patrick Media Group, Inc. became the largest
out-of-home advertising company in the U.S. Mr. Joyce sold his controlling
interest in the Patrick Media Group, Inc. in September 1989. Mr. Joyce is Thomas
Davis' brother- in- law.

Thomas M. Pugliese. Mr. Pugliese founded NGN, together with Gerard Joyce,
in 1990 and has served as our Vice Chairman of the Board of Directors, Chief
Executive Officer and Secretary since our inception. From 1988 to 1990, Mr.
Pugliese was President of Thomas More & Company, Inc., a private investment
banking firm. From 1984 through 1988, Mr. Pugliese was an investment banker with
Shearson, Lehman, Hutton Inc. and its predecessor firm, E. F. Hutton & Company,
Inc. where he held various positions in New York and London, including as
American representative for the firm's international investment banking
operations. Mr. Pugliese is Anthony Bonacci's brother-in-law.

Stephen Nesbit. Mr. Nesbit was appointed as our Executive Vice President of
Operations, Corporate Development and MIS in 1999. He has over 25 years
experience in high technology in the computer, networking and software
industries. Prior to joining NGN, he served as CEO and founder of NetCard
Systems, Inc., an Internet e-commerce start-up company from 1998 to 1999. From
1994 to 1997, he was a Vice President for Sandia Imaging Systems, Inc. Mr.
Nesbit has held various general management, marketing, sales and board of
directors positions with various companies, including IBM, Wang Labs and BBN
Communications, the original networking architect of the Internet.

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Tracy Crocker. Mr. Crocker was appointed as our Executive Vice President of
Sales and Marketing in January 2000. Mr. Crocker served in various positions
with the world's leading brand marketers, including Procter & Gamble, Pepsi and
Nabisco. From 1996 to 1999, he served as Vice President for Nabisco's Western
Division, with nearly a billion dollars in sales and 2,500 employees. From 1988
to 1996, he held various positions at PepsiCo, the last of which was Vice
President of National Sales and Marketing.

Michael J. Kolthoff. Mr. Kolthoff currently serves as our Vice President,
Treasurer and Assistant Secretary. From 1993 until he joined us in July 1995,
Mr. Kolthoff was Chief Financial Officer for ONYX Real Estate Services. From May
1985 until November 1992, he was Chief Financial Officer of Maico Hearing
Instruments. Mr. Kolthoff is a Certified Public Accountant in the State of
Minnesota.

Anthony Bonacci. Mr. Bonacci was elected as a director in February 2000.
Mr. Bonacci is a shareholder of Colombo & Bonacci, P.C., a Phoenix, Arizona law
firm, a position he has held since 1992. Prior to that time, he was an attorney
with the law firm of Brown & Bain, P.A. Mr. Bonacci is Mr. Pugliese's
brother-in-law.

Ari Bousbib. Mr. Bousbib was elected as a director in January 2000. Since
April 1997, Mr. Bousbib has been a Vice President of United Technologies
Corporation responsible for strategic planning and corporate development
functions. From 1995 to 1997, he was Managing Director of The Strategic Partners
Group. Prior to that time, he was a partner at the consulting firm, Booz, Allen
& Hamilton. In addition, he serves as a director for Techmetrics, International
Fuel Cells, Dow-UT and MyAircraft.com.

Thomas J. Davis. Mr. Davis has been one of our directors since 1996. Mr.
Davis is an executive with Piaker & Lyons, P.C., a New York accounting firm
where he has been employed since 1972. Mr. Davis specializes in auditing,
financial reporting and planning for closely-held businesses in the
communications and other industries. Mr. Davis is a Certified Public Accountant
in the State of New York. Mr. Davis is Gerard Joyce's brother-in-law.

William Grimes. Mr. Grimes was elected as a director in February 2000.
Since 1996, Mr. Grimes has been a member of BG Media Investors LLC, a company he
founded. BG Media Investors LLC is a private equity capital firm specializing in
investments in media and telecommunications companies. From 1994 until 1996, Mr.
Grimes was the Chief Executive Officer of Zenith Media, a media services agency.
Mr. Grimes serves on the board of directors of InterVU, Inc., i3 Mobile Inc.,
Versaware and American Media Inc. and is an Executive Director of the New School
University's Media Management Program.

Malcolm Lassman. Mr. Lassman has been one of our directors since 1998. Mr.
Lassman is a managing partner of the Washington office of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., a leading international law firm, a position he has held
since 1970.

Michael J. Marocco. Mr. Marocco has been one of our directors since 1996.
Mr. Marocco is a managing director of Sandler Capital Management, which he
joined in 1989. Sandler is a communications specific capital management firm,
managing approximately $2 billion invested in both public and private companies.
He is a general partner at the firm with primary responsibility for private
investment activities. He also serves as a director for Source Media Inc., which
is a public company listed on Nasdaq, and Convergent Communications Inc.

Susan Molinari. Ms. Molinari was elected as one of our directors in 1999.
Since 1998, Ms. Molinari has been a senior public affairs consultant with
Fleishman-Hillard Inc. Ms. Molinari is a prominent Republican political figure
whose political career began with her election to the New York City Council
where she served from 1986 to 1990. She also served as a member of the United
States House of Representatives from 1990 to 1997 and hosted the CBS Morning
Show from 1997 to 1998.

David Pecker. Mr. Pecker was elected as a director in September 1999. Since
1999, Mr. Pecker has been the Chairman, Chief Executive Officer, President and a
director of both American Media, Inc. and Marketing Services Inc. Prior to that
time, Mr. Pecker had been the Chief Executive Officer since 1992, and President
since 1991, of Hachette Filipacchi Magazines, Inc. Mr. Pecker has over 20 years
of publishing industry experience, having worked

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as the Director of Financial Reporting at CBS, Inc. Magazine Group and as the
Vice President and Controller of Diamandis Communications Inc.

Alejandro Zubillaga. Mr. Zubillaga has been one of our directors since
1998. He is the founder of Veninfotel LLC, Venezuela's leading provider of cable
television and other telecom services and has been its Chairman since 1995. Mr.
Zubillaga is the Chief Executive Officer of Grupo Zubillaga, a family holding
company which holds interests in real estate and mining. Mr. Zubillaga is also
the Chief Executive Officer of Equest Partners, LLC.

EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation for
each of the last three fiscal years for our chief executive officer and
president. These individuals are referred to as the named executive officers.

ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
SECURITIES
OTHER UNDER-
ANNUAL RESTRICTED LYING ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION(1)
-------- ---- ------ ----- ------ -------- ---- ------- ---------

Gerard P. Joyce 1999 $ 251,741 $ 150,000 - - - $ 21,975
Chairman of the 1998 251,741 60,000 - - - -
Board and President 1997 251,741 60,000 - - - -
Thomas M. Pugliese 1999 250,000 150,000 - - - 6,150
Vice Chairman, Chief 1998 250,000 50,000 $ 17,710 - - - -
Executive Officer, 1997 212,587 - - - -
Secretary

- --------
(1) Represents the dollar value of life insurance premiums that we have paid
for the benefit of the individual.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning the option
grants to the named executive officers during 1999. The options were granted
pursuant to our 1998 non-qualified stock option plan.

INDIVIDUAL GRANTS
----------------------------------------------------
% OF TOTAL
NUMBER OPTIONS POTENTIAL REALIZABLE VALUE
OF SECURITIES GRANTED TO EXERCISE AT RATES OF STOCK PRICE
UNDERLYING EMPLOYEE OF BASE APPRECIATION
OPTIONS IN FISCAL PRICE EXPIRATION FOR OPTION TERM ($)(2)
GRANTED(#) YEAR(1) ($/SHARE) DATE 5% 10%
---------- ------- --------- ---- -- ---

Gerard P. Joyce 100,000 12.3 $7.70 1/1/09 424,523 1,045,620
Thomas M. Pugliese 100,000 12.3 $7.70 1/1/09 424,523 1,045,620
Stephen Nesbit 68,000 8.3 $7.70 1/1/09 288,675 711,021
Tracy Crocker 68,000 8.3 $7.70 1/1/09 288,675 711,021
Michael J. Kolthoff 10,000 1.2 $7.70 1/1/09 42,452 104,562

- ----------

(1) Options to purchase a total of 815,000 shares of our common stock at an
exercise price of $7.70 per share were granted in 1999.

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(2) In accordance with the rules of the SEC, the amounts shown on this table
represent hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. These gains are based
on the assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date and do not reflect our estimates or projections of the
future price of our common stock. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of our common stock, the
option holder's continued employment through the option period, and the
date on which the options are exercised.

OPTION EXERCISES IN LAST FISCAL YEAR

The following table sets forth certain information concerning all
unexercised options held by the named executive officers as of December 31,
1999.

SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ACQUIRED OPTIONS AT MONEY OPTIONS AT
OR VALUE FISCAL YEAR-END(#) FISCAL YEAR-END (1)
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------

Gerard P. Joyce........... -- -- -- 100,000 -- --
Thomas M. Pugliese........ -- -- -- 100,000 -- --
Stephen Nesbit............ -- -- -- 68,000 -- --
Tracy Crocker............. -- -- -- 68,000 -- --
Michael J. Kolthoff....... -- -- 4,000 10,000 -- --

- ----------

(1) Value for "in-the-money" options represents the positive spread between the
respective exercise prices of outstanding options and the anticipated
initial public offering price of $ .

EMPLOYMENT AND INDEMNIFICATION AGREEMENTS

On January 1, 2000, we entered into employment agreements with each of
Gerard P. Joyce and Thomas M. Pugliese, effective through January 31, 2004. The
compensation for each employee is comprised of an annual salary of $300,000, an
annual bonus, as determined by the board, and additional benefits, including
stock options upon the consummation of this offering and a life insurance policy
with benefits of $10 million. If either Mr. Joyce or Mr. Pugliese is terminated
without cause, he is entitled to a severance payment equal to the greater of
double the amount of the lesser of his base salary and one-half of any bonuses
for the preceding 24 months (Current Annual Compensation), or $500,000 and his
Current Annual Compensation multiplied by the number of years remaining in the
term. However, if either Mr. Joyce or Mr. Pugliese is discharged for cause, we
no longer have any obligation to pay either of them any compensation, except for
any compensation and benefits accrued prior to the date of such discharge.

Each employment agreement contains a non-competition provision that
prevents Mr. Joyce and Mr. Pugliese from engaging or associating with a
competing business during a period of 24 months from the date of termination.
Mr. Joyce and Mr. Pugliese are also subject to non-solicitation and
non-disclosure obligations effective for two and three years, respectively, from
the date of termination.

401(K) PLAN

We maintain a retirement plan established in conformity with Section
401(k) of the Internal Revenue Code of 1986, as amended, covering all of our
eligible employees. Pursuant to the 401(k) plan, employees may elect to defer up
to 15% of their current pre-tax compensation and have the amount of such
deferral contributed to the 401(k) plan. The maximum elective deferral
contribution was $10,000 in 1999, subject to adjustment for cost-of-living in
subsequent years. Some highly compensated employees may be subject to a lesser
limit on their maximum elective deferral contribution. The 401(k) plan permits,
but does not require, matching contributions and non-matching (profit sharing)
contributions to be made by us up to a maximum dollar amount or maximum
percentage of participant contributions, as determined annually by us. We
presently do not match employee contributions. The 401(k) plan is qualified
under Section 401 of the Code so that contributions by the employees and
employer, if any, to the 401(k) plan, and income earned on plan contributions,
are not taxable to employees until withdrawn from the 401(k) plan, and so that
contributions by us, if any, will be deductible by us when made.

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STOCK OPTION PLANS AND OTHER EMPLOYEE INCENTIVE PLANS

We have adopted four stock option plans for the purpose of advancing our
interests and the interests of the stockholders by strengthening our ability to
attract and retain competent employees, to make service on the board of
directors more attractive to present and prospective non-employee directors and
to provide a means to encourage stock ownership and proprietary interest in us
by officers, non-employee directors and valued employees and other individuals
upon whose judgment, initiative and efforts affect our financial growth. The
plans are currently, and have been since their adoption, administered by the
board of directors and the compensation committee of the board.

2000 Stock Incentive Plan. The purpose of this plan is to provide
directors, officers, employees, consultants and independent contractors with
additional performance incentives by increasing their ownership interest in us.
Individual awards under the plan may take the form of one or more of: (i) either
incentive stock options, known as ISOs, or non-qualified stock options, known as
NQSOs; (ii) stock appreciation rights, known as SARs; (iii) restricted or
deferred stock; (iv) dividend equivalents; and (v) other awards not otherwise
provided for, the value of which is based in whole or in part upon the value of
our common stock. The compensation committee will administer the plan and
generally select the individuals who will receive awards and the terms and
conditions of those awards.

We have reserved 1,300,000 shares of common stock for use in connection
with the plan. Shares of common stock which are attributable to awards which
have expired, terminated or been canceled or forfeited are available for
issuance or use in connection with future awards.

The plan will remain in effect until terminated by the board of directors.
The plan may be amended by the board of directors without the consent of the
stockholders, except that any amendment, although effective when made, will be
subject to stockholder approval if required by any federal or state law or
regulation or by rules of any stock exchange or automated quotation system on
which our common stock may then be listed or quoted.

In connection with the offering, ISOs to purchase an aggregate of 666,000
shares of our common stock have been granted to members of management. The
grants of these options will be effective as of the date of this offering and
each option will have an exercise price equal to the initial public offering
price per share in this offering. These options will vest in three equal annual
installments starting with the first anniversary of the grant, and will expire
ten years from the date of grant or three months following termination of
employment.

ISOs may be granted only to our officers and key employees. Nonqualified
stock options may be granted to such officers and employees as well as to agents
and directors and consultants, whether or not otherwise employees. In
determining the eligibility of an individual for grants under the plans, as well
as in determining the number of shares to be optioned to any individual, the
board takes into account the position and responsibilities of the individual
being considered, the nature and value of his or her service or accomplishments
to us, his or her accomplishments, his or her present or potential contribution
to our success and such other factors as the board may deem relevant.

1998 Non-Qualified Stock Option Plan. The total number of shares with
respect to which options may be granted under the 1998 Non-Qualified Stock
Option Plan is 820,000. As of December 31, 1999, options for an aggregate of
697,000 shares were outstanding. No ISOs may be granted under the plan. The
option price may not be less than the greater of the fair market value per share
of the common stock at the time of the grant of such option or $7.70 per share.
No further options may be granted under the plan after December 31, 2005, and
all options granted under the plan become void and may not be exercised after
January 1, 2009. Upon the exercise of an option, the holder must make payment of
the full exercise price. Such payment may be made under certain circumstances in

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shares of common stock. The plan may be terminated at any time by the board of
directors, which may also amend the plan.

1994 Stock Option Plan. The 1994 Stock Option Plan provides for the
granting of ISOs to purchase our common stock at not less than the fair market
value on the date of the option grant and the granting of nonqualified options
with any exercise price. The total number of shares with respect to which
options may be granted under the plan is 80,000. As of December 31, 1999,
options for an aggregate of 40,000 shares were outstanding. To date, all options
issued under the plan have been nonqualified options. The plan contains certain
limitations applicable only to grants of ISOs. To the extent that the aggregate
fair market value, as of the date of grant, of the shares to which ISOs become
exercisable for the first time by an optionee during the calendar year exceeds
$100,000, the option will be treated as a nonqualified option. In addition, if
any optionee owns more than 10% of the total voting power of our stock at the
time the individual is granted an ISO, the option price per share cannot be less
than 110% of the fair market value per share and the term of the ISO cannot
exceed five years. No further options may be granted under the plan after
December 31, 1999, and all options granted under the plan become void and may
not be exercised after January 1, 2005. Upon the exercise of an option, the
holder must make payment of the full exercise price. Such payment may be made
under certain circumstances in shares of common stock. The plan may be
terminated at any time by the board of directors, which may also amend the plan.

1993 Stock Option Plan. The 1993 Stock Option Plan provides for the
granting of ISOs to purchase our common stock at not less than the fair market
value on the date of the option grant and the granting of nonqualified options
with any exercise price. The total number of shares with respect to which
options may be granted under the plan is 40,000. As of December 31, 1999,
options for an aggregate of 24,810 shares were outstanding. To date, all options
issued under the plan have been nonqualified options. The plan contains certain
limitations applicable only to grants of ISOs. To the extent that the aggregate
fair market value, as of the date of grant, of the shares to which ISOs become
exercisable for the first time by an optionee during the calendar year exceeds
$100,000, the option will be treated as a nonqualified option. In addition, if
any optionee owns more than 10% of the total voting power of our stock at the
time the individual is granted an ISO, the option price per share cannot be less
than 110% of the fair market value per share and the term of the ISO cannot
exceed five years. No further options may be granted under the plan after
December 31, 1998, and all options granted pursuant to the plan become void and
may not be exercised after January 1, 2004. Upon the exercise of an option, the
holder must make payment of the full exercise price. Such payment may be made
under certain circumstances in shares of common stock. The plan may be
terminated at any time by the board of directors, which may also amend the plan.

All of our directors, other than Malcolm Lassman, Susan Molinari and
Anthony Bonacci have been granted non-qualified stock options to purchase 5,000
shares of our common stock at an exercise price of $10.00 per share and 10,000
shares at an exercise price per share equal to the price per share in this
offering. All these options vest in equal installments over the next three
years. Mr. Lassman and Ms. Molinari each has been granted non-qualified stock
options to purchase 10,000 shares of our common stock at an exercise price of
$7.70 per share, of which 4,000 options vested in January 2000, 2,000 vest in
January 2001, 2,000 vest in January 2002 and 2,000 in January 2003. Each of Mr.
Lassman and Ms. Molinari also have been granted non-qualified stock options to
purchase 5,000 shares of our common stock at an exercise price of per share
equal to the price per share in this offering. Mr. Bonacci was granted options
to purchase 25,000 shares of our common stock at an exercise price of $7.70 per
share. Five thousand of these options vest on June 1, 2002 and 2003 and 15,000
vest in June 2004.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On February 25, 2000, we purchased $18.1 million aggregate face amount of
our senior secured notes from John Strauss, one of our shareholders, for $2.9
million. We purchased the notes from Mr. Strauss for a sum equal to the amount
he paid plus $150,000. In addition, Mr. Strauss has retained the warrants that
were associated with the notes.

Anthony Bonacci, who was appointed as one of our directors in February
2000, is a partner of Colombo & Bonacci, P.C. Colombo & Bonacci has represented
us in various matters and will continue to represent us. For the year ended
December 31, 1999, we incurred fees of $198,000.

David Pecker has been one of our directors since September 1999 and is
affiliated with American Media Operations, Inc. For the year ended December 31,
1999, we recognized revenues of $240,133 from American Media.

We invested $100,000 in Next Generation Network International, LLC (NGN
International) for the purpose of researching the development of markets for
E*billboards in several countries outside of the U.S. We own 50% of NGN
International and one of our directors, Alejandro Zubillaga, controls the
remaining 50%.

Malcolm Lassman, who has been one of our directors since 1998, is a partner
of Akin, Gump, Strauss, Hauer & Feld, L.L.P. Akin, Gump, Strauss, Hauer & Feld,
L.L.P. is representing us in this offering.

On September 15, 1993, Gerard P. Joyce, our Chairman and President, loaned
us $2,375,000 in return for a security interest in all of our assets. On August
29, 1997, we issued 6,494 shares of series C preferred stock to Mr. Joyce in
return for a reduction in our debt to him of $500,038. These shares of series C
preferred stock were converted into 92,242 shares of common stock in January
2000. In February 1998, we repaid the balance of the indebtedness to him with
the net proceeds of the offering of our senior secured notes and warrants and
his security interest in our assets was terminated.

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PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our common stock as of January 31, 2000 by:

(1) each person who is known by us to own beneficially more than 5% of our
common stock;

(2) each current director;

(3) each of the named executive officers; and

(4) all directors and executive officers as a group.

Beneficial ownership is determined in accordance with the SEC's rules. In
computing percentage ownership of each person, shares of common stock subject to
options, warrants or convertible preferred stock held by that person that are
currently exercisable or convertible, or exercisable or convertible within 60
days of January 31, 2000, are deemed to be beneficially owned. These shares,
however, are not deemed outstanding for the purpose of computing the percentage
ownership of each other person.

Except as indicated in this table and pursuant to applicable community
property laws, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite such
stockholder's name. Percentage of ownership is based on 8,403,396 shares of our
common stock outstanding on January 31, 2000, shares of our common stock
outstanding after completion of this offering.

PERCENTAGE OF SHARES
NUMBER OF SHARES BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- ------------------------ ------------------ --------------- --------------

Gerard P. Joyce.................. 1,610,436 19.2%
Thomas M. Pugliese(1)............ 703,222 8.4
Thomas J. Davis(2)............... 19,564 *
David Pecker..................... 28,053 *
Malcolm Lassman(3)............... 4,000 *
Michael J. Marocco(4)............ 1,239,802 14.8
Susan Molinari(3)................ 4,000 *
Alejandro Zubillaga(5)........... 179,282 2.1
Tracy Crocker.................... - *
Stephen Nesbit................... - *
Ari Bousbib(6)................... - *
William Grimes................... - *
Anthony Bonacci(7)............... 17,060 *

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Michael Kolthoff(3).............. 4,000 *
Nevada Bond Investment
Corp. II ...................
One Financial Plaza 3,025,017 36.0
Hartford, CT 06101
John Strauss(8)..................
200 Crescent Court 628,855 7.1
Dallas, Texas 75201
All directors and executive officers
as a Group (14 persons) 3,809,419 45.3

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

* Less than 1%

(1) Includes shares held in trust for the benefit of Mr. Pugliese, his spouse
and children.

(2) Includes 2,000 shares issuable upon exercise of warrants.

(3) Includes 4,000 shares of our common stock issuable upon exercise of stock
options.

(4) Represents shares of our common stock owned by affiliates of 21st Century
Communications Partners, each of which is a limited partnership of which
Sandler Investment Partners, L.P. is a general partner. Mr. Marocco is a
general partner of Sandler Investment Partners, L.P.

(5) Represents shares of our common stock owned by Elektra Investments A.V.V.,
which is controlled by Mr. Zubillaga.

(6) Mr. Bousbib is a Vice President of United Technologies Corporation, whose
wholly-owned subsidiary, Nevada Bond Investment Corp. II, beneficially owns
3,025,017 shares of our common stock.

(7) Represents shares of our common stock owned by his wife, Caroline Bonacci.

(8) Includes 451,855 shares of our common stock issuable upon exercise of
warrants issued in connection with the senior secured notes.

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DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, our authorized capital stock will
consist of shares of common stock, par value $0.01 per share, of which
shares will be issued and outstanding, and 500,000 shares of preferred
stock, par value $.01 per share, of which 3,240 shares will be outstanding.
The following summary of our capital stock is qualified in its entirety by
reference to our certificate of incorporation and our bylaws.

COMMON STOCK

Holders of our common stock are entitled to one vote for each share on all
matters voted upon by our stockholders, including the election of directors and
do not have cumulative voting rights. Subject to the rights of holders of any
then outstanding shares of our preferred stock, our common stockholders are
entitled to any dividends that may be declared by our board of directors.
Holders of our common stock are entitled to share ratably in our net assets upon
our dissolution or liquidation after payment or provision for all liabilities
and any preferential liquidation rights of our preferred stock then outstanding.
Holders of our common stock have no preemptive rights to purchase shares of our
stock. The shares of our common stock are not subject to any redemption
provisions and are not convertible into any other shares of our capital stock.
All outstanding shares of our common stock are, and the shares of common stock
to be issued in the offering will be, upon payment therefor, fully paid and
nonassessable. The rights, preferences and privileges of holders of our common
stock will be subject to those of the holders of any shares of our preferred
stock we may issue in the future.

In addition, in connection with the issuance of our senior secured notes,
we issued warrants to buy 1,411,159 shares of our common stock. At the time of
issuance, each warrant entitled the holder to purchase one share of common stock
at an exercise price of $0.01 per share, representing in the aggregate
approximately 20% of the common stock on a fully diluted basis at the time of
issuance. The number of shares purchasable by holders of the warrants is subject
to customary antidilution adjustments. The warrants are detachable and are
exercisable anytime prior to February 1, 2008.

PREFERRED STOCK

Our board of directors may, from time to time, authorize the issuance of
one or more classes or series of preferred stock without stockholder approval.
Subject to the provisions of our certificate of incorporation and limitations
prescribed by law, our board of directors is authorized to adopt resolutions to
issue shares, establish the number of shares, change the number of shares
constituting any series, and provide or change the voting powers, designations,
preferences and relative rights, qualifications, limitations or restrictions on
shares of our preferred stock, including dividend rights, terms of redemption,
conversion rights and liquidation preferences, in each case without any action
or vote by our stockholders.

One of the effects of undesignated preferred stock may be to enable our
board of directors to discourage an attempt to obtain control of our company by
means of a tender offer, proxy contest, merger or otherwise. The issuance of
preferred stock may adversely affect the rights of our common stockholders by,
among other things:

- restricting dividends on the common stock;

- diluting the voting power of the common stock;

- impairing the liquidation rights of the common stock; or

- delaying or preventing a change in control without further action by
the stockholders.

Series A preferred stock. Our 8.25% series A preferred stock is convertible
at the option of the holder into common stock, at any time prior to the close of
business on the tenth day prior to the date fixed for a redemption or exchange
by us, at a conversion price of $13.527 per common share (equivalent to a
conversion rate of 61.36 shares of common stock for each share of preferred
stock).

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The series A preferred stock is redeemable at our option, if not previously
converted into common stock, in whole or in part, at $500 per share, plus
accrued and unpaid dividends to the redemption date.

We did not declare or pay dividends of $247,500 for each of the years ended
December 31, 1999, 1998, and 1997. Dividends in arrears totaled $1,980,000 and
$1,732,500 at December 31, 1999 and 1998, respectively. The dividends in arrears
are also convertible into common stock at a conversion price of $13.527 per
common share.

All previously outstanding shares of series B preferred stock and series C
preferred stock were converted into shares of common stock on January 28, 2000.

EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Upon consummation of the offering, there will be authorized but
unissued shares of our common stock and 496,760 shares of preferred stock
available for our future issuance without stockholder approval. Of the shares
of common stock available for future issuance, 2,240,000 shares have been
reserved for issuance under our stock option plans.

Shares of common stock and preferred stock available for future issuance
may be utilized for a variety of corporate purposes, including to facilitate
acquisitions or future public offerings to raise additional capital. We do not
currently have any plans to issue additional shares of common stock or preferred
stock, other than shares of common stock issuable under our stock option plans.

ANTI-TAKEOVER CONSIDERATIONS AND SPECIAL PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, BYLAWS AND DELAWARE LAW

Certificate of Incorporation and Bylaws. A number of provisions of our
certificate of incorporation and bylaws concern matters of corporate governance
and the rights of our stockholders. Provisions such as those that grant our
board of directors the ability to issue shares of preferred stock and to set the
voting rights, preferences and other terms thereof, may have an anti-takeover
effect and may discourage takeover attempts not first approved by our board of
directors, including takeovers which may be considered by some stockholders to
be in their best interests. To the extent takeover attempts are discouraged,
temporary fluctuations in the market price of our common stock, which may result
from actual or rumored takeover attempts, may be inhibited. Such provisions also
could delay or frustrate the removal of incumbent directors or the assumption of
control by stockholders, even if such removal or assumption would be beneficial
to our stockholders. These provisions also could discourage or make more
difficult a merger, tender offer or proxy contest, even if they could be
favorable to the interests of stockholders, and could potentially depress the
market price of our common stock. Our board of directors believes that these
provisions are appropriate to protect our interests and the interests of our
stockholders.

Meetings of Stockholders. Our bylaws provide that annual meetings of our
stockholders may take place at the time and place established by our board of
directors and stated in the notice of meeting. A special meeting of our
stockholders may be called by the board of directors.

Amendment of the Bylaws. Our bylaws may be altered, amended, repealed or
replaced by a majority of our board of directors.

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The Delaware Business Combination Act. As a corporation organized under the
laws of the State of Delaware, we are subject to Section 203 of the General
Corporation Law of the State of Delaware. Section 203 imposes a three-year
moratorium on business combinations between a Delaware corporation and an
"interested stockholder," in general, a stockholder owning 15% or more of a
corporation's outstanding voting stock, or an affiliate or associate thereof,
unless:

- before the interested stockholder becomes an interested stockholder,
the board of directors of the corporation approved either the business
combination or the transaction resulting in the interested stockholder
becoming an interested stockholder;

- upon completion of the transaction resulting in the interested
stockholder becoming an interested stockholder, the interested
stockholder owned 85% of the voting stock outstanding at the time the
transaction commenced, excluding from the calculation of shares
outstanding those shares beneficially owned by directors who are also
officers and certain employee benefit plans; or

- on or after the interested stockholder becomes an interested
stockholder, the business combination is approved by the board of
directors and the holders of at least 66 2/3% of the outstanding
shares other than those shares beneficially owned by the interested
stockholder at a meeting of stockholders.

The Delaware Business Combination Act defines the term "business
combination" to encompass a wide variety of transactions with, or caused by, an
interested stockholder in which the interested stockholder receives or could
receive a benefit on other than a proportional basis with other stockholders.
These transactions include mergers, some asset sales, some issuances of
additional shares to the interested stockholder, transactions with us which
increase the proportionate interest of the interested stockholder or
transactions in which the interested stockholder receives some other benefits.

By a provision in its original certificate of incorporation or an amendment
thereto or to its bylaws adopted by a majority of the shares entitled to vote
thereon, a corporation may elect not to be governed by the Delaware Business
Combination Act, provided that any amendment to the certificate of incorporation
will not become effective until 12 months after its adoption. We have not made
this election in our certificate of incorporation.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our certificate of incorporation and bylaws provide that we must indemnify
our directors, officers, employees and agents to the fullest extent permitted by
applicable law. In addition, Gerard P. Joyce and Thomas M. Pugliese both have
indemnification provisions in their respective employment agreements with us.
Both agreements provide that we shall indemnify the employee and his legal
representatives, to the fullest extent permitted by the laws of the State of
Delaware and our existing bylaws, and the employee shall be entitled to the
protection of any insurance policies we may elect to maintain generally for the
benefit of our directors and officers, against all costs, charges and expenses
whatsoever incurred or sustained by him or his legal representatives in
connection with any action, suit or proceeding, or any threatened action, suit
or proceeding, to which he or his legal representatives may be made a party, or
threatened to be made a party, by reason of his being or having been our
director or officer. We have directors' and officers' insurance for our
directors, officers and some employees for specified liabilities.

The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also have the effect of reducing the likelihood of derivative litigation
against directors and officers, even though an action of this kind, if
successful, might otherwise benefit us and our stockholders. Furthermore, a
stockholders' investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers pursuant to
these indemnification provisions. However, we believe that these indemnification
provisions are necessary to attract and retain qualified directors and officers.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American Stock
Transfer and Trust Company.

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DESCRIPTION OF INDEBTEDNESS

On April 2, 1998, we filed a registration statement under the Securities
Act, which became effective on August 19, 1998, relating to the issuance of
45,000 units representing $45.0 million principal amount of 12% series B senior
secured PIK notes due 2003 (senior secured notes) and warrants to purchase
125,240 shares of common stock. The senior secured notes mature on February 1,
2003. Interest is payable semiannually in arrears on February 1 and August 1 of
each year, commencing August 1, 1998. The interest is payable either in cash or
in additional senior secured notes, at our option, until August 1, 2000, and
thereafter is payable in cash. On February 25, 2000, we repurchased $18.1
million aggregate face amount of our senior secured notes, leaving an aggregate
face amount of senior secured notes outstanding of $38.4 million.

At the time of issuance, each warrant entitled the holder to purchase one
share of common stock at an exercise price of $.01 per share, representing in
the aggregate approximately 20% of the common stock on a fully diluted basis at
the time of issuance. The number of shares purchasable by holders of the
warrants is subject to antidilution adjustments. The warrants are detachable and
are exercisable anytime prior to February 1, 2008.

The senior secured notes are secured by a first priority lien on
substantially all of our assets, except for certain equipment collateralizing
noninterest-bearing notes included in long-term debt. The senior secured notes
contain certain restrictive covenants that, among other things, prohibit the
payment of dividends on, and the redemption of, our capital stock and limit our
ability to incur debt, sell assets and merge or consolidate.

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SHARES ELIGIBLE FOR FUTURE SALE

Future sales of a substantial number of shares of our common stock in the
public market could adversely affect trading prices prevailing from time to
time. As of February 25, 2000, principal stockholders and all executive officers
and directors held 7,463,241 shares, representing 88.8% of the outstanding
shares of our common stock. After this offering, we will have shares of our
common stock outstanding. Of these shares, all shares sold in the offering,
other than shares, if any, purchased by our affiliates, will be freely tradable.
The shares purchased by our affiliates will be "restricted securities" as that
term is defined in Rule 144 under the Securities Act. Of the shares
outstanding before the offering, approximately 1,391,900 shares of common stock
will become eligible for sale in 2001 pursuant to Rule 144, subject to volume
and manner of sale restrictions. Restricted shares may be sold in the public
market only if such sale is registered under the Securities Act or if such sale
qualifies for an exemption from registration, such as the one provided by Rule
144. Sales of the restricted shares in the open market, or the availability of
such shares for sale, could adversely affect the trading price of our common
stock.

Subject to the lock-up agreements described below and the provisions of
Rule 144 and 144(k), additional shares will be available for sale in the public
market as follows:

LOCK-UP AGREEMENTS

Our officers, directors and other stockholders who hold in the aggregate
shares of our common stock and holders of options to purchase shares
of our common stock which vest and are exercisable within the next 180 days,
have agreed not to sell or otherwise dispose of any shares of our common stock
for a period of 180 days after the date of this prospectus, without the prior
written consent of Credit Suisse First Boston.

REGISTRATION RIGHTS AGREEMENT

On January 28, 2000, we entered into a registration rights agreement with
the holders of substantially all of our equity securities. Under this agreement,
Nevada Bond Investment Corp. II, its affiliates and their transferees (NBIC
Holders) and certain specified prior holders of our series B and C preferred
stock and their respective successors, assigns and transferees (the Existing
Investors), each have a one-time right, at any time on or after 180 days
following the consummation of this offering, to require that we effect a
registration of any registrable securities of such holders.

In addition, any NBIC Holder or any Existing Investor owning an aggregate
of more than 3% of our outstanding common stock may request at any time after
the consummation of this offering that we file a registration statement on Form
S-3 for the sale or distribution of all or any part of the registrable
securities held by them pursuant to Rule 415 of the Securities Act so long as
(i) the anticipated aggregate price to the public would exceed $5 million, (ii)
we are a registrant qualified to use Form S-3 and (iii) the plan of distribution
does not involve an underwritten offering. Each of the NBIC Holders as a group
and the Existing Investors as a group are entitled to a separate registration
statement on Form S-3. None of the other holders of registrable securities have
piggyback registration rights with respect to such Form S-3 demand
registrations.

RULE 144

In general, under Rule 144 as currently in effect, a person, or persons
whose shares are aggregated, who has beneficially owned restricted shares for at
least one year following the later of the date of the acquisition of such shares
from the issuer or an affiliate of the issuer would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:

- 1% of the number of shares of our common stock then outstanding,
approximately shares immediately after this offering; or

- the average weekly trading volume of our common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.

47
51

Sales under Rule 144 are subject to certain manner of sale provisions and notice
requirements and the availability of current public information about us.

RULE 144(k)

Under Rule 144(k), a person who is not deemed to have been an affiliate of
us at any time during the 90 days preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years following the later
of the date of the acquisition of such shares from the issuer or an affiliate of
the issuer, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.

48
52

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated, , 2000, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Banc of America
Securities LLC, CIBC World Markets Corp., and Friedman, Billings, Ramsey & Co.,
Inc. are acting as representatives, the following respective numbers of shares
of common stock:

Number
Underwriter of Shares
----------- ---------

Credit Suisse First Boston Corporation ...............................................
Banc of America Securities LLC........................................................
CIBC World Markets Corp...............................................................
Friedman, Billings, Ramsey & Co., Inc.................................................
-------
Total.............................................................................
=======

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

Per Share Total
-------------------------------- ----------------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------

Underwriting discounts and
commissions paid by us......................... $ $ $ $
Expenses payable by us.............................. $ $ $ $

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, or publicly disclose the intention to make any such offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
except issuances pursuant to the exercise of employee stock options outstanding
on the date hereof or pursuant to our dividend reinvestment plan.

Our officers and directors and certain other shareholders have agreed that
they will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock or securities convertible
into or exchangeable or exercisable for any shares of our common stock, enter
into a transaction which would have the same effect, or enter into any swap,
hedge or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether any such
aforementioned transaction is to be settled by delivery of our common stock or
such other securities, in cash or otherwise, or publicly disclose the intention
to make any such offer, sale, pledge or disposition, or to enter into any such
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.

49
53
The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent these
persons purchase the reserved shares. Any reserved shares not so purchased will
be offered by the underwriters to the general public on the same terms as the
other shares.

We have agreed to indemnify the underwriters against liabilities
under the Securities Act, or contribute to payments that the underwriters may be
required to make in that respect.

We will apply to list the shares of our common stock on The Nasdaq Stock
Market's National Market.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price was determined by negotiation between
us and the representatives of the underwriters. The principal factors that were
considered in determining the public offering price included:

- - the information set forth in this prospectus and otherwise available to the
representatives;

- - the history and the prospectus for the industry in which we will compete;

- - the ability of our management;

- - our prospects for future earnings;

- - the present state of our development and our current financial condition;

- - the general condition of the securities markets at the time of this offering;
and

- - the recent market prices of, and the demand for, publicly traded common stock
of generally comparable companies.

The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934.

- - Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position.

- - Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum.

- - Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions.

- - Penalty bids permit the representatives to reclaim a selling concession from
a syndicate member when the common stock originally sold by the syndicate
member is purchased in a stabilizing or syndicate covering transaction to
cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.

50
54

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

51
55

LEGAL MATTERS

The validity of the shares of our common stock offered hereby will be
passed upon for us by Akin, Gump, Strauss, Hauer & Feld, L.L.P. Legal matters in
connection with this offering will be passed upon for the underwriters by Cahill
Gordon & Reindel, New York, New York.

EXPERTS

Our financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999, included in this
prospectus and the related financial statement schedule included elsewhere in
the registration statement have been audited by McGladrey & Pullen, LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the registration statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission (SEC) a
registration statement on Form S-1 under the Securities Act for the common stock
sold in this offering. This prospectus does not contain all of the information
set forth in the registration statement and the accompanying exhibits and
schedules. For further information about us and our common stock, we refer you
to the registration statement and the accompanying exhibits and schedules.
Statements contained in this prospectus regarding the contents of any contract
or any other document to which we refer are not necessarily complete. In each
instance, reference is made to the copy of the contract or document filed as an
exhibit to the registration statement, and each statement is qualified in all
respects by that reference.

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York and Chicago. Please
call the SEC at 1-800-SEC-0330 for more information on the public reference
rooms and their copy charges. Our SEC filings are also available to the public
from the SEC's web site at http://www.sec.gov.

52
56
INDEX TO FINANCIAL STATEMENTS

NEXT GENERATION NETWORK, INC.

PAGE
----

Independent Auditor's Report........................................................................ F-2
Balance Sheets as of December 31, 1998 and 1999..................................................... F-3
Statements of Operations for Year Ended December 31, 1997, 1998 and 1999............................ F-4
Statements of Changes in Stockholders' Deficit for the Years Ended
December 31, 1997, 1998 and 1999............................................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1997, 1998 and 1999....................... F-6
Notes to Financial Statements....................................................................... F-7

F-1
57
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Next Generation Network, Inc.
Eden Prairie, Minnesota

We have audited the accompanying balance sheets of Next Generation
Network, Inc. as of December 31, 1998 and 1999, and the related statements of
operations, changes in stockholders' deficit, and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Next Generation
Network, Inc. as of December 31, 1998 and 1999, and the result of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with generally accepted accounting principles.

McGLADREY & PULLEN, LLP

Minneapolis, Minnesota
February 25, 2000

F-2
58
NEXT GENERATION NETWORK, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999

December 31,
--------------------------------
1998 1999
------------ ------------

ASSETS (Note 2)
Current Assets:
Cash and cash equivalents $ 24,710,213 $ 403,435
Trade accounts receivable, less allowance of $119,000
in 1998 and $120,000 in 1999 468,725 1,511,939
Other current assets 91,159 85,284
------------ ------------

Total current assets 25,270,097 2,000,658
------------ ------------

Equipment and Furnishings, at cost (Note 7)
Equipment 12,068,615 17,303,681
Office furniture, equipment, and software 888,951 1,421,334
Leasehold improvements 319,764 262,582
------------ ------------
13,277,330 18,987,597
Less accumulated depreciation and amortization 2,759,624 5,514,497
------------ ------------
10,517,706 13,473,100
------------ ------------

Other Assets
Deferred financing costs (net of accumulated
amortization of $390,072 in 1998 and $911,188 in 1999) 2,519,597 2,050,481
Deposits, noncurrent trade receivables, and other assets 145,971 191,730
------------ ------------
2,665,568 2,242,211
------------ ------------
$ 38,453,371 $ 17,715,969
============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current maturities of long-term debt $ 21,439 $ 24,949
Accounts payable 1,211,742 2,721,429
Accrued expenses (Notes 3 and 9) 4,516,000 4,848,637
------------ ------------

Total current liabilities 5,749,181 7,595,015
------------ ------------

Non-current accrued site lease expense (Note 3) 207,712 223,239
------------ ------------

Long-term Debt, less current maturities (Note 2) 42,115,147 49,555,649
------------ ------------

Commitments (Notes 3,4 and 5)

Mandatory Redeemable Preferred Stock (Notes 5 and 10) 14.8% Series B,
nonvoting; authorized 91,100 shares;
issued and outstanding 91,059 shares; stated at
liquidation value plus accrued dividends 9,748,507 11,273,351
14.8% Series C, nonvoting; authorized 90,000 shares; issued and
outstanding 75,540 shares stated at
liquidation value plus accrued dividends 7,024,323 8,123,598
------------ ------------
16,772,830 19,396,949
------------ ------------
Stockholders' Deficit (Notes 5, 6, and 10)
8.25% Series A cumulative preferred stock,
nonvoting; authorized 20,000 shares; issued and
outstanding 6,000 shares, stated at liquidation
value, excluding cumulative unpaid dividends
(aggregate liquidation value of $4,732,500 in 1998
and $4,980,000 in 1999) 3,000,000 3,000,000
Common stock, $0.01 par value; authorized 20,000,000
shares; issued and outstanding 2,662,680 shares 26,627 26,627

Additional paid-in capital 9,242,405 6,574,267
Accumulated deficit (38,660,531) (68,655,777)
------------ ------------
(26,391,499) (59,054,883)
------------ ------------
$ 38,453,371 $ 17,715,969
============ ============

The accompanying notes are an integral part of these financial statements

F-3
59
NEXT GENERATION NETWORK, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

Years ended December 31,
-------------------------------------------------
1997 1998 1999
----------- ------------ ------------

Revenues:
Advertising revenues $ 1,243,868 $ 2,609,512 $ 5,682,125
Less agency commissions (39,325) (47,851) (186,503)
----------- ------------ ------------

Net advertising revenues 1,204,543 2,561,661 5,495,622
Network equipment 137,279 26,309 4,807
Network operating revenues 485,299 1,720 840
----------- ------------ ------------
Total revenues 1,827,121 2,589,690 5,501,269
----------- ------------ ------------

Costs and expenses:
Network operating expenses (Note 3) 2,256,387 4,140,918 6,936,130
Selling expenses 1,757,523 6,062,770 8,980,846
General and administrative expenses 1,850,775 3,643,005 5,448,175
Corporate overhead 1,408,366 2,093,299 3,618,305
Depreciation and amortization 713,892 1,371,959 2,764,005
Cost of network equipment sales 60,893 9,996 1,526
----------- ------------ ------------
Total costs and expenses 8,047,836 17,321,947 27,748,987

Operating loss (6,220,715) (14,732,257) (22,247,718)

Non operating income (expense):
Interest expense (Note 2) (280,806) (6,494,147) (8,296,716)
Interest income 113,037 1,563,427 616,362
Other expense -- -- (67,175)
----------- ------------ ------------
Net loss before preferred stock dividends (6,388,484) (19,662,977) (29,995,247)
Preferred stock dividends (Note 5) 1,630,836 2,515,590 2,871,619
----------- ------------ ------------

Net loss applicable to common stockholders $(8,019,320) $(22,178,567) $(32,866,866)
=========== ============ ============

Basic and diluted net loss per common share $ (3.01) $ (8.33) $ (12.34)
=========== ============ ============
Weighted average number of common shares outstanding 2,662,680 2,662,680 2,662,680
=========== ============ ============

The accompanying notes are an integral part of these financial statements

F-4
60
NEXT GENERATION NETWORK, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

Series A
Cumulative Additional
Preferred Stock Common Stock Paid-In
Shares Amount Shares Amount Capital
------ ---------- --------- ------- -----------

Balance, December 31,1996 6,000 $3,000,000 2,662,680 $26,627 $ 5,440,956
Accrued dividends on
mandatory redeemable
preferred stock -- -- -- -- (1,383,336)
Series C mandatory
redeemable preferred stock
issuance costs -- -- -- -- (155,566)
Compensation element of stock
options forfeited (Note 6) -- -- -- -- (21,129)
Net loss -- -- -- -- --
----- ---------- --------- ------- -----------
Balance, December 31, 1997 6,000 3,000,000 2,662,680 26,627 3,880,925
Accrued dividends on
mandatory redeemable
preferred stock -- -- -- -- (2,268,090)
Issuance of Warrants in
connection with PIK
Notes (Note 2) -- -- -- -- 7,700,000
Compensation element of stock
options forfeited (Note 6) -- -- -- -- (70,430)
Net Loss -- -- -- -- --
----- ---------- --------- ------- -----------

Balance, December 31,1998 6,000 3,000,000 2,662,680 26,627 9,242,405
Accrued dividends on
mandatory redeemable
preferred stock -- -- -- -- (2,624,119)
Compensation element of
stock options forfeited (Note 6) -- -- -- -- (44,019)
Net Loss -- -- -- -- --
----- ---------- --------- ------- -----------
Balance, December 31,1999 6,000 $3,000,000 2,662,680 $26,627 $ 6,574,267
===== ========== ========= ======= ===========

Accumulated
Deficit Total
------------ ------------

Balance, December 31,1996 (12,609,071) (4,141,488)
Accrued dividends on
mandatory redeemable
preferred stock -- (1,383,336)
Series C mandatory
redeemable preferred stock
issuance costs -- (155,566)
Compensation element of stock
options forfeited (Note 6) -- (21,129)
Net loss (6,388,484) (6,388,484)
------------ ------------
Balance, December 31, 1997 (18,997,555) (12,090,003)
Accrued dividends on
mandatory redeemable
preferred stock -- (1,664,741)
Issuance of Warrants in
connection with PIK
Notes (Note 2) -- 7,700,000
Compensation element of stock
options forfeited (Note 6) -- (70,430)
Net Loss (19,662,977) (19,662,977)
------------ ------------

Balance, December 31,1998 (38,660,531) (26,391,499)
Accrued dividends on
mandatory redeemable
preferred stock -- (2,624,119)
Compensation element of
stock options forfeited (Note 6) -- (44,019)
Net Loss (29,995,247) (29,995,247)
------------ ------------
Balance, December 31,1999 $(68,655,777) $(59,054,883)
============ ============

The accompanying notes are an integral part of these financial statements

F-5
61
NEXT GENERATION NETWORK, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999

Years Ended December 31,
---------------------------------------------------

1997 1998 1999
----------- ------------ ------------

Operating Activities:
Net Loss $(6,388,484) $(19,662,977) $(29,995,247)
Adjustments to reconcile net loss to net cash used in
operating activities:
Accretion of long term debt 88,027 1,255,840 1,612,452
discounts
Noncash interest on PIK Notes -- 4,813,050 6,145,895
Amortization of deferred financing -- 390,072 521,116
costs
Depreciation and amortization 713,892 1,371,959 2,764,005
Compensation element of stock options (21,129) (70,430) (44,019)
forfeited
Loss from equity method investee -- -- 67,175
Other 1,896 17,710 8,454
Changes in assets and liabilities:
Receivables (270,530) (124,617) (1,015,544)
Other current assets (120,886) 29,728 5,875
Accounts payable (198,148) 892,337 1,509,687
Accrued expenses 1,543,107 595,956 3,269
----------- ------------ ------------
Net Cash Used In Operating Activities (4,652,255) (10,491,372) (18,416,882)
----------- ------------ ------------
Investing Activities:
Purchases of equipment and furnishings (1,278,775) (7,899,479) (5,733,059)
Investments, purchases of other assets and (109,516) 66,752 (140,604)
deposits
Proceeds from sale of equipment -- -- 5,207
----------- ------------ ------------
Net Cash Used in Investing Activities (1,388,291) (7,832,727) (5,868,456)
----------- ------------ ------------
Financing Activities:

Borrowings under PIK Notes -- 37,300,000 --
Principal payments on long-term debt (56,149) (1,923,764) (21,440)
Net proceeds from issuance of preferred stock 5,143,245 -- --
Proceeds from issuance of warrants -- 7,700,000 --
Deferred financing costs (78,603) (2,831,066) --
----------- ------------ ------------
Net Cash Provided by (Used in) Financing Activities 5,008,493 40,245,170 (21,440)
----------- ------------ ------------
Increase (decrease) in cash and cash (1,032,053) 21,921,071 (24,306,778)
equivalents
Cash and cash equivalents
Beginning 3,821,195 2,789,142 24,710,213
=========== ============ ============
Ending $ 2,789,142 $ 24,710,213 $ 403,435
=========== ============ ============

Supplemental Cash Flow Information
Cash payments for interest $ 192,779 $ 35,243 $ 17,262
Non cash activities:
Increase in mandatory redeemable preferred stock and
decrease in paid-in capital from accrued dividends 1,383,336 2,268,090 2,624,119

Accrued interest converted to long term debt(Note 2) -- 2,441,000 5,853,000
Increase in long term debt resulting from interest accretion -- 1,255,840 1,612,452

Reduction in paid-in capital from issuance
costs on mandatory redeemable preferred stock 155,566 -- --
Equipment repurchased through issuance of notes payable 996,514 -- --
Stockholder note converted to Series C mandatory
redeemable preferred stock (Note 5) 500,038 -- --
=========== ============ ============

The accompanying notes are an integral part of these financial statements

F-6
62
NEXT GENERATION NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS: Next Generation Network, Inc. (the "Company") sells
advertising space and programming in a network of digital video advertising
displays, known as E*billboards. The Company was founded in 1990 and thereafter
developed its proprietary technology platform to deliver digital advertising and
other media across its network of E*billboards in the U.S. At the same time, the
Company concentrated its efforts on securing site agreements for the placement
of E*billboards as well as recruiting local sales personnel and opening local
sales offices in designated market areas.

As of December 31, 1999, the Company has installed E*billboards at
5,031 sites and has secured long-term site rights covering approximately 5,000
additional sites. E*billboards have been installed in seventeen market areas,
principally in major cities. The Company currently generates revenue principally
through the sale of advertising on E*billboards and previously by selling
equipment and exclusive territorial rights for the NGN system within certain
markets (owner-operator networks). During 1997, the Company repurchased all
E*billboard equipment from the owner-operators who, in turn, forfeited their
territorial rights (see Note 7).

A summary of the Company's significant accounting policies follows:

REVENUE RECOGNITION: Advertising revenues are recognized at the time
the advertisement appears on the network. The Company bills advertisers and
recognizes revenue monthly for contracts that exceed one month in length, and on
the first day of a month during which the advertisement appears on the network
for contracts for shorter periods. Costs incurred for the production of media
advertising are recognized in the initial month of the advertising service or
contract period or as incurred during the advertising service period.
Advertising revenues are reduced by agency commissions (generally fifteen
percent) on the statements of operations. Revenue from network equipment sales
is recognized upon installation of the equipment. Network operating revenues,
which consist of network operating fees and royalties from advertising on
owner-operator networks, are recognized in the period the service is provided.
Network equipment sales and network operating revenues principally relate to
former owner operators (See Note 7). In addition, the Company provides
allowances for uncollectible revenues receivable based on Management's periodic
assessment of the need for such allowances. Such allowances charged to expense
amounted to $45,363 in 1997, $100,640 in 1998 and $223,396 in 1999.

The Company recognized advertising revenues of $240,133 from a company
affiliated with one of its Directors of which $99,860 was in trade accounts
receivable at December 31, 1999.

BARTER TRANSACTIONS: Barter transactions, which represent the exchange
of E*billboard advertising for goods or services, are recorded at the estimated
fair value of the products or services received, not to exceed the estimated
fair value of the E*billboard advertising provided. The Company has valued all
bartered revenues recognized and the resulting barter credit assets received at
a substantial discount from the Company's standard advertising rates. Barter
revenues are recognized as barter credit on the balance sheet when E*billboard
advertising appears on the network, and barter expense is recognized when the
related products or services are received or used. Barter revenues were $158,076
during 1997, $257,142 during 1998 and $62,116 during 1999, of which $47,738 and
$42,125 of barter credit are included in other current assets on the balance
sheets at December 31, 1998 and 1999, respectively.

CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, the
Company considers any Treasury bills, commercial paper, certificates of deposit,
and money market funds with an original maturity of three months or less to be
cash equivalents. The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts.

ADVERTISING EXPENSE: The Company expenses advertising costs as
incurred. Advertising expense was approximately $15,000, $309,000, and $233,000
in 1997, 1998 and 1999, respectively.

F-7
63
RESEARCH AND DEVELOPMENT COSTS: Expenditures for research and
development activities performed by the Company, which principally relate to
software feasibility, testing new equipment and exploring different
applications, are charged to operations as incurred. Research and development
expense was approximately $363,000, $430,000 and $233,000 for the years ended
December 31, 1997, 1998 and 1999 respectively.

SOFTWARE DEVELOPMENT COSTS: The majority of the Company's software
development costs are associated with the internal development and enhancement
of the NGN technology and software. During 1999 the Company adopted the
provisions of Statement of Position 98-1 Accounting for Costs of Computer
Software Developed or Obtained for Internal Use. Under the provisions of this
Statement the Company capitalizes internal and external costs incurred to
develop or upgrade and enhance its internal use NGN technology software during
the application development stage if it is probable that such development or
modifications will result in additional functionality. The Company capitalized
$138,792 of such costs during 1999 and is amortizing them over their expected
useful life of two years on a straight line basis. Prior to 1999 the Company's
policy was to expense such costs as incurred and to include them with research
and development costs.

DEPRECIATION: It is the policy of the Company to provide depreciation
based on estimated useful lives of its equipment and furnishings using the
straight-line method. The Company is using five year lives on its E*billboard
display equipment and three to seven year lives on its other equipment and
furnishings. Leasehold improvements are being amortized over the terms of the
respective leases.

ACCOUNTING FOR LONG-LIVED ASSETS: The Company generates operating
revenues with its long-lived assets and is in the process of building up an
acceptable revenue base and related cash flows. Management has and will
continue, on a periodic basis, to closely evaluate its equipment to determine
potential impairment by comparing its carrying value with the estimated future
net undiscounted cash flows expected to result from the use of the assets,
including cash flows from disposition. Should the sum of the expected future net
cash flows be less than the carrying value, the Company would recognize an
impairment loss at that date. An impairment loss would be measured by comparing
the amount by which the carrying value exceeds the fair value (estimated
discounted future cash flows or appraisal of assets) of the long-lived assets.
To date, management has determined that no impairment of long-lived assets
exits.

DEFERRED FINANCING COSTS: In connection with the issuance of Senior
Secured PIK Notes in 1998 the Company incurred approximately $2,910,000 of
financing costs which have been deferred and are being amortized over the five
year term of the Notes using the interest method. In addition, as of December
31, 1999 the Company had incurred $52,000 of financing costs in connection with
a private sale of its common stock subsequent to year end (see Note 10). These
costs have been deferred and will be recorded as a reduction of the common stock
sales proceeds in 2000.

INVESTMENT: The Company has an investment in Next Generation Network
International, LLC ("NGN International") which was formed for the purpose of
researching the development of markets for E*billboards in several countries
outside of the U.S. The Company owns 50% of NGN International and one of the
Company's directors controls the remaining 50%. The Company's interest in this
entity is reflected in other assets on the balance sheet and activity to date is
reflected as other expense on the statement of operations.

BASIC AND DILUTED NET LOSS PER SHARE: Basic per share amounts are
computed, generally, by dividing net income or loss by the weighted-average
number of common shares outstanding. Diluted per share amounts assume the
conversion, exercise, or issuance of all potential common stock instruments
unless their effect is antidilutive, thereby reducing the loss or increasing the
income per common share.

Loss per share has been adjusted for undeclared, cumulative dividends
on the Company's Series A cumulative preferred stock which totaled $247,500 for
each of the years ended December 31, 1997, 1998, and 1999, and the dividends
accrued on the Series B and C mandatory redeemable preferred stock of
$1,383,336, $2,268,090, and $2,624,119 for the years ended December 31, 1997,
1998, and 1999, respectively. As described in Note 6, the Company has options
and warrants outstanding to purchase shares of common stock, and the Series A,
B, and C preferred stock is convertible into common stock. However, because the
Company has incurred losses in all periods presented, the inclusion of those
potential common shares in the calculation of diluted loss per share would have
an antidilutive effect. Therefore, basic and diluted loss per share amounts are
the same in each period presented.

F-8
64
INCOME TAXES: The Company accounts for deferred taxes on an asset and
liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax basis. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

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

FAIR VALUE OF FINANCIAL INSTRUMENTS: The financial statements include
the following financial instruments and the methods and assumptions used in
estimating their fair value: for cash and cash equivalents, the carrying amount
is fair value; for trade accounts receivable and accounts payable, the carrying
amounts approximate their fair values due to the short term nature of these
instruments; and for the fixed rate notes payable the estimated fair value
approximates the carrying value based on discounted cash flows using interest
rates being offered for similar borrowing. No separate comparison of fair values
versus carrying values is presented for the aforementioned financial instruments
since their fair values are not significantly different than their balance sheet
carrying amounts. In addition, the aggregate fair values of the financial
instrument would not represent the underlying value of the Company.

SEGMENTS: The Company believes that it has one operating segment,
although certain separate financial information by the Company's market areas is
available. That is, the services being provided, the development of the
services, the method in which the services are being delivered and the customers
the services are being provided to, are similar.

REPORTING COMPREHENSIVE INCOME: For the Company, reporting
comprehensive income is equivalent to reporting operating results in the
statement of operations.

NOTE 2. LONG-TERM DEBT:

On February 18, 1998, the Company issued 45,000 units representing $45 million
principal amount of 12% Series A Senior Secured PIK Notes (the "Notes") and
warrants to purchase 125,240 shares of common stock (the "Warrants"). The Notes
mature on February 1, 2003. Interest on the Notes is payable semiannually in
arrears on February 1 and August 1 of each year commencing August 1, 1998.
Interest on the Notes is payable either in cash or in additional Notes, at the
option of the Company, until August 1, 2000, and thereafter is payable in cash.
At the time of issuance, each Warrant entitled the holder to purchase one share
of common stock at an exercise price of $0.001 per share, representing in the
aggregate approximately 20% of the common stock on a fully diluted basis at the
time of issuance. The number of shares purchasable by holders of the Warrants is
subject to antidilution adjustments. The Warrants are detachable and are
exercisable anytime prior to February 1, 2008. For financial reporting purposes
the aforementioned Notes have been recorded net of the value ascribed to the
Warrants which is in effect an original issuance discount on the Notes. This
discount is being amortized as additional interest expense over the five year
term of the Notes using the interest method. The value ascribed to the Warrants
was $7.7 million, and was recorded as additional paid in capital. The Warrant
value was determined based on the total estimated potential market
capitalization of the Company's common stock, on a fully diluted basis before
the Warrant issuance, using an estimated per share value of $7.70 per share
(post stock split) and the percentage of such value that the Warrants represent,
if exercised. In 1998 and 1999, the Company issued additional Notes in payment
of $2,441,000 and $5,853,000, respectively, of accrued interest on the
aforementioned Notes.

On August 19, 1998, all Series A Senior Secured PIK Notes were
exchanged for Series B 12% Senior Secured PIK Notes due 2003. Generally, the
form and terms of the Series B Notes are the same as the Series A Notes except
that they do not bear legends restricting their transfer.

F-9
65
The Notes are secured by a first priority lien on substantially all
assets of the Company except for certain equipment collateralizing
noninterest-bearing notes included in long-term debt. The Notes contain certain
restrictive covenants that among other things prohibit the payment of dividends
on, and the redemption of, the Company's capital stock.

A summary of long-term debt at December 31, 1998 and 1999 is as follows:

1998 1999
------------ -----------

12% Series B Senior Secured PIK Notes due February 2003 (net of
$6,606,331 and $5,181,775, respectively, of unamortized discount
attributed to warrants issued in connection with PIK Notes) (See
above) $40,834,669 $48,112,225

Noninterest-bearing note payable, discounted at 15%, total of
$700,000 payable based on certain cash flows, if any, with balance
due December 2001, secured by equipment repurchased (Note 7) 460,260 529,300

Noninterest-bearing note payable, discounted at 15%, total of
$1,500,000 payable August 2003, plus 10% of certain net revenues,
if any, secured by equipment repurchased (Note 7) 786,452 905,308

Other debt-capital lease obligations 55,205 33,765
----------- -----------
42,136,586 49,580,598

Less current maturities 21,439 24,949
----------- -----------
$42,115,147 $49,555,649
=========== ===========

The long term debt excluding capital lease obligations and assuming
full accretion of related discounts is payable as follows: $700,000 in 2001 and
$54,794,000 in 2003.

Interest expense on an 8% note payable to a shareholder was
approximately $176,000 and $20,000 for the years ended December 31, 1997 and
1998, respectively. This note of approximately $1,875,000 was repaid in full on
February 18, 1998.

NOTE 3. LEASE COMMITMENTS

SITE AGREEMENTS: In connection with the E*billboard network, the
Company enters into site agreements that provide for revenue-sharing
arrangements (based on percentage of net advertising revenues) with the
operators of the sites in which its E*billboards are located. The Company
accrues as monthly site agreement expense the greater of the computed amount
based on a percent of revenue or, where applicable, the appropriate portion of
an annual minimum.

At December 31, 1999, in connection with the aforementioned
arrangements, the Company was committed to certain minimum site agreement fees
of approximately $3,262,000 annually through the year 2003, based on
E*billboards installed as of December 31, 1999. The Company is highly dependent
upon one multistore site agreement and 65 percent of the Company's E*billboards
are located in sites covered by this agreement which expires on January 1, 2004,
if not renewed. This agreement also requires the Company to have E*billboards in
a specified number of locations by November 30, 2000 or be subject to $150,000
of liquidated damages.

Site agreement fees included in network operating expenses in the
statements of operations were, $1,120,431, $2,087,945 and $3,465,350, for the
years ended December 31, 1997, and 1998 and 1999 respectively.

OPERATING LEASES: The Company leases its offices and warehouse
facilities under noncancelable operating leases, which require various monthly
payments including operating costs. The approximate future minimum lease
payments under operating leases at December 31, 1999 are as follows:

F-10
66
Years ending December 31:

2000 $1,490,000
2001 1,255,000
2002 1,215,000
2003 994,000
2004 683,000
Thereafter 1,367,000
----------
$7,004,000
==========

Rent expense amounted to approximately $303,000, $623,000, and
$1,567,000 for the years ended December 31, 1997, 1998, and 1999 respectively.
Letters of credit in the amount of approximately $193,000 are outstanding at
December 31, 1999 as security for certain of these leases.

NOTE 4. EMPLOYMENT AGREEMENTS

Effective January 1, 2000 the Company entered into new employment
agreements with two officers, who are also significant shareholders of the
Company. These agreements, which extend to January 31, 2004, provide for an
annual base salary for each officer of $300,000. Bonuses are payable to these
officers solely at the discretion of the Board of Directors. If the officers are
terminated without cause or if the officers elect to terminate their employment
under certain circumstances the Company is required to pay them the greater of
the remaining amounts payable under the agreements or two times their annual
base salary. Under a prior employment agreement one of these officers received
230 shares (valued at $17,710) of Series C Preferred Stock in 1998.

The Company issued 88,310 shares of restricted common stock to one of
these officers and 49,830 shares of restricted common stock to the other officer
in 1996, effectively in exchange (at $7.70 per share) for $1,063,656 of deferred
compensation obligations payable to them under prior employment agreements. Such
shares are subject to forfeiture in certain circumstances under the January 1,
2000 employment agreements and become unrestricted (vest) December 31, 2006 or
upon the occurrence of death, disability, qualifying public offering, certain
business combinations, termination without cause and in certain other
circumstances.

NOTE 5. COMMON AND PREFERRED STOCK

COMMON STOCK AUTHORIZED AND STOCK SPLIT: The Company amended its
Certificate of Incorporation to increase the number of authorized shares of
common stock of the Company to 20,000,000 shares in January, 2000. In addition,
the outstanding common stock of the Company was split on a ten for one basis,
effective April 26, 1999. The effect of the stock split has been retroactively
reflected in the financial statements for all periods presented.

PREEMPTIVE RIGHTS: As of December 31, 1999, holders of 1,765,930 shares
of Common Stock (including shares issuable upon exercise of outstanding warrants
or upon conversion of Preferred Stock), or their transferees, are entitled to
certain rights permitting them to maintain their percentage common equity
interest in the Company (on a fully diluted basis).

PREFERRED STOCK: The Company's Board of Directors has authorized
500,000 shares of preferred stock for designation and issuance, of which 298,900
shares were not designated as of December 31, 1999.

DIVIDEND RESTRICTIONS: The Company is restricted from paying dividends
under its indenture covering the Series B Notes, as well as under its Series A,
Series B, and Series C Preferred Stock.

SERIES A CUMULATIVE PREFERRED STOCK: See Note 10 for partial conversion
to common stock subsequent to December 31, 1999.

The Company's 8.25% Series A cumulative preferred stock is convertible
at the option of the holder into Common Stock, at any time prior to the close of
business on the tenth day prior to the date fixed for a redemption or exchange
by the Company, at a conversion price of $13.527 per common share (equivalent to
a conversion rate of 36.96 shares of common stock for each share of preferred
stock).

F-11
67
The Series A preferred stock is redeemable at the option of the
Company, if not previously converted into common stock, in whole or in part, at
$500 per share, plus accrued and unpaid dividends to the redemption date.

Dividends of $247,500 for each of the years ended December 31, 1997,
1998, and 1999 were not declared nor paid. Dividends in arrears totaled
$1,732,500 and $1,980,000 at December 31, 1998 and 1999, respectively. The
dividends in arrears are also convertible into common stock at a conversion
price of $13.527 per common share.

SERIES B MANDATORY REDEEMABLE PREFERRED STOCK: See Note 10 for
conversion to common stock subsequent to December 31, 1999.

The Series B Senior Cumulative Compounding Redeemable Preferred Stock
was equal in all respective rights with the Series C Preferred Stock and senior
to all other classes of capital stock with respect to dividend and liquidation
rights. Dividends, which accrue at 14.8% on an initial liquidation value of $77
per share, were to be paid quarterly on March 1, June 1, September 1, and
December 1. On each dividend payment date, accrued dividends, to the extent
unpaid, were compounded upon the stock's liquidation value. For the years ended
December 31, 1997, 1998, and 1999, dividends of $1,125,070, $1,318,592, and
$1,524,844 respectively, were accrued relative to those years but were not paid.

The Series B Preferred Stock and all accrued unpaid dividends were
convertible, in whole or in part, at the option of the holder into common stock
at a conversion price of $7.70 per share (representing 1,094,790, 1,266,040, and
1,464,072 shares of common stock at December 31, 1997, 1998, and 1999,
respectively). The stock was convertible at the option of the Company in the
event of a qualifying public offering. The stock was also redeemable in whole,
but not in part, at the option of the Company at a redemption price of $308 per
share at any time prior to the mandatory redemption date, which was September
2003. At that time, the Company would have been required to redeem all
outstanding shares of the Series B preferred stock at a redemption price of $77
per share, adjusted for cumulative compounded unpaid dividends.

SERIES C MANDATORY REDEEMABLE PREFERRED STOCK: See Note 10 for
conversion to common stock subsequent to December 31, 1999.

During 1997, the Company's Board of Directors created and designated
for issuance 90,000 shares of $1 par Series C Senior Cumulative Compounding
Convertible Redeemable Preferred Stock. This preferred stock contained terms and
provisions that were virtually identical to the Series B Preferred Stock except
for the mandatory redemption date, which was March 2003 for Series C.

During 1997, the Company issued 75,310 shares of Series C Preferred
Stock to private investors at $77 per share. Proceeds upon issuance of this
stock, net of issuance costs of approximately $156,000 totaled approximately
$5,643,000, which consisted of approximately $5,143,000 in cash and conversion
of a stockholder note of $500,038. For the years ended December 31, 1997, 1998
and 1999, dividends of, $258,266, $949,498, and $1,099,275, respectively, were
accrued relative to those years on this preferred stock and were not paid.

The Series C Preferred Stock and all accrued unpaid dividends were
convertible into common stock at a conversion price of $7.70 (representing,
786,640, 912,250 and 1,055,013 shares of common stock at December 31, 1997, 1998
and 1999, respectively). The terms were similar to the Series B Preferred Stock.

NOTE 6. STOCK OPTIONS AND WARRANTS

The Company has a 1993 Stock Option Plan effective January 1, 1994, a
1994 Stock Option Plan effective December 15, 1994 and a 1998 Nonqualified Stock
Option Plan effective November 20, 1998 (the Plans). The Plans permit the
granting of incentive stock options and nonqualified options. A total of 40,000,
80,000, and 820,000 shares of the Company's common stock have been reserved for
issuance pursuant to options granted under the 1993, 1994, and 1998 Plans,
respectively.

Grants under the Plans are accounted for following APB Opinion No. 25
and related interpretations. During 1997, 1998 and 1999, certain compensatory
options were forfeited, resulting in the

F-12
68
reversal of $21,129, $70,430 and $44,019, respectively, of compensation expense.
Had compensation cost for the options been determined using the fair value
method required by FASB Statement No. 123, the Company's basic and diluted net
loss applicable to common stockholders and net loss per common share on a pro
forma basis would have been as follows:

Years Ended December 31
---------------------------------------------------------
1997 1998 1999
-------------- --------------- ----------------

Net loss applicable to common stockholders:
As reported ............................ $ (8,019,320) $ (22,178,567) $ (332,866,866)
Pro forma .............................. (8,088,000) (22,269,000) (33,234,000)
Basic and diluted net loss per common share:
As reported ............................ (3.01) (8.33) (12.34)
Pro forma .............................. (3.04) (8.36) (12.48)

The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants: risk-free interest rates of 6.16%
and 6.50% in 1997 and 1999, respectively; expected lives of 5 years; expected
volatility of 10%; and no dividends.

A summary of stock option activity is as follows:

Weighted Weighted
Average Grant - Average
Date Fair Exercise
Value Shares Price
----- ------ -----

Outstanding at December 31, 1996 59,060 $2.14
Granted $7.70 10,000 7.70
Canceled -- (3,000) .10
--------
Outstanding at December 31, 1997 66,060 3.08
Cancelled -- (15,000) 3.08
--------
Outstanding at December 31, 1998 51,060 3.08
Granted 7.70 815,000 7.70
Cancelled -- (104,250) 7.24
--------
Outstanding at December 31, 1999 761,810 7.45
========

The Company believes the exercise price of options granted was greater
than or equal to the per share fair value of the Company's common stock as of
the date of grant. In 1997 this was based on significant recent cash sales of
securities convertible into common stock at $7.70 per share. In 1999 the Company
obtained an opinion from an independent investment services organization that
the fair value of the Company's stock was less than $7.70 per share.

The weighted average fair value per option for options granted during
1997 and 1999 was $2.10 and $2.19, respectively, based on the Black-Scholes
option pricing model. No options were granted in 1998.

There were 3,308 3,506, and 28,810, options exercisable at December 31,
1997, 1998 and 1999 at weighted-average exercise prices of $0.37, $0.97 and
$1.16, respectively.

F-13
69
The following table summarizes additional information about stock
options outstanding as of December 31, 1999:

Weighted Average Number of Options
Number of Options Remaining Contractual Exercisable at
Range of exercise prices Outstanding Lives (In Years) December 31, 1999
------------------------ ----------- ---------------- -----------------

$.10 24,810 4.0 24,810
$7.70 737,000 8.8 4,000
------- ------
761,810 28,810
======= ======

WARRANTS: The Company issued warrants to purchase 31,000 shares of
common stock at a price of $7.143 per share, exercisable any time prior to May
1, 2000, in connection with a 1995 financing arrangement. Since the exercise
price approximated the estimated fair value of the common stock at date of
issuance and since the scheduled interest over the term of the financing was not
significantly different than interest computed using the Company's incremental
borrowing rate, no separate value was ascribed to the warrants as it was
determined to be immaterial.

In connection with the Company's issuance of Senior Secured PIK Notes
the Company issued warrants to purchase 1,252,400 shares of its common stock at
a price of $.01 per share, exercisable at any time prior to February 1, 2008. A
value of $7.7 million was ascribed to these warrants (See Note 2). Due to
antidilution provisions, these warrants allowed the holders to acquire 1,401,792
shares of common stock as of December 31, 1999.

NOTE 7. TERRITORIAL AGREEMENTS AND REPURCHASE OF NETWORK EQUIPMENT

In January 1997, the Company entered into an agreement with one of its
two NGN owner-operators whereby the Company repurchased equipment (which had
been previously paid for in full) originally sold by the Company in exchange for
a $700,000 note payable. In addition, the owner-operator forfeited its
territorial rights. This equipment repurchase was not a condition of or done in
connection with the terms of the original territorial agreement and equipment
sales contract. The note is noninterest-bearing and is payable annually at an
amount equal to 40% of operating cash flows generated by the former
owner-operator's territory with the unpaid balance of the note due December 31,
2001. The note is secured by the equipment repurchased. The Company recorded the
note and the repurchased equipment at $348,023, the present value of the note
using a discount rate of 15% and no assumed payments until maturity. No periodic
payments were assumed since the former owner-operator's territory was not
generating positive operating cash flow at the time of the equipment repurchase
and there is no assurance that such positive cash flow will be achieved and in
what amount.

In April 1997, the other NGN owner-operator gave notice of forfeiture
of its territorial rights and its option to purchase the exclusive rights to
certain additional designated NGN territories, effective as of August 18, 1997.
The Company subsequently entered into an agreement with the owner-operator
whereby, in August 1997, the Company repurchased equipment (which had been
previously paid for in full) originally sold by the Company in exchange for
$25,000 cash and a $1,500,000 note payable. This equipment repurchase was not a
condition of or done in connection with the terms of the original territorial
agreement and equipment sales contract. The note is noninterest-bearing and is
payable in full on August 18, 2003. The note is secured by the equipment
repurchased. The Company has also agreed to pay the former owner-operator 10
percent of the net revenues generated by the forfeited Florida territory for the
term of the note. The Company recorded the repurchased equipment at $25,000 plus
$648,491, the present value of the note using a discount rate of 15%.

In the aforementioned equipment repurchase transactions the entire
recorded present value repurchase price approximated less than fifty percent of
the original aggregate installed cost of the E*billboards (monitor equipment).
The Company believes this equipment has a five year useful life and at time of
repurchase had been used an average approximately six months to one year. The
Company allocated all of the repurchase price to the E*billboards in place since
it believed its fair value was significantly greater than the present value of
the total repurchase price. No value was allocated to the territorial rights
since they were forfeited, not repurchased, and since the estimated fair value
of the

F-14
70
tangible assets repurchased more than exceeded their repurchase cost as noted
above. The repurchased E*billboards are being depreciated over their approximate
remaining useful lives.

NOTE 8: INCOME TAXES

Deferred income tax assets (liabilities) consisted of the following:

December 31
-------------------------------
1998 1999
------------ ------------

Deferred tax assets:
Net operating loss carryforwards $ 14,523,000 $ 26,920,000
Tax credit carryforwards 166,000 166,000
Non-deductable compensation 541,000 530,000
Allowance for uncollectible accounts and other 64,000 93,000
------------ ------------
15,294,000 27,709,000
Deferred tax liabilities:
Depreciation and amortization (118,000) (449,000)
------------ ------------
Net deferred tax 15,176,000 27,260,000
Less valuation allowance (15,176,000) (27,260,000)
------------ ------------

$ -- $ --
============ ============

The Company had valuation allowances of $15,176,000 and $27,260,000
against its deferred tax assets to reduce those assets to amounts that
management believes are appropriate at December 31, 1998 and 1999, respectively.

The Company's income tax expense (benefit) differed from that which
would result from applying the statutory federal rate to the Company's net loss
as follows:

Years ended December 31,
--------------------------------------------------
1997 1998 1999
------------ ------------ ------------

Statutory rate applied to loss before income taxes $ (2,172,000) $ (6,685,500) $(10,198,000)
State income tax benefit net of federal tax effect
and other (288,000) (1,136,000) (1,886,000)

Change in deferred tax valuation allowance
resulting from unused NOLs 2,460,000 7,821,000 12,084,000
------------ ------------ ------------
$ -- $ -- $ --
============ ============ ============

The Company has tax net operating loss and tax credit carryforwards
which are available to reduce income taxes payable in future years. Future
utilization of these loss and credit carryforwards is subject to certain
limitations under provisions of the Internal Revenue Code including limitations
subject to Section 382, which relate to a 50 percent change in control over a
three-year period, and are further dependent upon the Company attaining
profitable operations. The Company believes that the issuance of warrants during
1998 (see Note 2) resulted in an "ownership change" under Section 382.
Accordingly, the Company's ability to use net operating loss carryforwards
generated prior to February 1998, (generally those expiring in 2012 and in prior
years) may be limited to approximately $1.3 million per year. Future equity
transactions could further limit the utilization of those loss carryforwards.
The carryforwards and credits will expire as follows:

F-15
71

Operating Loss Tax Credit Carryforwards
Year Carryforwards

2005 $ 627,000 $ --
2006 1,532,000 --
2007 1,536,000 --
2008 1,400,000 --
2009 1,442,000 100,000
2010 2,165,000 15,000
2011 1,959,000 24,000
2012 6,364,000 27,000
2018 20,172,000 --
2019 30,105,000 --
----------- --------
$67,302,000 $166,000
=========== ========

NOTE 9. ACCRUED EXPENSES

The components of accrued expenses are as follows:

December 31,
--------------------------
1998 1999
---------- ----------

Site agreement fees $1,807,422 $1,382,091
Interest 2,372,050 2,664,945
Compensation 207,952 561,032
Legal fees -- 167,000
Other 128,576 73,569
---------- ----------
$4,516,000 $4,848,637
========== ==========

NOTE 10. EVENTS SUBSEQUENT TO DECEMBER 31, 1999

LICENSE AGREEMENT: On January 17, 2000 the Company entered into a ten
year agreement with an unrelated company (licensee) for the worldwide rights to
license and distribute the E*billboard System in and around elevator and shuttle
installations and immediately adjacent to escalators and moving walkways. The
licensee shall be solely responsible for the installation, maintenance and
configuration of the E*billboard equipment and software, as well as acquiring
and contracting with customers (locations), in the aforementioned venues. Under
this arrangement, the Company will be responsible for, among other things,
operation of the NGN System and selling, producing and delivering advertisements
on the E*billboards in the licensee's venues. The Company and the licensee have
a sharing arrangement for advertising or other revenues generated under this
arrangement.

SALE OF COMMON STOCK: Through a Stock Purchase Agreement dated January
28, 2000 the Company sold 3,025,017 shares of its common stock at $10 per share
to an entity affiliated with the aforementioned licensee. This sale represented
approximately thirty percent of the Company's common stock, as calculated on a
fully diluted basis, immediately after giving effect to the issuance of the
shares.

Concurrent with and as a condition precedent to the January 28, 2000
stock sale all of the outstanding shares of the Company's Series B and C Senior
Cumulative Compounding Convertible Redeemable Preferred Stock together with all
accrued and unpaid dividends were converted into 2,546,353 shares of Company
common stock. In addition, 2,760 shares of the Company's Series A Convertible
Exchangeable Preferred stock together with accumulated unpaid dividends thereon
were converted into 169,346 shares of Company common stock.

In connection with the Stock Purchase Agreement: amended and restated
Certificates of Incorporation and Amended and Restated Bylaws were adopted;
Restated Stockholders and Restated Registration Rights agreements were executed;
and certain preemptive and antidilution rights relative to shares and warrants
were terminated, or waived for this transaction.

SENIOR SECURED NOTE REPURCHASE: On February 25, 2000, the Company
repurchased $18,092,000 face amount of its senior secured notes from the
noteholder, who is also a stockholder of the Company, for $2,927,579. As of the
date of this transaction the repurchased senior secured notes and related
accrued interest, net of unamortized discount, had a net book value of
$16,665,000.

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72
STOCK OPTIONS: In February 2000, the Company adopted the 2000 Stock
Incentive Plan and reserved 1,300,000 shares of common stock for use in
connection with the plan. In addition, the Company's Board of Directors granted
666,000 stock options to management. These grants will be effective with the
completion of an initial public offering and each option will have an exercise
price equal to the initial public offering price per share. At the same time
the Board of Directors also granted options to acquire 278,000 shares at an
exercise price of $10.00 per share to Company employees under its other stock
option plans.

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73
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13 -- OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses in connection with the issuance and distribution of
the securities being registered, other than underwriting discounts and
commissions are set forth in the following table. The Company will pay all
expenses of issuance and distribution. Each amount, except for the SEC, NASD and
the NASDAQ, is an estimate.

SEC registration fees.................................... $ 30,360
NASD filing fees......................................... $ 12,000
Nasdaq application fee................................... $
Transfer agent's and registrar's fees and expenses....... $
Printing and engraving expenses.......................... $
Legal fees and expenses.................................. $
Accounting fees and expenses............................. $
Blue sky fees and expenses............................... $
Miscellaneous............................................ $
----------
Total.......................................... $
==========

ITEM 14 -- INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our certificate of incorporation provides that it shall indemnify the
directors, to the fullest extent permitted by Section 145 of the Delaware
General Corporation Law (DGCL). Section 145 of the DGCL permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful.

Moreover, our employment agreements with Gerard P. Joyce and Thomas M.
Pugliese provide that we will indemnify them and their legal representatives to
the fullest extent permitted by the DGCL and our existing by-laws. These
employees are entitled to the protection of any insurance policies we may elect
to maintain generally for the benefit of our directors and officers.
Furthermore, we have agreed to indemnify these employees or their designated
representatives for all reasonable fees and expenses they may incur in
initiating legal action to enforce their rights and benefits under their
respective employment agreements, in the event of our breach or default, in
which they prevail.

In addition, on September 25, 1996, we entered into an indemnification
agreement with Michael Marocco, one of our directors. Under the agreement, Mr.
Marocco is entitled to be indemnified to the fullest extent permitted by law. In
addition, he can obtain advancement of all expenses incurred in connection with
the indemnification claim, provided that, if the reviewing party determines that
he is not entitled to indemnification under applicable law, we are entitled to
be reimbursed by him.

ITEM 15 -- RECENT SALES OF UNREGISTERED SECURITIES

On January 28, 2000, we entered into an agreement with Nevada Bond
Investment Corp. II (NBIC), a wholly owned subsidiary of United Technologies
Corporation (UTC), the parent company of Otis. Under the agreement, NBIC
acquired newly issued shares of our common stock, representing 30% of our common
equity (on a fully diluted basis after giving effect to the issuance), for
approximately $30.0 million in cash, at a price of $10.00 per share.

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74
On February 18, 1998, we sold 45,000 units representing $45.0 million
principal amount of 12% series A senior secured PIK notes due 2003 and warrants
to purchase 125,240 shares of common stock. On April 2, 1998, we filed a
registration statement under the Securities Act, which became effective on
August 19, 1998, relating to the issuance of 12% series B senior secured PIK
notes due 2003, which have the same terms as the series A notes, except that
they do not bear restrictions on transfer. All the outstanding series A notes
were exchanged for the series B notes.

Series A preferred stock. Our 8.25% series A preferred stock (series A
preferred stock) is convertible at the option of the holder into common stock,
at any time prior to the close of business on the tenth day prior to the date
fixed for a redemption or exchange by us, at a conversion price of $13.527 per
common share (equivalent to a conversion rate of 36.96 shares of common stock
for each share of preferred stock). The series A preferred stock is redeemable
at our option, if not previously converted into common stock, in whole or in
part, at $500 per share, plus accrued and unpaid dividends to the redemption
date. The dividends in arrears are also convertible into common stock at a
conversion price of $13.527 per common share.

Series B preferred stock. Our series B senior preferred stock was equal in
all respective rights with our series C preferred stock and senior to all other
classes of capital stock with respect to dividend and liquidation rights. The
series B preferred stock and all accrued unpaid dividends were convertible, in
whole or in part, at the option of the holder into common stock at a conversion
price of $7.70 per share (representing 1,464,072, 1,266,040, and 1,094,790
shares of common stock at December 31, 1999, 1998, and 1997, respectively). The
stock was also redeemable in whole, but not in part, at our option at a
redemption price of $308 per share at any time prior to the mandatory redemption
date, which was September 2003. At that time, we would have been required to
redeem all outstanding shares of the series B preferred stock at a redemption
price of $77 per share, adjusted for cumulative compounded unpaid dividends.

Series C mandatory redeemable preferred stock. During 1997, our board of
directors created and designated for issuance 90,000 shares of $1 par series C
senior cumulative compounding convertible redeemable preferred stock (series C
preferred stock). This preferred stock contained terms and provisions that were
virtually identical to the series B preferred stock, which were issued in 1996.
During 1997, we issued 75,310 shares of series C preferred stock to private
investors at $77 per share. Proceeds upon issuance of this stock, net of
issuance costs of approximately $156,000, totaled approximately $5,643,000,
which consisted of approximately $5,143,000 in cash and conversion of a
stockholder note of $500,038.

The issuances of securities described above were made in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act.

ITEM 16 -- EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

NUMBER DESCRIPTION
- ------ -----------

3.1(a) Amended and Restated Certificate of Incorporation*****
3.2(a) Amended and Restated By-Laws*****
4.1(a) Indenture dated as of February 1, 1998 between the Company and
the Trustee*
4.1(b) Amendment No. 1 dated as of January 28, 2000 to Indenture dated
as of February 1, 1998*****
4.1(c) Warrant Agreement dated as of February 18, 1998 by and between
the Company and United States Trust Company of New York as
Warrant Agent*****
4.1(d) Amendment No. 1 dated January 28, 2000 to the Warrant Agreement
dated February 18, 1998*****
4.1(e) Exchange and Registration Rights Agreement dated February 18,
1998 between the Company and the Initial Purchaser*
4.1(f) Pledge Agreement dated February 18, 1998 between the Company and
the Initial Purchaser*
4.1(g) Security Agreement dated February 18, 1998 between the Company
and the Initial Purchaser*
4.1(h) Amendment No. 1 dated January 28, 2000 to the Security Agreement
dated February 18, 1998*****
4.1(i) Purchase Agreement dated February 18, 1998 between the Company
and the Initial Purchaser*
4.1(j) Unit Agreement dated February 18, 1998 between the Company and
the Initial Purchaser*

II-2
75

4.1(k) Form of Co-Investment Agreement relating to issuances of
Preferred Stock in 1997*
4.1(l) Stock Purchase Agreement dated January 28, 2000 between the
Company and Nevada Bond Investment Corp. II*****
4.1(m) Agreement for Consents and Waivers dated as of January 21, 1998
by and among 21st Century Communications Partners, L.P., 21st
Century Communications T-E Partners, L.P. and 21st Century
Communications Foreign Partners, L.P. and Pulitzer Publishing
Company*****
4.1(n) Amendment for Consents and Waivers dated as of January 21, 1998
by 21st Century Communication Partners, L.P., 21st Century
Communications T-E Partners, L.P. and 21st Century Communications
Foreign Partners, L.P. and Pulitzer Publishing Company*****
4.1(o) Amended and Restated Registration Rights Agreement among the
Company and certain of its security holders dated as of January
28, 2000*****
4.1(p) Common Stock Registration Rights and Stockholders Agreement dated
as of February 19, 1998 by and between the Company and NatWest
Capital Markets Limited*****
4.1(q) Amendment No. 1 dated January 28, 2000 to the Common Stock
Registration Rights and Stockholders Agreement dated February 18,
1998*****
4.1(r) Amended and Restated Stockholders' Agreement among the Company
and certain of its securities holders dated as of January 28,
2000. *****
4.1(s) Joinder Agreement dated as of December 26, 1995 by and among
Stephen Adams, Gerard P. Joyce and Thomas M. Pugliese*
5.1(a) Opinion of Akin, Gump, Strauss Hauer & Feld, L.L.P. *****
10.1(a) Memorandum of Understanding between the Company and Alex
Zubillaga***
10.1(b) Assignment of Security Interest in United States Copyrights dated
as of February 18, 1998 by and between the Company and United
States Trust Company of New York as Collateral Agent*****
10.1(c) Assignment of Security Interest in United States Patents dated as
of February 18, 1998 by and between the Company and United States
Trust Company of New York as Collateral Agent*****
10.1(d) Assignment of Security Interest in United States Trademarks dated
as of February 18, 1998 by and between the Company and United
States Trust Company of New York as Collateral Agent*****
10.2(B)(a) Media Network Services Agreement dated April 18, 1995 between the
Company and The Southland Corporation(1)*****
10.2(B)(b) Amendment No. 1 to Media Network Services Agreement****
10.2(B)(c) Amendment No. 2 to Media Network Services Agreement*****
10.2(B)(d) E*Display Agreement dated as of January 17, 2000 with Otis
Elevator Company*****
10.2(B)(e) E*Display Product Schedules dated as of January 14, 2000*****
10.3(A)(a) Employment Agreement dated as of January 1, 2000 between the
Company and Gerard P. Joyce *****
10.3(A)(b) Employment Agreement dated as of January 1, 2000 between the
Company and Thomas M. Pugliese*****
10.3(A)(c) 2000 Stock Incentive Plan*****
10.3(A)(d) 1998 Stock Option Plan*****
10.3(A)(e) 1994 Stock Option Plan*****
10.3(A)(f) 1993 Stock Option Plan*****
23(a) Consent of Independent Auditors
23(b) Independent Auditors' Report on the Schedule
23(c) Consent of Akin, Gump, Strauss Hauer & Feld, L.L.P. *****
27.1 Financial Data Schedule

- --------
(1) This document has been submitted to the Secretary of the Securities and
Exchange Commission for application for "Confidential Treatment."

II-3
76
- -----------

* Incorporated by reference to the Registrant's Registration Statement on
Form S-4 (File No. [_____]) as amended, originally filed with the
Securities and Exchange Commission on April 2, 1998.

** Incorporated by reference to the Registrant's Quarterly Report on Form
10QSB (File No. [_____]) filed with the Securities and Exchange
Commission on November 16, 1998.

*** Incorporated by reference to the Registrant's Quarterly Report on Form
10QSB (File No. [____]) filed with the Securities and Exchange
Commission on August 16, 1999.

**** Incorporated by reference to the Registrant's Annual Report on Form
10KSB (File No. [____]) filed with the Securities and Exchange
Commission on March 31, 1999.

***** To be filed by amendment.

(b) Financial Statement Schedules

Schedule II: Valuation and Qualifying Accounts

ITEM 17 -- UNDERTAKINGS

The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall
be deemed to be part of this registration statement as of the time it
was declared effective.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

II-4
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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis, State of Minnesota, on February 29, 2000.

NEXT GENERATION NETWORK, INC.

By: /s/ GERARD P. JOYCE
--------------------------------------
Gerard P. Joyce
President and Chief Executive Officer

POWER OF ATTORNEY

The undersigned directors and officers of Next Generation Network, Inc.
hereby constitute and appoint Gerard P. Joyce and Thomas M. Pugliese, with full
power to act and with full power of substitution and resubstitution, our true
and lawful attorneys-in-fact and agents with full power to execute in our name
and behalf in the capacities indicated below any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
and to file the same, with all exhibits and other documents relating thereto and
any registration statement relating to any offering made pursuant to this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act with the Securities and Exchange Commission and
hereby ratify and confirm all that such attorneys-in-fact or his substitute
shall lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated below:

NAME TITLE DATE
---- ----- ----

/s/ GERARD P. JOYCE February 29, 2000
- -----------------------------------------
Gerard P. Joyce Chairman of the board of directors
and President (Principal Executive
Officer)

/s/ THOMAS M. PUGLIESE February 29, 2000
- -----------------------------------------
Thomas M. Pugliese Vice Chairman of the board of
directors, Chief Executive Officer
and Secretary

/s/ MICHAEL J. KOLTHOFF February 29, 2000
- -----------------------------------------
Michael J. Kolthoff Vice President, Treasurer and
Assistant Secretary (Principal
Accounting and Financial Officer)

/s/ MALCOLM LASSMAN February 29, 2000
- -----------------------------------------
Malcolm Lassman Director

/s/ MICHAEL J. MAROCCO February 29, 2000
- -----------------------------------------
Michael J. Marocco Director

/s/ SUSAN MOLINARI February 29, 2000
- -----------------------------------------
Susan Molinari Director

/s/ THOMAS J. DAVIS February 29, 2000
- -----------------------------------------
Thomas J. Davis Director

/s/ ALEJANDRO ZUBILLAGA February 29, 2000
- -----------------------------------------
Alejandro Zubillaga Director

/s/ DAVID PECKER February 29, 2000
- -----------------------------------------
David Pecker Director

/s/ ARI BOUSBIB February 29, 2000
- -----------------------------------------
Ari Bousbib Director

/s/ WILLIAM GRIMES February 29, 2000
- -----------------------------------------
William Grimes Director

/s/ ANTHONY BONACCI February 29, 2000
- -----------------------------------------
Anthony Bonacci Director