AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1998
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

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

CONSUMER NET MARKETPLACE, INC.

(Exact Name of Issuer as specified in its Charter)

CALIFORNIA 4825 95-4580601
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)

1900 LOS ANGELES AVE., SECOND FLOOR
SIMI VALLEY, CALIFORNIA 93065
(805) 520-7170
(Address and Telephone Number of Principal Executive Offices)

FREDRICK RICE, CHAIRMAN OF THE BOARD OF DIRECTORS
CONSUMER NET MARKETPLACE, INC.
1900 LOS ANGELES AVE., SECOND FLOOR
SIMI VALLEY, CALIFORNIA 93065
(805) 520-7170
(Name, address and telephone number of agent for service)

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

COPIES TO:

RICHARDSON & ASSOCIATES
MARK J. RICHARDSON, ESQ.
LAURA D. MURTAGH, ESQ.
1299 OCEAN AVENUE, SUITE 900
SANTA MONICA, CALIFORNIA 90401
(310) 393-9992

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE 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 of 1933, please check the
following box and list the Securities Act of 1933 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 of
1933 registration statement number of the earlier 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
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE OFFERING PRICE REGISTRATION FEE

Common Stock......................... 3,596,577 $14.00 $50,352,078 $14,853.86
Outstanding Common Stock............. 403,423 $14.00 $5,647,922 $1,666.14
Total................................ 4,000,000 $56,000,000 $16,520.00

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

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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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SUBJECT TO COMPLETION, DATED OCTOBER 8, 1998

PROSPECTUS

[LOGO]

CONSUMER NET MARKETPLACE, INC.

4,000,000 SHARES OF COMMON STOCK
------------------

Consumer Net Marketplace, Inc., a California Corporation ("CNM" or the
"Company") is a full service Internet Service Provider ("ISP") and Internet
Presence Provider ("IPP"). As an ISP, the Company offers dial-up access to the
Internet as well as ISDN, frame relay, IDSL, and many other DSL products and
services. As an IPP, the Company provides Web hosting and creation, virtual
domain hosting, co-location services, technical support, and training. The
Company is focused on providing complete individual and business products and
services over the Internet. Additionally, the Company is currently implementing
the equipment and software necessary to provide Voice over Internet Protocol
("VoIP"). See "BUSINESS."

The shares covered by this Prospectus are comprised of (i) 3,596,577 shares
of the Common Stock (the "Shares") of CNM and (ii) an aggregate of 403,423
outstanding shares of Common Stock (the "Outstanding Shares") which were issued
to several investors in a private placement and to an officer and director of
the Company (collectively, the "Shareholders"). See "SELLING SECURITY HOLDERS."

This is the Company's initial public offering. No public market currently
exists for the Company's shares. The offering price may not reflect the market
price of the Company's shares after the offering. The Company will not receive
any proceeds from the sale of the Outstanding Shares.

The Company will apply to have its Common Stock approved for quotation on
the Nasdaq Small Cap Market under the trading symbol "CNMN" if the Company
raises sufficient net proceeds from this offering to satisfy the listing
requirements of the Nasdaq Small Cap Market. See "RISK FACTORS--No Public Market
for Common Stock."

UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY

Per Share.......................................... $14.00 $0 $50,352,078
Per Outstanding Share.............................. $14.00 $0 $0
Total.............................................. -- $0 $50,352,078

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS."
---------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------

(1) No Underwriters are involved in the offer or sale of the Shares or the
Outstanding Shares at this time. The Shares and Outstanding Shares of Common
Stock are offered by the officers, directors and employees of the Company
on a best efforts basis. No selling commissions will be paid to the
officers, directors or employees of the Company for Shares or Outstanding
Shares sold by them. The Shares and Outstanding Shares may also be offered
and sold on a best efforts basis by registered broker-dealers selected by
the Company who are members of the National Association of Securities
Dealers, Inc. ("NASD"). The Company may pay selling commissions to firms
that are members of the NASD for Shares or Outstanding Shares sold by them.
As of the date of this Prospectus, no selling agreements have been entered
into by the Company with broker-dealer firms. See "PLAN OF DISTRIBUTION."

PROSPECTUS SUMMARY

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Consumer Net Marketplace, Inc., a California corporation (the "Company" or
"CNM"), commenced operations in January 1996 and was incorporated in May 1996.
The Company is currently in the process of implementing a major expansion of its
technical capability and infrastructure. Since March 1998, CNM has recruited
several high level computer engineers and systems analysts who have established
the Company as a full service Internet Service Provider ("ISP") and Internet
Presence Provider ("IPP"). See "MANAGEMENT." In June 1998, the Company relocated
to over 7,200 square feet of space enabling CNM to install and operate a highly
secure data and telecommunications facility and to accommodate the new CNM
headquarters. See "BUSINESS--Facilities." As an Internet Service Provider, the
Company offers reliable, fast, and inexpensive dial-up access to the Internet
for businesses and individuals as well as ISDN, frame relay, Digital Subscriber
Lines ("DSL") and many other DSL products and services. The Company also
provides Web hosting and creation, virtual domain hosting, co-location services,
technical support, and training.

The Company operates a high capacity OC12x3 ATM SONET that is linked
directly to the Internet backbone. The Company is currently implementing the
equipment and software necessary to provide Voice over Internet Protocol
("VoIP"). This equipment, along with Ascend GRF 1600 routers, Ascend Max TNTs,
Ascend Max 6000s, Ascend GRF 400 routers, and CBX 500 ATM switches enables CNM
to provide data communications and quality of service ("QOS") voice
telecommunications. Through access arrangements with competitive local exchange
carriers ("CLECs"), the Company is installing its switching equipment in several
"Points of Presence" ("POPs") to expand its telecommunications network,
initially in California and subsequently on a national basis. The Company plans
to implement additional POPs in other countries that would enable the Company to
provide Internet services and VoIP to customers on a global basis.

CNM provides two levels of service. These services are classified as
"Personal" and "Business." Personal Services are defined as services designed
and implemented for the individual user. Business Services are defined as
services designed and implemented for business owners, executives, and
employees. Through relationships established by CNM with Ascend Communications,
ICG Telecom Group, Inc., Pacific Bell Internet, PacNet, Covad, and other
telecommunications companies, the Company will implement both levels of service
in Southern California up through Northern California, including San Francisco
and Sacramento. The Company's short term plan is to expand coverage of both
levels of service on a national basis. The Company's long term plan is to
implement these same services on a global basis. Although the Company provides
high quality service at low prices for individuals, the Company's primary focus
is providing complete business solutions worldwide.

The Company also developed, owns, and operates the Consumer Net Marketplace
shopping mall on the Internet, which has been on-line since September 1996.
Consumer Net Marketplace provides information and sources for the purchase of
consumer products and services over the Internet in a convenient shopping mall
presentation. Since the introduction of the Company's shopping mall, the Company
maintains over 1,200 businesses averaging 1,000,000 hits per month by Internet
users.

The Company has developed proprietary software to enable secure commercial
transactions (i.e., purchases and sales) to be conducted within the CNM
Network-TM- and on other Web sites. The Company has also recently developed a
proprietary provisioning system allowing users complete and simplified
automation of all the Company's services.

The Company has recently entered into extensive advertising agreements with
Eller Media Company, Advo, Visa Card, Cable Networks and several major Southern
California radio stations as well as multiple reseller agreements to conduct the
Company's retail marketing program for prospective dial-up and business solution
customers. See "BUSINESS--Commerce on the Internet," "BUSINESS--Internet
Presence Provider--Web Services" and "BUSINESS--Marketing and Revenues."

The Company's executive offices are located at 1900 Los Angeles Avenue,
Second Floor, Simi Valley, California 93065, (805) 520-7170. The Company's
Internet addresses are: WWW.CNMNETWORK.COM, WWW.CONSUMERMARKET.COM, and
WWW.CNMINC.COM. The Company's email address is: INFO@CNMNETWORK.COM. Information
contained on the Company's World Wide Web site shall not be deemed to be a part
of this Prospectus.

THE OFFERING

Type of Security Registered.......................... Common Stock, no par value.

Number of Outstanding Shares of Series 1 Class A
Common Stock....................................... 6,534,250(2)

Number of Outstanding Shares of Series 1 Class B
Common Stock....................................... 75,000

Common Stock Offered................................. 3,596,577 shares

Outstanding Common Stock Offered(1).................. 403,423 shares

Common Stock Outstanding after this Offering......... 10,130,827 Shares(2)

Use of Proceeds...................................... To finance enhancements to the
Company's network infrastructure, to
fund new service and product
introductions, to finance protential
acquistions, and for working capital
and other general corporate
purposes.

Proposed Nasdaq Symbol............................... CNMN

Risk Factors......................................... The Common Stock offered hereby
involves a high degree of risk. See
"RISK FACTORS."

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(1) The investors in a prior private placement are offering 10%, and the
Chairman and President of the Company is offering 5%, of the shares of the
Company's Common Stock owned by them for sale in this offering, which equals
a total of 403,423 Outstanding Shares. See "SELLING SECURITY HOLDERS."

(2) Based on shares of Common Stock outstanding as of October 5, 1998. This
amount excludes (i) 250,000 shares of Series 1 Class B Common Stock reserved
for issuance upon the exercise of options outstanding at an exercise price
of $0.50 per share, (ii) 1,970,000 shares of Common Stock reserved for
issuance upon the exercise of stock options outstanding under the Company's
1997 Stock Option Plan at an exercise price of $2.00 per share, (iii)
127,500 shares of Common Stock reserved for issuance upon the exercise of
stock options outstanding which were granted outside of the Company's 1997
Stock Option Plan, and (iv) 30,000 shares of Common Stock and 100,000 shares
of Series 1

Class B Common Stock reserved for issuance upon the exercise of stock
options which may be granted in the future under the Company's 1997 Stock
Option Plan. See "CAPITALIZATION," "MANAGEMENT--Stock Option Plan" and
"DESCRIPTION OF CAPITAL STOCK." The number of shares of Common Stock
outstanding also do not include any shares which may be acquired by Eller
Media Company pursuant to its proposed subscription agreement with the
Company. See "BUSINESS-- Proposed Agreement with Eller Media Company."

SUMMARY FINANCIAL DATA
CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

PERIOD FROM
SIX MONTHS ENDED SIX MONTHS ENDED INCEPTION ON
JUNE 30, 1998 JUNE 30, 1997 YEAR ENDED 5/9/96 TO
(UNAUDITED) (UNAUDITED) DECEMBER 31, 1997 12/31/96
----------------- ----------------- ----------------- ----------------

STATEMENT OF OPERATIONS:
Revenues.............................. $ 11,713 $ 6,916 $ 30,697 $ 20,828
Loss before income taxes.............. (602,436) (9,374) (1,101,605) (101,699)
Net Loss.............................. (603,236) (10,174) (1,102,405) (102,499)

PER COMMON SHARE DATA:
Net Loss.............................. (.11) (.00) (.22) (.02)
Cash Dividends........................ 0 0 0 0
Book Value............................ (.07) (.02) (.11) (.02)
Number of Shares, weighted
average(1).......................... 5,273,290 5,003,619 5,037,857 5,000,000
BALANCE SHEET DATA:
Total Assets.......................... 856,970 45,550 81,973 25,795
Long-Term Debt(2)..................... 0 0 0 0
Shareholders' Equity.................. (385,040) (112,173) (542,404) (101,999)

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

(1) Includes 75,000 shares of Series 1 Class B Common Stock. See "DESCRIPTION OF
CAPITAL STOCK."

(2) Does not include a noninterest-bearing promissory note in the principal
amount of $500,000 payable on demand by the Company to Consumer Net
Partners, an affiliated California general partnership. See
"BUSINESS--Previous Financing and Development Arrangement."

RISK FACTORS

Investing in CNM's Shares is risky. You should be able to bear a complete
loss of your investment. You should carefully consider the following factors,
among others.

CAUTIONARY STATEMENTS

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the risk factors below and elsewhere in this
Prospectus. Important factors that may cause actual results to differ from
projections include, for example:

- adverse economic conditions

- intense competition, including entry of new competitors and products

- adverse federal, state and local government regulation

- inadequate capital to operate its business

- unexpected costs and operating deficits

- lower sales and revenues than forecast

- inability to develop marketable products and services

- technological obsolescence and other problems relating to the Company's
products and services

- loss of customers or inability to attract new business or individual
customers

- inability to establish consumer confidence in conducting transactions on
the Internet

- price competition forcing the Company's prices down

- inability to upgrade and develop its systems and attract or retain
qualified personnel

- lack of traffic on the Company's Web site

- systems downtime or Internet brownouts

- the risk associated with the Year 2000 in connection with computer
programs with which the Company may interact that read only the last two
digits of an annual date

- the risk of credit card fraud and other types of fraud and theft which may
be perpetrated by computer hackers and on-line thieves

- increased costs for supplies, components and personnel, or loss of
suppliers and contracts

- the risk of litigation and administrative proceedings involving the
Company and its employees

- the possible acquisition of new businesses that result in operating losses
or that do not perform as anticipated, resulting in unanticipated losses

- the possible fluctuation and volatility of the Company's operating results
and financial condition

- adverse publicity and news coverage

- loss of key executives

- changes in interest rates

- inflationary factors

- and other specific risks that may be alluded to in this Prospectus or in
other reports issued by the Company. The Company does not promise to
update forward-looking information to reflect actual results or changes in
assumptions or other factors that could affect those statements.

LIMITED OPERATING HISTORY--NEW BUSINESS

The Company commenced operations in January 1996, incorporated on May 9,
1996, and initiated its Web site in September 1996. Accordingly, the Company has
a limited operating history on which to base an evaluation of its business and
prospects. The Company's prospects must be considered in light of the risks,
expenses, and difficulties frequently encountered by companies in their
development stage, particularly companies in new and rapidly evolving markets.
Such risks for the Company include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, the Company must, among other things, obtain a customer base, implement
and successfully execute its business and marketing strategy, continue to
develop and upgrade its technology, improve its Web sites, provide superior
customer service, respond to competitive developments, and attract, retain, and
motivate qualified personnel. There can be no assurance that the Company will be
successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, prospects, financial
condition, and results of operations. Since inception, the Company has incurred
operating losses. As of June 30, 1998, the Company had an accumulated deficit of
$1,808,140. For the year ended December 31, 1997, the Company had a net loss of
$1,102,405, and for the six months ended June 30, 1998, the Company had a net
loss of $603,236. As a development stage company, the Company has only recently
begun to earn revenues. The Company believes that its success will depend in
large part on its ability to (i) obtain brand name recognition, (ii) provide its
customers with outstanding service, (iii) achieve sufficient sales volume to
realize economies of scale, and (iv) successfully establish its technological
infrastructures. Accordingly, the Company intends to invest heavily in marketing
and promotion, site development, technology and operating infrastructure. As a
result, the Company expects to incur operating losses in the foreseeable future.
The Company may be unable to adjust spending in a timely manner to compensate
for any unexpected shortfall of revenues. Any significant shortfall of demand
for the Company's products and services in relation to the Company's
expectations would have an immediate adverse impact on the Company's business,
operating results, and financial condition.

SPECULATIVE NATURE OF BUSINESS

The market for the Company's Internet services has only recently begun to
develop, is rapidly evolving, and is characterized by an increasing number of
market entrants who have introduced or developed products and services for
communication and commerce over the Internet and private networks. As is typical
in the case of a new and rapidly evolving industry, demand and market acceptance
for recently introduced products and services are subject to a high level of
uncertainty. The industry is young and has few proven products or services.
Moreover, critical issues concerning the commercial use of the Internet
(including security, reliability, cost, ease of use and access, and quality of
service) remain unresolved and may impact the growth of Internet use. While the
Company believes that its on-line services will offer significant advantages for
commerce and communication over the Internet and private networks, there can be
no assurance that such activities will become widespread, or that the Company's
services will become widely adopted for these purposes. The adoption of the
Internet for commerce and communications, particularly by those individuals and
enterprises which have historically relied upon alternative means of commerce
and communication, generally requires the acceptance of a new way of conducting
business and exchanging information. In particular, enterprises that have
already invested substantial resources in other means of conducting commerce and
exchanging information may be particularly reluctant to adopt a new strategy
that may make their existing personnel and infrastructure obsolete. In addition,
there can be no assurance that individual personal computer users in business or
at home will adopt the Internet for on-line commerce or communication. Because
the market for the Company's Internet services is new and evolving, it is
difficult to predict the future growth rate, if any, and size of this market.
There can be no

assurance that the market for the Company's products and services will develop,
that the Company's product or services will be adopted, or that individual
personal computer users in business or at home will use the Internet or private
networks for commerce and communication. If the market fails to develop,
develops more slowly than expected, or becomes saturated with competitors, or if
the Company's services do not achieve market acceptance, the Company's business,
operating results, and financial condition will be materially adversely
affected.

DEVELOPMENT RISKS

Key elements of the Company's strategy are to provide reliable co-location,
virtual domain hosting, dial-up access, voice and data communication, and
e-commerce service on the Internet, to provide QOS VoIP over its own network,
and to generate a high volume of traffic on and use of its Web sites.
Accordingly, the satisfactory performance, reliability and availability of the
Company's transaction-processing systems, network infrastructure, and Web sites
are critical to the Company's reputation and its ability to attract and retain
customers, as well as maintain adequate customer service. The Company's revenues
are expected to depend in part on the volume of business it will receive as an
Internet Service Provider (I.S.P.), Internet Presence Provider (I.P.P.), planned
provider of VoIP service, and the number of visitors who access its Web sites.

Any system interruptions that result in the unavailability of the Company's
Web site or Internet services would reduce the volume of the Company's business,
and the attractiveness of the Company's product and service offerings. The
Company may experience periodic system interruptions from time to time. There
can be no assurance that the Company will be able to accurately project the rate
or timing of increases, if any, in the use of its services, or timely expand and
upgrade its systems and infrastructure to accommodate such increase. Any
substantial disruptions or delays in any of the Company's systems would have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. There is no assurance that the Company will
be able to successfully complete the development, implementation, sale, and
service of its Internet Service Provider services, co-location and virtual
domain hosting services, proprietary provisioning system, shopping cart,
e-commerce software, and VoIP services. See "BUSINESS."

RISK OF SYSTEM FAILURE

The operations of the Company are dependent upon, among other things, its
ability to deliver high quality uninterrupted access to the Internet and other
services provided or intended to be provided by the Company. Any system failure
that causes excessive interruptions in the Company's operations could have a
material adverse effect on the Company. As the Company expands its network,
there will be increased stress placed upon network hardware and traffic
management systems. Any of a number of potential hardware failures at the
Company's operations center or at any of its POPs, as well as failure caused by
power losses, telecommunications failures, or natural causes such as fire,
floods or other natural causes, could result in significant interruptions of the
Company's services. Although the Company is currently in the process of
constructing its own high-speed fault-tolerant backbone to prevent service
interruptions even in the face of massive failures of sections of the network,
there is no assurance that the Company's backbone will eliminate all
interruptions of the Company's services in the event of a massive system
failure. See "BUSINESS." Although the Company maintains in effect casualty
insurance that would fund most of the cost of replacing equipment loss due to
fires, floods, or similar natural causes, such insurance would not protect the
Company from loss of customers and business reputation that could result from
such an event. In addition, some potential losses may not be adequately covered
by such policies. The occurrence of any of the foregoing risks could have a
material adverse effect on the business, financial condition, results of
operations, and cash flow of the Company.

COMPETITION IN TELEPHONE SERVICE INDUSTRY

The Company's VoIP long distance telephone service will place it in direct
competition with interexchange carriers ("IXCs") which provide long-distance
access, and other long-distance resellers and providers. The Company's
prospective competitors include large carriers such as AT&T, MCI, Sprint, and
WorldCom, and new entrants to the long distance market such as the Regional Bell
Operating Carriers ("RBOCs") who have entered or have announced plans to enter
the United States intrastate and interstate long-distance market pursuant to
recent legislation authorizing such entry. Most of the Company's competitors are
significantly larger and have substantially greater market presence as well as
financial, technical, operational, marketing, and other resources and experience
than the Company.

DEPENDENCE ON TELECOMMUNICATION CARRIERS AND OTHER SUPPLIERS

The Company relies on local telephone companies and other companies to
provide data communications capacity via local telecommunication lines and
leased long distance lines. The Company is subject to potential disruptions in
these telecommunication services and may have no means of replacing these
services on a timely basis or at all in the event of disruptions. In addition,
the Company is dependent on certain third-party suppliers of hardware
components. Certain components used by the Company in providing its network
services are currently acquired from limited sources. The Company also depends
on third-party software vendors to provide the Company with much of its Internet
software, including the Netscape Navigator software ("Netscape Navigator"),
which is the World Wide Web client software that the Company licenses from
Netscape Communications Corporation ("Netscape"). The ongoing development of the
Company's provisioning systems software by an independent software development
company currently under contract is important to the Company's Web hosting
business. See "BUSINESS--CNM Network Services" and "BUSINESS--Company Research
and Development." Failure of the Company's suppliers to provide components and
products in the quantities, at the quality levels or at the times required by
the Company, or an inability by the Company to develop alternative sources of
supply, if required, could result in delays and increased costs of expansion of
the Company's network infrastructure. The Company's suppliers and
telecommunication carriers also sell or lease services and products to the
Company's competitors and may be, or in the future may become, competitors of
the Company. There can be no assurance that the Company's suppliers and
telecommunication carriers will not enter into exclusive arrangements with the
Company's competitors, or cease selling or leasing their services or products to
the Company. See "BUSINESS--Competition," and "BUSINESS--Marketing and
Revenues."

DEPENDENCE ON TELECOMMUNICATIONS ACCESS

All Internet and most telecommunications service providers, including the
Company, depend on other companies to provide communications capacity via leased
facilities. If one or more of these companies is unable or unwilling to provide
or expand its current levels of service to the Company in the future, the
Company's operations could be materially and adversely affected. Although leased
facilities are available from several alternative suppliers, including AT&T,
MCI, Sprint, and WorldCom, there can be no assurance that the Company could
obtain substitute services from other providers at reasonable or comparable
prices or in a timely fashion. In addition, the Company is dependent on local
telephone companies to provide local dial-up and leased, high speed dedicated
access telephone lines for access to each of the Company's POPs. The Company is
presently dependent on Pacific Bell, ICG Telecom Group, Inc., and Covad to
install and maintain communication lines. Although the Company has not yet
experienced delays in the installation of communication lines, such delays could
adversely affect the rate of growth of the Company.

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

A number of new laws and regulations may be adopted with respect to the
Internet covering issues such as the provision of telephone service, user
privacy, pricing, and the quality of products and services.

The adoption of any such laws or regulations may decrease the growth of the
Internet, which could in turn decrease the demand for the Company's services and
increase the Company's cost of doing business, or otherwise have an adverse
affect on the Company's business, operating results and financial condition.
Moreover, the applicability to the Internet of existing laws governing issues
such as property ownership, libel and personal privacy is uncertain. The
Company's products may become subject to United States export controls in the
future. There can be no assurance that such export controls, either in their
current form or as may be subsequently enacted, will not limit the Company's
ability to distribute products outside of the United States or electronically.
In addition, federal or state legislation or regulation may further limit levels
of encryption or authentication technology. Any such export restrictions, new
legislation or regulation, or unlawful exportation could have a material adverse
impact on the Company's business, operating results and financial condition. See
"RISK FACTORS--Government Regulatory Policy Risks."

GOVERNMENT REGULATORY POLICY RISKS

The long distance telephone service that the Company intends to provide is
subject to federal and state regulation. The provision of long distance
telephone service is subject to the provisions of the Communications Act of
1934, as amended, including amendments effected by the Telecommunications Act of
1996 (the "1996 Telecommunications Act"), and the regulations of the Federal
Communications Commission (the "FCC"). At the state level, the long distance
telephone industry is subject to the applicable laws and regulations of the
various state Public Utility Commissions ("PUCs") and other state agencies.
Federal laws and FCC regulations apply to interstate telecommunications
(including international telecommunications that originate or terminate in the
United States), while state regulatory authorities have jurisdiction over
telecommunications both originating and terminating within a state. Regulation
of the telecommunications industry is changing rapidly, and the regulatory
environment varies substantially from state to state. Moreover, as deregulation
at the federal level occurs, some states are reassessing the level and scope of
regulation that may be applicable to the Company. There can be no assurance that
future regulatory, judicial, or legislative activities will not have a material
adverse effect on the Company, or that domestic or international regulators or
third parties will not raise material issues with regard to the Company's
compliance or noncompliance with applicable regulations.

The FCC has considered the issue of whether ISPs should be subject to access
charges, Universal Service Fund support fees, and regulation, and has determined
that it would not adopt such regulations. The FCC has announced that it will be
issuing a Notice of Proposed Rule Making ("NPRM") to explore proposals to create
incentives for companies to make the most efficient use of the telephone network
for Internet and other information services. While the FCC has announced that it
does not intend for this NPRM to consider the imposition of access charges or
regulations on ISPs, it could result in the creation of more competition for the
Company. In addition, the FCC could reopen and reconsider these issues at any
time.

A recent federal legislative change, the 1996 Telecommunications Act, may
have potentially significant effects on the operations of the Company. The 1996
Telecommunications Act, among other things, allows the RBOCs and other companies
to enter the long distance business and enables other entities, including
entities affiliated with power utilities, CLECs, and cable television companies,
to provide an expanded range of telecommunications services. Entry of such
companies into the long distance business would result in substantial additional
competition in one of the markets into which the Company intends to expand, and
may have a material adverse effect on the Company and its efforts to expand in
this market. On April 10, 1998, the FCC submitted a report to Congress regarding
the Universal Service Fund support payments. One of the principal issues
considered in this report is whether Internet VoIP should still be classified as
non-telecommunications services, so as to be exempt from regulation, access
charges, and Universal Service Fund support payments. While the FCC determined
that it would continue the exemption, primarily as part of a continuing policy
to permit continued expansion of the Internet, it also indicated that Congress
directed the universal service support mechanism to be competitively neutral.
The

FCC also noted the novel status of Internet telephony, and noted that it may
continue investigation of the regulatory status of Internet telephony. While
Internet services, including Internet telephony, remain unregulated and exempt
from access charges and Universal Service Fund support payments, the FCC could
change its policy at any time. In fact, the FCC has indicated that it will take
a case-by-case evaluation approach to determine whether individual Internet
telephony service offerings more closely resemble enhanced services, which
should remain exempt from regulation, or telecommunications services which are
subject to regulation.

POTENTIAL LIABILITY FOR INFORMATION DISSEMINATED THROUGH NETWORK

The law relating to the liability of ISPs and online service companies for
information carried on or disseminated through their networks has not yet been
definitively established. Internet access and content providers face potential
liability of uncertain scope for the actions of subscribers and others using
their systems, including liability for infringement of intellectual property
rights, rights of publicity, defamation, libel, and criminal activity under the
laws of the U.S. and foreign jurisdictions. The Company does not maintain errors
and omissions insurance. Any imposition of liability on the Company for alleged
negligence, intentional torts, or other liability could have a material adverse
effect on the Company. In addition, recent legislative enactments and pending
legislative proposals aimed at limiting the use of the Internet to transmit
indecent or pornographic materials could, depending upon their interpretation
and application, result in significant potential liability to Internet access
and service providers including the Company, as well as additional costs and
technological challenges in complying with any statutory or regulatory
requirements imposed by such legislation. For example, the Communications
Decency Act of 1996 (amending 47 U.S.C. Section 223), which is part of the 1996
Telecommunications Act, became effective on February 8, 1996. The 1996
Telecommunications Act would impose criminal liability on persons sending or
displaying in a manner available to minors indecent material on an interactive
computer service such as the Internet, and on an entity knowingly permitting
facilities under its control to be used for such activities. While the
constitutionality of these provisions has been successfully challenged in
federal appellate court, the U.S. Department of Justice has appealed to the U.S.
Supreme Court. There can be no assurance as to the final result regarding the
constitutionality of the 1996 Telecommunications Act, or as to the scope and
content of any substitute legislation or other legislation in the U.S. or
foreign jurisdictions restricting the type of content being provided over the
Internet. If these provisions or related legislation are upheld, the effect on
the Internet industry could have a material adverse effect on the Company's
business, financial condition, results of operation, and cash flow. In addition,
CompuServe faced action by German authorities in response to which CompuServe
temporarily restricted the scope of the Internet access it provides to all
subscribers, both in the U.S. and internationally. A number of countries are
considering content restrictions based on such factors as political or religious
views expressed, and pornography or indecency.

DEPENDENCE ON THE INTERNET

Despite growing interest in the many commercial uses of the Internet, many
businesses have been deterred from purchasing Internet access services for a
number of reasons, including, among others, inconsistent quality of service,
lack of availability of cost-effective, high-speed options, a limited number of
local access points for corporate users, inability to integrate business
applications on the Internet, the need to deal with multiple and frequently
incompatible vendors, inadequate protection of the confidentiality of stored
data and information moving across the Internet, and a lack of tools to simplify
Internet access and use. Published reports have indicated that a perceived lack
of security of commercial data, such as credit card numbers, has significantly
impeded commercial exploitation of the Internet to date, and there can be no
assurance that encryption or other technologies will be developed that
satisfactorily address these security concerns. Published reports have also
indicated that capacity constraints caused by growth in the use of the Internet
may, unless resolved, impede further development of the Internet to the extent
that users experience delays, transmission errors and other difficulties.
Further, the adoption of the Internet for commerce and communications,
particularly by those individuals and enterprises that have historically

relied upon alternative means of commerce and communication, generally requires
the understanding and acceptance of a new way of conducting business and
exchanging information. In particular, enterprises that have already invested
substantial resources in other means of conducting commerce and exchanging
information may be particularly reluctant or slow to adopt a new strategy that
may make their existing personnel and infrastructure obsolete.

The Company is also at risk as a result of fundamental technological changes
in the way Internet solutions may be marketed and delivered. Integrating
technological advances may require substantial time and expense, and there can
be no assurance that the Company will succeed in adapting its network
infrastructure. While the Company believes that its plan of combining the scale
and scope of a national operation with the local presence of its ISP operations
offers significant advantages for commerce and communication over the Internet,
there can be no assurance that commerce and communication over the Internet will
become widespread, or that the Company's offered Internet access and
communications services will become widely adopted for these purposes. The
failure of the market for business-related Internet solutions to continue to
develop would adversely impact the Company's business, financial condition,
results of operations, and cash flow. In addition, new technologies or industry
standards have the potential to replace or provide lower cost alternatives to
the Company's existing products and services. The adoption of such new
technologies or industry standards could render the Company's existing products
and services obsolete and unmarketable.

NO ASSURANCE OF PROFITABILITY

The Company's business is speculative and dependent upon the acceptance of
the Company's services and the effectiveness of its marketing program. The
Company has reported net losses since inception. There is no assurance that the
Company will earn significant revenues, that the Company will not continue to
incur losses, or that investors will not lose their entire investment.

IMMEDIATE DILUTION

Assuming an initial public offering price of $14.00 per share, investors
purchasing shares of Common Stock in this offering will incur immediate and
substantial dilution in net tangible book value of the Common Stock of $9.67 per
share. To the extent that currently outstanding options to purchase shares of
Common Stock are exercised, there will be further dilution. See "DILUTION."

RAPID TECHNOLOGICAL CHANGE

To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality, and features of its Internet services and related
Internet hardware and software. The on-line commerce industry is characterized
by rapid technological change, changes in user and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies, and the emergence of new industry standards and practices that
could render the Company's existing Web site and proprietary technology
obsolete. The Company's future success will depend, in part, on its ability to
license leading technologies, enhance its existing services, develop new
services and technologies that address the increasingly sophisticated and varied
needs of its prospective customers, and respond to technological advances and
emerging industry standards on a cost-effective and timely basis. In particular,
successful ISPs must provide customers with the appropriate products, services,
and guidance to best take advantage of the rapidly evolving Internet. The
development of Web sites and other proprietary technology entails significant
technical and business risks. There can be no assurance that the Company will
successfully use new technologies effectively or adapt its Web site and
proprietary technology to customer requirements or emerging industry standards.
If the Company is unable to meet such requirements, its business prospects,
financial condition and results of operations would be materially adversely
affected.

YEAR 2000

The Company may utilize certain third-party supplied computer programs,
interact with computer programs utilized by financial institutions in connection
with credit card transactions, and interact with computer programs used by the
Company's vendors and suppliers. These programs may refer to annual dates only
by the last two digits, e.g., "98" for "1998." Problems are anticipated to arise
for many of these programs in the year 2000. While the Company has taken this
problem into account with respect to its own internal programs, other programs
with which the Company may interact may not have corrected this problem. The
Company is currently assessing the Year 2000 problem readiness of its
third-party supplied software, computer technology, and other services. Based
upon the results of this assessment, the Company will develop and implement, if
necessary, a remediation plan with respect to third-party software, computer
technology, and services that are not Year 2000 ready. At this time, the
expenses associated with this assessment and potential remediation plan cannot
presently be determined. Year 2000 problems and associated costs could have a
material adverse effect on the Company's business, financial condition, and
results of operation.

COMPETITION

The market for the Company's Internet related services and products is
intensely competitive and is characterized by rapid changes in technology and
user needs as well as the frequent introduction of new services and Web sites.
The Company's principal competitors include other Internet Service Providers,
Internet Presence Providers, providers of VoIP, computer software and technology
companies, cable operators, and on-line information, advertising, and shopping
services on the Internet. These competitors have longer operating histories,
greater name recognition, larger installed customer bases, and substantially
greater financial, technical, and marketing resources than the Company. The
Company believes that the principal factors affecting competition in its
proposed market include service performance and reliability, product
functionality, ability to respond to changing customer needs, ease of use,
quality of technical service, training, quality of support, and price. Other
than technical expertise and the limited time available to enter the market,
there are no significant proprietary or other barriers of entry that could keep
potential competitors from developing or acquiring similar tools and providing
competing services in the Company's proposed market. The Company's ability to
compete successfully in the sale of services and software will depend in large
part upon its ability to attract new customers, sell products and services,
deliver and support product enhancements, and respond effectively to continuing
technological changes by developing new products and services. There can be no
assurance that the Company will be able to compete successfully in the future,
or that future competition for VoIP services and on-line e-commerce, services,
and information will not have a material adverse effect on the business,
operating results, and financial condition of the Company. No Assurance that
Marketing Programs will be successful. The Company is implementing a variety of
retail marketing programs, both outside and on the Internet, to attract
potential retail customers from the general public, there is no assurance that
any of these marketing strategies, including but not limited to direct mailings,
outdoor billboards, cable and television networks, radio advertisements, and
credit card advertising inserts, will be successful or that the Company will
acquire a significant number of new customers from its marketing program. Many
of the strategies are tests that are expensive and unproven as they apply to
selling Internet services. If the Company's marketing programs are not
successful, it would be expected to have a material adverse impact on the
financial condition, operating results and business of the Company.

NO ASSURANCE THAT MARKETING PROGRAMS WILL BE SUCCESSFUL

The Company is implementing a variety of retail marketing programs, both
outside and on the Internet, to attract potential retail customers from the
general public. There is no assurance that any of these marketing strategies,
including but not limited to direct mailings, outdoor billboards, radio
advertisements, and credit card advertising inserts, will be successful or that
the Company will acquire a significant

number of new customers from its marketing program. Many of the strategies
involve testing which is expensive. The strategies are unproven as they apply to
selling Internet services. If the Company's marketing programs are not
successful, it would be expected to have a material adverse impact on the
financial condition, operating results and business of the Company.

UNCERTAINTY OF CUSTOMER RETENTION

The sales, marketing, and other costs to the Company of acquiring new
customers are substantial relative to the monthly fee derived from such
customers. Accordingly, the Company believes that its long-term success largely
depends on its ability to retain customers, while continuing to attract new
customers. The Company continues to invest significant resources in its
infrastructure and customer and technical support capabilities. There can be no
assurance that such investment will maintain or improve member retention. The
Company believes that intense competition from competitors, some of which offer
free hours of services to new customers, may cause some of the Company's
customers to switch to competitors' services. In addition, a certain number of
new Internet users experience the Internet only as a novelty and do not become
consistent users of Internet services. These factors may adversely affect the
Company's customer retention rates. Unless offset by other factors, significant
customer loss could have a material adverse impact on the Company.

ON-LINE COMMERCE SECURITY RISKS

A significant barrier to on-line commerce and communications is the need for
secure transmission of confidential information over public networks. Concerns
over the security of transactions conducted on the Internet and other on-line
services, as well as user's desires for privacy may also inhibit the growth of
the Internet and other on-line services especially as a means of conducting
commercial transactions. The activities of the Company and third-party
contractors are expected to involve the storage and transmission of proprietary
information, such as credit card numbers and other confidential information. Any
such security breaches could damage the Company's reputation and expose the
Company to a risk of loss, litigation and possible liability. There can be no
assurance that the Company's security measures will prevent security breaches or
that failure to prevent such security breaches will not have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. Merchants on the Internet are subject to the risk of credit card
fraud and other types of theft and fraud perpetrated by hackers and on-line
thieves. Credit card companies may hold merchants fully responsible for any
fraudulent purchases made when the signature cannot be verified. Although credit
card companies and others are in the process of developing anti-theft and
anti-fraud protections, and while the Company itself is continually monitoring
this problem, at the present time the risk from such activities could have a
material adverse effect on the Company. There can be no assurance that advances
in computer capabilities, new discoveries in the field of cryptography, or other
events or developments will not result in a compromise or breach of the
algorithms used by the Company to protect customer transaction data. A party who
is able to circumvent the Company's security measures could misappropriate
confidential information or cause interruptions in the Company's operations. The
Company may be required to expend significant capital and other resources to
protect against such security breaches or to alleviate problems caused by such
breaches. If any such compromise of the Company's security were to occur, it
could have a material adverse effect to the Company's business, prospects,
financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL

The Company's success is substantially dependent on the performance of its
executive officers and key employees. Given the Company's stage of development
in the CNM Network-TM- business, the Company is dependent on its ability to
retain and motivate high quality personnel. Although the Company believes it
will be able to continue hiring qualified personnel for such purposes, an
inability to do so could materially adversely affect the Company's ability to
market, sell, and enhance its services. The market for qualified

personnel has historically been, and will continue to be, intensely competitive.
The demand for experienced consultants, marketers and programmers is expected to
continue to increase significantly over the next several years, particularly as
Internet utilization grows. The loss of key employees or the Company's inability
to hire and retain other qualified employees could have a material adverse
effect on the Company's business.

INABILITY TO PROTECT PROPRIETARY RIGHTS

The Company regards its CNM Network-TM- concept as proprietary and will
attempt to protect it under a combination of copyright, trade secret, and
trademark laws as well as by contractual restrictions on employees and third
parties. Despite these precautions, it may be possible for unauthorized parties
to copy the Company's services or otherwise obtain and use information that the
Company regards as proprietary. Existing trade secrets and copyright laws
provide only limited protection. Certain provisions of other license and
distribution agreements the Company intends to use, including provisions
protecting against unauthorized use, copying, transfer, and disclosure, may be
unenforceable under the laws of certain jurisdictions. Furthermore, the Company
may be required to negotiate limits on these provisions from time to time. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. There
can be no assurance that the steps taken by the Company will be adequate to
deter misappropriation of proprietary information or that the Company will be
able to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. Significant and protracted litigation may be
necessary to protect the Company's intellectual property rights, to determine
the scope of the proprietary rights of others, or to defend against claims for
infringement. There can be no assurance that third-party claims, with or without
merit, alleging infringement will not be asserted against the Company. Such
assertions can be time consuming and expensive to defend. They could require the
Company to cease the manufacture, use, and sale of infringing products and
services, to incur significant litigation costs and expenses, to develop or
acquire non-infringing technology, and to obtain licenses to the alleged
infringing technology. There can be no assurance that the Company would be able
to develop or acquire alternative technologies or to obtain such licenses on
commercially acceptable terms.

TRADEMARKS AND TRADENAMES

The Company believes that its trademarks and tradenames will have
significant value and will be important to the marketing of its services and
products. There can be no assurance, however, that the Company's registered
trademarks and tradenames with the United States Office of Patents and
Trademarks will not violate the proprietary rights of others, that the Company's
marks and names would be upheld if challenged, or that the Company will not be
prevented from using its marks and names, any of which could have an adverse
effect on the Company. In addition, there can be no assurance that the Company
will have the financial resources necessary to enforce or defend its trademarks
and service marks.

POTENTIAL FOR PRODUCT AND SERVICE LIABILITY

The Company's products and services will be designed to satisfy its
customer's needs. A failure to satisfy a customer's need or an adverse impact on
a customer from the Company's products or services could result in a claim for
damages against the Company, regardless of the Company's responsibility for such
failure. In connection with the sale of its products and services, the Company
will attempt to limit contractually its liability for damages arising from
negligent acts, errors, mistakes, or omissions. Despite this precaution, there
can be no assurance that the limitations of liability set forth in customer
contracts would be enforceable or would otherwise protect the Company from
liability for damages. The successful assertion of one or more large claims
against the Company that exceed available insurance coverages, or changes in the
Company's insurance policies, such as premium increases or the imposition of
large

deductible or co-insurance requirements, could materially and adversely affect
the Company's business, operating results, and financial condition.

CONTROL BY PRINCIPAL STOCKHOLDER

The Company's Chairman of the Board of Directors and President will
beneficially own approximately 46.9% of the Company's outstanding shares of
Common Stock following this offering, assuming that 3,596,577 Shares are sold
and Mr. Rice's 250,000 Outstanding Shares are sold. This stockholder would be
able to significantly influence all matters requiring approval by the
stockholders of the Company, including the election of directors and the
approval of mergers or other business combination transactions. See "PRINCIPAL
STOCKHOLDERS."

NO DIVIDENDS ON COMMON STOCK

The Company does not anticipate the payment of any cash dividends on its
Common Stock in the foreseeable future. See "DIVIDEND POLICY."

UNINSURED LOSSES

There is no assurance that the Company will not incur uninsured liabilities
and losses as a result of the conduct of its business. The Company plans to
maintain comprehensive liability and property insurance at customary levels. The
Company will also evaluate the availability and cost of business interruption
insurance. However, should uninsured losses occur, the Shareholders could lose
their invested capital.

LIABILITIES

The Company may have liabilities to affiliated or unaffiliated lenders.
These liabilities would represent fixed costs that would be required to be paid
regardless of the level of business or profitability experienced by the Company.
There is no assurance that the Company will be able to pay all of its
liabilities. Furthermore, the Company is always subject to the risk of
litigation from licensees, suppliers, employees, and others because of the
nature of its business. Litigation can cause the Company to incur substantial
expenses and, if cases are lost, judgments and awards can add to the Company's
costs.

FUTURE ADDITIONAL CAPITAL REQUIREMENTS

The Company's capital requirements depend on numerous factors, including the
rate of market acceptance of the Company's services, the Company's ability to
maintain and expand its customer base, the level of resources devoted to
expanding the Company's marketing and sales organization and the Company's
research and development activities, the availability of hardware and software
provided by third-party vendors, the rate of expansion of the Company's network
infrastructure, and other factors. The timing and amount of such capital
requirements cannot accurately be predicted. If capital requirements vary
materially from those currently planned, the Company may require additional
financing. The Company has no commitments for any additional financing, and
there can be no assurance that any such commitments can be obtained on favorable
terms, if at all. Any additional equity financing may be dilutive to the
Company's stockholders, and debt financing, if available, may involve
restrictive covenants with respect to dividends, raising future capital and
other financial and operational matters. If the Company is unable to obtain
additional financing as needed, the Company may be required to reduce the scope
of its operations or its anticipated expansion, which could have a material
adverse effect on the Company's business, financial condition, and results of
operations. See "RISK FACTORS--No Minimum Capital Requirement--Additional
Capital May Be Necessary" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Liquidity and Capital Resources."

NO MINIMUM CAPITAL REQUIREMENT--ADDITIONAL CAPITAL MAY BE NECESSARY

No minimum capital requirement is imposed in connection with this offering
of Shares, and subscription funds may be utilized by the Company as soon as they
are accepted, beginning with the commencement of the offering. This offering is
made on a best efforts basis with no underwriter, and there is no assurance that
the Company will raise any capital pursuant to this offering. If the Company
raises only minimal capital from this offering, or significantly less than the
maximum capital, then it will likely be required to raise additional capital in
the future in order to have sufficient funds to implement its business and
marketing plans. If additional capital or financing is not available, the
Shareholders could lose their entire investment in the Company. There is no
assurance that the Company will raise sufficient additional capital to finance
its operations. If the Company does not raise sufficient additional capital,
then it would not be able to implement its business and marketing expansion
plans, hindering its ability to be in business. Furthermore, the Company may
modify this offering due to market conditions or other factors.

FUTURE ISSUANCE OF STOCK BY THE COMPANY

Following this offering, the Company is expected to have outstanding
10,130,827 shares of Common Stock out of a total of 51,000,000 shares of Common
Stock authorized (i.e. 50,000,000 shares of Series 1 Class A Common Stock and
1,000,000 shares of Series 1 Class B Common Stock). The remaining shares of
Common Stock not issued or reserved for specific purposes may be issued without
any action or approval of the Company's stockholders. Furthermore, the Company's
Articles of Incorporation also authorize the issuance of up to 1,000,000 shares
of Preferred Stock, no par value, on terms that may be fixed by the Company's
Board of Directors without further stockholder action. No shares of Preferred
Stock are presently issued or outstanding. The terms of any future series of
Common Stock or Preferred Stock, which may include priority claims to assets and
dividends, and special voting rights, could adversely affect the rights of
holders of the Common Stock. There can be no assurance that the Company will not
undertake to issue additional shares of Commons Stock or Preferred Stock if it
deems the issuance appropriate. See "DILUTION."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of the Company's Common Stock in the
public market following this offering could adversely affect the market price of
the Company's stock. The number of shares of Common Stock available for sale in
the public market is limited by restrictions under the Securities Act of 1933,
as amended (the "Securities Act"). The outstanding shares of the Company's
Common Stock owned by affiliates and by unaffiliated investors are not, however,
subject to lock-up agreements and may be sold in accordance with the terms and
conditions of Rule 144 of the Securities Act or another exemption from
registration, if available. See "SHARES ELIGIBLE FOR FUTURE SALE."

EFFECT OF CERTAIN CHARTER PROVISIONS

Certain provisions in the Company's Articles of Incorporation allow the
Company to issue different classes of Common Stock, the rights and preferences
of which may be specified by the Board of Directors at any time prior to
issuance, without further stockholder approval, which could have the effect of
delaying, deferring or preventing a change in control of the Company, or
creating equity securities senior to the Shares and Outstanding Shares.

NO PUBLIC MARKET FOR COMMON STOCK

Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that a regular trading market will develop
and continue after this offering or that the market price of the Common Stock
will not decline below the initial public offering price.

POTENTIAL VOLATILITY OF STOCK PRICE

The stock markets have experienced price and volume fluctuations that have
particularly affected the stocks of technology companies, resulting in changes
in the market prices of the stocks of many companies that may not have been
directly related to the operating performance of those companies. Such broad
market fluctuations may adversely affect the market price of the Common Stock
following this offering. In addition, the market price of the Common Stock
following this offering may be highly volatile. Factors such as variations in
the Company's financial results, comments by securities analysts, announcements
of technological innovations or new products by the Company or its competitors,
changing government regulations, developments concerning the Company's
proprietary rights or litigation may have a material adverse effect on the
market price of the Common Stock.

DETERMINATION OF OFFERING PRICE ARBITRARY--NO UNDERWRITER

The Company has determined the initial public offering price of the Shares
and the Outstanding Shares in its sole discretion and not pursuant to
arms-length negotiations with an underwriter or other third party. The initial
public offering price bears no relationship to the book value of the Company's
assets, its current earnings or revenues, or any other objective standard. There
is no assurance that the initial public offering price for the Shares or the
Outstanding Shares will be accepted by the market, or that the Company's stock
will not trade for a lower price, if it eventually trades on a public exchange.
The initial public offering price may be deemed to have been determined
arbitrarily by the Company. In the absence of an underwriter for the offering,
purchasers of Shares will not have the benefit of additional due diligence and
arms-length negotiation, nor a firm commitment for the purchase of Shares or
Outstanding Shares. See "PLAN OF DISTRIBUTION."

USE OF PROCEEDS

The net proceeds from the sale of 3,596,577 shares of Common Stock offered
hereby are estimated to be approximately $42,799,266 assuming an initial public
offering price of $14.00 per share, after deducting the offering expenses
payable by the Company, estimated to be 15% of the gross proceeds of the
offering. The Company expects to use the net proceeds of this offering to
finance enhancements to the Company's network infrastructure, including
leasehold improvements and investments in network equipment, to fund CNM's
marketing programs, to develop new products and services, and for working
capital and other general corporate purposes. While the Company has from time to
time engaged in preliminary discussions concerning possible acquisitions or
joint ventures, it has no present understandings, commitments, agreements or
active negotiations with respect to any such transaction. Pending such uses, the
net proceeds of this offering will be invested in short-term, investment grade
interest bearing securities. See "RISK FACTORS--No Minimum Capital
Requirement--Additional Capital May Be Necessary."

DIVIDEND POLICY

The Company does not intend to pay cash dividends in the foreseeable future
on the shares of Common Stock. Cash dividends, if any, that may be paid in the
future to holders of Common Stock will be payable when, as, and if declared by
the Board of Directors of the Company, based upon the Board's assessment of the
financial condition of the Company, its earnings, its need for funds, and other
factors including any applicable laws. The Company is not currently a party to
any agreement restricting the payment of dividends. See "DESCRIPTION OF CAPITAL
STOCK."

CAPITALIZATION

The following table sets forth as of June 30, 1998 (i) the capitalization of
the Company and (ii) the capitalization of the Company as adjusted to reflect
the sale of the 3,596,577 Shares of Common Stock being offered hereby at an
assumed initial public offering price of $14.00 per share and the application of
the estimated net proceeds from the sale of those Shares.

AS OF JUNE 30,
1998 AS ADJUSTED
(UNAUDITED) (UNAUDITED)
------------------ --------------

Indebtedness:
Long-term indebtedness(1)................................................... $ 0 $ 0
Stockholders' Equity:
Preferred Stock, no par value per share,
1,000,000 shares authorized,
none issued and outstanding............................................... $ 0 $ 0
Common Stock, Series 1 Class A, no par value per share,
50,000,000 shares authorized,
5,448,800 issued and outstanding(2)
10,130,827 as adjusted(3)................................................. $ 898,100 $ 43,697,366
Common Stock, Series 1 Class B, $.001 par value per share,
1,000,000 shares authorized,
75,000 issued and outstanding and
as adjusted(4)............................................................ $ 525,000 $ 525,000
Additional Paid-in Capital.................................................. $ 0 $ 0
Accumulated Deficit During Development Stage................................ $ (1,808,140) $ (1,808,140)
Total Shareholders' Equity (Deficit)........................................ $ (385,040) $ 42,414,226
------------------ --------------
Total Capitalization........................................................ $ (385,040) $ 42,414,226
------------------ --------------
------------------ --------------

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

(1) Does not include a noninterest-bearing demand promissory note payable by the
Company to an affiliated general partnership. See "BUSINESS--Previous
Financing and Development Arrangement."

(2) Includes 448,800 shares of the Company's Common Stock (as of June 30, 1998)
previously sold to outside investors for $2.00 per share as part of a
private placement pursuant to Section 4(2) of the Securities Act of 1933, as
amended, which commenced in October 1997 and terminated on October 8, 1998.
Includes 5,000,000 shares of Common Stock owned by Fredrick Rice, the
President and Chairman of the Board of Directors of the Company. See
"DESCRIPTION OF CAPITAL STOCK" and "PRINCIPAL STOCKHOLDERS." Does not
include an additional 1,085,450 shares of Common Stock issued in the private
placement between June 30, 1998 and October 8, 1998. See "BUSINESS-- Prior
Private Placement of Stock." Does not include any shares which may be
subscribed for by Eller Media Company. See "BUSINESS--Agreement with Eller
Media Company."

(3) The capital to be raised from the placement of Shares is expected to be a
potential maximum of $50,352,078. The Common Stock capital, as adjusted,
reflects the issuance of 3,596,577 Shares, after deducting offering costs
estimated to be 15% of the gross proceeds of the offering. To the extent
that more or less than $50,352,078 is raised from the placement of Shares,
the figures would be adjusted proportionately. See "PLAN OF DISTRIBUTION."

(4) Includes 75,000 shares issued to a prior unaffiliated consultant. Does not
reflect an option to purchase 250,000 shares of Series 1 Class B Common
Stock held by Consumer Net Partners, an affiliated general partnership,
which were issued to it as part of the consideration for all of the
partnership's rights in the Company's business. See "BUSINESS--Previous
Financing and Development Arrangement." The Series 1 Class B Common Stock
does not have voting or dividend rights, but is convertible into Series 1
Class A Common Stock on a share-for-share basis. See "DESCRIPTION OF CAPITAL
STOCK--Common Stock."

DILUTION

As of June 30, 1998, the PRO FORMA net tangible book value of the Company
was $1,438,516 or approximately $.22 per share of Common Stock, including the
additional 1,085,450 shares issued in the previous private placement as if they
had been issued on June 30, 1998. The calculation assumes that the offering
costs incurred on the previous private placement are 16% of the gross proceeds
of that private placement. PRO FORMA net tangible book value per share consists
of total assets less intangible assets and liabilities, divided by the total
number of shares of Common Stock outstanding. Without giving effect to any
changes in such PRO FORMA net tangible book value after June 30, 1998, other
than to give effect to the sale of the 3,596,577 shares of Common Stock offered
hereby at an assumed initial public offering price of $14.00 per share and after
deducting estimated offering expenses payable by the Company (and accounting for
the issuance of an additional 1,085,450 shares of the Company's Common Stock for
$2.00 per share between June 30, 1998 and October 8, 1998), the PRO FORMA net
tangible book value at June 30, 1998, would have been $44,237,782 or
approximately $4.33 per share. As of June 30, 1998, the net tangible book value
per share of Common Stock owned by the Company's current stockholders would have
increased by approximately $4.11 without any additional investment on their part
and the purchasers of the Shares and Outstanding Shares will incur an immediate
dilution of approximately $9.67 per share from the offering price. "Dilution"
means the difference between the offering price and the PRO FORMA net tangible
book value per share after giving effect to the offering. Holders of Common
Stock may be subjected to additional dilution if any additional securities are
issued as compensation or to raise additional financing. The following table
illustrates the dilution which investors participating in this offering will
incur and the benefit to current stockholders as a result of this offering:

Initial public offering price per share............................. $ 14.00
Pro forma net tangible book per share value as of June 30,
1998(1)........................................................... $ .22
Increase per share attributable to the Offering..................... $ 4.11
Pro forma net tangible book value after this Offering............... $ 4.33
Dilution per share to new investors................................. $ 9.67

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

(1) Includes shares of the Company's Common Stock issued or sold between June
30, 1998 and October 8, 1998, on a pro forma basis. See "BUSINESS--Prior
Private Placement of Stock." Also includes the prior issuance of 5,000,000
shares of Common Stock to the President and Chairman of the Board of
Directors of the Company, and 75,000 shares of Series 1 Class B Common Stock
to an unaffiliated prior consultant. Does not include (i) options to
purchase 250,000 shares of the Company's Series 1 Class B Common Stock held
by Consumer Net Partners, an affiliated general partnership, or (ii)
2,097,500 management, employee, and other stock options granted between July
1997 and September 1998. See "MANAGEMENT" and "DESCRIPTION OF CAPITAL
STOCK."

The following table sets forth, on an as adjusted basis as of June 30, 1998,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid, and the average price per share paid by
the existing holders of Common Stock and by the new investors, before deducting
estimated offering expenses payable by the Company, at an assumed initial public
offering price of $14.00 per share:

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

Existing Shareholders(1).......................... 6,609,250(1) 65.2% $ 3,593,500(2) 6.7% $ .54
New Investors..................................... 3,596,577 34.8% $ 50,352,078 93.3% $14.00
---------------- --------- ----------------- --------- ------
Total........................................... 10,130,827 100.0% $ 53,945,578 100.0% $ 5.32
---------------- --------- ----------------- --------- ------
---------------- --------- ----------------- --------- ------

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

(2) Does not include $500,000 reflecting the promissory note issued by the
Company to Consumer Net Partners as part of the consideration for all of the
partnership's rights in the Company's business. See "BUSINESS--Previous
Financing and Development Arrangement."

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and the Financial Statements and Notes to the Financial Statements
included elsewhere in this Prospectus. The statement of operations data for the
period from inception (May 9, 1996) through December 31, 1996 and the balance
sheet data as of December 31, 1996, have been derived from financial statements
audited by Caldwell, Becker, Dervin, Petrick & Co. The statement of operations
data for the year ended December 31, 1997, and the balance sheet data as of
December 31, 1997, have been derived from financial statements audited by
Stonefield Josephson Accountancy Corporation, independent certified public
accountants. The selected financial data as of and for the six months ended June
30, 1997 and June 30, 1998 have been derived from the Company's unaudited
financial statements. In the opinion of management, the unaudited financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results for the periods
presented.

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STATE COMPANY)

YEAR ENDED DECEMBER 31
SIX MONTHS ENDED JUNE 30 -------------------------------
-------------------------- INCEPTION
(UNAUDITED) (UNAUDITED) (5/9/96 TO
1998 1997 1997 12/31/96)
------------ ------------ ------------ -----------------

STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ 11,713 $ 6,916 $ 30,697 $ 20,828
Loss before income taxes............................ (602,436) (9,374) (1,101,605) (101,699)
Net Loss............................................ (603,236) (10,174) (1,102,405) (102,499)
Net Income (Loss) per share......................... (.11) (.00) (.22) (.02)
Cash dividends per common share..................... 0 0 0 0
Weighted average number of shares................... 5,273,290 5,003,619 5,037,857 5,000,000

AT JUNE 30 AT DECEMBER 31
----------- -------------------
1998 1997 1996
----------- -------- --------

BALANCE SHEET DATA:
Total Assets............................................................... $856,970 $ 81,973 $ 25,795
Long-term Obligations...................................................... 0(1) 0(1) 0(1)

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

(1) The long term obligations do not include a non interest-bearing promissory
note in the outstanding principal amount of $500,000 payable by the Company
on demand to an affiliated general partnership. See "BUSINESS--Previous
Financing and Development Arrangement."

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

THE FOLLOWING "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN
THIS PROSPECTUS.

REVENUES

GENERAL

Recurring revenues consist of monthly fees charged to customers for Internet
access and other ongoing services. Other revenues generally represent one-time
setup fees. Recurring revenues are recognized pro rata over the period for which
the services are performed. Other revenues are recognized as earned.

SIX MONTHS ENDED JUNE 30, 1998, COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

Revenues for the six month period ended June 30, 1998 were $11,713 as
compared to $6,916 for the six month period ended June 30, 1997. The increase in
revenues was due primarily to a modest increase in dial-up and Web hosting
clients. The Company is still a development stage company and comparisons and
trends at this time may not be a meaningful indication of the Company's business
prospects. The Company has been focused on installing the telecommunications
equipment and software necessary to provide high speed service and to
accommodate traffic. It has only recently commenced its comprehensive marketing
program. See "BUSINESS--Marketing and Revenues."

TWELVE MONTHS ENDED DECEMBER 31, 1997, COMPARED TO PERIOD FROM MAY 9, 1996
(INCEPTION) TO DECEMBER 31, 1996

Revenues for the twelve month period ended December 31, 1997 were $30,697 as
compared to $20,828 for the period from inception, May 9, 1996, to December 31,
1996. The increase in revenues was due primarily to a modest increase in the
dial-up customers, more advertising revenue from the CNM Shopping Mall on the
Internet, and the longer comparative reporting period. Due to the fact that the
Company is a development stage company, comparisons and trends at this time may
not be a meaningful indication of the Company's business prospects. The revenues
generated during this period are primarily from the CNM Shopping Mall.

EXPENSES AND LOSS--GENERAL

GENERAL

The Company's expenses are generally comprised of (i) telecommunications
expenses and depreciation expense on equipment used in network operations and
for ongoing customer services, (ii) licensing fees, (iii) software development
costs, (iv) marketing and referral costs, and (v) general and administrative
costs. A small portion of the telecommunication costs are access fees paid to
CLECs.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

Expenses were $613,843 for the six-month period ending June 30, 1998 as
compared to $16,290 for the six-month period ending June 30, 1997. Substantially
higher expenses in the six months ended June 30, 1998 primarily resulted from
greater expenditures by the Company for advertising, and marketing, as well as
the hiring of a significant number of new computer engineers, systems analysts
and support personnel.

The net loss for the six-month period ended June 30, 1998 was $603,236 compared
to a net loss of $10,174 for the six-month period ended June 30, 1997. The
significant increase in net loss primarily reflects a rapid increase in the rate
at which the Company added infrastructure and management resources in the first
half of 1998 as compared to the first half of 1997.

TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO PERIOD FROM MAY 9, 1996
(INCEPTION) TO DECEMBER 31, 1996

Expenses were $1,132,302 for the twelve month period ended December 31, 1997
or $1,009,775 higher than the $122,527 for the period from inception, May 9,
1996, to December 31, 1996. The increase was primarily due to increases in
salaries, office expenses, outside services, and loss on acquisition of
partnership interest from related party. As the Company expands, operating
expenses are expected to continue to increase. Due to the fact that this is a
development stage company, comparisons and trends have not been established. The
net loss for the twelve month period ended December 31, 1997 was $1,102,405
compared to a net loss of $102,499 for the period from inception, May 9, 1996,
to December 31, 1996. This increase in the net loss was primarily due to the
payment made by the Company to Consumer Net Partners, an affiliated California
general partnership, on December 31, 1997, for intangible assets not
specifically identified, and the charge to earnings taken by the Company in
connection with the granting of 250,000 options to purchase 250,000 shares of
Series 1 Class B Common Stock for $.50 per share to Consumer Net Partners.

STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

The Company's statement of cash flows for the six months ended June 30, 1998
reflects that operating activities during that period utilized cash of $574,344
as compared to $4,323 of cash provided during the six months ended June 30,
1997. The increase in the use of cash flows from operating activities during the
six months ended June 30, 1998 primarily resulted from a higher net loss for the
six-month period ending June 30, 1998 as compared to the six-month period ending
June 30, 1997. The cash provided by financing activities for the six months
ended June 30, 1998 was $769,250 as compared to $4,593 of cash used by financing
activities for the six-month period ending June 30, 1997. The cash used by
investing activities for the six-month period ending June 30, 1998 was $179,652
as compared to none for the six months ended June 30, 1997. The significantly
higher utilization of cash for investing during the first half of 1998 than the
first half of 1997 primarily reflects the acquisition of computer equipment,
software and related assets.

TWELVE MONTHS ENDED DECEMBER 31, 1997, COMPARED TO PERIOD FROM MAY 9, 1996
(INCEPTION) TO DECEMBER 31, 1996

The Company's statement of cash flows for the twelve month period ended
December 31, 1997 reflects that operating activities during that period used
cash of $128,679 as compared to $62,398 used for the period from inception, May
9, 1996, to December 31, 1996. This increase in the use of cash from operating
activities during the twelve month period ended December 31, 1997 primarily
resulted from a higher net loss for the twelve month period ended December 31,
1997. The cash provided by financing activities for the twelve month period
ended December 31, 1997 was $176,264 as compared to $81,977 of cash provided by
financing activities for the period from inception, May 9, 1996, to December 31,
1996. The cash used by investing activities for the period ended December 31,
1997 was $41,740, as compared to $18,878 for the period from inception, May 9,
1996, to December 31, 1996. During the period from inception to December 31,
1997, the money used by investing activities was primarily for acquisition of
computer equipment, software and related assets.

SALES AND MARKETING

Sales and marketing expenses consist primarily of salaries, cost of
promotional material, advertising, travel, and third party sales commissions.
Sales and marketing expenses were approximately $180.00, or 0.9% of revenues,
and zero for the period from inception, May 9, 1996, to December 31, 1996, and
the year ended December 31, 1997, respectively. Sales and marketing expenses
were zero and $184,536, or 1,575.5% of revenues for the six months ended June
30, 1997 and June 30, 1998, respectively. The Company intends to aggressively
promote the CNM brand and as a result expects further significant increases in
sales and marketing expenses in future periods. The Company does not capitalize
costs associated with the acquisition of customers.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses consist primarily of costs associated
with finance and accounting, human resources, management compensation, legal
expenses, and office operations. General and administration expenses were
approximately $121,334, $394,900, and $427,250 for the period from inception,
May 9, 1996, to December 31, 1996, the year ended December 31, 1997, and the six
months ended June 30, 1998, respectively. General and administration expenses
were approximately $16,290 and $427,250 for the six months ended June 30, 1997
and June 30, 1998, respectively. Since inception, general and administrative
expenses have increased as a result of the increased number of employees,
increased rent, and other general and administrative expenses as the Company
focused on building an administrative infrastructure in anticipation of an
increase in the number of customers and employees. During the six months ended
June 30, 1998, the Company hired a number of senior management personnel and
moved into a new headquarters building, which resulted in a significant increase
in general and administrative expenses as compared to the same period in 1997.
Management intends to implement a new management information system and continue
to expand staff in order to support customer growth. As a result, the Company
expects general and administrative expenses to increase in future periods.

INCOME TAXES

No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses through December 31, 1997 and through June
30, 1998. At December 31, 1997, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $150,000 which begin to expire
in 2017, and for state income tax purposes of approximately $149,000, which
begin to expire in 2004. The Tax Reform Act of 1986 includes provisions which
limit the net operating loss carryforwards for use in a given year if
significant ownership changes have occurred. This offering may result in an
ownership change limiting the Company's ability to utilize net operating loss
carryforwards to offset future income, if any. The Company has provided a full
valuation allowance on the deferred tax asset because of the uncertainty
regarding the realizability.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The Company's operating results have fluctuated significantly in the past
and will likely continue to fluctuate significantly in the future as a result of
a variety of factors, many of which are beyond the Company's control. These
factors include the rates of and costs associated with new customer acquisition,
customer retention, capital expenditures, and other costs relating to the
expansion of operations, the timing of new service and product announcements,
changes in the pricing policies of the Company and its competitors, market
acceptance of new and enhanced versions of the Company's services and products,
changes in operating expenses, including telecommunication costs, changes in the
Company's strategy, personnel changes, the introduction of alternative
technologies, the effect of potential acquisitions, increased competition in the
Company's markets and other general economic factors. In addition, a relatively
large portion of the Company's expenses are fixed, and therefore the Company's
operating margins are particularly sensitive to fluctuations in revenues. Due to
these factors, in some future quarter

the Company's operating results may fall below the expectations of securities
analysts and investors. In such event, the market price of the Company's Common
Stock would likely be materially and adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations primarily through the private sales of
equity securities. The Company's operating activities used net cash of
approximately $128,679 and $574,344 during 1997 and the six months ended June
30, 1998, respectively. During 1997 and the six months ended June 30, 1998, net
cash used in operations resulted primarily from net losses.

Cash used by investing activities has consisted primarily of equipment
purchases for the Company's Simi Valley headquarters, for its POPs and for
network expansion. For the year ended December 31, 1997 and the six months ended
June 30, 1998, capital expenditures amounted to approximately $41,740 and
$179,652, respectively. Including the $179,652 spent during the first six months
of 1998, the Company anticipates investing approximately $1,100,00 during 1998
on network enhancements, including leasehold improvements and investments in
network equipment, with commitments for approximately an additional $11,000,000.

Cash from financing activities provided the Company with approximately
$769,250 the six months ended June 30, 1998, and $176,264 during the twelve
months ended December 31, 1997. The Company's financing activities have
consisted of the private sale of Common Stock. From inception through June 30,
1998, the Company raised $897,600 through the private sale of Common Stock.

As of December 31, 1997 and June 30, 1998, the Company had cash and cash
equivalents of approximately $6,546 and $21,800, respectively, and negative
working capital of approximately $615,391 and $643,745, respectively. The
Company does not intend to make private offerings of its stock while this
Prospectus is in registration or while this offering is being conducted. On
September 15, 1998 the Company ceased its private placement of Common Stock
pursuant to which it had raised a total of $3,068,500 since it began in October
1997.

The Company believes that the net proceeds from this offering will be
sufficient to meet the Company's operating expenses and capital requirements for
a certain period of time, depending on the amount of capital raised by this
offering. In the absence of any capital from this offering, or from an
alternative source, the Company estimates that it could be depleted of working
capital by the end of 1998. See "RISK FACTORS--No Minimum Capital
Requirement--Additional Capital May Be Required."

BUSINESS

GENERAL

The Company was incorporated under the laws of the State of California on
May 9, 1996. The Company is a full-service Internet Service Provider and
Internet Presence Provider on the World Wide Web, providing dial-up access,
dedicated connectivity, virtual Web hosting, Web creation, virtual domain
hosting, Web server co-location, technical support, training, and link-up
services for businesses and individuals. The Company gives particular attention
to providing exemplary customer service at competitive prices. In July 1998, the
Company, as an Internet Service Provider, began offering to individuals and
businesses dial-up access to the Internet. The Company offers reliable, fast and
inexpensive 56K V.90 Personal Access, 112K V.90 Personal Access, and 64k/128k
ISDN Personal Access to the Internet. The Company provides complete business
solutions in ISDN, frame relay, IDSL and many other Digital Subscriber Lines
("DSL") products and services, corporate firewalls, security audits, and network
intrusion investigations.

The Company is expanding the scope of sophisticated Internet services that
it can provide by installing state-of-the-art Ascend Communications switching
equipment and entering into strategic telecommunications access arrangements
with competitive local exchange carriers ("CLECs"). The Company intends to
provide high quality, high speed voice and data communication services to
businesses and individuals by utilizing analog dialup, ISDN, frame relay, DSL,
Voice over Internet Protocol ("VoIP"), T-1 and T-3 circuits, and primary rate
interface ("PRI") with multiple telephone lines. The wiring in the Company's
data center is CAT-5 enhanced, capable of handling 1.2 gigabytes per second. The
Company operates a high capacity OC12x3 ATM SONET that is linked directly to the
Internet backbone. The Company is currently implementing the equipment and
software necessary to provide VoIP. This equipment, along with Ascend GRF 1600
routers, Ascend Max TNTs, Ascend Max 6000s, Ascend GRF 400 routers, and CBX 500
ATM switches enables CNM to provide data communications and quality of service
("QOS") voice telecommunications. Through access arrangements with competitive
local exchange carriers ("CLECs"), the Company is installing its switching
equipment in several "Points of Presence" ("POPs") to expand its
telecommunications network, initially in California and subsequently on a
national basis. The Company plans to implement additional POPs in other
countries that would enable the Company to provide Internet services and VoIP to
customers on a global basis.

The Company recently completed the development of proprietary software to
enable secure commercial transactions (i.e., purchases and sales) to be
conducted within the CNM Network-TM- and on other Web sites. The Company also
recently developed a proprietary provisioning system allowing users complete and
simplified automation of all the Company's services.

CNM provides two levels of service. These services are classified as
"Personal" and "Business." Personal Services are defined as services designed
and implemented for the individual user. Business Solutions are defined as
services designed and implemented for business owners, executives, and
employees. Through relationships acquired by CNM with Ascend Communications, ICG
Telecom Group, Inc., Pacific Bell Internet, PacNet, Covad, and other high
profile companies, the Company will implement both levels of service in Southern
California up through Northern California, including San Francisco and
Sacramento. The Company's short term plan is to expand coverage of both levels
of service on a national basis. The Company's long term plan is to implement
these same services on a global basis. Although the Company provides high
quality service at low prices for individuals, the Company's primary focus is
providing complete business solutions worldwide.

PERSONAL SERVICES

INTERNET CONNECTIVITY INTERNET PRESENCE TELEPHONY SERVICES
- -------------------------- -------------------------- --------------------------

Analog Dial-up CNM Network Web Space Inter-Local Long Distance

ISDN Dedicated/Dial-up CNM Network Email Long Distance

Frame Relay Dedicated Internet Software Facsimile Services

xDSL Dedicated Technical Support On-Line Account
Maintenance

Point-To-Point Dedicated On-Line Account
Maintenance

On-Line Account
Maintenance

BUSINESS SOLUTIONS

INTERNET/NETWORK
INTERNET CONNECTIVITY INTERNET PRESENCE TELEPHONY SERVICES CONSULTING
- --------------------------- --------------------------- --------------------------- ---------------------------

Analog Dial-up Web Site Hosting Inter-Local Long Distance Security Evaluation

ISDN Dedicated/Dial-up Email Hosting Long Distance Web Design

Frame Relay Dedicated Secure E-Commerce Facsimile Services Intranet/Extranet Design

xDSL Dedicated Domain Name Service On-Line Account Maintenance LAN/WAN Design

Point-To-Point Dedicated Site Promotion

On-Line Account Maintenance Co-location Services

On-Line Account Maintenance

The Company has recently entered into extensive advertising agreements with
Eller Media Company, Advo, Visa Card, Cable Networks and several major Southern
California radio stations, as well as multiple reseller agreements to conduct
the Company's retail marketing program for prospective dial-up and business
solution customers. See "BUSINESS--Marketing and Revenues."

The Company recognizes that the Internet represents a rapidly expanding
medium to a growing number of on-line users. The Company's objective is to
capitalize on this opportunity by providing enhanced and expanded Internet
services to businesses and individuals nationwide, beginning with the State of
California.

INDUSTRY BACKGROUND

The Internet is an increasingly significant global medium for
communications, information, and online commerce. International Data Corporation
("IDC") estimates that the number of Internet users was 81 million is 1997 and
will reach 177 million by 2000. In addition, IDC projects that ISP revenues in
the United States will grow from $4.6 billion in 1997 to $18.3 billion in 2000,
implying a compound annual growth rate of 58.5% per year. Continued growth in
Internet usage is expected to be fueled by several factors, including the large
and growing installed base of personal computers in the workplace and home,
advances in the performance and speed of personal computers and modems,
improvements in network infrastructure, easier and cheaper access to the
Internet, and increased general awareness of the Internet.

The networks that comprise the Internet are connected in a variety of ways,
including by public switched telephone network and by high speed, dedicated
leased lines. Communications on the Internet are enabled by Internet Protocol
("IP"), an inter-networking standard that enables communication across the
Internet regardless of the hardware and software used.

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

ISPs generally operate networks comprised of dedicated lines leased from
Internet backbone providers using IP-based switching and routing equipment and
server-based applications and databases. Customers are connected to the ISP's
POP by facilities obtained by the customer or the ISP from either I-LECs or
C-LECs through a dedicated access line or the placement of a circuit-switched
local telephone to call the ISP. The rapidly growing need for Internet access
and technology has resulted in a highly fragmented industry with the
proliferation of over 2000 ISPs operating within the United States. These ISPs
are primarily made up of a few large national providers focused on high
bandwidth access and a large number of small providers with limited resources
focused on serving local markets. Often the solutions offered by these companies
fail to address certain elements required to ensure that customers'
mission-critical Internet operations are reliable, scalable, and high-performing
and these companies fail to provide a broad array of efficient, low-cost
communications products and services. The Company believes that customer service
has emerged as an increasingly important element of providing Internet services
and that often the large, national ISPs do not offer individual customers the
level of support desired and that many of the small, regional ISPs do not have
the resources necessary to offer adequate customer support.

CNM NETWORK SERVICES

Internet Connectivity for Businesses and Individuals

ANALOG DIAL-UP. CNM provides high-speed access to the Internet over
standard telephone lines. Access speeds range from 2400bps to 112kbps. CNM
provides access for connections up to 56Kbps for a flat monthly fee of $14.95
and a one-time set-up fee of $25.00. For Multi-Link (2 modems) users, CNM
provides access for a flat rate of $18.00 per month and a one time set-up fee of
$25.00.

ISDN (INTEGRATED SERVICES DIGITAL NETWORK). The Company provides high-speed
digital Internet access via ISDN for both dedicated and dial-up customers.
Access speeds range from 64Kbps to 128Kbps. Dial-up ISDN fees range from $20.00
to $28.00 depending upon connection speeds. A one-time set-up fee of $25.00
applies to this service. Dedicated ISDN fees range from $125.00 to $235.00
depending upon connection speeds and contract length. A one-time set-up fee of
$200.00 applies to this service.

xDSL (DIGITAL SUBSCRIBER LINES). XDSL is a burgeoning method of Internet
connectivity that includes ADSL (Asymmetric Digital Subscriber Line), sDSL
(Symmetric Digital Subscriber Line), RADSL (Rate Adaptive Digital Subscriber
Line), and iDSL (ISDN Digital Subscriber Line). DSL is a promising technology
that dramatically increases a subscriber's bandwidth, utilizes telephone wiring
already installed in virtually every home and business, and offers faster
set-up/connection times than the public switched telephone network. These
digital circuits enable businesses to connect a LAN (Local Area Network) to the
Internet at high speeds for reduced costs. Access speeds range from 144Kbps to
1.54Mps. Fees for xDSL range from $250.00 to $850 per month depending upon
access speed. All xDSL customers are charged a one-time set-up fee that varies
depending upon service level.

FRAME RELAY. CNM offers high-speed dedicated/24 hour connectivity via frame
relay. Frame relay connections range from 56Kbps up to 1.544Kbps. Fees for frame
relay range from $105.00 to $605.00 depending upon access speed. CNM also
charges a one-time set-up fee that varies depending upon access speed.

POINT-TO-POINT DEDICATED CIRCUITS. The Company provides high speed private
dedicated digital circuits with access speeds ranging from 1.53M(T-1) to
45M(T-3).

ON-LINE ACCOUNT MAINTENANCE. The Company provides all customers with
on-line account maintenance capability. This capability allows both business and
personal users to access their account information in order to review and/or
update account information.

Internet Presence for Businesses

VIRTUAL WEB SITE HOSTING. Virtual Web Site Hosting is a service through
which CNM hosts Web pages on behalf of its customers. Targeted for retailers and
other businesses, this service enables customers to have a continued presence on
the Internet. CNM customers are also able to offer on-line customer service and
electronically facilitated order processing. CNM offers space on its proprietary
virtual web hosting network for corporate customers. Virtual Web Hosting
accommodates businesses and organizations who demand an individualized address
on the World Wide Web (i.e. "www.mycompany.com"). Web hosting features include
database connectivity, Microsoft FrontPage compatibility, CGI scripting
capabilities, and unlimited FTP (File Transfer Protocol) access. Site promotion
is provided for customers who purchase certain Virtual Web Hosting packages. The
Company also offers "upper level host names," a unique Web service that allows a
virtual web hosting customer to have several unique address on the world wide
web all of which are based upon the customer's individual domain name (i.e.
"sales.mycompany.com"). Prices for Virtual Web Hosting range from $20.00 to
$345.00 per month depending upon the package selected by the customer. CNM also
charges a one-time set-up fee that also depends upon the package selected. The
Company currently supports approximately 200 virtual Web hosting customers.

The Company supports and promotes Web sites by providing:

- Web production and hosting service.

- On-line sales (e-commerce).

- Animation/3D graphics.

- Sound and live audio environments.

- Local, national and global 24-hour access and exposure.

- Daily technological research and developments.

- Extensive customer service.

- Wide varieties of media coverage.

- Technical support and training.

VIRTUAL EMAIL HOSTING. CNM provides SMTP (Simple Mail Transport Protocol)
and POP (Post Office Protocol) for virtual domains. These services are included
in Virtual Web Site Hosting packages and can also be purchased separately. As
with Virtual Web Hosting, Virtual Email Hosting offers business and
organizations a unique presence on the Internet (i.e. joe@mycompany.com). Email
hosting features include unlimited Email "forwarding," and "aliases," and
"autoresponders." Fees for Virtual Email Hosting depend upon the number of
virtual email users and the amount of storage space required.

SECURE E-COMMERCE. The Company also offers secured transaction processing
via the Internet. Utilizing the Company's experience, virtual hosting customers
may implement secured transaction processing over the Internet. Secure
E-Commerce allows customers to process transactions on-line in an encrypted
manner. Thus, both CNM customers and end users have a safe and secure way to
conduct transactions over the Internet. Secure E-Commerce is included with
certain Virtual Web Site Hosting packages and can also be purchased with
Co-location services.

DOMAIN NAME SERVICE. Domain Name Registration allows for unique addresses
on the Internet (i.e. "mycompany.com"). CNM charges $75.00 for initial Domain
Name Registration. Customers then pay renewal fees on a yearly basis to an
Internet Domain Registration Agency, Internic. Domain Name Service is included
in all Virtual Web Hosting packages and with co-location services.

CO-LOCATION SERVICES. The Company also provides Web server co-location
services to allow medium and large scale businesses the ability to house their
proprietary servers on CNM's own switches. Co-located customers are provided
with a switched ethernet connection to the Company's backbone. This service
provides companies with the ability to control their own specific bandwidth and
the flexibility to make day-to-day changes, as well as to receive substantial
traffic without delays. Customers may purchase "Maintenance Contracts" from CNM
to obtain high-level/on-site technical support for their servers. Fees for co-
location services vary depending upon transfer rate and rack space needs. The
Company currently supports four co-location servers in its Simi Valley
headquarters.

PROVISIONING SYSTEM. Pursuant to an agreement with Comat Systems Solutions
Private Limited, a software development company based in India, the Company has
developed a provisioning system to support a retail customer base for virtual
and co-location Web hosting. As a split wire application, this system allows
automatic end user order processing for Web sites, including DNS registration
and host resources set-up. CNM customers can troubleshoot, add additional disk
space, and add additional email accounts automatically through the provisioning
system. Additionally, the system can initialize accounting records, process
bills, generate invoices, and maintain customer accounts for CNM and its
clients.

VIRTUAL BUSINESS CENTER. The advent of high power, low cost hardware
coupled with public domain operating systems and server software has
significantly enhanced the profit potential in this Internet market. To take
advantage of this market, the Company plans to implement the CNM Network-TM-
virtual business center through which the Company can offer a tool kit for
domain registration, Web site creation, resource allocation, and Web site
maintenance. The service would be offered at various levels of sophistication,
ranging from simple Web sites to business Web sites and Web sites with
e-commerce capability. The Company plans to include a credit card module for
payment to facilitate secure commercial

purchases and sales on the Internet. Other planned features include site account
database record creation, co-location, name servers, virtual FTP host,
email/smpt host, central file services, accounting and virtual domain
maintenance modules. Co-located servers are also expected to provide different
levels of virtual domain registration and hosting.

ON-LINE ACCOUNT MAINTENANCE. The Company provides all customers with
on-line account maintenance capability. This allows both business and personal
users to access their account information in order to review and/or update
account information.

Internet Presence for Individuals

CNM NETWORK WEB SPACE. The Company offers individual users Web space on the
CNM Network Web site. This service is included with all personal connectivity
packages and may also be purchased separately. Fees are based upon storage
needs.

CNM NETWORK EMAIL. CNM includes one email account with all connectivity
packages from which Customers may send and receive electronic mail. Additional
email accounts can be purchased separately.

INTERNET SOFTWARE. Through collaborations with several software developers,
CNM has developed an Internet software package that enables customers to use the
Internet in a simple and efficient manner. This software package includes a web
browser, a news reader, several email client programs, and an audio/video
streaming client. The CNM software package is free to all CNM customers.

TECHNICAL SUPPORT. To ensure a simple and enjoyable Internet experience,
the Company offers superior technical support to all customers. Customer
problems are handled in an expedient and efficient manner. A detailed on-line
knowledge base is available to all CNM users. Technical support is free for all
customers.

ON-LINE ACCOUNT MAINTENANCE. The Company provides all customers on-line
account maintenance capability. This allows both business and personal users to
access their account information in order to review and/or update account
information.

Internet and Network Consulting for Businesses

BUSINESS NETWORK SECURITY SERVICES. CNM offers three levels of security
services. The first level consists of a one-time security check-up. This
involves intrusion testing of a company's network. Once complete, the Company
will identify the appropriate measures needed to improve the security flaws
found during the intrusion test. The price of this service varies based upon the
size and topology of the network and any fees involved in upgrading the
company's network, including, but not limited to software patches on servers and
router updates. The second level is an option available to customers who
purchase a turnkey dedicated connection package from CNM. CNM technicians, after
establishing the network connection, will implement a core level of security
measures into the network equipment, such as router enhancements to block
malicious network traffic which can disrupt the various computers connected to
the network and disrupt a business. The third level of security service involves
constant security monitoring of a company's network. Upon entering into a
"security support contract," a company will receive constant security monitoring
of its network, as well as continuous upgrading of network equipment to guard
against network intrusion. At this time, the third level of security service is
only available to those who purchase their connectivity from CNM.

WEB PRODUCTION. Web production is one of the fastest growing segments of
the Internet industry. The Company's Web production services include Web site
design, Web site creation, and technical support. CNM customers are able to
offer interactive, multimedia advertising displays. This provides businesses

with direct gateways to offer goods and services in an attractive and user
friendly environment to anyone on the Internet. The Company utilizes several
high-quality Web site designers. These designers are available to all CNM
customers. Fees for web site design vary depending upon Web site size and
content.

LAN/WAN DESIGN. Custom network design is provided by the Company's
engineering task force. Customized networks can be designed and implemented by
the Company. These networks include Local Area Networks and Wide Area Networks.
Fees for LAN/WAN design are dependent upon the size and configuration of the
customers network needs.

Telephony Services for Business and Individuals

INTER-LOCAL LONG DISTANCE. The Company will offer inter-local long distance
service to both businesses and individuals at highly competitive rates outside
and within the network calling radius.

LONG DISTANCE. The Company will provide long distance service to both
businesses and individuals within the network calling radius. Outside the
network calling radius, long distance rates will be offered through a
collaborative arrangement with other companies at the lowest rate possible.

FACSIMILE SERVICES. MultiVoice reduces remote site communication costs by
routing voice and facsimile across the Company's intranet connection. Customers
who use the Company's MultiVoice equipment will be charged CNM's inter-local
long distance and long distance rates for facsimiles.

TELECOMMUNICATIONS NETWORK INFRASTRUCTURE

The Company is installing telecommunications equipment and entering into
access agreements to build a full service telecommunications network that is
presently conceived to encompass the Southwestern United States from California
to Texas, and north to Colorado. The Company is currently collaborating with
RBOC's such as Pacific Bell and CLECs, primarily ICG Communications, Inc. and
Covad Communications, Inc., to provide access for the Company's switching
equipment to the Internet backbone, fiber optic cable, and telephone lines. The
Company's main switching and related telecommunications equipment is located at
its Simi Valley headquarters facility. The Company has established POPs in
several locations throughout Southern California and is expected to install more
POPs in California by the end of the year, including ones in San Francisco, San
Jose, and San Diego. Each of these POPs provides, or is expected to provide,
Primary Rate Interface with multiple telephone lines through Pacific Bell and
others. The CLECs providing access for the Company's telecommunications
equipment generally charge fixed monthly fees for the access service.

The Company's POPs are established to permit high speed local dial-up access
to the Internet. All of the Company's POPs are expected to contain sufficient
switching equipment to provide local dial-up service and frame relay voice and
data transmissions. Certain of the Company's POPs installed in strategic
locations are also expected to contain CBX 500 ATM switches to enable QOS voice
and data long distance transmission on dedicated lines. Larger POPs are
currently planned for San Diego and Sacramento, California, as well as Las Vegas
and Reno, Nevada, Phoenix, Arizona, Albuquerque, New Mexico, El Paso, Amarillo,
San Antonio, and Dallas/Fort Worth, Texas, Oklahoma City, Oklahoma, Denver,
Colorado and Salt Lake City, Utah. The Company also plans to offer DSL service
pursuant to access and co-location arrangements with Covad Communications, Inc.
DSL service capability may be incorporated into the Company's existing and
planned POPs, and may also be installed in separate POPs on dedicated switching
locations. There is no assurance regarding the timing or whether or not the
Company will complete its telecommunications network as presently planned. See
"RISK FACTORS."

VOICE OVER INTERNET PROTOCOL

The most significant trend in the Internet and indeed in the broader
telecommunications industry, is the convergence of voice and data communications
to a singular mode of transmission. Traditional circuit-switch based
communications systems establish a dedicated channel for each communication
(such as a telephone call for voice and fax), maintain the channel for the
duration of the call, and disconnect the channel at the conclusion of the call.
With the inception of faxes and computer data in the late seventies and early
eighties, the resources of such circuit-switch based networks became taxed and
the need for greater bandwidth became evident. Today, voice, data, and video
transmission can be transmitted through a single high-speed data packaging
network with the TCP/IP data transmission standard becoming the most widely used
methodology. Originally constructed as a network of computer networks, the
Internet revolves around the TCP/IP, which moves data in a series of packets.
These packets are disassembled at the point of transmission, routed over the
Internet backbone in the most efficient manner and reassembled at the point of
receipt. The disadvantage of these packets is that they are cumbersome and
occupy large amounts of space on telephone wires. As a result, data is slow to
arrive at its destination. Various solutions have been created to address this
problem, yet to date the most common and effective method is to access a high
bandwidth network for transmission.

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

Many initiatives are under way to develop technology to address the
disadvantages of packet-switched based systems. Many companies are migrating
their data networks to carrier-provided virtual private networks ("VPNs"), using
IP, frame relay, and ATM, which are more efficient means of transporting voice,
video, and data. These companies are realizing cost savings and improved
performance. The Company believes that the IP standard, which is an "open
networking standard" broadly adopted on the Internet and elsewhere, should
remain a primary focus of these development efforts. The Company expects the
benefits of these efforts to be improved communications, reduced latency and
lower networking hardware costs. Already, VoIP, or transmission of voice calls
from a telephone to a telephone using the Internet Backbone to transmit the
data, is being offered to consumers. This new voice and data network solution is
evolving for several reasons:

- Voice and facsimile communications are currently separate from the
corporate data network. The result is inefficient, two incompatible
network infrastructures.

- With the integration of voice and data traffic onto one network, companies
will realize savings in network infrastructure, maintenance, and
management costs.

- According to a recent CMP survey, over 40% of an organization's long
distance costs are attributable to voice. For the average company,
integration of voice traffic with data traffic can amount to significant
savings.

The Company is offering a totally integrated solution for delivering voice
and data services over a single data network. The Company recently acquired
additional equipment from Ascend Communications to expand further its POPs and
the VoIP equipment needed for voice over data over the Company's network.
Ascend's MultiVoice-TM- for IP, frame relay, and ATM is the only product on the
market to guarantee IP QOS from the access area to the core of the public
network. Using MultiVoice, the Company

can transparently integrate services between its circuit switched voice/fax and
packet switched ATM, frame relay, and IP networks. MultiVoice enables a single
data network to carry efficiently and cost-effectively voice, fax, and data,
allowing the Company to guarantee quality and provide transparent telephony to
its customers.

VoIP provides the customer with the ability to make digital local long
distance calls through the Company's network for nearly half the cost of
traditional telephone companies. CNM will provide IP over its own network as
opposed to over the Internet. The Company will use its own high-speed
fault-tolerant backbone, whose main purpose is to transport VoIP signals. The
use of a dedicated backbone for this transport has numerous advantages over the
current trend of transporting VoIP signals across the public Internet. The
private CNM backbone will render VoIP traffic immune to the current glitches and
saturation issues that are currently felt by the ever-expanding Internet. The
highest priority on the CNM VoIP agenda is to provide a QOS that rivals that of
the current Public Service Telephone Network ("PSTN"). Another advantage of
carrying VoIP traffic across a high speed ATM backbone is fine-tuned control
over the backbone bandwidth. This control will allow CNM to use the inherent
traffic-shaping abilities provided by the ATM specification to ensure a truly
incredible QOS to the customer. The private backbone also ensures a higher level
of security and data-confidence, which not only aids the VoIP side, but will
also increase the confidentiality of electronic commercial transactions. The
combination of this emerging VoIP technology along with the security and
stability of a high-speed private backbone gives the customer the best of the
current PSTN, which is dedicated solely to the purpose of voice based
telecommunications, and the IP based network, whose flexibility and redundancy
give it the ability to continue running, even in the face of massive failure on
the part of other sections of the network.

COMMERCE ON THE INTERNET

The emergence of the Web has created major opportunities for companies to
advertise and promote their products and services in a targeted, interactive and
multimedia market. IDC HTTP:// WWW.IDCRESEARCH.COM estimates that the number of
users accessing the Web will grow from over 50 million in 1997 to over 200
million by 2000. A large and growing base of personal computers installed in the
workplace and home, advances in the performance and speed of computers and
modems, the amazing technological advances recently developed that are now being
implemented such as "Web Television," improvements in network infrastructure,
easier and cheaper access to the Internet, and increased awareness of the
Internet among consumer and trade customers are contributing to the growth. A
study by O'Reilly & Associates (HTTP://WWW.ORA.COM) in 1997 indicated that 50%
of large, 25% of mid-sized and 8% of small businesses had access to the
Internet, for a total of more than half a million businesses. Based on a study
by O'Reilly & Associates on US Business Establishments with Internet Access,
past growth curves, and the expected incorporation of the Internet into banking
and credit card activity, ACTIVMedia (HTTP:// WWW.ACTIVMEDIA.COM) predicts that
those numbers will swell to over 5.9 million, or 92% of United States business
establishments, by 2001. With nearly every large US business (i.e., more than
500 employees) connected to the Internet and with pressure to upgrade mounting,
the connectivity market is expected to remain vibrant.

Although the international market has been slower to embrace the advantages
of the Internet, ACTIVMedia predicts that the European and Pacific Rim Web
populations will grow at an "exponential rate." Based on its study of Web
marketers, the upward curve in sales generated by the Internet is only just
beginning as Web users become more accustomed to shopping on-line. Even in the
United States, where Internet use is most advanced, Internet commerce is still
in its infancy and experiencing tremendous growth. During the 1997 holiday
season, on-line orders soared.

Internet on-line services are fast becoming a new social phenomenon in
shopping. "Electronic malls" are exerting a powerful on-line presence and the
concept of electronic shopping malls and e-commerce, in the Company's view, will
shape the future of world economics. The Company owns and operates a fully
designed, state of the art Internet shopping presence on the World Wide Web
named Consumer Net

Marketplace (HTTP://WWW.CONSUMERMARKET.COM). Internet "search engines" offer
on-line users quick and easy access to the Consumer Net Marketplace shopping
mall.

One of the crucial developmental aspects of on-line shopping malls is
advancement of technologies. Design in three dimensional appearances enables
users to simulate walking among stores from their computers or televisions while
at the same time engaging in shopping. On-line stores provide text and/or
catalog pictures of goods and services which can be purchased electronically and
delivered directly to the customer. With proper design and technology, an
Internet shopping mall has the capacity to rent space to an unlimited number of
stores with unlimited inventory. As such, each store transcends the notion of a
traditional store and can provide information hubs and service centers in
addition to normal merchandise. New products and services, special discounts,
and "sale items" can be advertised and changed daily. With an ever increasing
global market, an Internet mall can generate substantial sales.

The Company commenced operating its electronic shopping mall Web site in
September 1996. The Company's electronic mall operates under the name Consumer
Net Marketplace or "CNM" at HTTP:// WWW.CONSUMERMARKET.COM. Since the
introduction of the Company's shopping mall, the Company maintains over 1,200
businesses averaging 1,000,000 hits per month by Internet users. CNM is listed
with most major and secondary Internet search engines such as Yahoo, Alta Vista,
Infoseek, Excite, Magellan, Lycos, HotBot and others.

CNM plans to make on-line shopping increasingly cost effective, convenient
and enjoyable as the CNM business plan envisions. The CNM Web site was awarded:

- "FAME", a prestigious Award of Excellence for 1997.

- "Starting Point", HotSite's Award in 1997.

CNM suppliers include such companies as Netscape, Microsoft, Superior Bank
Card Services, Advo Direct Marketing, BMD Solutions, Softbank, Modem Media, Left
Field, Integrated Telemanagement Services, Yahoo, Excite, Web Crawler, Visa,
Master Card, American Express and many other leading industry providers. The
Company's customers are a wide range of independent private or public businesses
now on-line or which need a presence on the Web, particularly small and medium
sized, specialized vendors who would not otherwise have the national market
exposure offered by the CNM shopping mall. The advertising customers currently
include Amazon.com, USA Today, 800-Florals by Phillip's, Loralie, Hollywood
Cookie Studio, Wired News, Advanced Comfort, Excite, Sports Center On-Line,
Vinylvendors, Virtual Vineyards, C/NET, Toys R Us, Zip2, Fragrance Counter and
many others within the CNM Network-TM-.

CNM STRATEGY

CNM's objectives are to become a global ISP and VoIP telecommunications
provider to its personal and business solution users of the Internet. The key
elements of CNM's strategy include:

EXPANSION OF CUSTOMER BASE. CNM believes that a key to its success in the
competitive ISP market is to rapidly expand its user base, thereby amortizing
its fixed assets over a larger revenue base and enhancing its ability to enter
into favorable arrangements. The Company plans to accelerate its efforts and
financial commitments to attract new users and will continue to aggressively
advertise and promote its services to individuals and the business community.

PERSONAL SERVICES AND BUSINESS SOLUTIONS. The Company offers an extensive
range of services to both individuals and businesses. In order to continue to
attract and retain individual users, the Company will offer user friendly
Internet access and services. Accordingly, the Company will continue to devote
significant resources to expanding its customer and technical support and
enhancing its network operations capability. The CNM software, which includes
front-end software and documentation for Windows 95 and Windows 98 users, is
designed to make it easy for users to register and configure their system for
Internet

access. At the same time, the Company is enhancing its network infrastructure to
offer highly sophisticated and complete business solutions, including VoIP, high
end dedicated access, state of the art co-location services, and four highly
demanded flavors of DSL products (aDSL, iDSL, sDSL, and xDSL). Moreover, the
Company constantly works to develop new services, content and features to
enhance that user experience.

UTILIZATION OF THIRD PARTY SERVICE PROVIDERS. In order to maintain its
focus on user needs, the Company leverages the infrastructure of others by
leasing POP capacity from ICG Telecom Group, Inc., Pacific Bell Internet, Covad
Communications, Inc., and IBM Technologies. In addition to lowering required
capital expenditures, the Company believes that this approach gives it
flexibility to rapidly expand its service coverage. Moreover, access to multiple
networks provides users with increased service quality resulting from redundant
network access. The Company will continue to pursue this strategy so that it can
devote its significant resources to its sales and marketing efforts and to
improving its users' Internet experience.

ENHANCE MARKETING AND DISTRIBUTION. The Company plans to expand its
targeted marketing programs and distribution efforts in geographic markets other
than California in order to achieve a nationwide presence and obtain brand
recognition. In order to achieve these goals the Company will utilized print
publication, radio, billboards, and direct mail. CNM closely monitors the
results of its marketing techniques as part of an ongoing effort to increase the
cost-effectiveness of its marketing efforts.

ENHANCE NETWORK INFRASTRUCTURE. To effectively attract new customers and
continue to offer high quality service, the Company is making significant
capital investments, including the expansion of its data center, accounting, and
billing systems. CNM believes that its planned infrastructure will be adequate
to manage a significant increase in its customer base.

AGREEMENT WITH STARNET. Recently the Company entered into an agreement with
Starnet, Inc. Under this agreement the Company will lease POPs throughout the
United States from Starnet, Inc. These POPs, in conjunction with the Company's
existing POPs, will allow the Company to offer its Internet connectivity
services on a national basis.

COMPANY RESEARCH AND DEVELOPMENT

VOICE OVER INTERNET PROTOCOL. At present, CNM is continuing its research
and development of VoIP technology. VoIP technology simulates telephone
conversations by processing analog signals which cannot be done on regular
networks. VoIP technology allows the conversion of analog signals into digital
data. The data is then moved digitally and transformed back into analog. The
receiving telephone then produces the same high quality sound of the
conversation as if it were a regular phone call.

CNM is working on improving the existing VoIP technology which is still
undergoing major developments. The key to VoIP's success in business
applications is high quality voice reproduction, low bandwidth consumption, and
gateway payback periods of less than 18-24 months. To that end, CNM is
developing proprietary VoIP service to offer toll quality levels of sound
reproduction, ensuring more widespread usage among its clients.

The second key to VoIP's success is minimizing WAN bandwidth consumption.
CNM is improving on "silence suppression" technology which recognizes periods of
silence in a conversation or facsimile transmittal, and stops the transmission
of IP speech packets during those periods. This technology can reduce bandwidth
consumption by up to 60%.

The most attractive aspect of VoIP technology is the cost savings it can
bring to businesses. The cost savings can come from several areas: (1) reduced
intracompany voice and facsimile communications costs, (2) reduced selected PSTN
communications costs by using off-net calling, (3) reduced selected 800 number
calling costs by making local numbers that ride over the corporate IP network
available to outside callers,

and (4) reduced costs from reducing the number of telephone lines in proportion
to the offloading of calling volume to the VoIP network.

PROVISIONING SYSTEM. CNM has developed a proprietary provisioning system
for allocating resources for its Web Server/ATM. This system allows the end user
to set up various levels of virtual Web services without a system administrator.
The end user is able to:

- register a domain name

- move a domain name from another ISP

- determine the resources the end user requires, including

-- number of email accounts

-- monthly transfer

-- disk space

-- database access

-- front page access

-- e-commerce merchant accounts

- add or subtract incremental offerings to the end user's site at a later
date, including

-- additional email users

-- additional disk space

-- higher transfer

- select payment options

The end user can also use the provisioning system as a maintenance tool kit.
If the end user experiences a problem with his site, the end user can use the
CNM provisioning system tool kit to analyze the site for errors. In many
instances, the tool kit can fix the problem. If the tool kit is unable to fix
the problem, the provisioning system tool kit will provide the CNM administrator
with a diagnostic printout.

The provisioning system interacts with the CNM billing system allowing for
various departments to access an end user's history information. The
provisioning system can also be used to:

- set up and sell dedicated connectivity services

- set up and sell personal dial up products

- set up resources for co-located services

- manage and maintain these accounts

The provisioning system reduces costs in terms of the following:

- reduced system administrative personnel for handling account settings and
troubleshooting

- reduced staff costs for account billing and tracking

- increased customer satisfaction

MARKETING AND REVENUES

The Company's current or anticipated sources of revenue are derived from (i)
Web site development fees paid by customers, primarily businesses, which engage
the Company to design and establish Web sites for them on the Internet, (ii) Web
site hosting fees, (iii) fees for virtual domain hosting, (iv) fees for co-
location services (v) fees for business consulting relating to conducting
commerce and advertising on the Internet, (vi) fees for designing Intranet and
Internet solutions for networking projects, (vii) Web site advertising fees from
advertisers on the CNM Network-TM- Web site, (viii) fees for monitoring and
upgrading Web sites for other businesses, (ix) fees for dial-up Internet access
service, X2, 56K Flex ISDN and frame relay, and (x) fees for developing
corporate firewalls and other Internet security features. The Company is
presently designing the infrastructure and is retaining additional management
with the technical expertise to enable it to provide the following services from
which future revenue may potentially be earned: (a) secure commercial
transactions on the Internet utilizing the Company's proprietary e-commerce
(shopping cart) technology which is planned for use on the CNM Network-TM- Web
site and for licensing to third parties, (b) VoIP, (c) QOS voice and data
telecommunications, (d) video and real audio streaming, (e) Web support
provisioning system software for use by the Company and its licensees, (f)
licensing the Company's proprietary search engine currently in development and
(g) other proprietary products which may be developed by the Company in the
future. The Company recently established a high capacity OC-12x3 ATM SONET to
provide Internet backbone solutions nationwide beginning with the State of
California.

CNM currently promotes and advertises its business via the Internet and a
wide variety of other media campaigns. The Company has recently entered into
extensive advertising agreements with Eller Media Company, Advo, Visa Card,
Cable Networks and several major Southern California radio stations as well as
multiple reseller agreements to conduct the Company's retail marketing program
for prospective dial-up and business solution customers.

Through the Company's agreement with VISA, customers in the Los Angeles area
who already charge monthly Internet access service fees will receive information
in their monthly VISA statements about the Company's dial-up access service.
These advertisements will allow customers to sign-up for the Company's service
and to charge the monthly access fee directly to their VISA accounts. The term
of the Company's agreement with VISA is month to month.

The Company entered into an advertising agreement with Eller Media Company
in June 1998. In addition, Eller Media Company has agreed in principle to
provide the Company with extensive billboard and other outdoor advertising in
Southern California at certain rates in exchange for the right to subscribe for
up to 1,000,000 shares of the Company's Common Stock. See "BUSINESS--Proposed
Agreement with Eller Media."

The Company has an agreement with Advo Direct Marketing for direct mass
mailings of the Company's advertising materials to specific areas of the
Southern California market. The direct mailing campaign may be expanded to other
areas of the United States in the future, in coordination with the planned
expansion of the Company's telecommunications network. The current mailing
campaign with Advo commenced in May 1998 and is scheduled to continue through
December 1998. The Company also plans to advertise its Internet access services
on local radio stations from San Diego to Santa Barbara beginning in September
1998. The Company has already purchased advertising time on a month-to-month
basis.

The marketing activities for the Consumer Net Marketplace Shopping Mall are
conducted out by CNM's in-house sales and marketing force. CNM screens and
identifies potential vendors via email, facsimile, and telephone, and then
prioritize each vendor accordingly. CNM's criteria for vendors in its shopping
mall include diversity, name recognition, commercial reputation and sales
volume.

AGREEMENT WITH ELLER MEDIA

The Company is currently conducting a major billboard advertising campaign
throughout Southern California with Eller Media Company, an advertising firm
specializing in marketing programs utilizing outdoor billboards, shelters and
other outdoor venues. In connection with the current program, Eller Media
Company and the Company entered into a subscription agreement on October 7, 1998
pursuant to which Eller Media has agreed to provide additional remnant outdoor
advertising space to CNM at a price equal to 50% of the negotiated rate for
outdoor advertising space in the market where the remnant space is available
(excluding any production costs), in consideration for shares of CNM's Common
Stock at a price of $2.00 per share. Eller Media will subscribe for shares as
CNM orders advertising services. Eller Media has the right to subscribe for up
to 1,000,000 shares of CNM's Common Stock pursuant to the agreement, depending
on the level of orders made by the Company. The subscription agreement
terminates on December 31, 1999, regardless of the number of shares of CNM
Common Stock to which Eller Media subscribes by that date pursuant to the
agreement. The subscription agreement also provides that Eller Media Company has
certain piggyback registration rights with respect to its shares of CNM,
applicable to the next registration statement (except on Form S-4 or S-8) after
the registration statement encompassing this Prospectus, to the extent that
Eller Media Company cannot sell such shares pursuant to Rule 144. If the next
registration statement has an underwriter, then the underwriter may reduce the
number of Eller Media Company's shares registered if other selling security
holders' shares on the registration statement, if any, are also reduced on a pro
rata basis.

PREVIOUS FINANCING AND DEVELOPMENT ARRANGEMENT

Fredrick Rice and certain associates formed Consumer Net Partners, a
California general partnership ("CNP"), in 1996 with $500,000 of contributed
equity. Approximately 85% of the of the partnership equity (after deducting
expenses related to the operation and formation of the general partnership) was
allocated to Consumers On-Line Development Group, Inc. ("COLD Group"). Pursuant
to a Management Agreement with CNP, COLD Group was engaged to manage and oversee
the development of an on-line shopping mall. COLD Group was also engaged to
purchase equipment and design software programming for the CNM electronic
shopping mall and for the development of merchant participation in the mall,
including the preparation of marketing and lead-generation materials to promote
the mall. The COLD Group served as the managing partner of CNP with Fredrick
Rice as the principal shareholder and President of the COLD Group. The COLD
Group dissolved in July 1997 and assigned all of its rights to CNP. See "CERTAIN
TRANSACTIONS." The remaining partnership equity, approximately 15%, was
allocated to the Company to participate in the promotion and start up operation
of the CNM electronic shopping mall. CNP also advanced funds to the Company to
finance the Company's ability to provide support services to CNP and the COLD
Group for the CNM shopping mall. The Company is repaying the advance as part of
its purchase of all of CNP's and the COLD Group's interest in the CNM electronic
shopping mall and related intangible assets.

Pursuant to the CNP Partnership and Management Agreements, 75% of net income
generated by the CNM shopping mall would be paid to CNP and allocated as
follows: 75% to the CNP general partners (after deducting partnership expenses)
and 25% to the COLD Group. On December 31, 1997, the Company purchased all of
the rights and interests held by CNP in the Company's potential income for a
combination of a promissory note payable on demand and options to purchase the
Company's Series 1 Class B Common Stock. The aggregate purchase price was (i)
$500,000, payable by issuance of a noninterest-bearing promissory note payable
to CNP upon demand (which includes repayment of the advance by CNP, the proceeds
of which will be allocated among the CNP partners along with the balance of the
Company's payment on the promissory note), plus (ii) options to purchase 250,000
shares of Series 1 Class B Common Stock for a period of three years at a
purchase price of $.50 per share. Pursuant to CNP's General Partnership
Agreement, the written consent of a majority-in-interest of the partners of CNP
must

approve the sale of rights to the Company. The consent of a majority-in-interest
of the partners of CNP has been obtained.

PRIOR PRIVATE PLACEMENT OF STOCK

Commencing on October 1, 1997, the Company made a private placement of its
Series 1 Class A Common Stock to investors for a purchase price of $2.00 per
share pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
Rule 506 of the Regulation D promulgated under Section 4(2). The private
placement terminated on October 8, 1998. Pursuant to the private placement, the
Company issued 1,534,250 shares of its Common Stock and raised $3,068,500 in
total capital. See "SELLING SECURITY HOLDERS."

COMPETITION

The market for the Company's Internet related services is diverse and highly
competitive. The competition is expected to continue to increase significantly.
The Internet is characterized by few barriers to entry, relatively low
participation costs, and innovative and rapidly expanding services. The Company
expects competition to persist, intensify, and increase in the future. Most of
the Company's current and potential competitors have longer operating histories,
greater name recognition, larger installed customer bases, and significantly
greater financial, technical, and marketing resources than the Company. Although
the Company believes that the diversity of the Internet market will provide
opportunities for a variety of marketing techniques, it is possible that the
industry could become dominated by a limited number of entities. The Company
competes directly with several other ISPs, IPPs, and companies offering a
variety of on-line services. Some of these existing competitors, as well as
potential future competitors, have or could have significantly greater
financial, technical, and marketing resources than the Company. The Company
believes that the principal competitive factors in its market are Web site
location recognition, variety of products and services, and technological
innovation. The Company believes that its current ISP and IPP services, VoIP
services, and shopping mall configuration will provide it with the opportunity
to compete effectively in the market. See "RISK FACTORS--Competition."

GOVERNMENT REGULATION

The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to commerce on the
Internet. Nevertheless, due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted
with respect to the Internet covering issues such as user privacy, pricing,
telephone services, and characteristics and quality of services. The adoption of
any such laws or regulations may decrease the growth of the Internet, which
could in turn decrease the demand for the Company's services and increase the
Company's cost of doing business, or otherwise have an adverse effect on the
Company's business, operating results and financial condition. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, telephony, libel and personal privacy is uncertain. See "RISK
FACTORS--Government Regulatory Policy Risks."

PROPRIETARY RIGHTS

The Company believes its trademarks, service marks, trade secrets and
intellectual property are essential to its success. The Company relies upon
trademark and copyright law, trade secret protection and confidentiality
agreements with its employees, customers and others to protect its proprietary
rights. The Company has registered the domain names "cnmnetwork.com,"
"consumermarket.com," and "cnminc.com" with Internic for the exclusive use of
such names on the Internet. The Company has registered its service marks and
trademarks in the United States and internationally, including "CNM
Network-TM-," "CNM Inc.," "Consumer Market," and "Consumer Net Marketplace."
While the Company

will endeavor to rely on trademark, trade secret, and copyright law to protect
its technology, the Company believes that factors such as the technologies and
creative skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are more
essential to establishing and maintaining a technology leadership position. The
Company presently has no patents or patent applications pending. There can be no
assurance that others will not develop technologies that are similar or superior
to the Company's technologies.

The Company has entered into confidentiality or license agreements with its
employees, consultants and vendors, and generally controls access to and
distribution of its other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use the
Company's products or technology without authorization, or to develop similar
technology independently. In addition, effective copyright and trade secret
protection may be unavailable or limited in certain foreign countries, and the
global nature of the Internet makes it virtually impossible to control the
ultimate destination of the Company's products. To license its products, the
Company will primarily rely on licenses that are not signed by the end-user and,
therefore, may be unenforceable under the laws of certain jurisdictions. There
can be no assurance that the steps taken by the Company will prevent
misappropriation of its technology or that such agreements will be enforceable.
Furthermore, while the Company attempts to monitor the product quality and
customer service provided by CNM, there is no assurance that such participants
will not offer and sell products or services that might adversely affect the
reputation or utilization of the CNM Network-TM-. See "RISK FACTORS."

EMPLOYEES

As of October 7, 1998 the Company employs 32 full-time and over 20 part time
employees, including four senior executive officers, twelve computer engineering
systems administrators and programmers, seven administrative personnel, nine
marketing representatives and assistants, and multiple customer support
personnel. The Company may engage outside consultants in the future, including
systems and software analysts and marketing personnel. See "MANAGEMENT."

The Company is highly dependent on the technical and managerial skills of
its key employees, including technical, sales, marketing, financial, and
executive personnel, and on its ability to identify, hire and retain additional
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be able to retain existing personnel or to
identify or hire additional personnel. In addition, the Company is highly
dependent on the continued services of its senior management team, which
currently is composed of a small number of individuals. The inability to
attract, hire or retain the necessary technical, sales, marketing, financial and
executive personnel, or the loss of the services of any member of the Company's
senior management team, could have a material adverse effect on the Company's
business, financial condition and results of operations.

SEASONALITY

The Company's operations are not expected to be affected by seasonal
fluctuations, although the Company's cash flow may be affected by fluctuations
in the timing of cash receipts from its customers.

FACILITIES

The Company's executive offices are located at 1900 Los Angeles Avenue,
Second Floor, Simi Valley, California 93065, (805) 520-7170. The Company's
Internet addresses are: WWW.CNMNETWORK.COM, WWW.CONSUMERMARKET.COM, and
WWW.CNMINC.COM. The Company's email address is: info@cnmnetwork.com. Information
contained on the Company's World Wide Web site shall not be deemed to be a part
of this Prospectus. The Company has signage rights at its executive offices,
which are expected to accommodate projected demand for space over the next two
years.

The Company has also secured POP sites in several other locations throughout
the Los Angeles Metropolitan Area to provide dial-in coverage for personal dial
up access to the Internet. Additional POPs are expected to be obtained either
(i) pursuant to traditional leases for space or (ii) pursuant to equipment
facilities (barter) agreements under which the Company will receive space for
its switching equipment in consideration for providing a certain amount of
bandwidth access to the landlord. The Company anticipates that it will obtain
future POP locations primarily through barter arrangements.

LEGAL PROCEEDINGS

The Company is not currently aware of any legal proceedings or claims that
it believes will or could have a material adverse effect on the Company's
financial position or results of operation.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
Company's directors and executive officers as of October 7, 1998.

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

Fredrick J. Rice......................... 40 Chairman of the Board of Directors, President,
Chief Executive Officer and
Chief Financial Officer

Donald Lee Carver........................ 43 Vice President of International Network Development

Christopher Young........................ 26 Senior Computer Systems Engineer and Systems Analyst

Jon P. DeOng............................. 26 Senior Computer Systems Engineer and Systems Analyst

Christopher Fogel........................ 25 Senior Computer Systems Engineer and Systems Analyst

Laura Murtagh............................ 29 Secretary

Kenneth K. Lattin........................ 52 Director

Charles Rice............................. 34 Director

Dr. Douglas Benson....................... 67 Director

Mark J. Richardson....................... 45 Director

FREDRICK J. RICE is the founder of Consumer Net Marketplace, Inc. Mr. Rice
has been President, Chairman of the Board of Directors, Chief Executive Officer
and Chief Financial Officer of the Company since the Company's inception in
January 1996. Prior to founding the Company, in 1995, Mr. Rice was the President
and Chairman of the Board of Directors of Consumers On-Line Development, Inc.,
the managing partner of Consumer Net Partners, a California general partnership.
See "CERTAIN TRANSACTIONS." Mr. Rice, from 1990 through 1995, held various
positions in the securities and financial services industry involving stocks,
funds and venture capital interests and was a securities broker registered with
the National Association of Securities Dealers, Inc. Mr. Rice settled an
administrative proceeding with the Securities and Exchange Commission which
permanently enjoins him from any violations of certain sections of the
Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as
amended. Mr. Rice has an extensive advertising and marketing background in print
media, radio and television broadcast for over 14 years. Fredrick Rice is the
brother of Charles Rice.

DONALD LEE CARVER has been the Vice President of International Network
Development for the Company since March 1998. Mr. Carver oversees CNM's
development of its global network by utilizing his relationships with foreign
government officials and representatives of other telecommunication companies
developed during his career. Prior to joining the Company, Mr. Carver was the
Senior Systems Administrator for the Web Hosting Division of Netcom On-line
Communications, Inc. from November 1996 until March 1998, where he was
responsible for the administration and maintenance of co-located servers. He was
also responsible for developing and implementing a centralized NFS server farm
and automated backup recovery strategy for the Web hosting section, as well as
developing and implementing strategies to migrate from 10 BaseT passive hub base
network for the server farm to a fully switched 100 BaseTx network. Mr. Carver
worked with Pentium 200 Web servers, along with a variety of other related
hardware, and NT3.51, NT4.0, Irix, Linux and other related software. From July
1996 until November 1996, Mr. Carver was an Internet Software Developer for
Comat InterActive and the Web Master for www.comat.com. During his tenure with
Comat, Mr. Carver developed international relationships for networking and
Internet development. These relationships included individuals in the ministries
of telecommunications in India and Pacific Rim nations. Mr. Carver has also
fostered relationships with representatives of major telecommunication firms
doing business in these countries. Mr. Carver worked

for the Dallas Planning Department as a UNIX/WinNT Network Administrator from
December 1989 until July 1996, where he installed and configured the City's
Internet connection and services. Mr. Carver was a GIS Analyst for the City of
Dallas Planning Department from February 1986 until December 1989. Mr. Carver
attended the University of North Texas commencing in 1984 where he earned most
of the credits necessary for a Bachelors of Science in Urban Geography and Earth
Sciences. Mr. Carver earned an Associate Degree in Applied Science-Horticulture
from Tarrant County Junior College in 1981. Mr. Carver has earned several
supplemental certificates in various systems and network administration
environments.

CHRISTOPHER L. YOUNG has been a Senior Computer Engineer and Systems Analyst
with the Company since March 1998. Prior to joining the Company, Mr. Young was a
Systems Administrator with Netcom On-line Communications, Inc. in Dallas, Texas
from May 1997 until March 1998, where he was responsible for managing a wide
variety of Web servers, primarily utilizing Linux, Intel hardware and the Apache
Web server. Mr. Young was responsible for third level technical support on all
Web hosting related services, including domain home services, FTP services,
electronic mail service, SQL services and Front Page services. Mr. Young was
also responsible for monitoring Netcom's network, installing and configuring the
Oracle Database System, and utilizing a variety of hardware and software tools,
including 3Com's HP Openview, Sun Microsystem's workstations, Digital's servers,
Budtool, Sun OS, Windows NT Sever and Workstation and Mac OS. From June 1996
until May 1997, Mr. Young was a Systems Administrator for Hownet Communications,
where he managed Hownet's computer network (Internet), administered all
accounts, database security, and hardware and software technical support, and
performed HTML programming, graphic design and photography. Mr. Young has also
been a Web page designer for WebStuff Networks and a Sales and Technical Support
Trainer for The Internet Store. Mr. Young's basic skills include UNIX
administration, networking, operating systems, and software programming and
applications.

JON P. DEONG has been a Senior Computer Engineer and Systems Analyst with
the Company since March 1998. Prior to joining the Company, Mr. DeOng was a
Senior Systems Administrator in the Web Hosting Department of Netcom On-line
Communications, Inc. in Dallas, Texas from June 1996 until March 1998. As the
Senior Systems Administrator, Mr. DeOng was responsible for the business center
design and software specification, administrative tool set, installation,
configuration, maintenance and monitoring of over 50 secure Unix Internet Web
servers, eight secure NT Internet Web servers and co-located servers and
customers. Mr. DeOng was also responsible for third level technical support for
all Web hosting related services, including domain home services, FTP services,
electronic mail services, SQL services and FrontPage services. Mr. DeOng also
worked with the development group to design, implement and support Automated Web
Hosting Software, on-line payment services, and dial-up access service. From
June 1994 until June 1996, Mr. DeOng worked with the Texas Department of Health
as a Technical Clerk III in the NICADS Department. From February 1992 until June
1994, Mr. DeOng was an Information Systems Supervisor for Labels On The Go. Mr.
DeOng has computer software and systems experience in troubleshooting,
automation, firewall setup, network traffic information, disk usage information,
processing Internic data, establishing list servers and collecting statistics.

CHRISTOPHER FOGEL has been a Senior Computer Engineer and Systems Analyst
with the Company since March 1998. Prior to joining the Company, Mr. Fogel was a
Senior Systems Administrator in the Web Hosting Department of Netcom On-line
Communications, Inc. in Dallas, Texas from September 1996 until March 1998. As
the Senior Systems Administrator, Mr. Fogel was the business center architect,
responsible for data flows and software module specification and coding various
Perl interfaces, the installation, configuration, maintenance and monitoring of
over 50 secure Unix Internet Web servers, eight secure NT Internet Web servers
and co-located servers and customers. Mr. Fogel was also responsible for third
level technical support for all Web hosting related services, including domain
home services, FTP services, electronic mail services, SQL services and
FrontPage services. Mr. Fogel also worked with the development group to design,
implement and support Automated Web Hosting Software, on-line payment services,
and dial-up access service. From January 1996 until September 1996, Mr. Fogel
worked with CyberRamp

L.L.C. in Dallas, Texas as a Systems Administrator. Mr. Fogel was responsible
for System Maintenance of six UNIX machines, maintenance of machine service
including: Web Servers, Domain Name Service (DNS), Users accounts, Email, FTP
servers and POP servers. Configuration and usage of network equipment including:
Ascend MAX 4000, Ascend Pipeline 25 (and 50), Gandalf Edge Router, Cisco 4000
and Motorola BitSurfer Pro. From September 1994 until January 1996, Mr. Fogel
was the System Administrator of Project Development for Moorhead State
University in Moorhead, MN. Mr. Fogel was responsible for designing all facets
of the schools existing Web server and site, system maintenance of the UNIX
machine upon which the Web site and all pertaining data was placed, assisting
students with computer related problems and related projects.

LAURA MURTAGH became the Secretary of the Company on September 30, 1998. Ms.
Murtagh has been in the private practice of law since 1994. In August 1998, Ms.
Murtagh joined the law firm of Richardson & Associates where she practices in
the areas of corporate and securities law. Prior to joining Richardson &
Associates, Ms. Murtagh was an associate with the law firm of Preston, Gates &
Ellis LLP. At Preston, Gates & Ellis LLP, Ms. Murtagh practiced in the area of
high technology intellectual property law. Prior to joining Preston, Gates &
Ellis LLP, Ms. Murtagh was corporate counsel for Zenith Information Systems,
Inc. Ms. Murtagh graduated from the University of California, Berkeley with
honors in 1991 with a Bachelors of Arts. Ms. Murtagh earned a Juris Doctor from
Boston University School of Law in 1994, graduating cum laude. Ms. Murtagh is a
member of the California State Bar.

KENNETH K. LATTIN became a Director in August 1998. Mr. Lattin has been an
active real estate broker for over 18 years, specializing in office, commercial,
and industrial property. Mr. Lattin is President of the Edwin S. Johnson
Company, a real estate investment and development company, and owns Trevent
Management, a property management and real estate consulting company. After
graduating from the University of Southern California in 1972 with a Bachelor of
Science in Business with an emphasis in Accounting, Mr. Lattin worked for five
years as a senior auditor for Price Waterhouse assisting clients such as Disney,
Toyota, and U.S. Steel. As a First Lieutenant in the U.S. Army, Mr. Lattin
served in Vietnam as a platoon leader, company commander, and battalion and
brigade operations officer. He was awarded the Silver Star, Bronze Star with V
divice, Bronze Star with oak leaf cluster, Army Commendation medal, and Purple
Heart.

CHARLES RICE became a Director in August 1998. Since 1990, Mr. Rice has been
the President of Cmeca Corporation, a production services corporation for film,
television, commercials, and video. Involved in over 300 feature film products
and award winning videos, Mr. Rice has worked with Warner Brothers, Universal,
Saban, Sony, Disney, NBC, ABC, CBS, FOX, and Paramount. At Cmeca, Mr. Rice has
developed sales, direct marketing, and administrative service divisions and
designed marketing campaigns and a training program. Prior to working at Cmeca,
in 1985 Mr. Rice founded Perfect Image, an industrial advertising and marketing
corporation, with offices throughout Southern California. At Perfect Image, Mr.
Rice developed advertising and promotional campaigns for subsidiaries of Unocal,
Chevron, Texaco, Mobil, and other major oil companies. In 1982 Mr. Rice joined
National Image's sales department and eventually became a regional vice
president. Mr. Rice attended California State University of Northridge where he
earned a degree in Business Administration with an emphasis in Finance and a
minor in real estate. Mr. Rice is the brother of Fredrick Rice.

DR. DOUGLAS BENSON became a Director in August 1998. Dr. Benson has
practiced family medicine in Los Angeles, California for 37 years. Dr. Benson
received his Bachelor degree from Andrews University and his Doctor of Medicine
from Loma Linda University. Dr. Benson served on the Board of Directors of
Andrews University for over ten years. He was a founder, majority stockholder,
and Director of Heritage Bank in Berrien Springs, Michigan which received praise
from the Michigan Bank Examiners Office as the first bank to show a profit in
the first year of business. Now retired, Dr. Benson manages his investments
which include commercial and farm real estate, real estate development, and
Hardwood Equities, a company that produces black walnut trees. Dr. Benson is the
general partner of Edwin S. Johnston Co., a

purchaser of shares of CNM in the Company's previous private placement of stock.
See "SELLING SECURITY HOLDERS."

MARK J. RICHARDSON has been a Director of the Company since September 30,
1998. Mr. Richardson has been in the private practice of law since 1978 in the
areas of corporate and securities law, and has had his own law firm in those
practice areas since June 1993. Prior to forming his own law firm, Mr.
Richardson was a partner and an associate in private law firms and the
Vice-President of a Southern California savings and loan institution,
responsible for real estate securities. Mr. Richardson graduated from the
University of Michigan summa cum laude in 1975 with a Bachelors of Science from
the School of Natural Resources, with Phi Beta Kappa honors. Mr. Richardson
earned a Juris Doctor from the University of Michigan Law School in 1978,
graduating cum laude. Mr. Richardson is a member of the California State Bar and
Los Angeles County Bar Associations. He was a contributing author to the
Prentice Hall publication CALIFORNIA STATE PARTNERSHIP LAW from 1985 to 1993.

All directors hold office until the next annual meeting of stockholders and
until their successors are elected. Officers are elected to serve, subject to
the discretion of the Board of Directors, until their successors are appointed.

BOARD OF DIRECTORS AND COMMITTEES

The Company's Board of Directors presently consists of five members:
Fredrick J. Rice, Charles Rice, Mark J. Richardson, Kenneth K. Lattin, and Dr.
Douglas Benson. The Board of Directors may be expanded in the future. All
employee and consultant compensation, including payroll expenditures, salaries,
stock options, stock incentives, and bonuses, must be approved by the unanimous
consent of the members of the Compensation Committee of the Company's Board of
Directors, whose members have not yet been determined. The Compensation
Committee is expected to be comprised of Directors who are not executive
officers of the Company. The Bylaws of the Company generally provide for
majority approval of directors in order to adopt resolutions.

The Board of Directors intends to appoint an Audit Committee. The Audit
Committee will be authorized by the Board of Directors to review, with the
Company's independent accountants, the annual financial statements of the
Company prior to publication, and to review the work of, and approve non-audit
services preformed by, such independent accountants. The Audit Committee will
make annual recommendations to the Board for the appointment of independent
public accountants for the ensuing year. The Audit Committee will also review
the effectiveness of the financial and accounting functions and the
organization, operations and management of the Company.

EXECUTIVE COMPENSATION

No executive officer of the Company received compensation from the Company
in excess of $100,000 during the fiscal year ending December 31, 1997. Upon the
availability of funds, the Company expects to commence paying an annual salary
to Fredrick Rice, the President and Chairman of the Board of Directors of the
Company, equal to $180,000 per year, as well as a company automobile allowance.
The compensation payable to the Company's executive officers will generally not
exceed that which is customarily paid in the industry by companies of comparable
size and in the same geographic areas. Directors receive no cash compensation
for their services to the Company as directors, but are reimbursed for expenses
actually incurred in connection with attending meetings of the Board of
Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Compensation Committee of the Board are expected
to be an officer or employee of the Company. No executive officer of the Company
serves as a member of the Board of Directors or compensation committee of any
other entity that has one or more executive officers serving on the Company's
Compensation Committee.

EMPLOYMENT AGREEMENTS AND STOCK OPTION PLAN

The Company has entered into employment agreements with its executive
officers and other key employees of the Company. All of the employment
agreements are terminable at will. A stock incentive program (the "1997 Stock
Option Plan") for the directors, executive officers, employees and key
consultants of the Company has been adopted pursuant to which 2,000,000 shares
of authorized but unissued Series 1 Class A Common Stock and 100,000 shares of
authorized but uninsured Series 1 Class B Common Stock have been reserved for
issuance to the officers, directors, employees and key consultants of the
Company. Within 90 days after the effective date of the Registration Statement
encompassing this Prospectus, the Company intends to file a Form S-8
Registration Statement registering the Company's 1997 Stock Option Plan under
the Securities Act of 1933, as amended, as well as the other stock options
issued outside of the 1997 Stock Option Plan. See "DESCRIPTION OF CAPITAL
STOCK--Stock Options Granted Outside of the Plan." As of October 7, 1998, the
following stock options have been issued to the directors, executive officers
and key employees of the Company under the 1997 Stock Option Plan:

OPTIONS FOR SERIES 1 CLASS A COMMON STOCK

DATE OF NUMBER OF VESTING EXERCISE EXPIRATION
NAME OF GRANTEE GRANT OPTIONS SCHEDULE(1) PRICE(2) DATE
- --------------------------------------------- --------- ----------- ------------------ ----------- ------------

Randy D. Greene.............................. 12/15/97 200,000 40,000: 12/15/97 $ 2.00 12/15/2000
40,000: 12/15/98 12/15/2001
40,000: 12/15/99 12/15/2002
40,000: 12/15/00 12/15/2003
40,000: 12/15/01 12/15/2004

Donald Lee Carver............................ 3/25/98 200,000 40,000: 3/25/98 $ 2.00 3/25/2001
40,000: 3/25/99 3/25/2002
40,000: 3/25/00 3/25/2003
40,000: 3/25/01 3/25/2004
40,000: 3/25/02 3/25/2005

Christopher L. Young......................... 3/16/98 100,000 20,000: 3/16/98 $ 2.00 3/16/2001
20,000: 3/16/99 3/16/2002
20,000: 3/16/00 3/16/2003
20,000: 3/16/01 3/16/2004
20,000: 3/16/02 3/16/2005

Christopher L. Young......................... 8/31/98 100,000 20,000: 8/31/98 $ 2.00 8/31/2001
20,000: 8/31/99 8/31/2002
20,000: 8/31/00 8/31/2003
20,000: 8/31/01 8/31/2004
20,000: 8/31/02 8/31/2005

Jon P. DeOng................................. 3/16/98 100,000 20,000: 3/16/98 $ 2.00 3/16/2001
20,000: 3/16/99 3/16/2002
20,000: 3/16/00 3/16/2003
20,000: 3/16/01 3/16/2004
20,000: 3/16/02 3/16/2005

Jon P. DeOng................................. 8/31/98 100,000 20,000: 8/31/98 $ 2.00 8/31/2001
20,000: 8/31/99 8/31/2002
20,000: 8/31/00 8/31/2003
20,000: 8/31/01 8/31/2004
20,000: 8/31/02 8/31/2005

Christopher Fogel............................ 3/31/98 100,000 20,000: 3/30/98 $ 2.00 3/30/2001
20,000: 3/30/99 3/30/2002
20,000: 3/30/00 3/30/2003
20,000: 3/30/01 3/30/2004
20,000: 3/30/02 3/30/2005

Christopher Fogel............................ 8/31/98 100,000 20,000: 8/31/98 $ 2.00 8/31/2001
20,000: 8/31/99 8/31/2002
20,000: 8/31/00 8/31/2003
20,000: 8/31/01 8/31/2004
20,000: 8/31/02 8/31/2005

Olivia Salyer................................ 12/15/97 20,000 4,000: 12/15/97 $ 2.00 12/15/2000
4,000: 12/15/98 12/15/2001
4,000: 12/15/99 12/15/2002
4,000: 12/15/00 12/15/2003
4,000: 12/15/01 12/15/2004

Olivia Salyer................................ 5/01/98 10,000 2,000: 5/01/98 $ 2.00 5/01/2001
2,000: 5/01/99 5/01/2002
2,000: 5/01/00 5/01/2003
2,000: 5/01/01 5/01/2004
2,000: 5/01/02 5/01/2005

Richard Knittle.............................. 7/01/98 20,000 4,000: 7/01/98 $ 2.00 7/01/2001
4,000: 7/01/99 7/01/2002
4,000: 7/01/00 7/01/2003
4,000: 7/01/01 7/01/2004
4,000: 7/01/02 7/01/2005

Charles Rice................................. 7/01/98 300,000 60,000: 7/01/98 $ 2.00 7/01/2001
60,000: 7/01/99 7/01/2002
60,000: 7/01/00 7/01/2003
60,000: 7/01/01 7/01/2004
60,000: 7/01/02 7/01/2005

Kenneth K. Lattin............................ 8/04/98 400,000 80,000: 8/04/98 $ 2.00 8/04/2001
80,000: 8/04/99 8/04/2002
80,000: 8/04/00 8/04/2003
80,000: 8/04/01 8/04/2004
80,000: 8/04/02 8/04/2005

Dr. Douglas Benson........................... 8/31/98 100,000 20,000: 8/31/98 $ 2.00 8/31/2001
20,000: 8/31/99 8/31/2002
20,000: 8/31/00 8/31/2003
20,000: 8/31/01 8/31/2004
20,000: 8/31/02 8/31/2005

Judd L. Bourgeois............................ 8/31/98 10,000 2,000: 8/31/98 $ 2.00 8/31/2001
2,000: 8/31/99 8/31/2002
2,000: 8/31/00 8/31/2003
2,000: 8/31/01 8/31/2004
2,000: 8/31/02 8/31/2005

William J. Lawrence.......................... 8/31/98 5,000 1,000: 8/31/98 $ 2.00 8/31/2001
1,000: 8/31/99 8/31/2002
1,000: 8/31/00 8/31/2003
1,000: 8/31/01 8/31/2004
1,000: 8/31/02 8/31/2005

Eric Hankins................................. 8/31/98 20,000 4,000: 8/31/98 $ 2.00 8/31/2001
4,000: 8/31/99 8/31/2002
4,000: 8/31/00 8/31/2003
4,000: 8/31/01 8/31/2004
4,000: 8/31/02 8/31/2005

Denise J. Garcia............................. 8/31/98 5,000 1,000: 8/31/98 $ 2.00 8/31/2001
1,000: 8/31/99 8/31/2002
1,000: 8/31/00 8/31/2003
1,000: 8/31/01 8/31/2004
1,000: 8/31/02 8/31/2005

Mark J. Richardson........................... 9/30/98 50,000 10,000: 9/30/98 $ 2.00 9/30/2001
10,000: 9/30/99 9/30/2002
10,000: 9/30/00 9/30/2003
10,000: 9/30/01 9/30/2004
10,000: 9/30/02 9/30/2005

Laura D. Murtagh............................. 9/30/98 25,000 5,000: 9/30/98 $ 2.00 9/30/2001
5,000: 9/30/99 9/30/2002
5,000: 9/30/00 9/30/2003
5,000: 9/30/01 9/30/2004
5,000: 9/30/02 9/30/2005

William Wu................................... 10/07/98 5,000 1,000: 10/07/98 $ 2.00 10/7/2001
1,000: 10/07/99 10/7/2002
1,000: 10/07/00 10/7/2003
1,000: 10/07/01 10/7/2004
1,000: 10/07/02 10/7/2005

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

(1) The vesting of all stock options accelerates in the event that the Company
sells all or substantially all of its assets, merges with another company,
is acquired by another company or enters into a similar business
combination. The vesting of stock options also accelerates for officers,
directors and key employees who are terminated from their position with the
Company, after which they would have 90 days to exercise their vested
options before they would expire.

(2) The exercise price is equal to the fair market value of each share of the
Company's Common Stock on the date of the issuance of the options. Each
stock option for Series 1 Class A Common Stock confers upon the holder the
right to purchase one share of the Company's Series 1 Class A Common Stock
for a price of $2.00 per share at any time from the vesting date to the
expiration date.

KEY EMPLOYEES AND CONSULTANTS

The Company has certain key employees and consultants who will assist in
product and solution development, and implementation and marketing for the
Company. These key employees and consultants will also perform marketing,
administrative, and other services for the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Under California Corporation Law and the Company's Amended and Restated
Articles of Incorporation, the Company's directors will have no personal
liability to the Company or its stockholders for monetary damages incurred as
the result of the breach or alleged breach by a director of his "duty of care".
This provision does not apply to the director's (i) acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law, (ii)
acts or omissions that a director believes to be contrary to the best interests
of the corporation or its shareholders or that involve the absence of good faith
on the part of the director, (iii) approval of any transaction from which a
director derives an improper personal benefit, (iv) acts or omissions that show
a reckless disregard for the director's duty to the corporation or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the corporation or its shareholders, (v) acts or omissions
that constituted an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation or its shareholders, or
(vi) approval of an unlawful dividend, distribution, stock repurchase or
redemption. This provision would generally absolve directors of personal
liability for negligence in the performance of duties, including gross
negligence.

The effect of this provision in the Company's Amended and Restated Articles
of Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholder's derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of his fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (vi) above.
This provision does not limit nor eliminate the rights of the Company or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. In addition, the Company's
Amended and Restated Articles of Incorporation provide that if California law is
amended to authorize the future elimination or limitation of the liability of a
director, then the liability of the directors will be eliminated or limited to
the fullest extent permitted by the law, as amended. The California Corporations
Code grants corporations the right to indemnify their directors, officers,
employees and agents in accordance with applicable law. The Company's Bylaws
provide for indemnification of such persons to the full extent allowable under
applicable law. These provisions will not alter the liability of the directors
under federal securities laws.

The Company intends to enter into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Bylaws. These agreements, among other things, indemnify the Company's directors
and officers for certain expenses (including attorney's fees), judgments, fines
and settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director or officer of the Company, any subsidiary of the
Company or any other company or enterprise to which the person provides services
at the request of the Company. The Company believes that these provisions and
agreements are necessary to attract and retain qualified directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been

informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.

AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS

Under the California Corporations Code, a corporation's articles of
incorporation can be amended by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote, and a majority of the
outstanding stock of each class entitled to vote as a class, unless the
certificate requires the vote of a larger portion of the stock. The Company's
Restated Articles of Incorporation do not require a larger percentage
affirmative vote. As is permitted by the California Corporations Code, the
Company's Bylaws give its Board of Directors the power to adopt, amend or repeal
the Company's Bylaws. The Company's shareholders entitled to vote have
concurrent power to adopt, amend or repeal the Company's Bylaws.

CERTAIN TRANSACTIONS

Fredrick Rice and certain associates formed Consumer Net Partners, a
California general partnership ("CNP") in 1996. CNP provided the start-up equity
for the Internet shopping mall concept and previously held certain rights and
interests in the electronic shopping mall business. Pursuant to CNP's
Partnership Agreement, it retained a right to receive 75% of net income
generated by the Company. From inception through December 31, 1997 the CNM
shopping mall business had not generated any net income. Fredrick Rice also
serves as the President and sole shareholder of Consumers On-Line Development,
Inc. Consumers On-Line Development, Inc. was primarily responsible for managing
and overseeing the development, creation, establishment and marketing of the CNM
electronic shopping mall. Pursuant to a Management Agreement with CNP, Consumers
On-Line Development, Inc. had a 25% net revenue interest in revenue received by
CNP which is generated by the CNM electronic shopping mall business.

In July 1997, Consumers On-Line Development, Inc. dissolved and assigned all
of its rights to CNP. On December 31, 1997, the Company purchased all the rights
and interest held by CNP in the CNM Internet shopping mall business, including
all rights pursuant to the Management Agreement between CNP and Consumers
On-Line Development, Inc. The Company issued to CNP a non interest-bearing
promissory note in the principal amount of $500,000, payable on demand, and an
option to purchase 250,000 shares of the Company's Series 1 Class B Common Stock
at an exercise price of $.50 per share for a period of three years, in
consideration for CNP's rights in the Company's business. See "BUSINESS--
Previous Financing And Development Arrangement." The Company has not and does
not anticipate obtaining an independent valuation of the rights and interests
being purchased. Although the Company believes the purchase consideration to be
fair and reasonable, there is no assurance that such consideration reflects the
true value of the rights and interests being acquired.

Due to the positions held by Mr. Rice, he has a potential conflict of
interest in any transactions between the Company and CNP. Mr. Rice is aware of
these conflicts and will endeavor at all times to do what is in the best
interest of each entity with which he is affiliated. If an objection is raised
or if he should determine, on his own volition, that he cannot overcome any real
or perceived conflict, Mr. Rice would withdraw from participating in such
transaction. As indicated previously, the Company's purchase of rights from CNP
received the approval of a majority in-interest of the general partners of CNP.
Mr. Rice does not personally have any voting rights in the CNP general
partnership.

PRINCIPAL STOCKHOLDERS

GENERAL

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of October 8, 1998: (a) by each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (b) by each of the Company's executive officers and
directors, and (c) by all officers and directors of the Company as a group.

PERCENTAGE OWNERSHIP
SHARES ------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF OWNER OWNED(1) OFFERING(2) OFFERING(3)
- ----------------------------------------------------------------- ----------------- ----------- -----------

Fredrick Rice(4) ................................................
1900 Los Angeles Ave., Second Floor
Simi Valley, California 93065 5,000,000 76.5% 46.9%
All officers and directors
as a group (5 persons)......................................... 5,000,000(5) 76.5% 46.9%

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

(1) The person named in the table has sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by him,
except as otherwise indicated.

(2) Reflects 1,534,250 shares of the Company's Common Stock previously issued
(as of October 8, 1998) in a private placement to outside investors. See
"BUSINESS--Prior Private Placement of Stock."

(3) Assumes the issuance of 3,596,577 Shares offered by this Prospectus and the
sale of 250,000 Outstanding Shares owned by Fredrick Rice. See "SELLING
SECURITY HOLDERS."

(4) Fredrick Rice is the President, Chief Financial Officer, and Chairman of the
Board of Directors of the Company. Mr. Rice received these shares as the
founder of the Company. See "MANAGEMENT."

(5) Does not include (a) 75,000 shares of Series 1 Class B Common Stock owned by
a prior unaffiliated consultant to the Company, (b) stock options to
purchase up to 1,970,000 shares of the Company's Series 1 Class A Common
Stock held by the executive officers, directors and employees of the
Company, 394,000 of which are currently vested, (c) stock options to
purchase up to 250,000 shares of the Company's Series 1 Class B Common Stock
held by Consumer Net Partners, an affiliated general partnership, and (d)
stock options to purchase up to 127,500 shares of the Company's Series 1
Class A Common Stock granted to certain investors outside of the Company's
1997 Stock Option Plan, 25,500 of which are currently vested. See
"MANAGEMENT--Employment Agreements and Stock Options," "BUSINESS--Previous
Financing and Development Arrangement," and "DESCRIPTION OF CAPITAL
STOCK--Stock Options Granted Outside Plan."

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company consists of 50,000,000 shares of
Series 1 Class A Common Stock, no par value per share, of which 6,534,250 are
issued and outstanding, 1,000,000 shares of Series 1 Class B Common Stock, $.001
par value per share, of which 75,000 shares are issued and outstanding and
1,000,000 shares of Preferred Stock, no par value per share, none of which is
issued. See "CAPITALIZATION."

COMMON STOCK

The Company is authorized to issue 50,000,000 shares of Series 1 Class A
Common Stock, no par value per share, of which 6,534,250 shares are issued and
outstanding as of October 8, 1998. Holders of Series 1 Class A Common Stock are
entitled to dividends when, as, and if declared by the Board of Directors out of
funds available therefor, subject to any priority as to dividends for Preferred
Stock that may be outstanding. See "DIVIDEND POLICY." Holders of Series 1 Class
A Common Stock are entitled to cast one vote for each share held at all
stockholder meetings for all purposes, including the election of directors. The
holders of more than 50% of the Series 1 Class A Common Stock issued and
outstanding are entitled to vote, present in person or by proxy and constitute a
quorum at all meetings of stockholders. The vote of the holders of a majority of
Series 1 Class A Common Stock present at such a meeting will decide any question
brought before such meeting, except for certain actions such as amendments to
the Company's Restated Articles of Incorporation, mergers or dissolution's which
require the vote of the holders of a majority of the outstanding Series 1 Class
A Common Stock. Upon liquidation or dissolution, the holder of each outstanding
share of Series 1 Class A Common Stock will be entitled to share equally in the
assets of the Company legally available for distribution to such stockholder
after payment of all liabilities and after distributions to preferred
stockholders legally entitled to such distributions. Holders of Series 1 Class A
Common Stock do not have any preemptive, subscription or redemption rights. They
are entitled to cumulative voting rights under the California Corporations Code.
Under cumulative voting, minority shareholders may have the right to vote one or
more members onto the Company's Board of Directors. See "DESCRIPTION OF CAPITAL
STOCK--Cumulative Voting." The Series 1 Class B Common Stock essentially has all
of the same rights as the Series 1 Class A Common Stock on a pro rata basis,
including with respect to a liquidation, except that the holders of Series 1
Class B Common Stock have no voting or dividend rights. Each share of Series 1
Class B Common Stock is convertible into one share of Series 1 Class A Common
Stock at any time. All outstanding shares of Common Stock are fully paid and
non-assessable.

PREFERRED STOCK

The Company has authorized 1,000,000 shares of Preferred Stock, no par
value. As of October 8, 1998 the Company has not issued any shares of Preferred
Stock. The Preferred Stock may be issued in such series as are designated by the
Company's Board of Directors, and the Board of Directors may fix the number of
authorized shares of Preferred Stock for each series, and the rights,
preferences, and privileges of each series of Preferred Stock.

STOCK OPTIONS GRANTED OUTSIDE PLAN

The Company has granted stock options to purchase a total of 127,500 shares
of the Company's Series 1 Class A Common Stock to 15 individuals outside of the
1997 Stock Option Plan. The exercise price of all of these stock options is
$2.00 per share and they are exercisable for three years after vesting. The
stock options were granted during the period of June 20, 1997 to August 31,
1998. The stock options vest one-fifth upon grant and one-fifth each year
thereafter over a four year vesting period. Accordingly, as of October 7, 1998,
25,500 of the 127,500 stock options granted had vested. The stock options
granted

outside of the plan include 5,000 stock options granted to Bruce Seidel,
President of the Southern California Shelter Division of Eller Media Company,
and 5,000 stock options granted to Paul Thompson, Account Executive of the
Southern California Division of Eller Media Company. The stock options granted
outside of the plan also include 50,000 stock options granted to Edward Allen
Consulting, an Internet marketing consulting firm. Edward Allen consulting is
owned by the brother of Fredrick Rice, the President of the Company. These stock
options were granted during the period from July 1997 to August 1998. See
"BUSINESS--Proposed Agreement with Eller Media."

CUMULATIVE VOTING

Pursuant to the Company's Bylaws and in accordance with the California
Corporations Code, each holder of Series 1 Class A Common Stock is entitled to
one vote for each share of the Company's Common Stock held, and such holders may
be entitled to cumulative voting rights in the election of directors. Under the
California Corporations Code, cumulative voting is not required unless, at the
annual meeting and prior to the voting, at least one shareholder gives notice of
his intention to cumulate his votes. If one shareholder gives notice of an
intention to cumulate votes, then all shareholders have cumulative voting rights
in the election of directors. If no such notice is given, voting for directors
is non-cumulative, which means that a simple majority of the shares voting may
elect all of the directors. Under cumulative voting, each shareholder entitled
to vote has the right to give one candidate a number of votes equal to the
number of authorized directors multiplied by the number of votes to which his
shares are entitled, or to distribute his votes on the same principle among as
many candidates as he desires. As a result, each share of the Company's Series 1
Class A Common Stock has a number of votes equal to the number of authorized
directors. The California cumulative voting law applies only to the election of
directors and not to any other matters as to which shareholders may vote.

TRANSFER AGENT AND REGISTRAR

The Company has selected US Stock Transfer Corporation in Glendale,
California as the Transfer Agent and Registrar.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the Common Stock of the
Company. Future sales of Common Stock in the public market could adversely
affect market prices prevailing from time to time. Sales of substantial amounts
of Common Stock of the Company in the public market after various restrictions
lapse could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.

Upon the completion of this offering, assuming that the maximum number of
Shares offered by this Prospectus are sold, the Company will have 10,130,827
shares of Common Stock, of which 3,596,577 Shares of Common Stock and 403,423
Outstanding Shares sold in this offering will be freely tradable without
restriction under the Securities Act. The 6,609,250 shares of Common Stock held
by existing stockholders prior to this offering were issued and sold by the
Company in reliance on exemptions from the registration requirements of the
Securities Act and are deemed "restricted shares" under Rule 144. These shares
may be sold in the public market only if registered, or pursuant to an exemption
from registration such as Rules 144, 144(k) or 701 under the Securities Act of
1933, as amended. The existing shareholders of the Company have not entered into
any lock-up or other agreements pursuant to which they have agreed not to sell
the stock of the Company that they own. Accordingly, 5,075,000 shares will
become eligible for immediate public resale subject to Rule 144, including the
volume limitations of Rule 144(e). The remaining 1,534,250 shares held by
existing stockholders will become eligible for public resale at various times
following expiration of the one-year holding periods pursuant to Rule 144(d),
subject to the volume limitations of Rule 144(e). After a holding period of two
years, non-affiliates of the Company may sell their shares without volume
limitations pursuant to Rule 144(k).

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year (including the holding period of any prior owner, except an affiliate) is
entitled to sell in "broker's transactions" or to market makers, within any
three month period commencing 90 days after the date of this Prospectus, a
number of shares that does not exceed the greater of (i) one percent of the
number of shares of Common Stock then outstanding (approximately 10,130,827
shares immediately after this offering) or (ii) the average weekly trading
volume of the Common Stock during the four calendar weeks preceding the required
filing of a Form 144 with respect to such sale. Sales under Rule 144 are
generally subject to certain manner of sale provisions and notice requirements
and to the availability of current public information about the Company. Under
Rule 144(k), a person who is not deemed to have been an affiliate of the Company
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, is entitled to sell such
shares without having to comply with the manner of sale, public information,
volume limitation or notice provisions of Rule 144. Under Rule 701 of the
Securities Act, persons who purchase shares upon exercise of options granted
prior to the effective date of this offering are entitled to sell such shares 90
days after the effective date of this offering in reliance on Rule 144 without
having to comply with the holding period requirements of Rule 144 and, in the
case of persons who are not affiliates of the Company, without having to comply
with the public information, volume limitation or notice provisions of Rule 144.

SELLING SECURITY HOLDERS

THE OUTSTANDING SHAREHOLDERS

The selling shareholders include (i) Fredrick Rice who was issued a total of
5,000,000 founder's shares, and (ii) 120 investors who purchased 1,534,250
shares in a private placement between October 1, 1997 and October 8, 1998. The
selling security holders are offering 10% of their shareholdings in the Company
pursuant to this Prospectus, except Frederick Rice, the President and Chairman
of the Board of Directors of the Company, who is offering 5% of his shares in
the Company. The following table lists the selling security holders who are
Outstanding Shareholders and the number of Outstanding Shares offered by them
for sale.

NUMBER OF
NAME OF OUTSTANDING SHAREHOLDER(2) OUTSTANDING SHARES
- ------------------------------------------------------ ------------------

Fredrick Rice(1)...................................... 250,000
Millard & Yvonne Fry.................................. 250
Bernice Harray........................................ 2,800
George F. Carlsten.................................... 1,150
Woodrow Cunningham.................................... 375
Francois Jamati....................................... 850
Vance H. Watland Trust................................ 250
Virgil C. Buhrman..................................... 250
Edward Greist & Margaret Layton....................... 500
Carl H. Karduck....................................... 500
Delores Henne......................................... 3,350
John & Henrietta Marino............................... 1,000
Bette Carmer & George Bailey.......................... 250
Thomas G. Nolta....................................... 6,250
Naomi F. Smith........................................ 225
Joseph Kadlec, Sr..................................... 872
Jack E. Allen......................................... 225
Albin J. Konchar...................................... 400
Laurence B. Falk...................................... 62
Joseph Brown, Jr...................................... 250
Howell L. Tarver...................................... 1,000
Leonard Eisner........................................ 250
Douglas Ariyoshi Family Trust......................... 250
John D. Rice.......................................... 1,500
David Gharaman........................................ 650
Peter & Jeanne McCauley............................... 400
Joseph & Mary Spisich................................. 300
Roger McClure......................................... 150
W. Andrew Stone....................................... 225
James L. Lafferty..................................... 1,000
Muriel Brobst......................................... 1,000
Paul & Sharon Montagne................................ 62
Walter Wulff.......................................... 1,000
Oran Bly.............................................. 125
Margaret G. Terrill................................... 100
Kenneth W. Terrill.................................... 100
Kenneth Hare.......................................... 62

NUMBER OF
NAME OF OUTSTANDING SHAREHOLDER(2) OUTSTANDING SHARES
- ------------------------------------------------------ ------------------

Stan Norman........................................... 250
Mary E. Peters........................................ 500
Robert C. Gregg....................................... 500
Robert W. Hitt........................................ 350
Terry D. Lee.......................................... 125
Nicholas F. Shehadi................................... 900
Judith Lampert........................................ 500
Edward & Joan Rodberg................................. 850
Lisa Rodberg.......................................... 250
Althea Jacobs......................................... 100
Bradley H. & Donn Greene.............................. 100
Yakov & Lillian Sapozhnikov........................... 500
George Walcott........................................ 125
Louis & Peggy Youlos.................................. 500
Joyce Johnson......................................... 100
Muriel Shandler....................................... 100
Laura Berg............................................ 300
Lillian Dickmon....................................... 625
Terry Harper.......................................... 500
William Kugler........................................ 500
Laroma Management..................................... 200
Alfred & Andrea Medina................................ 250
Alan & Dale Rodberg................................... 150
Estelle Tenenbaum..................................... 300
Lois Welsh............................................ 800
Wanda Wirick.......................................... 3,000
Rick & Renita Dechellis............................... 200
Ann McCauley.......................................... 50
Maureen McCauley...................................... 50
Edward J. Snider...................................... 5,250
Pearl N. Eyre......................................... 450
Lonnie Gene Prewitt................................... 1,250
Elaine Halko.......................................... 750
Richard Labahn........................................ 1,000
Patricia L. Gapik..................................... 150
Erwin Heiser.......................................... 1,500
William W. Straub, III................................ 500
Allen L. & Virginia Redfield.......................... 600
Theodore Nalepa....................................... 1,150
George & Paula Rountree............................... 100
Victor Suits.......................................... 125
Debra A. Boone........................................ 100
William & Marge Crombie............................... 200
John Sherman.......................................... 500
Charles Stewart....................................... 150
Dennis Bassett........................................ 2,500
Virgil Ice............................................ 125
Terry Daus............................................ 125
George M. Long........................................ 1,300

NUMBER OF
NAME OF OUTSTANDING SHAREHOLDER(2) OUTSTANDING SHARES
- ------------------------------------------------------ ------------------

Tom Johnson........................................... 250
Edwin S. Johnston Co.................................. 25,600
Jeffery & Barbara Phillips............................ 440
Robert & Jaqueline Haynes............................. 1,150
Bruce Lairmore........................................ 350
John M. Pata.......................................... 100
Paula Grassel......................................... 100
Brian Hurd............................................ 50
William Joseph Lucas.................................. 1,500
George M. Toran, Jr................................... 750
Anton Grasl........................................... 1,000
Arthur Schoen......................................... 500
Corbin 22 Ltd......................................... 450
Candace Lee........................................... 500
Dede P. Wandel........................................ 500
Dennis & Patricia Rozsa............................... 500
Dennis D. Silver...................................... 1,500
Constante & Jane Tacata............................... 150
Jay George Stone...................................... 250
Robert & Shirley Torrey............................... 2,000
Anthony & Karen Wolosowski............................ 350
Frederick W. Brienen.................................. 100
Craig Desalva......................................... 600
Keith & Eunice Ethell................................. 250
Cornett Ferrell....................................... 500
Kenneth Hitts......................................... 125
Gerald Kopstein....................................... 125
Cyd Lucas............................................. 500
John & Irene Meany.................................... 2,500
Jane N. Park.......................................... 1,000
John & Ivalee Patterson............................... 125
Dr. Marvin A. Piper................................... 37,500
Mary Poulos........................................... 750
Louis Rahhal.......................................... 750
Charles Rice.......................................... 3,500
Lou Rice.............................................. 1,750
James Skeoch.......................................... 200
William R. Jones...................................... 75
John Oppelt........................................... 75
Karen Angone.......................................... 500
Dan Prunk............................................. 400
Mark Shah............................................. 200
Joseph Quenneville.................................... 250
Mitesh Parikh......................................... 500
Mary Hankins.......................................... 500
Dr. Carl Todd Bridges................................. 500
George Bridges........................................ 500
Dr. George I. "Trace" Bridges, III.................... 500
Jack Bryan............................................ 1,000

NUMBER OF
NAME OF OUTSTANDING SHAREHOLDER(2) OUTSTANDING SHARES
- ------------------------------------------------------ ------------------

Major Gregory Lang.................................... 500
Matthias Dautremont................................... 50
Paresh Patel.......................................... 300
Kalyan Majmundar...................................... 100
Paul Pantera.......................................... 150
American Mortgage Professionals, Inc.................. 200
Mary Jane Von Bokel................................... 125
Robert & Victoria Brooks.............................. 250

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

(1) Fredrick Rice is the President and Chairman of the Board of Directors. Mr.
Rice received 5,000,000 shares of Common Stock as founder's stock for an
aggregate price of $500.00.

(2) These individuals, other than Mr. Rice, purchased these Outstanding Shares
for $2.00 per share in a private placement of Common Stock made by the
Company commencing on October 1, 1997 and terminating on October 8, 1998.

PLAN OF DISTRIBUTION

The Shares are being offered by the Company on a best-efforts basis by its
officers, directors and employees, and possibly through registered
broker-dealers selected by the Company who are members of the National
Association of Securities Dealers, Inc. or independent referral sources. As of
the date of this Prospectus, the Company had not entered into selling agreements
with any registered broker-dealers. No selling commissions will be paid to the
officers, employees or directors of the Company for Shares or Outstanding Shares
sold by or through them. The Company will pay selling commissions to
participating broker-dealers equal to a percentage of the purchase price of the
Shares and Outstanding Shares sold by them, to be determined by management in
negotiations with such parties. The Company may also reimburse participating
broker-dealer firms for due diligence costs on an accountable or non-accountable
basis. The Company will indemnify participating broker-dealer firms, if any,
with respect to the disclosures made in this Prospectus. The Shares and
Outstanding Shares will be sold together as shares are sold in this offering, in
proportion to the relative number of Shares and Outstanding Shares covered by
this Prospectus, subject to mathematical rounding when necessary. Accordingly,
when a lot of 100 shares is sold pursuant to this Prospectus, nine shares will
be Outstanding Shares and 91 shares will be Shares issued by the Company. As
among the Outstanding Shareholders, their shares will be sold on a pro rata
basis in accordance with the relative number of Outstanding Shares offered by
them pursuant to this Prospectus.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by the Company and
may not be indicative of the market price of the Common Stock following this
offering. Among the factors to be considered in such determination are
prevailing market conditions, certain financial information of the Company,
market valuations of other companies that the Company believes to be comparable
to the Company, estimates of the business potential of the Company, the present
state of the Company's development and other factors deemed relevant.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Richardson & Associates, Santa Monica,
California. Mark J. Richardson, Esq. and Laura Murtagh, Esq, members of the law
firm, are a director and corporate secretary of the Company, respectively,
positions which they have held since September 30, 1998. Mr. Richardson and Ms.
Murtagh have stock options in the Company. See "MANAGEMENT."

EXPERTS

The financial statements as of December 31, 1997 and for the twelve month
period ending December 31, 1997 included in this Prospectus and Registration
Statement have been so included in reliance on the report of Stonefield
Josephson, independent certified accountants, given on the authority of said
firm as experts in auditing and accounting. The financial statements as of
December 31, 1996 and for the period from inception on May 9, 1996 to December
31, 1996 included in this Prospectus and Registration Statement have been so
included in reliance on the report of Caldwell, Becker, Dervin, Petrick & Co.,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed a registration statement on Form S-1 (the
"Registration Statement") with the Commission under the Securities Act in
respect of the Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, and Financial Statements
and Notes thereto filed as a part thereof. Statements herein concerning the
contents of any contract or other document filed with the Commission as an
exhibit to the Registration Statement are not necessarily complete and are
qualified in all respects by such reference. Copies of the Registration
Statement, including all exhibits and schedules thereto, may be inspected
without charge at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material
can be obtained from the Public Reference Section of the Commission upon payment
of certain fees prescribed by the Commission.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements certified by its independent accountants
and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

PAGE
---------

Report of Stonefield Josephson, Inc., Independent Auditors at December 31, 1997............................ F-1

Report of Independent Auditors at December 31, 1996........................................................ F-2

Balance Sheet at June 30, 1998 (unaudited), December 31, 1997 and December 31, 1996........................ F-3

Statement of Operations for the six months ended June 30, 1998 (unaudited) and June 30, 1997 (unaudited)
and for the years ended December 31, 1997 and December 31, 1996 and for the period from May 9, 1996 (date
of inception) to June 30, 1998........................................................................... F-4

Statement of Shareholders' Deficit for the six months ended June 30, 1998 (unaudited) and June 30, 1997
(unaudited) and for the years ended December 31, 1997 and December 31, 1996 and for the period from May
9, 1996 (date of inception) to June 30, 1998............................................................. F-5

Statements of Cash Flows for the six months ended June 30, 1998 (unaudited) and June 30, 1997 (unaudited)
and for the years ended December 31, 1997 and December 31, 1996 and for the period from May 9, 1996 (date
of inception) to June 30, 1998........................................................................... F-7

Notes to Financial Statements.............................................................................. F-10

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Consumer Net Marketplace, Inc.
Simi Valley, California

We have audited the accompanying balance sheet of Consumer Net Marketplace,
Inc. as of December 31, 1997, and the related statements of operations,
shareholders' deficit and cash flows for the year ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit 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 Consumer Net Marketplace,
Inc. at December 31, 1997, and the results of its operations and its cash flows
for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13, the Company
has had significant losses in the past, and has been dependent on outside equity
investors to finance its operations. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans with
respect to these matters are described in Note 13 to the financial statements.
The financial statements do not included any adjustments that might result from
the outcome of these uncertainties.

Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
August 25, 1998

F-1

INDEPENDENT AUDITORS' REPORT

August 22, 1997

To the Board of Directors and Stockholders

Consumer Net Marketplace

Simi Valley, California

We have audited the accompanying balance sheet of Consumer Net Marketplace,
(A California S Corporation), (a development stage company) as of December 31,
1996, and the related statements of (loss), stockholder(1)s (deficit), and cash
flows for the period from inception (May 10, 1996) to December(7)31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.

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

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

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, there is doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.
- ------------------------------------------------------------
CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.

F-2

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

DECEMBER 31, DECEMBER 31,
1997 1996
JUNE 30, ------------- ------------
1998
-------------
(UNAUDITED)

ASSETS

CURRENT ASSETS:
Cash............................................................... $ 21,800 $ 6,546 $ 701
Accounts and advances receivable, net of allowance for doubtful
accounts......................................................... 2,365 1,940 2,043
Prepaid advertising................................................ 573,600 -- --
Loan receivable, shareholder....................................... 500 500 500
------------- ------------- ------------
Total current assets............................................. 598,265 8,986 3,244
------------- ------------- ------------

PROPERTY AND EQUIPMENT, net.......................................... 214,480 55,574 20,092

DEFERRED OFFERING COSTS.............................................. 14,998 15,137 --

OTHER ASSETS......................................................... 29,227 2,276 2,459
------------- ------------- ------------
258,705 72,987 22,551
------------- ------------- ------------
$ 856,970 $ 81,973 $ 25,795
------------- ------------- ------------
------------- ------------- ------------

LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
Notes payable, related party....................................... $ 500,000 $ 500,000 $ 87,037
Note payable, bank................................................. 8,510 -- --
Accounts payable and accrued expenses.............................. 159,900 124,377 40,757
Accrued advertising expenses....................................... 573,600 -- --
------------- ------------- ------------
Total current liabilities........................................ 1,242,010 624,377 127,794
------------- ------------- ------------

CONTINGENCIES AND COMMITMENTS

SHAREHOLDERS' DEFICIT:
Common stock; Series 1, Class A, no par value, 20,000,000 shares
authorized, 5,448,800 shares issued and outstanding.............. 898,100 137,500 500
Common stock; Series 1, Class B, convertible, par value $.001,
1,000,000 shares authorized, 75,000 shares issued and
outstanding...................................................... 525,000 525,000 --
Deficit accumulated during the development stage................... (1,808,140) (1,204,904) (102,499)
------------- ------------- ------------
Total shareholders' deficit...................................... (385,040) (542,404) (101,999)
------------- ------------- ------------
$ 856,970 $ 81,973 $ 25,795
------------- ------------- ------------
------------- ------------- ------------

See accompanying independent auditors' report and notes to financial statements.

F-3

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

PERIOD FROM PERIOD FROM
MAY 9, 1996 MAY 9, 1996
SIX MONTHS YEAR ENDED (INCEPTION) TO (INCEPTION)
ENDED JUNE DECEMBER 31, DECEMBER 31, TO JUNE 30,
30, 1997 1997 1996 1998*
----------- -------------- -------------- -----------
SIX MONTHS
ENDED JUNE (UNAUDITED)
30, 1998
-----------
(UNAUDITED)

Revenues....................... $ 11,713 $ 6,916 $ 30,697 $ 20,828 $ 63,238
Selling, general, and
administrative expense....... 611,786 16,290 394,900 121,334 1,128,020
Loss on acquisition of
partnership interest from
related party................ -- -- 733,562 -- 733,562
Bad debt expense............... 2,057 -- 3,840 1,193 7,090
----------- ----------- -------------- -------------- -----------
Net loss from operations....... (602,130) (9,374) (1,101,605) (101,699) (1,805,434)
Interest expense............... (306) -- -- -- (306)
----------- ----------- -------------- -------------- -----------
Net loss before income taxes... (602,436) (9,374) (1,101,605) (101,699) (1,805,740)
Provision for income taxes..... (800) (800) (800) (800) (2,400)
----------- ----------- -------------- -------------- -----------
Net loss....................... $(603,236) $ (10,174) $ (1,102,405) $ (102,499) ($1,808,140)
----------- ----------- -------------- -------------- -----------
----------- ----------- -------------- -------------- -----------
Net loss per common share basic
and diluted.................. $ (.11) $ (.00) $ (.22) $ (.02) $ (.14)
----------- ----------- -------------- -------------- -----------
----------- ----------- -------------- -------------- -----------
Weighted average number of
shares outstanding basic and
diluted...................... 5,273,290 5,003,619 5,037,857 5,000,000 5,273,290
----------- ----------- -------------- -------------- -----------
----------- ----------- -------------- -------------- -----------

* Audited from inception to December 31, 1997 and unaudited from January 1,
1998 to June 30, 1998.

See accompanying independent auditors' report and notes to financial statements.

F-4

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF SHAREHOLDERS' DEFICIT

SERIES 1, CLASS A COMMON SERIES 1, CLASS B DEFICIT
STOCK COMMON STOCK ACCUMULATED DURING TOTAL
------------------------ -------------------- THE DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT STAGE DEFICIT
------------ ---------- --------- --------- ------------------ ------------

Balance at inception
May 9, 1996.............................. 10,000,000 $ 1,000 -- $ -- $ -- $ 1,000
Cancellation of shares..................... (5,000,000) (500) -- -- -- (500)
Net loss for the year ended December 31,
1996..................................... -- -- -- -- (102,499) (102,499)
------------ ---------- --------- --------- ------------------ ------------
Balance at December 31, 1996............... 5,000,000 500 -- -- (102,499) (101,999)
Issuance of shares in connection with
services provided to the Company......... 75,000 150,000 -- 150,000
Issuance of shares in connection with
private placement........................ 72,250 137,000 -- -- -- 137,000
Issuance of Series 1, Class B Common Stock
options for repurchase of partnership
interest with related party.............. -- -- -- 375,000 -- 375,000
Net loss for the year ended December 31,
1997..................................... -- -- -- -- (1,102,405) (1,102,405)
------------ ---------- --------- --------- ------------------ ------------
Balance at December 31, 1997............... 5,072,250 137,500 75,000 525,000 (1,204,904) (542,404)
Issuance of shares in connection with
private placement (unaudited)............ 376,550 760,600 -- -- -- 760,600
Net loss for the six months ended June 30,
1998 (unaudited)......................... -- -- -- -- (603,236) (603,236)
------------ ---------- --------- --------- ------------------ ------------
Balance at June 30, 1998 (unaudited)....... 5,448,800 $ 898,100 75,000 $ 525,000 $ (1,808,140) $ (385,040)
------------ ---------- --------- --------- ------------------ ------------
------------ ---------- --------- --------- ------------------ ------------

See accompanying independent auditors' report and notes to financial statements.

F-5

(This page intentionally left blank.)

F-6

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

PERIOD FROM MAY PERIOD FROM
9, 1996 MAY 9, 1996
SIX MONTHS SIX MONTHS YEAR ENDED (INCEPTION) TO (INCEPTION)
ENDED JUNE ENDED JUNE DECEMBER 31, DECEMBER 31, TO JUNE 30,
30, 1998 30, 1997 1997 1996 1998*
----------- ----------- --------------- --------------- ------------
(UNAUDITED) (UNAUDITED)

CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net loss......................... $(603,236) $ (10,174) $(1,102,405) $(102,499) $(1,808,140)
----------- ----------- --------------- --------------- ------------

ADJUSTMENTS TO RECONCILE NET LOSS
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Depreciation and amortization.... 20,838 3,997 6,441 3,029 30,308
Non-reciprocal expenses paid by
affiliate...................... -- -- -- 880 880
Loss on acquisition of
partnership interest from
related party.................. -- -- 733,562 -- 733,562
Issuance of common stock for
services received.............. -- -- 150,000 -- 150,000

CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable.............. (2,484) 1,706 (3,735) (3,236) (9,455)
Allowance for doubtful
accounts....................... 2,057 (1,193) 3,838 1,193 7,088
Other assets..................... (27,043) -- -- (2,520) (29,563)
Prepaid advertising costs........ (573,600) -- -- -- (573,600)

INCREASE (DECREASE) IN LIABILITIES:
Increase in accounts payable,
accrued expenses and other
liabilities.................... 35,524 9,987 83,620 40,755 159,899
Accrued advertising expenses..... 573,600 -- -- -- 573,600
----------- ----------- --------------- --------------- ------------
Total adjustments.............. 28,892 14,497 973,726 40,101 1,042,719
----------- ----------- --------------- --------------- ------------
Net cash provided by (used for)
operating activities......... (574,344) 4,323 (128,679) (62,398) (765,421)
----------- ----------- --------------- --------------- ------------

* Audited from inception to December 31, 1997 and unaudited from January 1,
1998 to June 30, 1998.

See accompanying independent auditors' report and notes to financial statements.

F-7

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS (CONTINUED)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH FLOWS USED FOR INVESTING
ACTIVITIES--
purchase of property and
equipment (179,652) -- (41,740) (18,878) (240,270)
----------- ----------- --------------- --------------- ------------
CASH FLOWS PROVIDED BY (USED FOR)
FINANCING ACTIVITIES:
Proceeds from sale of common
stock.......................... 760,600 -- 137,000 -- 897,600
Proceeds from issuance of note
payable, related party......... -- 16,300 54,401 81,977 136,378
Principal payment of notes
payable, bank.................. (1,349) -- -- -- (1,349)
(Increase) decrease in deferred
offering costs................. 139 (20,893) (15,137) -- (14,998)
Note payable, bank............... 9,860 -- -- -- 9,860
----------- ----------- --------------- --------------- ------------
Net cash provided by (used for)
financing activities......... 769,250 (4,593) 176,264 81,977 1,027,491
----------- ----------- --------------- --------------- ------------

NET INCREASE (DECREASE) IN CASH.... 15,254 (270) 5,845 701 21,800
CASH, beginning of period.......... 6,546 701 701 -- --
----------- ----------- --------------- --------------- ------------

CASH, end of period................ $ 21,800 $ 431 $ 6,546 $ 701 $ 21,800
----------- ----------- --------------- --------------- ------------
----------- ----------- --------------- --------------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid.................... $ 306 $ -- $ -- $ -- $ 306
----------- ----------- --------------- --------------- ------------
----------- ----------- --------------- --------------- ------------
Income taxes paid................ $ -- $ 1,600 $ 800 $ -- $ 2,400
----------- ----------- --------------- --------------- ------------
----------- ----------- --------------- --------------- ------------

* Audited from inception to December 31, 1997 and unaudited from January 1,
1998 to June 30, 1998.

See accompanying independent auditors' report and notes to financial statements.

F-8

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS (CONTINUED)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

1. During 1997, the Company issued Series 1, Class B Common Stock for services
rendered provided to the Company with stock valued at $150,000.

2. On December 31, 1997, the Company purchased certain rights and interest from
Consumer Net Partners (CNP), a related party and issued notes and stock
options for such rights and cash advances from CNP as mentioned in Note 4 as
follows:

Promissory note issued............................................... $ 500,000
Options for Series 1, Class B Common Stock issued and valued at...... 375,000
Cash advances received from CNP during:
1996............................................................... (87,037)
1997............................................................... (54,401)
-----------
Consideration for certain rights and interest from CNP which was
written off in 1997................................................ $ 733,562
-----------
-----------

See accompanying independent auditors' report and notes to financial statements.

F-9

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS:

Consumer Net Marketplace, Inc. (the "Company") is in the development stage
of business as a full service Internet Service Provider ("ISP") and Internet
Presence Provider ("IPP") on the World Wide Web (the "Web") which includes Web
services, Web creating, virtual Web hosting, server co-location, technical
support, training, and link-up services for individuals and businesses. The
Company is focused on providing complete individual and business products and
services over the Internet.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS:

For purposes of the statement of cash flows, cash equivalents include all
highly liquid debt instruments with original maturities of three months or less
which are not securing any corporate obligations.

PROPERTY AND EQUIPMENT:

Property and equipment, recorded at cost, are depreciated or amortized using
the straight-line and accelerated methods over the estimated useful lives of the
assets, which is generally five to seven years. Leasehold improvements are
amortized using the straight-line method over the shorter of their estimated
lives or the lease.

INCOME TAXES:

At inception (May 9, 1996), the Company elected to taxed under the
provisions of subchapter S of the Internal Revenue Code. Under these provisions,
the Company does not pay federal income taxes on its taxable income. Instead,
the stockholders were liable for individual federal and California income taxes
on their respective shares of the Company's taxable income. On September 1,
1997, the Company elected to revoke S corporation status and will be taxed as a
C corporation.

Income taxes are accounted for under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under this method, deferred
tax assets and liabilities are determined based on differences between the
financial reporting basis and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

CONCENTRATION OF CREDIT RISK:

Financial instruments that potentially subject the Company to concentrations
of credit risk consists principally of cash investments. The Company's cash
investment policies limit investments to short-term, low risk instruments.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company's financial instruments principally consist of accounts
receivable, accounts payable, line of credit, note payable to a bank, and notes
payable to a related party as defined by Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial Instruments." The
carrying value of accounts receivable and accounts payable approximate of their
fair value due to the short-term nature of these instruments. The carrying value
of the line of credit and note payable to a bank

F-10

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
approximates its fair market value since these financial statements carry a
floating interest rate. The fair market value of the note payable to a related
party approximated its carrying value based on current market rates for such
debt

USE OF ESTIMATES:

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

NET LOSS PER COMMON SHARE:

The Company has adopted Statement of Financial Accounting Standard No. 128,
Earnings per Share ("SFAS No. 128"), which is effective for annual and interim
financial statements issued for periods ending after December 15, 1997. In
accordance with SFAS No. 128, prior years per share amounts have been restated.
SFAS No. 128 was issued to simplify the standards for calculating earnings per
share ("EPS") previously in APB No. 15, Earnings Per Share. SFAS No. 128
replaces the presentation of primary EPS with a presentation of basic EPS. The
new rules also require dual presentation of basic and diluted EPS on the face of
the statement of operations.

For the six months ended June 30, 1998 and 1997, and the years ended
December 31, 1997 and for the period from May 9, 1996 (inception) to December
31, 1996, the per share data is based on the weighted average number of common
and common equivalent shares outstanding, and are calculated in accordance with
Staff Accounting Bulletin of the Securities and Exchange Commission (SAB) No. 98
whereby common stock, options or warrants to purchase common stock or other
potentially dilutive instruments issued for nominal consideration must be
reflected in basic and diluted per share calculations for all periods in a
manner similar to a stock split, even if anti-dilutive. Accordingly, in
computing basic earnings per share, nominal issuances of common stock are
reflected in a manner similar to a stock split or dividend. In computing diluted
earnings per share, nominal issuances of common stock and potential common stock
are reflected in a manner similar to a stock split or dividend.

INTERIM FINANCIAL STATEMENTS (UNAUDITED):

The accompanying unaudited condensed financial statements for the interim
periods ended June 30, 1998 and 1997 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Regulation SX. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six months ended
June 30, 1998 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1998.

F-11

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(3) PROPERTY AND EQUIPMENT:

A summary of property and equipment, recorded at cost is as follows:

DECEMBER 31,
(UNAUDITED) --------------------
JUNE 30, 1998 1997 1996
------------- --------- ---------

Data communications equipment............................ $ 28,986 $ 6,371 $ --
Office and other equipment............................... 163,304 58,429 23,060
Leasehold improvements................................... 52,162 -- --
------------- --------- ---------
244,452 64,800 23,060
Less accumulated depreciation and amortization........... 29,972 9,226 2,968
------------- --------- ---------
$ 214,480 $ 55,574 $ 20,092
------------- --------- ---------
------------- --------- ---------

Depreciation and amortization expense charged to operations amounted to
$20,838, $3,997, $6,441 and $3,029 for the six months ended June 30, 1998 and
1997 and the years ended December 31, 1997 and for the period from May 9, 1996
(inception) to December 31, 1996, respectively.

(4) RELATED PARTY TRANSACTIONS:

Fredrick Rice, officer and major shareholder of the Company, and certain
associates formed Consumer Net Partners, a California general partnership
("CNP") in 1996. CNP provided the start-up equity for the Internet shopping mall
concept and previously held certain rights and interest in the electronic
shopping mall business. Pursuant to CNP's Partnership Agreement, it retained a
right to receive 75% of net income generated by the Company. From inception
through December 31, 1997, the CNM shopping mall business had not generated any
net income. Fredrick Rice also serves as the President and sole shareholder of
Consumers On-Line Development, Inc., which services as the Managing Partner of
CNP. Consumers On-Line Development, Inc. was primarily responsible to manage and
oversee the development, creation, establishment and marketing of the CNM
electronic shopping mall. Pursuant to a Management Agreement with CNP, Consumers
On-Line Development, Inc. had a 25% net revenue interest in revenue received by
CNP which is generated by the CNM electronic shopping mall business. No payments
have been made to Consumers On-Line Development, Inc. pursuant to its Management
Agreement.

On December 31, 1997, the Company purchased all the rights and interest held
by CNP in the CNM Internet shopping mall business, including all rights pursuant
to the Management Agreement between CNP and Consumers On-Line Development, Inc.
The Company issued to CNP a non-interest bearing note in the principal amount of
$500,000, payable on demand from the proceeds of this offering, and an option to
purchase 250,000 shares of the Company's Series 1, Class B common stock at an
exercise price of $.50 per share, valued at an aggregate amount of $375,000 for
a period of three years, in consideration for CNP's rights in the Company's
business and for cash advances and property received from CNP to the Company
amounted to $141,438 ($54,401 in 1997 and $87,037 in 1996).

Pursuant to Accounting Principles Board opinion No. 17, the costs of
developing, maintaining, or restoring intangible assets which are not
specifically identifiable, have indeterminable lives, or are inherent in a
continuing business and related to an enterprise as a whole, such as goodwill,
should be deducted from

F-12

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(4) RELATED PARTY TRANSACTIONS: (CONTINUED)
income when incurred. Since there was no specifically identifiable asset
received from the partnership, a charge to 1997 operations of $733,562, net of
payments from CNP, was recorded.

The Company also leases property from one of the board of directors of the
Company (see Note 7).

(5) LINES OF CREDIT:

The Company has secured a revolving credit agreement with its bank under
which the Company may borrow up to a maximum principal amount of $15,000 with
interest at 18% per annum. The line of credit is secured by company assets as
stated in the agreement. Payments of 3.5% of the outstanding balance plus
accrued interest are due monthly. The outstanding principle balance under these
lines of credit was $8,511 at June 30, 1998.

(6) NOTE PAYABLE, RELATED PARTY:

Note payable issued in connection with the purchase of Consumer Net
Partners' Rights in the Company's business as mentioned in Note 4 above. The
note is non-interest bearing and is payable on demand.

(7) COMMITMENTS AND CONTINGENCIES:

LEASES

The Company leases its facilities under noncancellable operating leases
expiring in various years through 2003. One of the facilities was leased from a
related party at a monthly rate of $818. Rent expense for all periods were
accounted for under the straight-line method.

Total rent expense for the six months ended June 30, 1998 and 1997 and for
the years ended December 31, 1997 and for the period from May 9, 1996
(inception) to December 31, 1996 for all operating leases amounted to $37,016,
$2,235, $11,235 and $6,786, respectively.

The minimum lease payments for the years ended December 31, are as follows:

Year ending December 31,
1998............................................................................ $ 46,237
1999............................................................................ 112,120
2000............................................................................ 108,030
2001............................................................................ 110,911
2002............................................................................ 112,351
2003 and thereafter............................................................. 37,450
----------
$ 527,099
----------

SIGNIFICANT AGREEMENT

In April 1998, the Company entered into an agreement with Pacific Bell
Internet to provide Internet access service to the Company at a monthly fee of
$30,664 for a period of five years.

F-13

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(7) COMMITMENTS AND CONTINGENCIES: (CONTINUED)
EMPLOYMENT AGREEMENT

The Company has entered into an employment agreement with an officer of the
Company requiring payment effective July 1997, of annual compensation of
$180,000 plus future increases, if appropriate.

The Company has also entered into various employment agreements with other
executives of the Company requiring payment of annual compensation ranging from
$24,000 to $60,000.

(8) PREPAID ADVERTISING COSTS:

In June 1998, the Company entered into various contracts with two
advertising companies to provide outdoor and in-home advertising for the Company
from July 1998 to November 1998 for a total cost of $573,600. These advertising
costs will be amortized over the periods in which advertising space is used.

Subsequent to June 30, 1998, the Company entered into additional contracts
and agreements with one of the advertising companies (see Note 12).

Advertising expense for the six months ended June 30, 1998 and 1997 and for
the year ended December 31, 1997 and for the period from May 9, 1996 (inception)
to December 31, 1996 is $28,563, $531, $5,070 and $65,434, respectively.

(9) INCOME TAXES:

The stockholders, upon incorporating the Company, elected to treat the
Company as an S Corporation under the Internal Revenue Code. On September 1,
1997, this election was revoked by all stockholders of the Company. The Company
is now subject to income taxes on income earned after August 31, 1997. At
December 31, 1997, the Company had net operating loss carryforwards for federal
income tax purposes totaling approximately $153,000, which begin to expire in
2017. Operating loss carryforwards for state income tax purposes totaling
approximately $149,000, which will begin to expire in 2004. The Tax Reform Act
of 1986 includes provisions which may limit the net operating loss carryforwards
available for use in any give year if certain events occur, including
significant changes in ownership. If the Company is successful in completing its
proposed initial public offering, utilization of the Company's net operating
loss carryforwards to offset future income may be limited.

Deferred tax assets at December 31, 1997 include the following:

Net operating loss carryforwards.................................................. $ 61,200
Valuation allowance............................................................... (61,200)
----------
$ --
----------
----------

The Company recorded a full valuation allowance for net deferred tax assets
as management does not believe it is more likely than not that the deferred tax
asset will be realized.

(10) STOCK OPTION PLAN:

The Company has established stock option plans for its Directors, employees
and consultants (the "1997 Stock Option Plan").

F-14

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(10) STOCK OPTION PLAN: (CONTINUED)
The 1997 Stock Option Plan allows for options (including Incentive Stock
Options) to be granted to directors, employees and consultants at less that fair
market value at date of grant. These options vest at 20% each year commencing at
the date of grant and expire three years from the date of vesting. The total
number of options available to grant under this plan is 2,000,000 shares of
Series 1, Class A common stock and 100,000 shares of Series 1, Class B common
stock. A summary of the Stock Option Plan-- Series 1, Class A Common Stock as of
and for the six months ended June 30, 1998 and the year ended December 31, 1997
are as follows:

JUNE 30, 1998
-----------------------------
DECEMBER 31, 1997
(UNAUDITED) ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ----------------- --------- -----------------

Outstanding at beginning of year...................... 582,500 $ 2.00 -- $
Granted............................................. 510,000 2.00 582,500 2.00
Exercised........................................... --
Forfeited/Expired................................... (240,000) --
---------- ---------
Outstanding at June 30, 1998 and December 31, 1997,
respectively........................................ 852,500 582,500
---------- ---------
---------- ---------

A summary of the Stock Option Plan-- Series 1, Class B Common Stock as of
and for the six months ended June 30, 1998 and the year ended December 31, 1997
are as follows:

Outstanding at beginning of year...................... 5,000 $ .50 --
Granted............................................. -- 5,000 $ .50
Exercised........................................... -- --
Forfeited/Expired..................................... -- --
---------- ---------
Outstanding at June 30, 1998 and December 31, 1997,
respectively........................................ 5,000 5,000
---------- ---------
---------- ---------

The Company has elected, as permitted by FASB Statement No. 123, "Accounting
for Stock Based Compensation" ("FASB 123"), to account for its stock
compensation arrangements under the provisions of Accounting Principles Board
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Accordingly,
because the exercise price of the Company's employee stock options equals or
exceeds the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

Subsequent to June 30, 1998, the Company granted 835,000 shares of Series 1,
Class A common stock options at $2.00 per share, exercisable at 20% each year
commencing on the grant date. The additional stock options granted included
300,000 stock options granted to a person who is related to the Company's
principal shareholder.

F-15

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(10) STOCK OPTION PLAN: (CONTINUED)

Proforma information regarding net income and earnings per share as if the
Company had accounted for its employee stock options under the fair value method
of such pronouncement has not been presented as the amounts are not materially
different.

(11) SERIES 1--CLASS B COMMON STOCK:

In 1997, the Company and its Board of Directors agreed to authorize and
provide for the issue of 1,000,000 shares of Series 1, Class B common stock. The
shares are not entitled to receive dividends. Each Series 1, Class B share will
automatically be converted into 1 share of Series 1, Class A common stock upon
the closing of an initial public offering.

(12) SUBSEQUENT EVENTS:

COMMON STOCK

Subsequent to June 30, 1998, the Company issued 207,250 shares of common
stock at $2.00 per share in a private placement, raising total proceeds of
$414,500.

LEASES

In July 1998, the Company entered into a capital lease agreement. The
following is a schedule of future minimum lease payments for agreements entered
into subsequent to June 30, 1998:

CAPITAL
LEASES
----------

Year ending December 31,
1998............................................................................ $ 76,436
1999............................................................................ 152,872
2000............................................................................ 152,872
2001............................................................................ 76,436
----------
458,617
Less amount representing interest................................................. (84,700)
----------
Present value of future lease payments............................................ $ 373,917
----------
----------

PURCHASE COMMITMENT

In August 1998, the Company entered into an agreement with a vendor to
purchase computer network equipment at a cost of approximately $2.6 million. The
agreement provides the Company to pay the vendor with a full cash payment upon
the completion of the Company's initial public offering or enter into an
equipment lease agreement for the entire amount by December 15, 1998.

ADVERTISING AGREEMENT

In August 1998, the Company entered into a tentative agreement with an
advertising company to provide additional outdoor advertising for the Company.
The Company will issue 1,000,000 shares of

F-16

CONSUMER NET MARKETPLACE, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(12) SUBSEQUENT EVENTS: (CONTINUED)
common stock Series 1, Class A at $2.00 per share in exchange for advertisement
space at a discounted price. These outdoor advertising spaces would be
preemptable. Shares to be issued to the advertising company are kept in an
escrow account and released as advertising services are provided.

Subsequent to June 30, 1998, the Company entered into additional contracts
and agreements with the same advertising company for additional advertising
space for a total fee of $365,370.

(13) GOING CONCERN:

The Company's financial statements for the six months ended June 30, 1998
and 1997 and for the years ended December 31, 1997 and for the period from May
9, 1996 (inception) to December 31, 1996 have been prepared on a going concern
basis which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The Company
expects to incur substantial expenditures to produce Internet services to the
public. The Company's working capital plus limited revenue from its current
operations will not provide sufficient funds for the Company's ongoing
operations.

Management recognizes that the Company must generate additional resources to
enable it to continue operations. Management's plans include the sale of
additional equity securities. Towards this goal, management is in the process of
preparing the initial public offering of the Company's common stock. However, no
assurance can be given that the Company will be successful in raising additional
capital. Further, there can be no assurance, assuming the Company successfully
raises additional equity, that the Company will achieve profitability or
positive cash flow.

(14) RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENT:

The December 31, 1996 financial statements were restated to reclassify paid
in capital of $87,037 to notes payable, related party due to items were
inadvertently misclassified. This restatement did not affect net income (loss)
for the same period ended December 31, 1996.

F-17

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

TABLE OF CONTENTS

PAGE
-----

Prospectus Summary............................. 3
The Company.................................... 3
Risk Factors................................... 6
Use of Proceeds................................ 18
Dividend Policy................................ 18
Capitalization................................. 19
Dilution....................................... 20
Selected Financial Data........................ 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 27
Legal Proceedings.............................. 43
Management..................................... 44
Certain Transactions........................... 52
Principal Stockholders......................... 53
Description of Capital Stock................... 54
Shares Eligible for Future Sale................ 56
Selling Security Holders....................... 57
Plan of Distribution........................... 60
Legal Matters.................................. 60
Experts........................................ 61
Additional Information......................... 61
Financial Statements........................... F-1

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

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

4,000,000 SHARES

[LOGO]

COMMON STOCK

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

PRELIMINARY PROSPECTUS

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

OCTOBER 8, 1998

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

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following are the estimated expenses, other than underwriting discounts
and commissions, to be borne by the Company in connection with the issuance and
distribution of the Common Stock being registered:

ITEM AMOUNT
- -------------------------------------------------------------------------------- ------------

Securities and Exchange Commission registration fee............................. $ 16,520.00
NASD filing fee................................................................. *
Nasdaq Small Cap Market listing fee............................................. *
Blue Sky fees and expenses...................................................... *
Printing and engraving expenses................................................. *
Legal fees and expenses......................................................... *
Accounting fees and expenses.................................................... *
Transfer Agent and Registrar fee................................................ *
Miscellaneous................................................................... *
------------
Total......................................................................... $ *
------------
------------

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Amended and Restated Articles of Incorporation provide that
directors of the Company will not be personally liable for monetary damages to
the Company or its stockholders for breaches of their fiduciary duty of care or
other duties as directors to the extent provided by California law. The
Company's Bylaws and Indemnification Agreements with each director provide that
the Company will indemnify (i) directors who succeed in the defense of any
proceeding to which the director was a party; or (ii) directors who are made a
party to a proceeding because of their service for or on behalf of the Company
if the directors acted in good faith in or not against the Company's best
interest or if the directors had no reasonable cause to believe their conduct
was unlawful. Indemnification is not available to directors who are adjudged
liable to the Company, who receive improper benefits, who make unlawful
distributions, or who appropriate a business opportunity of the Company. The
Company's Board of Directors has the discretion to apply these provisions to
officers, employees and agents of the Company.

In appropriate circumstances, the Company will advance or reimburse
reasonable expenses if authorized by the Board of Directors, legal counsel, or
the stockholders.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since its inception in May 1996, the Registrant has issued unregistered
securities in the following transactions:

SHARES OF COMMON STOCK

1. On May 9, 1996, the Company issued 5,000,000 shares of Series 1 Class A
Common Stock to Mr. Fredrick Rice as founder's stock for an aggregate price of
$500.00.

2. On August 20, 1997, the Company issued 75,000 shares of Series 1 Class B
Common Stock to a prior unaffiliated consultant, for services rendered.

II-1

3. From October 1, 1997 until October 8, 1998, the Company sold 1,534,250
shares of Series 1 Class A Common Stock to investors in a private placement
pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
of Regulation D promulgated thereunder, at a purchase price of $2.00 per share.

OPTIONS TO PURCHASE COMMON STOCK

4. From June 20, 1997 to August 31, 1998, the Company granted a total of
127,500 stock options to purchase 127,500 shares of its Series 1 Class A Common
Stock for a purchase price of $2.00 per share. These options were not issued
pursuant to the Company's 1997 Stock Option Plan.

5. On December 15, 1997, the Company granted options to purchase 200,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 per share
to Ms. Vickie C. McLoughlin in consideration for Ms. McLoughlin's development
efforts and employment with the Company. These options were granted pursuant to
the Company's 1997 Stock Option Plan. Upon termination by Ms. McLoughlin of her
employment on June 26, 1998, 60,000 of these options had vested and the balance
expired. The vested options expire on September 26, 1998 in accordance with
their terms unless they are exercised before that date.

6. On December 15, 1997, the Company granted options to purchase 200,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Randy D. Greene in consideration for his continuing efforts to develop the
Company and its business. These options were granted pursuant to the Company's
1997 Stock Option Plan.

7. On December 15, 1997, the Company granted options to purchase 20,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Ms.
Olivia Sayler in consideration for her continuing efforts to develop the Company
and its business. These options were granted pursuant to the Company's 1997
Stock Option Plan.

8. On December 31, 1997, the Company granted options to purchase 250,000
shares of Series 1 Class B Common Stock at an exercise price of $0.50 per share
to Consumer Net Partners in exchange for all rights and interest held by
Consumer Net Partners in the CNM Internet shopping mall business. These options
were not issued pursuant to the Company's 1997 Stock Option Plan.

9. On March 25, 1998, the Company granted options to purchase 200,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Donald Lee Carver in consideration for his continuing efforts to develop the
Company and its business. These options were granted pursuant to the Company's
1997 Stock Option Plan.

10. On March 16, 1998, the Company granted options to purchase 100,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Christopher L. Young in consideration for his continuing efforts to develop the
Company and its business. These options were granted pursuant to the Company's
1997 Stock Option Plan.

11. On March 16, 1998, the Company granted options to purchase 100,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr. Jon
P. DeOng in consideration for his continuing efforts to develop the Company and
its business. These options were granted pursuant to the Company's 1997 Stock
Option Plan.

12. On March 31, 1998, the Company granted options to purchase 100,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Christopher Fogel in consideration for his continuing efforts to develop the
Company and its business. These options were granted pursuant to the Company's
1997 Stock Option Plan.

II-2

13. On May 1, 1998, the Company granted options to purchase 10,000 shares of
Series 1 Class A Common Stock at an exercise price of $2.00 to Ms. Olivia Sayler
in consideration for her continuing efforts to develop the Company and its
business. These options were granted pursuant to the Company's 1997 Stock Option
Plan.

14. On July 1, 1998, the Company granted options to purchase 20,000 shares
of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr. Rick
Knittle in consideration for his continuing efforts as a key consultant to
develop the Company and its business. These options were granted pursuant to the
Company's 1997 Stock Option Plan.

15. On July 1, 1998, the Company granted options to purchase 300,000 shares
of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr. Charles
Rice in consideration for his service as a director of the Company. These
options were granted pursuant to the Company's 1997 Stock Option Plan.

16. On August 4, 1998, the Company granted options to purchase 400,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Kenneth K. Lattin in consideration for his service as a director of the Company.
These options were granted pursuant to the Company's 1997 Stock Option Plan.

17. On August 31, 1998, the Company granted options to purchase 100,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Dr.
Douglas Benson in consideration for his service as a director of the Company.
These options were granted pursuant to the Company's 1997 Stock Option Plan.

18. On August 31, 1998, the Company granted options to purchase 100,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Christopher L. Young in consideration for his continuing efforts to develop the
Company and its business. These options were granted pursuant to the Company's
1997 Stock Option Plan.

19. On August 31, 1998, the Company granted options to purchase 100,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr. Jon
P. DeOng in consideration for his continuing efforts to develop the Company and
its business. These options were granted pursuant to the Company's 1997 Stock
Option Plan.

20. On August 31, 1998, the Company granted options to purchase 100,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Christopher Fogel in consideration for his continuing efforts to develop the
Company and its business. These options were granted pursuant to the Company's
1997 Stock Option Plan.

21. On August 31, 1998, the Company granted options to purchase 10,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Judd L. Bourgeois in consideration for his continuing efforts to develop the
Company and its business. These options were granted pursuant to the Company's
1997 Stock Option Plan.

22. On August 31, 1998, the Company granted options to purchase 5,000 shares
of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr. William J.
Lawrence in consideration for his continuing efforts to develop the Company and
its business. These options were granted pursuant to the Company's 1997 Stock
Option Plan.

23. On August 31, 1998, the Company granted options to purchase 20,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Eric Hankins in consideration for his continuing efforts to develop the Company
and its business. These options were granted pursuant to the Company's 1997
Stock Option Plan.

24. On August 31, 1998, the Company granted options to purchase 5,000 shares
of Series 1 Class A Common Stock at an exercise price of $2.00 to Ms. Denise J.
Garcia in consideration for her continuing efforts to develop the Company and
its business. These options were granted pursuant to the Company's 1997 Stock
Option Plan.

II-3

25. On September 30, 1998, the Company granted options to purchase 50,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr.
Mark J. Richardson in consideration for his service as a director of the
Company. These options were granted pursuant to the Company's 1997 Stock Option
Plan.

26. On September 30, 1998, the Company granted options to purchase 25,000
shares of Series 1 Class A Common Stock at an exercise price of $2.00 to Ms.
Laura D. Murtagh in consideration for her service as the Corporate Secretary of
the Company. These options were granted pursuant to the Company's 1997 Stock
Option Plan.

27. On October 7, 1998, the Company granted options to purchase 5,000 shares
of Series 1 Class A Common Stock at an exercise price of $2.00 to Mr. William Wu
in consideration for his consulting services to the Company. These options were
granted pursuant to the Company's 1997 Stock Option Plan.

All issuances of securities described above were made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended, and Rule 506 promulgated thereunder. All of the securities
were acquired by the investors for investment and with no view toward the resale
or distribution thereof. In each instance, the investor was either an employee
of the Company or a sophisticated investor, the offers and sales were made
without any public solicitation and the stock certificates bear restrictive
legends. No underwriter was involved in the transactions and no commissions were
paid.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------

II-4

EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------

10.5 Lease Agreement by and between Ascend Credit Corporation and Consumer Net Marketplace, Inc. dated July
1, 1998.
10.6 Purchase Order for additional equipment from Ascend Communications, Inc. dated August 12, 1998.
10.7 Sales Agreement by and between Pacific Bell Internet Services and Consumer Net Marketplace, Inc. dated
March 4, 1998.
10.8 ISP Customer Agreement by and between Covad Communications Company and Consumer Net Marketplace, Inc.
10.9 Forms of CNM Network-TM- Reseller Terms and Conditions.
10.10 Lease Agreement by and between Levitt, Levitt & Lijgash and Consumer Net Marketplace, Inc. dated April
8, 1998.
10.11 Lease Agreement by and between Edwin S. Johnston Company and Fred Rice doing business under the name
Consumer Net Marketplace, Inc. dated May 28, 1998.
10.12 Facility Agreements for Equipment Placement by Consumer Net Marketplace, Inc.
10.13 Agreement by and between Advo Direct Marketing and Consumer Net Marketplace, Inc.
10.14 License Agreement by and Between Netscape, Inc. and Consumer Net Marketplace, Inc.
10.15 License Agreement by and between Qualcomm, Inc. and Consumer Net Marketplace, Inc.
10.16 Promissory Note, dated December 31, 1997, payable by Consumer Net Marketplace, Inc. to Consumer Net
Partners.
10.17 Assignment, dated December 31, 1997, by and between Consumer Net Marketplace, Inc. and Consumer Net
Partners.
10.18 Subscription Agreement by and between the Company and Eller Media Company, dated October 7, 1998.*
10.19 Agreement with Starnet, Inc., dated October 6, 1998.*
10.20 Service Agreement by and between the Company, Consumer Net Partners, and Consumers On-Line Development,
Inc., dated May 10, 1996.
23.1 Consent of Stonefield Josephson, independent public accountants.
23.2 Consent of Caldwell, Becker, Dervin, Petrick & Co., independent certified public accountants.
27 Financial Data Schedule

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

* To be filed by amendment. + Confidential treatment requested.

(b) Financial Statement Schedules:

All of the financial statement schedules for which provision is made in the
applicable accounting regulations of the Commission are either not required
under the related instructions or are inapplicable and have therefore been
omitted, except for the Financial Data Schedule referenced above as Exhibit 27
and filed herewith; provided, however, that Exhibit 27 shall not be deemed filed
for purposes of Section 11 of the Securities Act, Section 18 of the Exchange Act
and Section 323 of the Trust Indenture Act, or otherwise be subject to the
liabilities of such sections, nor shall it be deemed a part of this Registration
Statement.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons to the Company,
the Company has been advised that in the opinion of the

II-5

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

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of a prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act 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, 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-6

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Simi Valley, State of
California, on the 8th day of October, 1998.

CONSUMER NET MARKETPLACE, INC.--REGISTRANT

By: /s/ FREDRICK J. RICE
-------------------------------
Fredrick J. Rice
PRESIDENT AND CHAIRMAN
OF THE BOARD OF DIRECTORS

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mark J. Richardson, Esq. his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents of each of them, or their or his substitutes,
may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 8th day of October, 1998, by
the following persons in the capacities indicated.

SIGNATURES TITLE
- ------------------------------ --------------------------

/s/ FREDRICK J. RICE President, Chairman of the
- ------------------------------ Board of Directors,
Fredrick J. Rice Chief Executive Officer

/s/ KENNETH K. LATTIN
- ------------------------------ Director
Kenneth K. Lattin

/s/ CHARLES RICE
- ------------------------------ Director
Charles Rice

/s/ DR. DOUGLAS BENSON
- ------------------------------ Director
Dr. Douglas Benson

/s/ MARK J. RICHARDSON
- ------------------------------ Director
Mark J. Richardson

II-7

INDEX TO EXHIBIT

(a) Exhibits:

EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------

3.1 The Amended and Restated Articles of Incorporation of Consumer Net Marketplace, Inc.
3.2 The Bylaws, as amended, of Consumer Net Marketplace, Inc.
3.3 Amendment to Amended and Restricted Articles of Incorporation of Consumer Net Marketplace, Inc.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws defining rights of
holders of Common Stock.
4.2 Specimen Stock Certificate.
4.3 Stock Option Plan for Directors, Employees and Key Consultants of Consumer Net Marketplace, Inc.
4.4 Form of Stock Option Agreement for the Plan.
4.5 Form of Stock Option Agreement for Series 1 Class B Common Stock Not Subject to the Stock Option Plan.
4.6 Amendment to Stock Option Plan for Directors, Employees, and Key Consultants of Consumer Net
Marketplace, Inc.*
5.1 Form of Legal Opinion and Consent of Mark J. Richardson, Esq.
10.1 Agreement by and between Eller Media Company and Consumer Net Marketplace, Inc. dated June 5, 1998.
10.2 Agreement by and between Eller Media Company and Consumer Net Marketplace, Inc. dated July 10, 1998.
10.3 Agreement by and between Eller Media Company and Consumer Net Marketplace, Inc. dated June 4, 1998.
10.4 Consulting Agreement by and between Comat Systems Solutions Private Limited, India and Consumer Net
Marketplace, Inc.
10.5 Lease Agreement by and between Ascend Credit Corporation and Consumer Net Marketplace, Inc. dated July
1, 1998.
10.6 Purchase Order for additional equipment from Ascend Communications, Inc. dated August 12, 1998.
10.7 Sales Agreement by and between Pacific Bell Internet Services and Consumer Net Marketplace, Inc. dated
March 4, 1998.
10.8 ISP Customer Agreement by and between Covad Communications Company and Consumer Net Marketplace, Inc.
10.9 Forms of CNM Network-TM- Reseller Terms and Conditions.
10.10 Lease Agreement by and between Levitt, Levitt & Lijgash and Consumer Net Marketplace, Inc. dated April
8, 1998.
10.11 Lease Agreement by and between Edwin S. Johnston Company and Fred Rice doing business under the name
Consumer Net Marketplace, Inc. dated May 28, 1998.
10.12 Facility Agreements for Equipment Placement by Consumer Net Marketplace, Inc.
10.13 Agreement by and between Advo Direct Marketing and Consumer Net Marketplace, Inc.
10.14 License Agreement by and Between Netscape, Inc. and Consumer Net Marketplace, Inc.
10.15 License Agreement by and between Qualcomm, Inc. and Consumer Net Marketplace, Inc.
10.16 Promissory Note, dated December 31, 1997, payable by Consumer Net Marketplace, Inc. to Consumer Net
Partners.
10.17 Assignment, dated December 31, 1997, by and between Consumer Net Marketplace, Inc. and Consumer Net
Partners.

EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------

10.18 Subscription Agreement by and between the Company and Eller Media Company, dated October 7, 1998.*
10.19 Agreement with Starnet, Inc., dated October 6, 1998.*
10.20 Service Agreement by and between the Company, Consumer Net Partners, and Consumers On-Line Development,
Inc., dated May 10, 1996.
23.1 Consent of Stonefield Josephson, independent public accountants.
23.2 Consent of Caldwell, Becker, Dervin, Petrick & Co., independent certified public accountants.
27 Financial Data Schedule

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

* To be filed by amendment. + Confidential treatment requested.

(b) Financial Statement Schedules: