<PAGE>

                                 SECURITIES AND
                               EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

/X/   Annual  Report  Pursuant  to Section 13 or  15(d) of  the  Securities
      Exchange Act of 1934 (Fee Required)
      For the fiscal year ended December 31, 2000.

/_/   Transition  Report  Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 (No Fee Required)
                        For the transition period from     to

                                   -----------

                           COMMISSION FILE NO. 0-29768

                                   -----------

                                24/7 MEDIA, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                               13-3995672
                 --------                               ----------
     (STATE OR OTHER JURISDICTION OF         (I.R.S. EMPLOYER IDENTIFICATION)
      INCORPORATION OR ORGANIZATION)
              1250 BROADWAY                                10001
                                                           -----
            NEW YORK, NEW YORK                          (ZIP CODE)
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                 (212) 231-7100
                                 --------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


        Securities registered pursuant to Section 12(b) of the Act: NONE
           Securities registered pursuant to Section 12(g) of the Act:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (TITLE OF CLASS)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO /_/

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

Aggregate market value of voting stock held by non-affiliates of registrant as
of March 29, 2001: $10,194,000.

Number of shares of Common Stock outstanding as of March 29, 2001: approximately
43,519,674.


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                                24/7 MEDIA, INC.
                         2000 ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

ITEM NO.                                                                           PAGE
<S>            <C>
PART I
1.              Business                                                              3
2.              Properties                                                           17
3.              Legal Proceedings                                                    18
4.              Submission of Matters to a Vote of Security Holders                  18
PART II
5.              Market for Registrant's Common Equity and Related                    19
                Stockholder Matters
6.              Selected Consolidated Financial Data                                 20
7.              Management's Discussion and Analysis of Financial Condition          21
                and Results of Operations
8.              Consolidated Financial Statements and Supplementary Data             37
9.              Changes in and Disagreements with Accountants on Accounting          37
                and Financial Disclosure
PART III
10.             Directors and Executive Officers                                     38
11.             Executive Compensation                                               43
12.             Security Ownership of Certain Beneficial Owners and Management       45

13.             Certain Relationships and Related Transactions                       47
PART IV
14.             Exhibits, Financial Statement Schedule, and Reports on Form 8-K      48
</TABLE>


      This report contains Forward-Looking Statements based on our current
expectations, assumptions, estimates and projections about 24/7 Media and our
industry. These Forward-Looking Statements involve risks and uncertainties. Our
actual results could differ materially from those anticipated in such
Forward-Looking Statements as a result of certain factors, as more fully
described in this Annual Report. 24/7 Media undertakes no obligation to update
publicly any Forward-Looking Statements for any reason, even if new information
becomes available or other events occur in the future.

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                                     PART I

ITEM 1. BUSINESS OF THE REGISTRANT

OVERVIEW

      We are a leading global provider of end-to-end advertising and marketing
solutions for Web publishers, online advertisers, advertising agencies,
e-marketers and e-commerce merchants. We provide a comprehensive suite of media
and technology products and services that enable such Web publishers, online
advertisers, advertising agencies and e-marketers to attract and retain
customers worldwide, and to reap the benefits of the Internet and other
electronic media. Our solutions include advertising and direct marketing sales,
ad serving, promotions, email list management, email list brokerage, email
delivery, email service bureau, data analysis, search engine result
optimization, and broadband/convergence solutions, all delivered from our
industry-leading data and technology platforms. Our technology solutions are
designed specifically for the demands and needs of advertisers and agencies, Web
publishers and e-commerce merchants.

      Our business is organized into three principal lines of business:

      o     24/7 Network

      o     24/7 Mail

      o     24/7 Technology Solutions

THE 24/7 NETWORK

      The 24/7 Network is a global online advertising network. The 24/7 Network
aggregates the advertising inventory of thousands of Web sites globally that are
attractive to advertisers, generate a high number of ad impressions and
contribute a variety of online content to the network. Web publishers seeking to
join the network must meet our affiliation criteria, including high quality
content, brand name recognition, significant existing and projected page views,
attractive user demographics, and sponsorship opportunities. For Web sites on
the 24/7 Network, we sell Web site-specific advertising campaigns and also
bundle advertisements for sale in content channels or across the entire global
network in regional, pan-regional or global buys. For our flagship Web sites on
the network, we solicit sponsorships and integrate sales efforts with the Web
site's management. The 24/7 Network consists of over 600 high profile Web sites
as well as 3,000 small to medium-sized Web sites in North America, South America
and Europe to which we delivered an aggregate of approximately 3.3 billion
advertisements in December 2000. We deliver advertising using 24/7 Connect, our
next generation Internet ad serving system that is one of the world's fastest
and most reliable ad serving systems. 24/7 Connect enables us to offer
advertisers the ability to target Internet users based on a variety of criteria
including on a geo-targeted basis.

      Through the 24/7 Network, we also offer network-related value-added
solutions to advertisers, marketers and Web publishers. For example, our Website
Results subsidiary offers

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Web sites, that seek to drive highly-qualified traffic to their site, the
opportunity to appear prominently in search engine result pages of many of the
Internet's leading search engines. We also offer creative design services,
sponsorship opportunities and syndication services.


24/7 MAIL

      24/7 Mail provides email direct marketing services. Our permission-based
email marketing database of more than 30 million email addresses enables direct
marketers to target promotional campaigns to consumers who elect to receive
commercial messages. The users can opt out of the database and stop receiving
these messages, at any time. Currently, 24/7 Mail has U.S. operations that serve
as list manager for permission-based email lists that collectively contained
more than 30 million email addresses as of March 2001, and European and Canadian
operations that currently serve as list manager for permission-based email lists
that collectively contained more than three million email addresses as of March
2001.

24/7 TECHNOLOGY SOLUTIONS

      24/7 Technology Solutions is comprised of comprehensive service and
software solutions designed specifically for the needs of three targeted
customer segments: advertisers and agencies, Web publishers, and e-commerce
merchants. Our technical service team of over 150 employees provides consulting
services. Products within 24/7 Technology Solutions include:

      o     24/7 Exactis, which provides companies a suite of permission-based
            e-mail marketing and communications products and services that allow
            them to precisely, efficiently and personally interact with
            customers, and retain and grow these valuable customer
            relationships. We acquired 24/7 Exactis in June 2000;

      o     e.mergeTM, a fully integrated, customizable suite of back office
            business applications designed to enable digital media service
            providers to offer cutting edge services to their customers
            including Interactive Advertising, Video on Demand (VOD), Broadband
            Internet, e-Commerce, and Targeted Broadband Advertising which we
            acquired with our acquisition of IMAKE in January 2000; and

      o     24/7 Website Results, which delivers targeted search engine traffic
            on behalf of its clients. We acquired Website Results in August
            2000.

INDUSTRY BACKGROUND

      We operate in Internet advertising, direct marketing and technology
industries. Jupiter Communications estimates that at the end of 2000 there were
over 122 million Web users in the United States.

      We believe that advertisers seek to place Internet ads in ways to maximize
unduplicated reach. In February 2001, according to Media Metrix, our network
reached 45.5% of all U.S. Internet users. We believe that this reach figure is
among the highest in the Internet advertising industry. We plan to recruit Web
sites for our network to further extend our reach, provide

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advertisers with a broad and diverse base of online content and page views, and
improve our brand awareness and visibility with media buyers.

      In addition, as online advertisers and direct marketers increase their use
of the Internet, they seek solutions and technologies that allow them to
efficiently deliver highly targeted advertisements. Our customized solutions
allow advertisers and direct marketers to tailor their ad campaigns to reach
desired audiences, while reducing costs, easing time pressures and alleviating
the need to purchase a series of ad campaigns from numerous Web sites.
Advertisers and direct marketers can achieve their objectives by buying ad space
on a specific Web site or email list, within a particular content channel or
across our entire network.

      As Internet traffic grows, Web publishers increasingly seek to maximize
the value of their online inventory. Our extensive sales and marketing expertise
provides Web publishers and email list owners access to media buyers at large ad
agencies and advertisers and enables them to sell advertisements and marketing
space without incurring the costs and challenges associated with building and
maintaining an internal ad sales force.

      ONLINE COMMERCE. The Web provides online merchants with the ability to
reach a global audience and to operate with minimal infrastructure, reduced
overhead and greater economies of scale, while providing consumers with a broad
selection, increased pricing power and unparalleled convenience. As a result, a
growing number of consumers are transacting business on the Web, including
trading securities, buying consumer goods, paying bills and purchasing airline
tickets. Jupiter Communications estimates that approximately 40% of Web users
purchased goods or services over the Web in 2000 and that approximately 54% of
Web users will make online purchases in 2003. Furthermore, E-Marketer estimates
that 62.7% of the U.S. internet users made an online purchase in 2000 and
expects that number to grow to 74.3% in 2003. We believe that as electronic
commerce expands, advertisers and direct marketers will increasingly use the Web
to advertise products, drive traffic to their Web sites, attract and retain
customers, and facilitate transactions.

      INTERNET ADVERTISING. Unlike more traditional advertising methods, the Web
gives advertisers the potential to target advertisements to broad audiences or
to selected groups of users with specific interests and characteristics. The Web
also allows advertisers and direct marketers to measure the effectiveness and
response rates of advertisements and to track the demographic characteristics of
Web users. The interactive nature of Web advertising enables advertisers to
better understand potential customers, and to change messages rapidly and cost
effectively in response to customer behavior and product availability. The
unique capabilities of online advertising, the growth in traffic on the Web and
the favorable characteristics of Web users have led to an increase in online
advertising over recent years. Despite the slowdown in the online advertising
industry in late 2000 and early 2001, Forrester Research estimates that the
dollar value of Internet advertising in the U.S. will increase from $7.0 billion
in 2000 to $30.2 billion in 2005, representing a 44% compounded annual growth
rate. International online ad spending is expected to grow from $1.3 billion in
2000 to $11.4 billion in 2005, according to Forrestor Research.

      OPPORTUNITIES FOR DIRECT MARKETING. The Web also represents an attractive
medium for direct marketing, which has traditionally been conducted through
direct mail, telemarketing and television infomercials. The interactive nature
of the Web enables direct marketers to deliver

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targeted promotions to consumers at the point-of-sale. The success of a direct
marketing campaign is measured by the response rate of consumers. The Internet
has the potential to enable direct marketers to increase consumer response rates
and decrease costs-per-transaction by targeting and delivering direct marketing
campaigns to particular consumers based on their demographic profile,
self-selected interests or online behavioral characteristics. By providing a
more cost-effective method to reach target customers, online advertising is
expected to improve the direct marketer's return on investment. The Direct
Marketing Association estimates that, in 2000, $2.8 billion was spent on
interactive media marketing and that number is expected to grow 38.9% per year
to $14.6 billion in 2005.

OUR COMPREHENSIVE SOLUTIONS

      We believe that we currently are the only company to offer a complete
end-to-end e-marketing solution for Web publishers, advertisers and e-marketers
that seek to attract and retain customers on the Internet and otherwise generate
revenue from their activities.

BENEFITS TO ADVERTISERS AND DIRECT MARKETERS.

      We reduce costs and ease time pressures for advertisers and direct
marketers by alleviating the need to purchase a series of ad campaigns from
numerous Web publishers or direct marketers. Our network and email lists provide
advertisers and direct marketers with access to a wide variety of online content
and a broad reach of users. Advertisers and direct marketers customize their ad
delivery on our network or email lists by purchasing ad space either on selected
Web sites within our network, within a particular content channel or across the
entire network, as well as on our email lists. In addition, we provide
advertisers and direct marketers with comprehensive reporting services to
monitor the effectiveness of ad delivery. Our 24/7 Website Results technology
enables advertisers to attract highly-qualified traffic through prominent
placement in the results listings of major Internet search engines. Our 24/7
Exactis technology provides companies a suite of permission-based e-mail
marketing and communications products and services that allow marketers to
precisely, efficiently and personally interact with customers, and retain and
grow these valuable relationships.

BENEFITS TO WEB PUBLISHERS.

      Affiliation with our online advertising network enables Web publishers to
generate advertising revenues by gaining access to advertisers and direct
marketers without the costs and challenges associated with building and
maintaining their own ad sales force and ad serving technology. Web sites in our
network benefit from our experienced management team, our extensive sales and
marketing organization and our direct access to advertisers and agencies. The
organization of our network into content channels enhances the value of
inventory on small to medium-sized Web sites. We also provide sophisticated
tracking and reporting functions for our Web sites. The targeting capabilities
of our 24/7 Connect ad serving technology enable us to increase the value of Web
publishers' inventory.

THE 24/7 MEDIA STRATEGY

      Our objective is to provide comprehensive marketing and technology
solutions for Web publishers, online advertisers and direct marketers to enable
them to attract and retain

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customers. We intend to further this objective by continuing to implement the
following interconnected strategies:

      o     We continually seek to identify additional value-added services for
            our clients, in order to help them maximize their customer
            acquisition and revenue goals. We believe that we offer the broadest
            range of solutions to advertisers and Web publishers. Our solutions
            include advertising and direct marketing sales, ad serving,
            promotions, email list management, email list brokerage, email
            service bureau, email delivery, data analysis, search engine results
            optimization and broadband/convergence solutions, all delivered from
            our industry-leading data and technology platforms. We strive to
            understand our client's marketing strategies and from our list of
            solutions, recommend those which best suit our buyers needs.

      o     We plan to continue to recruit high-profile Web sites for our 24/7
            Network, to extend our reach and to provide a broad base of
            desirable page views and online content to advertisers. We recruit
            Web sites of all sizes, including high-profile large to medium-sized
            Web sites on the 24/7 Network as well as medium to smaller-sized Web
            sites on the ContentZone area of the 24/7 Network. Such a collection
            of Web sites of diverse sizes and content allows advertisers to
            target Internet users by interest and enhances the value of each of
            our Web sites' inventory. An increased number of Web sites in our
            network and an expanded breadth of available targeted content on
            such Web sites will further enable advertisers to consolidate their
            ad purchases and will improve our brand awareness and visibility
            with media buyers.

      o     We intend to maintain and extend our leadership role in email direct
            marketing by aggressively expanding our network of email lists with
            additional lists worldwide. In connection with our worldwide email
            list expansion, we intend to develop capabilities for adding email
            addresses to our database from non-English language consumers.

      o     We intend to maintain and extend our leadership role in online
            advertising technology by continuously developing and enhancing our
            state of the art technology systems. One of our principal focuses
            will be the continued integration of all our technologies to further
            enhance the ability of online advertisers to deliver their messages
            across Web sites, e-mail, wireless services, set-top boxes and other
            Internet appliances.

      o     We believe that our sales and marketing organization is one of the
            best in the Internet advertising industry. We seek to continually
            enhance the quality of our sales force and sales management through
            the hiring of experienced media sales personnel who are well
            equipped to work in a difficult media environment, as well as
            through a continuing program of sales education and training. We
            intend to leverage the substantial media sales expertise of our
            management team to maximize the value of ad campaigns to benefit our
            advertiser and Web site clients.

      o     We seek to increase the rate at which users click on advertisements
            by employing the targeting capabilities of 24/7 Connect to deliver
            advertisements to a more highly targeted audience, resulting in more
            effective advertising campaigns. Furthermore, we believe that as we
            increase the breadth and depth of our content channels, the sale of
            ads targeted to specific channels will increase. We intend to
            further increase the value of our Web sites' ad inventory by
            selling sponsorships on our Web sites and by further refining

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            our management of ad space inventory.

      o     We intend to provide the highest level of customer service in our
            industry. For example, we employ techniques of benchmarking,
            statistical analysis and continuous process improvement to provide
            our Web sites and advertisers with "best of class" service. We
            continually survey our Web sites and advertisers to monitor service
            levels and identify and resolve problems.

   OUR PRINCIPAL LINES OF BUSINESS

   24/7 NETWORK

      The 24/7 Network is a global advertising network where advertisers can
   place a global ad campaign, or geographically select regions of the world to
   target advertising. The network aggregates Web sites that are attractive to
   advertisers, generate a high number of ad impressions and contribute a
   variety of online content to the network. Web publishers seeking to join our
   network must meet specified standards, such as quality content and brand name
   recognition, specified levels of existing and projected page views,
   attractive user demographics, and sponsorship opportunities. For Web sites on
   the 24/7 Network, we sell Web site-specific advertising campaigns as well as
   bundle advertisements for sale in one of the channels listed above or across
   the entire network. Through our international sales effort, we can sell
   advertisers in any location on the globe on regional, pan regional or
   international network buys. For our flagship Web sites on the network, we
   appoint a relationship manager, actively solicit sponsorships and integrate
   sales efforts with the Web site's management. Our global advertising network
   is described below. In the United States, we provide advertisement sales and
   delivery services and related functions to over 400 high-profile Web sites
   that generated an aggregate of 3.3 billion impressions in December 2000. The
   24/7 Network includes, among others, the following Web sites:

<TABLE>

<S>                         <C>                    <C>
   o 180 Solutions          o  AT&T Business.net   o  AT&T Worldnet Service
   o EarthLink              o  half.com            o  Maps.com
   o Rand McNally           o  Real Cities         o  Scientific American
   o Wall Street Transcrip  o Tom's Hardware       o  Womens' Forum
   o Working Woman.com

</TABLE>

      In Canada, we provide advertising sales and delivery services and related
functions to over 100 English and French language Web sites that generated an
aggregate of 210 million impressions in February 2001 including the Telus
portals - MyBC.com, Alberta.com, MyTO.com, and Canada Newswire, The Toronto
Stock Exchange, MLS Online, the Weather Network, and Bellzinc.ca.

      In Europe, we provide advertising sales and delivery services and related
functions to over 250 Web sites that generated an aggregate of 550 million
impressions in December 2000 including MSN, Breathe, Infobolsa, Emerce and
Kauppalehti. The network currently covers Belgium, Denmark, Finland, France,
Germany, Holland, Italy, Norway, Portugal, Spain, Sweden, Switzerland and the
U.K. In Latin America, we provide advertisement sales and delivery services

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and related functions to over 30 Web sites. The network in Latin America
currently covers Brazil, Mexico, Peru and Argentina.

THE CONTENTZONE

      The ContentZone consists of over 3,000 small to medium-sized Web sites to
which we provide advertisement sales and delivery services. The ContentZone
provides one of the few advertising opportunities for such small and emerging
Web sites. Ads are delivered to specific Web sites organized by content or are
optimized across the entire network. Any Web publisher with quality,
non-objectionable content that is attractive to advertisers can qualify for
admission to the ContentZone, and we "graduate" ContentZone members to
high-profile status in the 24/7 Network if they generate a sufficient number of
ad impressions and satisfy the requisite standards. ContentZone was recently
substantially redesigned and relaunched, providing new enhancements to make it
even more attractive to Web publishers.

CHANNELS ON THE 24/7 NETWORK

The 24/7 Network is currently organized into the following topical channels:

<TABLE>

<S>                <C>               <C>                 <C>
o Auto             o  Business       o  Careers          o  College
o Community        o  Entertainment  o  Games            o  Consumer Health
o Health           o  ISP/Portal     o  Kids/teens       o  Multi-cultural
o Music            o  News           o  Real Estate      o  Search Engine
o Seniors          o  Shopping       o  Small Business   o  Sports
o Technology       o  Travel         o  Women's Interest
</TABLE>

      We are presently enhancing existing channels and developing several new
channels for our network prompted by user and advertiser interests.

ADVERTISERS ON THE 24/7 NETWORK.

We focus our sales and marketing efforts on the leading Internet and traditional
advertisers and advertising agencies, many of which have utilized our solutions.
Advertisers and advertising agencies employ us in various ways. Advertisers and
ad agencies typically buy advertising using written purchase order agreements
that run for a limited time. Based on our breadth of online content and our
extensive reach, we have the ability to package personalized advertising
solutions for advertisers and ad agencies. Our sales force works closely with
advertisers to customize ad delivery to enhance the effectiveness of advertising
campaigns. Below is a representative list of advertising agencies and
advertisers that delivered advertisements on the 24/7 Network in the United
States in 2000. Some of these advertising agencies and advertisers represented
less than one percent of our total revenues in 2000.


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                              ADVERTISING AGENCIES

<TABLE>

<S>                       <C>                   <C>                            <C>
o Ant Farm Interactive    o  Avenue A           o  BBDO Interactive            o  Beyond Interactive
o Bozell Worldwide        o  DDB Needham        o  Go Beyond                   o  Goodby Silverstein & Partners
o iBalls                  o  iTraffic           o  iFrontiers                  o  J. Walter Thompson
o Jump Start Media        o  March First        o  Mass Transit Interactive    o  McCann-Erikson
o Mediavest               o  Miller-Huber       o  Modem Media                 o  ORB Digitial Direct
o Ogilvy One              o  Organic Online     o  Saatchi & Saatchi           o  SF Interactive
</TABLE>


                                   ADVERTISERS

<TABLE>

<S>                     <C>                     <C>                        <C>
o  Amazon.com           o  Americast            o  American Express        o  AT&T Corp
o  Backwire.com         o  Barnes & Noble       o  Capital One             o  Cassava Enterprises
o  Citicorp             o  Covad                o  DealTime.com            o  Fleet Bank
o  Get Smart            o  Verizon              o  LifeMinders.com         o  Mass Transit
o  Mediaplex            o  Network Commerce     o  Nextcard.com            o  Ogilvy One Worldwide
o  Providian            o  Sony Music           o  Tech Republic           o  Travelscape
</TABLE>


VALUE-ADDED SOLUTIONS FOR THE NETWORKS

       Through the 24/7 Network, we also offer network-related value-added
solutions to advertisers, marketers and Web publishers. For example, through our
relationship with Dynamic Logic, we employ its AdIndex measurement tool to
measure recall of banner advertising by Internet users. In addition, our Website
Results subsidiary offers Web sites the opportunity to increase the level of
highly qualified traffic directed at their Web sites. Furthermore, we also offer
our clients other value added solutions such as creative design services,
sponsorship opportunities, and syndication services.

24/7 CONNECT

In early 2000, we launched our next generation Internet ad serving system, 24/7
Connect. 24/7 Connect enables centralized ad delivery, ad management and
reporting. 24/7 Connect selects an appropriate advertisement for a Web page at
the same time that content is being delivered to that Web page from a third
party, and, based on various targeting criteria, delivers that advertisement to
the user within milliseconds. 24/7 Connect is a high volume, highly-scalable
system tailored to streamline work flow for tomorrow's business, increase sales
force productivity and efficiency and provide agencies and advertisers with
advanced online reporting, analytical and automated purchasing tools. We believe
that it is the only system in the world designed to support ad-serving across
multiple networks globally from a centralized data repository. We believe that
24/7 Connect is the first unified platform to provide true

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multi-medium support integrating traditional online ad delivery with email,
sponsorship, and local market components. We built 24/7 Connect utilizing
various components of our previous proprietary ad serving system, Adfinity. We
completed the transition of our 24/7 Network in the United States to 24/7
Connect in the third quarter of 2000 and we converted the 24/7 Network in Canada
and Latin America to 24/7 Connect in early 2001. We plan to convert the 24/7
Network in Europe to 24/7 Connect in the second half of 2001.

24/7 MAIL

      24/7 Mail provides email direct marketing services. Our permission-based
email marketing database of more than 30 million email addresses is the largest
such database in the world and enables direct marketers to target promotional
campaigns to consumers who choose to receive commercial messages. The users can
opt out, or stop receiving these messages, at any time. Our opt-in email direct
marketing business offers direct marketers three key advantages over traditional
postal direct marketing and banner advertising:

      o     Opt-in email campaigns can be sent out immediately to millions of
            potential customers. Email campaigns generate results in a shorter
            period of time than traditional postal direct marketing, typically
            producing leads and sales within 24 to 48 hours, compared to six to
            eight weeks through offline direct marketing channels.

      o     Opt-in email campaigns typically generate higher response rates than
            postal mail or banner ad campaigns. We believe that such response
            rates for email campaigns normally exceed 2%, which we believe
            exceeds typical postal direct mail response rates.

      o     Opt-in email campaigns cost less than traditional postal direct
            marketing campaigns. Forrester Research estimates that the typical
            delivery costs for email campaigns range from 5 to 10 cents per
            email message delivered, with such costs covering the expenses of
            list rental and online delivery. This cost compares to an average
            cost of between 50 cents and $1.00 per delivery for a traditional
            direct marketing campaign, including the list rental, printing,
            postage and processing fees.

      Our 24/7 Mail customers include Web sites that collect email addresses,
direct marketers, advertisers and email list brokers. Our 24/7 Mail service
allows demographic selection of email addresses based on more than 35 selected
fields of self-reported user demographics and psychographics. The 24/7 Mail
staff helps marketers maximize their return on investment through custom email
marketing programs that reach targeted customers. 24/7 Mail provides
state-of-the-art reporting, campaign analysis and modeling.

      Our email address database offers direct marketers and email address list
brokers more than 30 million permission-based email addresses gathered from a
wide network of third-party Web publishers. We provide marketers and e-commerce
retailers a selection of targeted email address lists designed to achieve
maximum response to their offers. Currently, 24/7 Mail has U.S. operations that
serve as list manager for permission-based email lists that collectively
contained more than 26 million email addresses as of March 2001, and European
and Canadian operations

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that currently serve as list manager for permission-based email lists that
collectively contained more than three million email addresses as of March 2001.


24/7 MAIL SERVICES

24/7 MAIL LIST MANAGEMENT

      We currently exclusively manage email lists from a diverse range of
branded third-party Web sites. When a user consents to receive email or other
marketing information through one of these web site clients, the user's email
address is added to a separate permission-based database which is housed and
managed by us. However, the Web site from which the email address was derived
continues to be the owner of these addresses.

24/7 MAIL ALLIANCE DATABASE

      The 24/7 Alliance database is the industry's largest aggregated database
of permission-based email addresses and related information. The database
includes up to 35 fields of selectable self-reported preference data . Direct
marketers can use the database to deliver e-marketing messages selected by
preference, demographic and lifestyle elements.

24/7 MAIL LIST BROKERAGE

      As a list broker, we rent third-party e-mail lists in order to supplement
our list management business on behalf of marketers who use email to reach
prospects and customers. If a specific list is not under management by 24/7
Mail, we may rent specific lists from other list managers or directly from list
owners on behalf of marketers. We believe that our list brokers deliver the
industry's most sophisticated multi-source email campaign planning,
implementation and reporting services.


24/7 TECHNOLOGY SOLUTIONS

      24/7 EXACTIS. 24/7 Exactis provides companies a suite of permission-based
e-mail marketing and communications products and services that allows precise,
efficient and personal interaction with customers, and the potential to retain
and grow these valuable relationships.

      24/7 Exactis' technology and customer service make it the world's most
reliable delivery system for high-volume email. With the largest bandwidth in
the industry, 24/7 Exactis provides effective, powerful online message delivery.
Our sophisticated state-of-the-art email delivery infrastructure is capable of
delivering over 50 million emails per day in multiple formats, including text,
HTML and Rich Media (a revolutionary technology that allows audio, video,
animation and secure e-commerce to be streamed directly into email). We deliver
personalized email messages to online customers in any volume, at any frequency,
with reliability.

      24/7 Exactis'clients include on-line advertisers as well as traditional
direct marketers

                                       12
<PAGE>

such as First Union Bank, Tunes.com (Rolling Stone), Chicago Tribune, The
Economist, USA Today and the World Wrestling Foundation.

      E.MERGE(TM). Our e.mergetm product offers a fully integrated, customizable
suite of back office business applications designed to manage and distribute
digital media assets, provide real time subscriber management, provide for
personalized e-commerce, marketing campaign management across mixed media and
broadband targeted advertising. The integration of 24/7 Connect with the e.merge
technology enables us to deliver campaigns across Web sites, email, electronic
programming guides, set top boxes and other information appliances via one
interface. Our Broadband & Professional Services division ("BPS") is a leading
provider of technology products that facilitate the convergence of Internet
technologies with broadband video programming, and also provides system
integration services. We acquired our e.merge product through our acquisition of
IMAKE in January 2000.

      Through BPS, our customer base includes telecommunication companies,
Internet service providers, cable service operators, digital entertainment
content providers, satellite companies and the hospitality industry. Our
combined product offerings enable Web publisher clients to develop enhanced
broadband, and advertising capabilities. Current customers of our BPS division
include several divisions of Verizon, Network Guidance, Southwestern Bell Video
Services, and MCI Tele-TV.

      24/7 WEBSITE RESULTS.  Our 24/7 Website Results provides a unique and
cost-effective means of delivering a high volume of targeted visitors from
Internet Search Engines.

Website Results is a search engine optimization technology solution that
allows one-to-one connection between a company and its desired customer. It
bridges the gap, delivering prospects who are ready, willing and able to buy
the customer's product. Companies select keywords and/or phrases most
identified with their products. Our technology converts these choices into
priorities in the users' individual Internet search. Thus, products appear at
the top of the list when the search results are revealed. Our system
prioritizes the website and product on the computer screen - and in the mind
- of the potential customer. The audience is pre-selected because these are
the people who are actively seeking the type of products and services an
advertiser offers.

24/7 MEDIA SALES ORGANIZATION

      We believe we maintain one of the best Internet advertising sales
organizations. We sell services worldwide from 50 offices in over 20
countries through a sales and marketing organization that included over 300
sales professionals as of December 31, 2000. In the United States, these
employees are located at our headquarters in New York and our offices in
Boston, Chicago, Austin, Los Angeles, San Francisco, Seattle, Denver and the
Washington, D.C. area.

      Globally, we also have offices in Australia, Belgium, Canada, China,
Denmark, Finland, France, Germany, Holland, Japan, Italy, Norway, Portugal,
Spain, Sweden, Switzerland and the United Kingdom. Advertisers typically
purchase advertising under written purchase order agreements that run for a
limited time. Advertisers can purchase regionally, pan regionally or
internationally from any office in our system. We believe that the terms of
our purchase order agreements are consistent with

                                       13
<PAGE>

industry practice. These agreements provide for our indemnification by the
advertiser for breach of representations and warranties by the advertisers
and limit the right of the advertiser to cancel or modify a campaign once
commenced. We sell sponsorship advertising whereby an advertiser enters into
a long-term agreement with a single Web site, typically with exclusivity and
renewal privileges and restrictions on the advertisers' ability to cancel the
agreement. Sponsorship advertising involves a greater degree of integration
among our company, the advertiser and our Web sites.

      We believe that we have a competitive advantage due to the geographic
breadth of our sales force and our ability to continually improve our sales
and marketing capabilities. We continuously leverage the substantial media
expertise of our management team to maximize the value of ad campaigns for
both our advertisers and our Web sites. We also employ a Web site
relationship department that surveys our Web sites and monitors qualitative
indicators of service levels in order to continuously improve our customer
service.

      We believe that advertiser awareness of our company and our services is
critical to our success. As a result, we seek to continually communicate with
advertisers and advertising agencies through our Web site, trade publication
advertisements, public relations, direct mail, ongoing customer
communications programs, promotional activities, trade shows and online
advertisements over our networks and on third party Web sites.

PRIVACY PROTECTION

      The growth of our business and of the Internet depends on user trust in
the integrity of the Internet. We believe that fostering user confidence in
online privacy is an integral component of our mission to deliver the right
message to the right user at the right time. We have been, and intend to
continue to be, a leader in respecting users' privacy in all of our marketing
initiatives.

      We believe strongly that consumers must always have both notice and the
right of choice and the confidence that their information is secure. When
collecting non-personally identifiable information in the delivery of
Internet advertising, we provide notice to users about our use of such
information and the choice not to participate. We provide notice to users
about the marketing uses of personally identifiable information collected
online and the choice not to participate. Our email service bureau does not
condone or contribute to the proliferation of unsolicited bulk commercial
email, or spam. We require that all clients respect our No Spam policy and
provide subscribers in every email sent the option to elect to no longer
receive email from the client.

      In the event that we associate online and offline information about a
user, we believe we have an obligation to the users to protect their privacy.
Therefore, we will not associate any personally identifiable information
about a user with his or her Internet browser or anonymous "cookie" unless
that user has first been provided with notice about the collection and use of
personally identifiable information about that user, and has affirmatively
consented to participate. In addition, we believe that some sensitive
information, such as health-related information, financial information or
information regarding children, warrant higher levels of caution when used to
target advertising, and we will not make that sensitive information part of
our targeting systems without the express affirmative consent of the user or
the user's legal

                                       14
<PAGE>

guardian, in the case of a child.

      We built our 24/7 Connect technology with user privacy concerns in
mind. 24/7 Connect offers users a selective opt-out that makes it impossible
for us to associate any online behavior with the user's browser or cookie or
to associate any personally identifiable information with a browser that has
opted out. This opt-out is available to all users, whether or not we have any
personally identifiable information linked to that person's browser. We call
this opt-out selective because, unlike deleting cookies, our opt-out only
impacts our ability to recognize a user. None of the user's other
personalization efforts (e.g., customized home pages) are affected.

      As a founding member of the Network Advertising Initiative and
Responsible Electronic Communications Alliance, we are working closely with
the marketing and advertising industries, the Federal Trade Commission and
government groups in developing industry self-regulating principles for the
collection and use of user information by network advertising companies and
the responsible sending of email communications. We also actively monitor
privacy laws and regulations, and endeavor to comply with all applicable
privacy requirements.

INTERNATIONAL OPERATIONS

      Our organization is a global one. In January 1999, we acquired a 60%
interest in 24/7 Media Europe Ltd., formerly known as InterAd Holdings
Limited, that operates the 24/7 Network in Europe, and we acquired 100% of
the remaining interest in 24/7 Media Europe in January 2000. Our Website
network in Europe consists of over 250 high-profile Web sites to which we
delivered over 550 million advertisements in December 2000. We acquired our
operations in Canada from our acquisition of Clickthrough Interactive in July
1999. In August 2000, we entered into a royalty and licensing agreement with
chinadotcom.

INTELLECTUAL PROPERTY

      Intellectual property is critical to our success, and we rely upon
patent, trademark, copyright and trade secret laws in the United States and
other jurisdictions to protect our proprietary rights and intellectual
property. We have received two patents, and we have filed and intend to file
additional applications with the United States Patent and Trademark Office,
to protect aspects of our 24/7 Connect and other technologies. We have also
applied to register our trademarks both domestically and internationally.
These trademark registrations and patent applications may not be approved or
granted and may be challenged by others or invalidated through administrative
process or litigation. Patent, trademark, copyright and trade secret
protection may not be available in every country in which our services are
distributed or made available. In addition, we protect our proprietary rights
through the use of confidentiality agreements with employees, consultants and
affiliates.

      We will collect demographic profiles of Internet and email users and
the ad serving technology we employ collects and uses anonymous data derived
from user activity on our networks and our Web sites. This data is intended
to be used for advertisement targeting and for predicting advertisement
performance. Although we believe that we have the right to use such data,
trade secret, copyright or other protection may not be available for such
information or

                                       15
<PAGE>

others may claim rights to such information. Further, under our contracts
with Web publishers using our services, we are obligated to keep information
regarding the Web publisher confidential.

COMPETITION

      The market for interactive marketing solutions is competitive.
Competition may increase as a result of industry consolidation. We compete
for Internet advertising revenues with large Web publishers and Web portals,
such as America Online, Excite@Home, Lycos, Microsoft Network and Yahoo. We
also compete with the traditional advertising media including television,
radio, cable and print for a share of advertisers' total advertising budgets.

      The 24/7 Network competes for Web site clients with a variety of
Internet advertising networks, including DoubleClick, Engage Technologies,
L90 and Real Media. Our 24/7 Mail business competes for list management
clients with Message Media, NetCreations, DoubleClick and YesMail. In the
third party adserving business, we compete with DoubleClick, AdForce, Engage
Technologies, Avenue A and MatchLogic. We also have additional regional
competitors in each of our business lines. We encounter competition from a
number of other sources, including content aggregators, companies engaged in
advertising sales networks, advertising agencies, and other entities that
facilitate Internet advertising. Many of our existing competitors, as well as
a number of potential new competitors, have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than we do.

EMPLOYEES

      As of December 31, 2000, we employed approximately 1,027 persons
worldwide, including approximately 481 in sales, marketing and customer
support, 196 in technology and product development, and 250 in accounting,
human resources and administration. In November 2000 and January 2001, we
reduced our workforce by approximately 200 and 100 employees, respectively,
in connection with certain restructuring initiatives and cost reductions. We
expect to further reduce our workforce by approximately 100 employees and
close or downside certain offices by the end of April 2001. We are not
subject to any collective bargaining agreements and believe that we enjoy a
good relationship with our employees.

                               RECENT DEVELOPMENTS

      On March 21, 2001, we issued a press release and held a conference call
pertaining to our financial results for the three months and year ended
December 31, 2001. During the conference call, we stated that we would
require additional funding to reach profitability, and that, among other
things, we were actively exploring the sale of assets to raise financing. If
we complete any of these asset sales, we may as a result exit one or more of
the business lines discussed under "Business."

      In addition, on March 21, 2001, we entered into a common stock purchase
agreement and a registration rights agreement with Maya Cove Holdings Inc.
Pursuant to the terms of these

                                       16
<PAGE>

agreements, beginning on the date that a registration statement covering a
number of shares estimated to be issued under the common stock purchase
agreement is declared effective by the SEC, and continuing for 18 months
thereafter, we have the right, but not the obligation, subject to the
satisfaction or waiver of certain conditions, to sell up to $50 million of
our common stock to Maya pursuant to such periodic draw downs as we may elect
to make. Maya will purchase such shares at a discount of between 3.5% and
3.0%, depending on the market capitalization of our outstanding common stock
at the time of issuance. The minimum amount that may be drawn down at any one
time is $250,000. The draw downs are subject to our ability to continue
trading on NASDAQ and our trading volumes and prices. As a result, our
ability to utilize this equity credit line is limited and there can be no
assurance that it will provide the resources necessary to fund our needs. We
also issued a warrant certificate to Maya to purchase up to 100,000 shares of
our common stock. The warrant is exercisable for a period of three years from
the date of issuance. The warrant exercise price will be equal to 150% of the
average closing bid of our common stock for the fifteen trading days prior to
the date of closing or $0.78 per share.

      On April 9, 2001, our Board of Directors approved a new restructuring
plan with the objective to leverage our infrastructure and improve and preserve
our cash position. The plan calls for the divestitures of certain non-core
assets, a reduction of our headcount of approximately 100 employees, closing
of one office and downsizing of four other offices as well as the elimination
of certain redundancies related to our technology costs.

ITEM 2.     PROPERTIES

      Our principal executive offices are located at 1250 Broadway, New York,
New York. They consist of approximately 41,000 square feet under a lease that
expires in 2008 and provides for total annual rent of approximately
$1,200,000, subject to increase annually to reflect increases in operating
expenses.

      In addition, we currently lease office space in the following domestic
locations:

<TABLE>

<S>                           <C>                           <C>
      o  Bethesda, MD         o  Boston, MA                 o  Chicago, IL

      o  Denver, CO

      o  Fairfax, VA          o  Austin, TX                 o  Miami, FL

      o  Los Angeles, CA      o  San Francisco, CA          o  Seattle, WA

</TABLE>

      Furthermore, we currently lease office space in the following countries
for our international operations:

<TABLE>

<S>                                 <C>                     <C>
      o  Australia                  o  Belgium              o  Canada

      o  Denmark                    o  England              o  Finland

      o  France                     o  Germany              o  Holland

      o  Italy                      o  Japan                o  Norway

      o  Portugal
</TABLE>

                                       17
<PAGE>

<TABLE>

<S>                                 <C>
      o  Spain                      o  Sweden               o  Switzerland
</TABLE>


      We are continually evaluating our facilities requirements.

Our technology software and hardware are housed at Exodus Communications,
Inc. in Sterling, Virginia, Digital Island in Hong Kong and London, and
Global Center in New York and Herndon, Virginia. Our agreements with these
organizations provide for Internet connectivity services, tape rotation,
off-site storage services, facilities management, and the lease of secure
space to store and operate this equipment. Hardware and Software located in
these facilities is owned or leased by 24/7 Media. Our agreements with these
organizations include a "99% Uptime Guarantee." Downtime results in certain
returns of payment to us and gives rise to a right of termination by us. In
the future, we may expand our utilization of third party organizations to
ensure the continued support of our present and future customers and maintain
our levels of redundancy.

ITEM 3. LEGAL PROCEEDINGS.

In December 1999, DoubleClick, Inc. filed a patent infringement lawsuit
against our subsidiary, Sabela Media, Inc., in the United States District
Court for the Southern District of New York. The suit alleged that Sabela was
infringing, and inducing and contributing to the infringement by third
parties of a patent held by DoubleClick entitled "Method for Delivery,
Targeting and Measuring Advertising Over Networks". DoubleClick was seeking
treble damages in an unspecified amount, a preliminary and permanent
injunction from further alleged infringement and attorneys' fees and costs.
On May 4, 2000, we filed suit in the U.S. District Court for the Southern
District of New York against DoubleClick Inc. alleging infringement by
DoubleClick of our U.S. Patent No. 6,026,368, entitled "On-Line Interactive
System and Method for Providing Content and Advertising Information to a
Targeted Set of Viewers." On November 6, 2000, we settled the patent
litigation initiated by DoubleClick against Sabela and the patent litigation
initiated against DoubleClick by us. Consequently, both of these lawsuits
have been dismissed with prejudice. As part of the settlement, we and
DoubleClick granted each other certain rights in certain of the respective
patents. Under the settlement agreement, no other terms of the settlement are
permitted to be disclosed.

On November 21, 2000, our 24/7 Exactis subsidiary filed a lawsuit in U.S.
Federal District Court in Denver, Colorado against the Mail Abuse Prevention
System LLC ("MAPS") and its founder, Paul Vixie, alleging various
tort-related claims in connection with MAPS' inclusion of IP addressed
associated with 24/7 Exactis on MAPS Real-time Blackhole List (the "RBL").
The court has issued a preliminary injunction against MAPS' prohibiting it
from including 24/7 Exactis' servers on the RBL, and a trial is scheduled for
July 2001.

On December 26, 2000, Christina A. Wells, Garen Razoian, and Stephen J.
Simkovich filed a lawsuit in the Superior Court of California, Los Angeles
County, against us, Website Results, The Pinnacle Group, Michael Osborn,
Ronald Penna, and Kevin Smith. Plaintiffs alleged claims for (i) breach of
express contract; (ii) breach of implied in fact contract; (iii) negligent
management; (iv) fraud and misrepresentation; (v) breach of covenant of good
faith and fair dealing; (vi) conversion; (vii) loss of benefit of the bargain
and business opportunity; (viii)

                                       18
<PAGE>

declaratory relief; (ix) intentional infliction of emotional distress; and
(x) negligent infliction of emotional distress. The thrust of the complaint
is that the defendants failed to pay certain commissions promised to
plaintiffs. Plaintiffs claim to have suffered over $1 million in damages and
seek punitive damages as well. We are mounting a vigorous legal defense that
may include counterclaims, and we have submitted a demurrer seeking to
dismiss all tort-based claims. We do not believe that the outcome of this
litigation will have a materially adverse impact on our financial position or
our results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      There were no matters submitted to a vote of security holders during
the fourth quarter of 2000.

                                       19
<PAGE>

                                     PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY
            AND RELATED STOCKHOLDER MATTERS.

      We have not declared or paid any dividends on our capital stock since
our inception and do not anticipate paying dividends in the foreseeable
future. Our current policy is to retain earnings, if any, to finance the
expansion of our business. The future payment of dividends will depend on the
results of operations, financial condition, capital expenditure plans and
other factors that we deem relevant and will be at the sole discretion of our
board of directors.

      Since our initial public offering on August 13, 1998, our common stock
has traded on the Nasdaq National Market under the symbol "TFSM." The
following table sets forth the high and low sales prices of the common stock,
for the periods indicated, as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>

                                                 HIGH                     LOW

<S>                                              <C>                    <C>
YEAR ENDED DECEMBER 31, 1999
First Quarter                                    59.00                  22.88
Second Quarter                                   69.63                  23.88
Third Quarter                                    48.38                  21.75
Fourth Quarter                                   65.25                  34.38
YEAR ENDED DECEMBER 31, 2000
First Quarter                                    65.00                  36.13
Second Quarter                                   39.50                  12.06
Third Quarter                                    17.25                   9.00
Fourth Quarter                                   10.44                   0.47
YEAR ENDED DECEMBER 31, 2001
First Quarter                                     2.22                   0.25
Second Quarter (through April 10, 2001)           0.34                   0.19
</TABLE>

      On April 10, 2001, the last reported sale price for our common stock on
the NASDAQ National Market was $0.31. As of March 29, 2001, there were
approximately 490 holders of record of our common stock.

      The shares of our common stock are currently listed on the NASDAQ
national market. On April 6, 2001, we have received a letter from NASDAQ
stating that they have determined that we have failed to meet NASDAQ's
minimum listing requirements and as a result our common stock could be
delisted.

                                       20
<PAGE>

      Our failure to meet NASDAQ's maintenance criteria may result in the
discontinuance of our securities in NASDAQ. In such event, trading, if any,
in the securities may then continue to be conducted in the non-NASDAQ,
over-the-counter market in what are commonly referred to as the electronic
bulletin board and the "pink sheets". As a result, an investor may find it
more difficult to dispose of or obtain accurate quotations as to the market
value of the securities. In addition, we would be subject to a Rule
promulgated by the Securities and Exchange Commission that, if we fail to
meet criteria set forth in such Rule, imposes various practice requirements
on broker-dealers who sell securities governed by the Rule to persons other
than established customers and accredited investors. For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transactions prior to sale. Consequently, the Rule may have a materially
adverse effect on the ability of the broker-dealers to sell the securities,
which may materially affect the ability of the shareholders to sell the
securities in the secondary market.

      Delisting of our shares could make trading our shares more difficult
for investors, potentially leading to further declines in share price. It
would also make it more difficult for us to raise additional capital. We
would also incur additional costs under blue-sky laws to sell equity if we
are delisted.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.

The selected consolidated financial data as of December 31, 2000 and 1999,
and for each of the years in the three-year period ended December 31, 2000
have been derived from our audited consolidated financial statements, which
are included elsewhere herein. The consolidated financial statements included
herein are prepared assuming the Company will continue as a going concern.
The report of KPMG LLP covering the December 31, 2000 consolidated financial
statements and financial statement schedule contains an explanatory paragraph
that states that the Company has suffered recurring losses from operations
since inception that raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to this matter are described in
Note 1 to the consolidated financial statements. The consolidated financial
statements and financial statement schedule do not include any adjustments
that might result from the outcome of this uncertainty. The selected
financial data as of December 31, 1997 and 1996 and for each of the years in
the two-year period ended December 31, 1997 are derived from our audited
financial statements, which are not included herein. We believe that due to
the many acquisitions that we made in recent years, the period to period
comparisons for 1996 through 2000 are not meaningful and should not be relied
upon as indicative of future performance.

You should read the selected consolidated financial data stated below in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
related Notes thereto included elsewhere herein.


                                       21
<PAGE>

<TABLE>
<CAPTION>

                                                                                 FOR THE YEARS ENDED DECEMBER 31,
                                                         ---------------------------------------------------------------------------
                                                              2000           1999          1998            1997             1996
                                                         ------------    ------------   ------------   ------------    -------------
                                                                             (IN THOUSANDS, EXPEEPT PER SHARE AMOUNTS)
<S>                                                      <C>             <C>            <C>            <C>             <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenues:
 Network .............................................   $    125,256    $     81,158   $     19,744   $      1,467    $      1,111
 Email ...............................................         29,269           8,853          1,003             69            --
 Technology ..........................................         30,630
 Other ...............................................           --              --              119          1,681             436
                                                         ------------    ------------   ------------   ------------    ------------
   Total revenues ....................................        185,155          90,011         20,866          3,217           1,547
                                                         ------------    ------------   ------------   ------------    ------------

Cost of revenues:
 Network .............................................        102,365          61,000         15,970          1,655           1,596
 Email ...............................................         20,642           4,963            179             14            --
 Technology ..........................................          9,886            --             --             --              --
                                                         ------------    ------------   ------------   ------------    ------------
   Total cost of revenues ............................        132,893          65,963         16,149          1,669           1,596
                                                         ------------    ------------   ------------   ------------    ------------

   Gross profit (loss) ...............................         52,262          24,048          4,717          1,548             (49)
                                                         ------------    ------------   ------------   ------------    ------------

Operating expenses:
 Sales and marketing .................................         52,406          23,396          8,235          1,857           2,364
 General and administrative ..........................         61,719          24,575          8,827          3,226           3,390
 Product development .................................         18,215           1,891          2,097          1,603           1,617
 Other expenses ......................................           --              --             --              989            --
  Amortization of goodwill, intangibles and advances .        129,684          16,939          5,722           --
  Stock-based compensation ...........................          8,555             313            569             32              24
  Merger related costs ...............................          5,513            --            5,000           --              --
  Restructuring and exit costs .......................         11,956            --             --             --              --
  Impairment of intangible assets ....................        500,220            --             --             --
                                                         ------------    ------------   ------------   ------------    ------------
   Total operating expenses ..........................        788,268          67,114         30,450          7,707           7,395
                                                         ------------    ------------   ------------   ------------    ------------

   Loss from operations ..............................       (736,006)        (43,066)       (25,733)        (6,159)         (7,444)

 Interest income (expense), net ......................          1,359           3,025            576           (154)            (38)
 Gain on sale of investments .........................         52,059            --             --             --              --
 Gain on exchange of patent rights, net ..............          4,053            --             --             --              --
 Impairment of investments ...........................       (101,387)           --             --
                                                         ------------    ------------   ------------   ------------    ------------

   Net loss before minority interest .................       (779,922)        (40,041)       (25,157)        (6,313)         (7,482)

 Minority interest in loss of consolidated subsidiaries          --               979           --             --              --
                                                         ------------    ------------   ------------   ------------    ------------
   Net loss ..........................................       (779,922)        (39,062)       (25,157)        (6,313)         (7,482)

 Cumulative dividends on mandatorily
  convertible preferred stock ........................           --              --             (276)          --
                                                         ------------    ------------   ------------   ------------    ------------
 Net loss attributable to common
  stockholders .......................................   $   (779,922)   $    (39,062)  $    (25,433)  $     (6,313)   $     (7,482)
                                                         ============    ============   ============   ============    ============
 Net loss per share--basic and diluted ...............   $     (23.38)   $      (1.96)  $      (2.48)  $      (3.50)   $      (4.24)
                                                         ============    ============   ============   ============    ============
 Weighted average shares outstanding .................     33,363,613      19,972,446     10,248,677      1,802,235       1,765,053
                                                         ============    ============   ============   ============    ============

CONSOLIDATED BALANCE SHEET
DATA:
 Cash and cash equivalents (including restricted cash
  of $800 in 2000) ...................................   $     29,697    $     42,786   $     34,049   $        121    $      1,847
 Working capital (deficit) ...........................         21,874          41,189         31,290         (1,668)           (232)
 Goodwill and intangible assets, net .................        124,792          62,398         10,935           --              --
 Total assets ........................................        268,927         534,012         63,108          1,463           4,687
 Long-term debt ......................................           --              --             --            2,317            --
 Obligations under capital leases,
  excluding current installments .....................            154              13             34             80            --
 Total stockholders' equity (deficit) ................        207,998         397,791         51,087         (2,947)          1,888
</TABLE>


                                       22
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OFOPERATIONS.

GENERAL

We are a leading global provider of end-to-end advertising and marketing
solutions for Web publishers, online advertisers, advertising agencies,
e-marketers and e-commerce merchants. We provide a comprehensive suite of
media and technology products and services that enable such Web publishers,
online advertisers, advertising agencies and e-marketers to attract and
retain customers worldwide, and to reap the benefits of the Internet and
other electronic media. Our solutions include advertising and direct
marketing sales, ad serving, promotions, email list management, email list
brokerage, email delivery, data analysis, loyalty marketing and convergence
solutions, all delivered from our industry-leading data and technology
platforms. Our 24/7 Connect ad serving technology solutions are designed
specifically for the demands and needs of advertisers and agencies, Web
publishers and e-commerce merchants. Our business is organized into three
principal lines of business:

o     24/7 Network,

o     24/7 Mail, and

o     24/7 Technology Solutions.

Through our global advertising network, 24/7 Media provides a full suite of
interactive marketing solutions and services. Through the 24/7 Network, we
serve more than 3.0 billion ad impressions per month on more than 600
high-profile sites globally. 24/7 Mail, the world's largest permission-based,
opt-in email database, consists of more than 30 million email addresses that
can be used to deliver targeted online banner and email campaigns. Our 24/7
Technology Solutions enables 24/7 Connect to provide advertisers, marketers
and Web sites a centralized ad delivery, ad management and reporting system.
We are based in New York and as of December 31, 2000, we had offices in 50
cities in over 20 countries.

We generate our revenues primarily by delivering advertisements to affiliated
Web sites on our networks and email messages to clients. We typically sell
our advertisements and deliver our email related services under purchase
order agreements with advertisers which are short-term in nature or subject
to cancellation.

The pricing of ads and email messages is based on a variety of factors,
including the gross dollar amount spent on the advertising campaign and the
platform over which the campaign is delivered. We strive to sell 100% of our
inventory through the combination of advertisements sold on a "CPM" basis,
which is the cost to the advertiser to run 1,000 ads, and a "cost-per-action"
basis whereby revenues are generated if the user responds to the ad with an
action, such as an inquiry or a purchase of the product advertised.

We recognize advertising and email revenues in the period that the
advertisement or promotion is delivered, provided that no significant
obligations remain and the receivable is probable of collection. In nearly
all cases, we recognize revenues generated from advertising sales, net of any

                                       23
<PAGE>

commissions paid to advertising agencies on behalf of their clients. We pay
our affiliated Web site clients a fee calculated as a percentage of revenues
generated by advertisements run on the Web site, which amount is included in
cost of revenues. We pay our email list owners a royalty for use of their
email list in our ad campaigns. In addition, we are responsible for billing
and collecting for advertisements delivered to our networks. We recognize
technology revenues on a percentage of completion basis for fixed price
contracts or as hours are incurred for time and materials contracts.

The period-to-period comparisons of our historical operating results should
not be relied upon as indicative of future performance. Our prospects should
be considered in light of the risks, expenses and difficulties encountered by
companies in the early stages of development, particularly companies in the
rapidly evolving Internet market. Although we have experienced revenue growth
in recent periods, there can be no assurances that this growth will be
maintained in addition, we anticipate that we will incur operating losses for
the foreseeable future due to a high level of planned operating and capital
expenditures.

RESULTS OF OPERATIONS - 2000 COMPARED TO 1999

REVENUES

NETWORK. Our Network revenues increased 54.3% to $125.3 million for the year
ended December 31, 2000 from $81.2 million for the year ended December 31,
1999. The increase in Network revenue was due to an increase in online
spending, an increase in volume across our network and strong international
growth in Europe further aided by acquisitions in Canada (July 1999) and
Latin America (December 1999).

MAIL. Our Mail revenues increased 230.6% to $29.3 million for the year ended
December 31, 2000 from $8.9 million for the year ended December 31, 1999.
This increase in revenue was fueled by a significant expansion in the types
of email services that we offer to include email list management and list
brokerage services in addition to our service bureau offerings, as well as a
dramatic increase in the number of opt-in email addresses under management. A
significant portion of our growth and the expansion into these new service
offerings was due to our acquisitions of Sift in the first quarter of 1999
which was accounted for as a pooling of interests and of ConsumerNet in the
third quarter of 1999.

TECHNOLOGY.  Our Technology Solutions segment was formed with our
acquisitions of Sabela Media, Inc. and IMAKE Software and Service, Inc. in
January 2000 and increased with our acquisitions of Exactis.com, Inc.  in
June 2000 and Website Results  in August 2000.  Technology revenues were
$30.6 million for the year ended December 31, 2000.

COST OF REVENUE AND GROSS PROFIT

NETWORK COST OF REVENUES AND GROSS PROFIT. The cost of network revenues
consists primarily of fees paid to affiliated Web sites, which are calculated
as a percentage of revenues resulting from ads delivered on our networks.
Cost of revenues also includes third party ad serving costs, depreciation of
our 24/7 Connect ad serving system and Internet access. We completed the
transition of our 24/7 Network in the United States to 24/7 Connect in the
third quarter of 2000 and we converted the 24/7 Network in Canada and Latin
America to 24/7

                                       24
<PAGE>

Connect in early 2001. We plan to convert the 24/7 Network in Europe to 24/7
Connect in the second half of 2001.

Gross profit dollars increased significantly due to the increase in revenue
and the gross margin decreased from 24.8% for the year ended December 31,
1999 to 18.3% for the year ended December 31, 2000. The decline in margin is
due to increased competition in the marketplace and the cost to exit our
least profitable advertising contracts. Gross margin further decreased due to
increases in the amounts of unsold inventory, which diluted the effective
price of delivered advertising impressions.

MAIL COST OF REVENUES AND GROSS PROFIT. The cost of mail revenues consists
primarily of list provider royalties and delivery costs. Gross profit dollars
increased significantly due to the growth in revenues. Gross margin declined
to 29.5% for the year ended December 31, 2000 from 43.9% for the year ended
December 31, 1999. The decrease is due to the shift in the mix of business
from service bureau in 1999 to primarily list management and list brokerage
in 2000, each of which has a lower gross margin. The gross margin also
decreased due to our obligation to fulfill guarantee contracts. We expect
that the margin on mail will improve as all guarantee contracts have expired
as of December 31, 2000.

TECHNOLOGY COST OF REVENUES AND GROSS PROFIT. The cost of technology revenues
consists of time and materials for consulting contracts, and the cost of
equipment and broadband for our third party ad serving solutions. Gross
margin for the year ended December 31, 2000 was 67.7%. We expect to maintain
this margin throughout 2001.

OPERATING EXPENSES. Each of sales and marketing, general and administrative,
product development and amortization expenses increased in the year ended
December 31, 2000 compared to the year ended December 31, 1999 as a result of
numerous acquisitions from July 1999 through August 2000 and expenses
incurred in connection with the internal growth of our business. We expect
expenses to decrease in the future due to our restructuring activities,
described in "Restructuring and exit costs" below.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consist primarily
of sales force salaries and commissions, advertising expenditures and costs
of trade shows, conventions and marketing materials. Sales and marketing
expenses increased as a result of the growth of our business on a global
scale and the resulting additions to sales staff as well as increased
marketing expenses for expanding into new markets and new product lines,
broadening our visibility and our global advertising campaign. We expect
sales and marketing expenses to decrease as we restructure and better
integrate our sales force.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of compensation, facilities expenses and other overhead
expenses incurred to support the growth of our business. General and
administrative expenses increased as a result of the growth of our business,
numerous acquisitions, the addition of new personnel and increased operating
expenses. General and administrative further increased due to bad debts as a
result of the difficulties facing the internet industry. We incurred
approximately $10.5 million in bad debt expense for the year ended December
31, 2000, which was $9.3 million higher than the year ended December 31, 1999
due to the significant downturn in the Internet advertising and marketing
sectors. We expect general and administrative expenses to decrease as we
implement

                                       25
<PAGE>

our restructuring activities to the reduce employee headcount, consolidate
operations and reduce office space.

PRODUCT DEVELOPMENT EXPENSES. Product development expenses consist primarily
of compensation and related costs incurred to further develop our ad serving
and other technology capabilities. 24/7 Connect, our ad serving solution,
reached the application development stage in March 1999 and we began
capitalizing costs related to the project. We capitalized certain costs
through June 2000 when 24/7 Connect became fully operational. During the
second half of 2000, all enhancements to Connect were expensed as incurred.
In addition, product development expenses increased due to the acquisition of
Exactis on June 30, 2000 which has significant new products under
development. We expect product development expenses to decrease as we scale
our research & development budget in line with the current market conditions.

AMORTIZATION OF GOODWILL, INTANGIBLES AND ADVANCES. Amortization of goodwill,
intangibles and advances was $129.7 million for the year ended December 31,
2000 and $16.9 million for the year ended December 31, 1999. The increase is
due to the goodwill and intangibles acquired with ConsumerNet, Clickthrough,
Netbookings, IMAKE, Sabela, AwardTrack, iPromotions, Kendro Communications,
Exactis, Website Results and the remaining interest in 24/7 Media Europe.
During the fourth quarter of 2000, we wrote off a substantial portion of the
remaining goodwill and intangible assets. As a result, we expect this expense
to significantly decline in the 2001.

STOCK-BASED COMPENSATION. Stock based compensation of $8.6 million for the
year ended December 31, 2000 consists of a $1.8 million charge for
unregistered shares issued to employees, $4.5 million in amortization of
deferred compensation from acquisitions, $2.1 million in amortization of
deferred compensation for restricted shares issued to certain employees and
$0.2 million in stock to be given as bonuses to certain employees. The
expense in 1999 relates to issuance of options to a former employee for $0.2
million and amortization of deferred compensation for restricted shares
issued to certain employees for $0.1 million.

MERGER RELATED COSTS. Merger related costs of $5.5 million for the year ended
December 31, 2000 consist primarily of acquired in-process technology of $4.7
million from the acquisition of IMAKE that was immediately charged to
operations in the first quarter of 2000. As of the date of the acquisition,
the e.merge technology acquired had not been fully developed and had no
alternative future uses. As a result, the Company will be required to incur
additional costs to successfully develop and integrate the technology. The
value of the acquired in-process technology was determined using an
independent valuation. The remaining expense consisted primarily of
consultant costs related to the integration of our numerous acquisitions.

RESTRUCTURING AND EXIT COSTS. During the fourth quarter of 2000, we recorded
a restructuring charge of approximately $12.0 million. . Our restructuring
initiatives are to reduce employee headcount, consolidate operations and
reduce office space in order to better align our sales, development and
administrative organization and to position us for profitable growth
consistent with our long-term objectives. This restructuring involved the
involuntary termination of approximately 200 employees, the exiting of six
sales office locations, a significant reduction of space at two additional
offices, and the abandonment of our AwardTrack subsidiary. In addition, we
have entered into negotiations to sell our Sabela subsidiary and have
recorded its

                                       26
<PAGE>

assets at their estimated realizable value.

In connection with the restructuring plan, we have recorded a $12.0 million
charge to operations during the fourth quarter of 2000 consisting of
severance of approximately $3.5 million, lease exit costs of approximately
$1.7 million, acceleration of restricted stock grants of approximately $0.9
million and the write down of assets to net realizable value primarily
related to AwardTrack and Sabela and certain leasehold improvements of $5.5
million, and other exit costs of approximately $0.4 million. This amount
includes non-cash charges of approximately $6.4 million. We have paid the
majority of these costs in the first quarter and expect to pay all remaining
amounts by the end of the third quarter.

IMPAIRMENT OF INTANGIBLES ASSETS. We perform on-going business reviews and,
based on quantitative and qualitative measures, assess the need to record
impairment losses on long-lived assets used in operations when impairment
indicators are present. Where impairment indicators were identified,
management determined the amount of the impairment charge by comparing the
carrying values of goodwill and other long-lived assets to their fair values.

Through August 2000, we completed numerous acquisitions that were financed
principally with shares of our common stock, and were valued based on the
price of our common stock at that time (see note 2). During the fourth
quarter of 2000, we reevaluated the carrying value of our businesses. Our
revaluation was triggered by the continued decline in the Internet
advertising and marketing sectors throughout 2000. In addition, each of these
entities had experienced significant and continuing declines in operating
and financial metrics over the last two quarters of 2000, primarily due to the
continued weak overall demand of on-line advertising and marketing services,
in comparison to the metrics forecasted at the time of their respective
acquisitions. These factors significantly impacted current projected revenue
generated from these businesses. Our evaluation of impairment was also based
on achievement of the unit's business plan objectives and milestones, the
fair value of each business unit relative to its carrying value, the
financial condition and prospects of each business unit and other relevant
factors. The business plan objectives and milestones that were considered
included, among others, those related to financial performance, such as
achievement of planned financial results, and other non-financial milestones
such as successful deployment of technology or launching of new products and
the loss of key employees. The impairment analysis also considered when these
properties were acquired and that the intangible assets recorded at the time
of acquisition were being amortized over useful lives of 2 - 4 years. The
amount of the impairment charge was determined by comparing the carrying
value of goodwill and other long-lived assets to fair value at December 31,
2000.

Where impairment was indicated, we determined the fair value of our business
units based on a market approach, which included an analysis of market price
multiples of companies engaged in similar businesses. To the extent that
market comparables were not available, we used discounted cash flows in
determining the value. The market price multiples are selected and applied to
the business based on the relative performance, future prospects and risk
profile of the business in comparison to the guideline companies. The
methodology used to test for and measure the amount of the impairment charge
was based on the same methodology used during our initial acquisition
valuations. As a result, during management's review of the value and periods
of amortization of both goodwill and certain other intangibles it was
determined that the

                                       27
<PAGE>

carrying value of goodwill and certain other intangible assets were not
recoverable. The other intangible assets that were determined to be impaired
related to the decline in fair market value of acquired technology, a
significant reduction in the acquired customer bases and turnover of
workforce which was in place at the time of the acquisition of these
companies.

As a result, we determined that the fair value of goodwill and other
intangible assets attributable to IMAKE, iPromotions, Exactis and Website
Results were less than their recorded carrying values. In addition, we have
abandoned operations of our AwardTrack subsidiary and entered into
negotiations for the sale of its Sabela subsidiary. As such we have recorded
Sabela's assets at their estimated realizable value. As a result of these
actions, we have written off all remaining goodwill and intangible assets
related to AwardTrack and Sabela. Accordingly, we recognized $500.2 million
in impairment charges to adjust the carrying values of these entities in the
fourth quarter of 2000. Of this amount, $367.2 million related to Exactis,
$55.5 million to AwardTrack, $47.9 million to Sabela, $21.3 million to
Website Results, $5.4 million to IMAKE and $2.9 million to iPromotions. The
impairment factors evaluated by management may change in subsequent periods,
given that our business operates in a highly volatile business environment.
This could result in significant additional impairment charges in the future.

INTEREST INCOME, NET. Interest and other income, net primarily includes
interest income from our cash and cash equivalents and short-term investments
and interest expense related to our capital lease obligations. Interest
income, net was $1.4 million for the year ended December 31, 2000 and $3.0
million for the year ended December 31, 1999. The decrease in interest
income, net for the year ended December 31, 2000 compared to December 31,
1999 was primarily attributable to a decrease in interest income earned as a
result of a lower cash and cash equivalent balances.

GAIN ON SALE OF INVESTMENTS. This gain relates to the sale of a portion of
our chinadotcom stock. In the year ended December 31, 2000, we sold
approximately 5.2 million shares of chinadotcom stock at prices ranging from
$6.63 to $40.48 per share. The shares had a cost basis of $13.8 million,
which resulted in a gain of approximately $52.1 million throughout the year.

GAIN ON EXCHANGE OF PATENT RIGHTS, NET.  On November 6, 2000, we and
DoubleClick, Inc. settled the DoubleClick, Inc. v. Sabela Media, Inc. and
24/7 Media, Inc. v. DoubleClick, Inc. patent litigation. Both lawsuits have
been dismissed with prejudice. As part of the settlement, 24/7 Media and
DoubleClick have granted each other certain rights in certain of their
respective patents. Under the settlement agreement, no other terms of the
settlement were to be disclosed.  During the fourth quarter of 2000, proceeds
from the exchange of patent rights were recorded net of related legal
expenses, resulting in a gain of $4.1 million.

IMPAIRMENT OF INVESTMENTS. During the fourth quarter of 2000, we wrote down
certain of our investments and recognized impairment charges of approximately
$101.4 million for other-than-temporary decline in value of certain
investments. We made an assessment of the carrying value of our cost-based
investments and determined that they were in excess of their carrying values
due to the significance and duration of the decline in valuation of
comparable companies operating in the Internet and technology sectors. The
write down to cost based investment were $73.9 million, of which $38.8
million related to 24/7 Media-Asia, a subsidiary of chinadotcom, $23.5
million related to Idealab!, $5.6 million to Naviant, $3.0 million to
Bidland.com and $3.0

                                       28
<PAGE>

million in other investments. We also recognized that the decline in value of
our available-for-sale investments in Network Commerce and i3Moble were
other-than-temporary and recorded an impairment charge of $26.4 million and
$1.1 million, respectively.

RESULTS OF OPERATIONS--1999 COMPARED TO 1998

Total revenues increased 331% in 1999 from 1998 due to the explosive growth
of the Internet as a business medium and our rapidly growing position within
this medium on a global basis. In addition to expanding our services
geographically from the U.S. to Canada, Europe and Latin America in 1999, we
also extended our product line beyond the Web site network business to offer
opt-in email services and technology solutions.

REVENUES

NETWORK REVENUES. Our network revenues increased to $81.2 million in 1999
from $19.7 million in 1998, representing 311% growth. This increase was
fueled by a dramatic expansion in the number of ad impressions sold in the
U.S. network business, a significantly increasing number of Web sites that we
represent, and our expansion globally to Canada, Europe and Latin America. In
addition, the number of advertisers and the amount of advertising spending on
the Internet increased significantly during this period.

EMAIL REVENUES. Our email revenues increased to $8.9 million in 1999 from
$1.0 million in 1998, representing 783% growth. This increase was fueled by a
significant expansion in the types of email services that we offer to include
email list management and list brokerage services in addition to our service
bureau offerings, as well as a dramatic increase in the number of opt-in
email addresses under management. The expansion into these new service
offerings was supported by our acquisition of ConsumerNet in the third
quarter of 1999.

COST OF REVENUES AND GROSS PROFIT

NETWORK COST OF REVENUES AND GROSS PROFIT. The cost of network revenues
consists primarily of fees paid to affiliated Web sites, which are calculated
as a percentage of revenues resulting from ads delivered on our networks.
Cost of revenues also includes third party ad serving costs, depreciation of
our ad serving system and Internet access. Gross profit dollars increased
significantly and the gross margin, which is network gross profit as a
percent of total network revenues, increased to approximately 25% in 1999
from 19% in 1998. The increase in gross margin was primarily due to more
favorable third party ad serving costs due to renegotiated rates.

EMAIL COST OF REVENUES AND GROSS PROFIT. The cost of email revenues consists
primarily of list provider royalties and delivery costs. Gross profit dollars
increased significantly due to the growth in revenues. Gross margin decreased
from 82% to 44% as the mix of business shifted from service bureau in 1998 to
primarily list management and list brokerage in 1999, each of which has a
lower gross margin.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consist primarily
of

                                       29
<PAGE>

sales force salaries and commissions, advertising expenditures and costs of
trade shows, conventions and marketing materials. Sales and marketing
expenses increased in dollar terms; however, as a percentage of revenue the
expenses decreased from 39% in 1998 to 26% in 1999. Sales and marketing
expenses increased as a result of the growth of our business on a global
scale and the resulting additions to sales staff as well as increased
marketing expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of compensation, facilities expenses and other overhead
expenses incurred to support the growth of our business. General and
administrative expenses increased in dollar terms; however, as a percentage
of revenue the expenses decreased from 42% in 1998 to 27% in 1999. General
and administrative expenses increased as a result of the growth of our
business, the addition of new personnel and increased operating expenses.

PRODUCT DEVELOPMENT EXPENSES. Product development expenses consist primarily
of compensation and related costs incurred to further develop our ad serving
and other technology capabilities. Product development expenses decreased in
1999 compared to 1998 as 24/7 Connect, our ad serving solution, reached the
application development stage in March 1999 and we began capitalizing costs
related to the project.

AMORTIZATION OF GOODWILL, INTANGIBLE ASSETS, AND ADVANCES. In 1999, we
incurred total amortization charges of $16.9 million compared to $5.7 million
in 1998. The expense is the amortization of goodwill and other intangible
assets related to the acquisitions of InterAd Holdings Ltd., ClickThrough
Interactive, ConsumerNet and Netbooking OY in 1999 and Petry, Advercomm,
Intelligent Interactions, CardSecure and CliqNow! in 1998.

STOCK BASED COMPENSATION. The expense in 1999 relates to issuance of options
to a former employee for $0.2 million and amortization of deferred
compensation for restricted shares issued to certain employees for $0.1
million. The expense in 1998 relates to issuance of warrants and common stock
to consultants and former officers of $0.5 million and deferred compensation
for restricted shares issued to certain employees for of approximately $0.1
million.

INTEREST (EXPENSE) INCOME, NET. Interest income, net was $3.0 million in 1999
and $0.6 million in 1998. The increase in interest income was attributable to
interest earned on the cash and cash equivalents from the net proceeds due to
our secondary offering of common stock in May 1999.

MINORITY INTEREST IN LOSS OF CONSOLIDATED SUBSIDIARIES. Minority interest
relates to losses attributable to minority investors in 24/7 Media Europe
N.V. We acquired 24/7 Media Europe N.V. in 1999, and at December 31, 1999 we
owned approximately 58% of the primary common equity.

QUARTERLY RESULTS OF OPERATIONS--UNAUDITED

The following tables set forth unaudited consolidated quarterly statements of
operations for the eight quarters ended December 31, 2000. This information
is unaudited, but in the opinion of management, it has been prepared
substantially on the same basis as the audited consolidated financial
statements appearing elsewhere in this report, and all necessary adjustments,
consisting

                                       30
<PAGE>

of normal recurring adjustments, have been included in the amounts stated
below to fairly present the unaudited consolidated quarterly results of
operations. The consolidated quarterly data should be read in conjunction
with our 2000 consolidated financial statements and the notes to such
statements appearing elsewhere in this report. The results of operations for
any quarter are not necessarily indicative of the results of operations for
any future period.

<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED
                                            ------------------------------------------------
                                             MARCH 31,    JUNE 30,     Sept. 30,    Dec. 31,
                                               2000        2000          2000         2000
                                            ---------    ---------    ---------    ---------
                                                              (in thousands)
<S>                                         <C>          <C>          <C>          <C>
Revenues:
     Network ............................   $  36,483    $  40,782    $  26,013    $  21,978
     Email ..............................       6,884        8,535        9,728        4,122
     Technology .........................       2,864        2,870       12,386       12,510
                                            ---------    ---------    ---------    ---------
        Total revenues ..................      46,231       52,187       48,127       38,610

Cost of revenues:
     Network ............................      28,692       31,794       21,770       20,109
     Email...............................       4,266        5,712        5,639        5,025
     Technology .........................       1,127        1,253        3,654        3,852
                                            ---------    ---------    ---------    ---------
            Total cost of revenues ......      34,085       38,759       31,063       28,986

            Gross profit ................      12,146       13,428       17,064        9,624
                                            ---------    ---------    ---------    ---------

Operating expenses:
     Sales and marketing ................      11,890       11,817       14,745       13,954
     General and administrative .........      10,856       13,023       17,469       20,371
     Product development ................       1,039        2,156        7,889        7,131
     Other expenses:
        Amortization of goodwill, intangible
          assets and advances ...........      16,692       18,549       46,758       47,685
        Stock-based compensation ........       2,910        1,319        2,226        2,100
        Merger related costs ............       4,762          409          151          191
        Restructuring and exit costs ....        --           --           --         11,956
        Impairment of intangible assets .        --           --           --        500,220
                                            ---------    ---------    ---------    ---------
            Total operating expenses ....      48,149       47,273       89,238      603,608
                                            ---------    ---------    ---------    ---------
            Loss from operations ........     (36,003)     (33,845)     (72,174)    (593,984)

     Interest income (expense), net .....         474          259          502          124
     Gain on sale of investments ........      11,682       11,421       14,885       14,071
     Gain on exchange of patent rights, net      --           --           --          4,053
     Impairment of investments ..........        --           --           --       (101,387)
                                            ---------    ---------    ---------    ---------
            Net loss ....................   $ (23,847)   $ (22,165)   $ (56,787)   $(677,123)
                                            =========    =========    =========    =========
</TABLE>


REVENUES. Although revenues increased substantially from 1999 to 2000, we
experienced declines quarter-to-quarter since the quarter ended June 30, 2000
and we anticipate that this trend will continue into the first half of 2001
due to the downturn in advertising and marketing spending on the internet.
The significant increase in technology revenues during the second half of
2000 was a result of our acquisition of Exactis and Website Results.

COST OF REVENUES AND GROSS PROFIT. Cost of revenues trended with revenue.
Gross margin remained relatively consistent, except in the third quarter,
when it was significantly higher. We were able to maintain gross margin by
increasing revenue from the higher margin technology segment from our
acquisitions throughout 2000 which was offset by declining margins in network
and mail.

                                       31
<PAGE>

SALES AND MARKETING EXPENSES. Sales and marketing expenses increased as a
result of the growth of our business, internally and through acquisitions,
and the resulting additions to sales staff as well as increased marketing
expenses.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased as a result of the growth of our business, the addition of new
personnel and increased operating expenses. General and administrative
expenses further increased due to bad debt as a result of the difficulties
facing the internet industry in the third and fourth quarters.

PRODUCT DEVELOPMENT EXPENSES. Product development expenses increased from the
first quarter to the second quarter however we capitalized certain
development costs associated with our 24/7 Connect ad serving system in first
and second quarters of 2000. 24/7 Connect was initially launched during the
second quarter of 2000. Product development expenses increased in the third
and fourth quarter due to the acquisition of Exactis which had significant
new products under development as well as our continued development of 24/7
Connect.

AMORTIZATION OF GOODWILL, INTANGIBLE ASSETS, AND ADVANCES. Amortization of
goodwill and other intangible assets relates to acquisitions. The expense
increased due to the timing of acquisitions completed during 2000, including
Sabela, IMAKE, AwardTrack, Exactis and Website Results.

INTEREST INCOME. Interest and other income, net primarily includes interest
income from our cash and cash equivalents and short-term investments and
interest expense related to our capital lease obligations. The decrease in
interest income was primarily attributable to a decrease in interest income
earned as a result of a lower cash and cash equivalent balances.

Please see Results of Operations - 2000 compared to 1999 above for further
details on the remaining line items.

                                       32
<PAGE>

<TABLE>
<CAPTION>

                                                                                  THREE MONTHS ENDED
                                                                 ---------------------------------------------
                                                                 March 31,   June 30,    Sept. 30,    Dec. 31,
                                                                   1999        1999        1999         1999
                                                                 --------    --------    --------    ---------
                                                                                (in tbousands)
<S>                                                              <C>         <C>         <C>         <C>
Revenues:
     Network .................................................   $ 11,071    $ 16,536    $ 21,861    $ 31,690
     Email ...................................................        379         619       2,452       5,403
                                                                 --------    --------    --------    --------
        Total revenues .......................................     11,450      17,155      24,313      37,093

Cost of revenues:
     Network .................................................      8,749      12,815      16,368      23,068
     Email ...................................................         47         247       1,379       3,290
                                                                 --------    --------    --------    --------
        Total cost of revenues ...............................      8,796      13,062      17,747      26,358

        Gross profit .........................................      2,654       4,093       6,566      10,735
                                                                 --------    --------    --------    --------

Operating expenses:
     Sales and marketing .....................................      3,494       4,454       6,920       8,528
     General and administrative ..............................      3,434       4,893       7,282       8,966
     Product development .....................................        922         320         327         322
     Amortization of goodwill, intangible
        assets and advances ..................................      2,308       2,421       4,511       7,699
     Stock-based compensation ................................         28          28         228          29
                                                                 --------    --------    --------    --------
        Total operating expenses .............................     10,186      12,116      19,268      25,544
                                                                 --------    --------    --------    --------
        Loss from operations .................................     (7,532)     (8,023)    (12,702)    (14,809)

     Interest income (expense), net ..........................        288         860       1,034         843
     Minority interst in loss of consolidated subsidiary .....       --          --          --           979

        Net loss .............................................   $ (7,244    $ (7,163)   $(11,668)   $(12,987)
                                                                 ========    ========    ========    ========
</TABLE>


REVENUES. Our revenues increased each quarter primarily due to an increase in
advertising revenue on the 24/7 Network. This increase is due to the same
reasons noted in the 1999 to 1998 year-to-year comparison, that is, a
dramatic expansion in the number of ad impressions sold in the US network
business, a significantly increasing number of Web sites that we represent,
and our expansion globally through acquisition to Canada, Europe and Latin
America. In addition to network revenues, we generated increased revenues
through email services.

COST OF REVENUES AND GROSS PROFIT. Cost of revenues increased each quarter of
1999 due to the growth of our business. Gross margin increased each quarter,
reaching approximately 29% in the fourth quarter. The increase is due to
favorable ad serving costs in the network business, as well as an increasing
percentage of total revenues being generated by email, which enjoys a higher
gross margin than the network business.

SALES AND MARKETING EXPENSES. Sales and marketing expenses increased as a
result of the growth of our business and the resulting additions to sales
staff as well as increased marketing expenses.

GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased as a result of the growth of our business, the addition of new
personnel and increased operating expenses.

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<PAGE>

PRODUCT DEVELOPMENT EXPENSES. Product development expenses decreased from the
first quarter to the second quarter due to capitalizing development costs for
24/7 Connect. Product development expenses remained consistent for the second
through the fourth quarters as we continued to develop 24/7 Connect.

AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE ASSETS. Amortization of
goodwill and other intangible assets relates to acquisitions. The expense
increased during the third and fourth quarters principally due to the
acquisition of ConsumerNet in August of 1999.

INTEREST INCOME.  Interest income is attributable to interest earned on cash
and cash equivalents. Interest income increased in the second and third
quarters as cash and cash equivalents were increased.

MINORITY INTEREST IN LOSS OF CONSOLIDATED SUBSIDIARIES.  Minority interest
relates to losses attributable to minority investors in 24/7 Media Europe
N.V. We acquired 24/7 Media Europe N.V. in 1999, and at December 31, 1999 we
owned approximately 58%.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, we had cash and cash equivalents of $29.7 million
including restricted cash of $0.8 million versus $42.8 million at December
31, 1999. Cash and cash equivalents are comprised of highly liquid short term
investments with maturities of three months or less. The value of our
investments totaled $11.3 million and $366.6 million at December 31, 2000 and
1999, respectively. These investments generally relate to equity and cash
transfers from us for minority equity ownership positions. Such investments
include, but are not limited to, chinadotcom, Network Commerce, i3Mobile,
Naviant, Inc. and idealab!. We used approximately $6.1 million and $45.1
million in cash to fund these investments in 2000 and 1999, respectively. In
addition, we acquired majority and full ownership positions in several
companies through the transfer of common stock and cash. These acquisitions
included, but were not limited to Sabela, Imake AwardTrack, ipromotions,
Kendro Communications, Exactis, Website Results, during 2000 and InterAd
Holdings, Ltd., Netbooking, ClickThrough Interactive and ConsumerNet during
1999. We acquired net cash of $24.0 million related to our 2000 acquisitions.
Cash paid for our 1999 acquisitions approximated $7.0 million.

      We generated much of our liquidity through our monetization of our
investment in chinadotcom securities throughout 2000 which generated
approximately $65.9 million in proceeds, net cash received in our 2000
acquisitions of approximately $24.0 million and our secondary offering which
occurred in 1999 and provided us with $100.5 million. These proceeds were
used to finance growth in operations, acquisitions of subsidiaries and
investments discussed above, and the purchase of property and equipment
needed during this growth period. We used approximately $87.5 million and
$22.0 million of cash in operating activities during 2000 and 1999 generally
as a result of our net operating losses, adjusted for certain non-cash items
such as amortization of goodwill and other intangible assets, gains on sales
of investments and exchange of patent rights, net of expenses, impairment of
investments and intangibles and non-cash related equity transactions and
restructuring and exit costs, and also by significant increases in accounts
receivable, decreases in our accounts payable and accrued expenses that were
partially offset by decreases in prepaid and other current assets and
deferred revenue.

                                       34
<PAGE>

      Net cash provided by investing activities was approximately $69.5
million in 2000 versus net cash used by us in 1999 of approximately $70.7
million. The majority of the cash provided by investing activities during
2000 related to proceeds received from our sale of a portion of our
investment in chinadotcom and marketable securities, acquisitions and
exchange of our patent rights, net of related expenses which amounted to
$75.5 million, $24.0 million and $4.1 million respectively. In addition to
our acquisitions and our investments discussed above we have continued
investment in technology and efforts to develop our infrastructure through
capital expenditures, including capitalized software. Cash used for such
expenditures totaled approximately $28.3 million and $18.6 million for 2000
and 1999, respectively. To the extent we continue to acquire additional ad
serving hardware, invest in enhancing or expanding our current product lines,
make cash investments in other businesses or acquire other businesses, net
cash used in investing activities could continue to be significant. In
addition, since December 31, 2000, we have sold all of our investment in
chinadotcom stock which yielded proceeds of $6.4million. In addition, we sold
a portion of our holding in Network Commerce and i3Moble yielding proceeds of
$0.3 million, however, there can be no assurances that we will be successful
in realizing our remaining investment in our available-for-sale securities.
Currently, we have various capital and operating leases relating to the use
of computer hardware, software and office space.

      The annual lease for our corporate headquarters is approximately $1.2
million per year. In addition, we have significant rental space in Denver
related to the Exactis business and data center. Total rent expense for 2000
relating to all leases was $6.8 million. As of December 31, 2000, we had
obligations amounting to $0.6 million in connection with equipment purchased
under capital leases. These obligations are payable at various intervals
between 2001 and 2003. We expect to meet our current capital lease
obligations with our cash and cash equivalents. In addition, we have entered
into negotiations to sell Sabela and have recorded their assets at their
estimated realizable value. The Company is contingently liable for
approximately $2.6 million of equipment obligations assumed by the purchaser
of Sabela. Should the buyer default the liability would revert to us.

      All European employees have employment contracts as required by local
law. The majority of these contracts allow for resignation or termination by
either party at any time. They also require severance for involuntary
termination ranging from one to six months. As of December 31, 2000, there
were approximately 250 employees in Europe whose annualized base salaries
were approximately $10.8 million.

      As of December 31, 2000, we have approximately $4.5 million remaining
of cash outlays relating to restructuring and exit costs. These amounts
consist primarily of severance and rent exit costs which are being paid
ratably. We paid the majority of these costs in the first quarter of 2001 and
expect to pay all remaining amounts by the end of the third quarter of 2001.

      No provision for federal or state income taxes has been recorded
because we incurred net operating losses for all periods presented. At
December 31, 2000, we had approximately $107.3 million of US and $21.1
million of foreign net operating loss carryforwards available to offset
future taxable income; such carryforwards expire in various years through
2020. As a result of various equity transactions during 2000, 1999, 1998 and
1997, we believe that our company has undergone an "ownership change" as
defined by Section 382 of the Internal Revenue Code.

                                       35
<PAGE>

Accordingly, the utilization of substantially all of the net operating loss
carryforward is limited. Due to the Company's operating losses and Section
382 limitations, there is substantial uncertainty whether the Company will
ultimately realize its deferred tax assets. Accordingly, these assets have
been fully reserved. During 2000 and 1999, the valuation allowance decreased
by $41.1 million and increased by $3.9 million, respectively. Of the total
valuation allowance of $53.0 million subsequently recognized tax benefits, if
any, in the amount of $5.2 million will be applied directly to contributed
capital. This amount relates to the tax effect of employee stock option
deductions included in the Company's net operating loss carryforward.

        Our capital requirements depend on numerous factors, including market
demand of our services, the capital required to maintain our technology, and
the resources we devote to marketing and selling our services. We have
received a report from our independent accountants containing an explanatory
paragraph stating that our recurring losses from operations since inception
raise substantial doubt about our ability to continue as a going concern.
Moreover, management's plans to continue as a going concern rely heavily on
achieving revenue targets, further rationalizations, our ability to monetize
our non-core assets which includes selling certain divisions, and or raising
additional financing, as well as, reducing our operating expenses. In
addition, management is currently exploring a number of strategic
alternatives and is also continuing to identify and implement internal
actions to improve our liquidity. These alternatives may include selling core
assets which could result in significant changes in our business plan. To the
extent we encounter additional opportunities, we may need to sell a portion
of our current investments in affiliates, or we may sell additional equity or
debt securities which would result in further dilution of our stockholders.
Stockholders may experience extreme dilution due both to our current stock
price and the significant amount of financing we would be required to raise.
These securities may have rights senior to those of holders of our common
stock. We do not have any contractual restrictions on our ability to incur
debt. Any indebtedness could contain covenants, which restrict our
operations. See "Risk Factors - We may need to raise additional funds,
including the issuance of debt."

      On March 21, 2001, we entered into a common stock purchase agreement with
Maya Cove Holdings . The agreement gives us the ability to sell up to $50
million of our common stock to Maya pursuant to periodic draw downs. The draw
downs are subject to our ability to continue trading on the NASDAQ and our
trading volumes and prices. As a result, our ability to utilize this equity
credit line is limited and there can be no assurances that it will provide the
resources necessary to fund our needs. We are continuing to evaluate other fund
raising vehicles.

      We believe that our current cash may not be sufficient to meet our
anticipated operating cash needs for the twelve months commencing January 1,
2001. We have limited operating capital and no current access to any
meaningful funds from our credit facilities. Our continued operations
therefore will depend on its ability to raise additional funds through sale
of certain divisions, bank borrowings or equity or debt financing. We cannot
be certain that we will be able to sell additional equity or issue debt
securities in the future or that additional financing will be available to us
on commercially reasonable terms, or at all.

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<PAGE>

MARKET FOR COMPANY'S COMMON EQUITY

      The shares of our Common Stock are currently listed on the Nasdaq national
market. Due to the decline in the share price of our Common Stock and our
continued operating losses, we received a letter from the Nasdaq stating that
they have determined that we have failed to meet Nasdaq's minimum listing
requirements and as a result, our Common Stock could be delisted if we do not
satisfy these requirements by July 5, 2001.

      Our failure to meet NASDAQ's maintenance criteria may result in the
discontinuance of the inclusion of our securities in NASDAQ. In such event,
trading, if any, in the securities may then continue to be conducted in the non-
NASDAQ over-the-counter market in what are commonly referred to as the
electronic bulletin board and the "pink sheets". As a result, an investor may
find it more difficult to dispose of or obtain accurate quotations as to the
market value of the securities. In addition, we would be subject to a Rule
promulgated by the Securities and Exchange Commission that, if we fail to meet
criteria set forth in such Rule, imposes various practice requirements on
broker-dealers who sell securities governed by the Rule to persons other than
established customers and accredited investors. For these types of transactions,
the broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transactions
prior to sale. Consequently, the Rule may have a materially adverse effect on
the ability of broker-dealers to sell the securities, which may materially
affect the ability of shareholders to sell the securities in the secondary
market.

      Delisting could make trading our shares more difficult for investors,
potentially leading to further declines in share price. It would also make it
more difficult for us to raise additional capital. We would also incur
additional costs under state blue-sky laws to sell equity if we are delisted.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, Statement of Financial Accounting Standard No. 133,"Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133") was issued
and, as amended by SFAS 137, will be adopted by us on January 1, 2001. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts,
and for hedging activities. The adoption of this statement is not expected to
materially impact our consolidated financial statements.

FASB Interpretation No 44, Accounting for Certain Transactions Involving Stock
Compensation" ("FIN No. 44") provides guidance for applying APB Opinion No 25.
"Accounting for Stock Issued to Employees. With certain exceptions, FIN No. 44
applies prospectively to new awards, exchanges of awards in a business
combination, modifications to outstanding awards and changes in grantee status
on or after July 1, 2000. We applied FIN No. 44 to account for its cancellation
and reissuance of options and there has been no impact on its results of
operations for the year ended December 31, 2000. The adoption of FIN No. 44
did not have a material impact on the our consolidated financial statements,
except for the accounting for exchanges of stock compensation awards in our
business combinations.

                                       37
<PAGE>

In March 2000, the EITF reached a consensus on Issue 00-2, "Accounting for Web
Site Development Costs," which provided guidance on when to capitalize versus
expense costs incurred to develop a web site. The consensus is effective for web
site development costs in quarters beginning after June 30, 2000. We have
applied the guidance as described by Issue 00-2 for the year ended December 31,
2000, and noted that there was no material impact on our results of operations.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101, 'Revenue
Recognition in Financial Statements" ("SAB No. 101") which summarizes certain of
the SEC staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. We were required to adopt the
accounting provisions of SAB No. 101, in the fourth quarter of 2000. Our revenue
recognition policies are consistent with SAB 101; accordingly, its
implementation did not have a significant effect on our results of operations.

Possible Volatility of Stock Price.

The market price of our common stock has fluctuated in the past and may continue
to be volatile. In addition, the stock market has experienced extreme price and
volume fluctuations. The market prices of the securities of Internet-related
companies have been especially volatile. Investors may be unable to resell their
shares of our common stock at or above the purchase price. In the past,
companies that have experienced volatility in the market price of their stock
have been the object of securities class action litigation. If we were the
object of securities class action litigation, it could result in substantial
costs and a diversion of management's attention and resources.

Interest Rate Risk, Market Risk and Currency Rate Fluctuations.

Cash and cash equivalents are investments with original maturities of three
months or less. Therefore, changes in the market's interest rates do not affect
the value of the investments as recorded by 24/7 Media.

Our accounts receivables are subject, in the normal course of business, to
collection risks. We regularly assess these risks and have established policies
and business practices to protect against the adverse effects of collection
risks. Due to the current economic environment, although we believe that we
have sufficiently provided for any material losses in this area. There can be
no assurance that unanticipated material losses may not result.

We are exposed to equity price risks on the marketable portion of our equity
securities. Our available-for-sale securities at December 31, 2000 include
equity positions in companies in the Internet industry sector, including
chinadotcom corporation, Network Commerce, Inc., and i3Mobile, many of which
have experienced significant historical volatility in their stock prices. We
typically do not attempt to reduce or eliminate our market exposure on these
securities. As of April 10, 2001, the Company sold its remaining stake in
chinadotcom, approximately 1.2 million shares. Proceeds from the sales were $6.4
million resulting in a pre-tax gain of approximately $4.6 million. The Company
also sold approximately 2.2 million shares of Network Commerce and approximately
25,000 shares of i3Mobile. Proceeds were $0.3 million resulting in a loss on
sale of investments of $1.5 million. Our remaining 2.1 million shares in Network
Commerce and 69,000 shares in i3Mobile have an adjusted cost basis of $1.9
million as of April 10, 2001. There can be no assurance that we

                                       38
<PAGE>

will realize any proceeds from these investments.

We transact business in various foreign countries. Accordingly, we are subject
to exposure from adverse movements in foreign currency exchange rates. This
exposure is primarily related to revenue and operating expenses in the countries
in which the currency is the Euro. The effect of foreign exchange rate
fluctuations for 2000 and 1999 was not material. We do not use derivative
financial instruments to limit our foreign currency risk exposure.

                                       39
<PAGE>

                           FORWARD-LOOKING STATEMENTS

      This report includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. We intend such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and we are including this
statement for purposes of complying with these safe harbor provisions. We have
based these forward-looking statements on our current expectations and
projections about future events. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties and
assumptions, including those set forth under "--Risk Factors" below.

      Words such as "expect", "anticipate", "intend", "plan", "believe",
"estimate" and variations of such words and similar expressions are intended to
identify such forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this report might not
occur.


                                  RISK FACTORS

      You should carefully consider the following risk factors before you decide
to buy our common stock. These risks may adversely impair our business
operations.

WE WILL NEED TO RAISE ADDITIONAL FUNDS TO CONTINUE OPERATIONS AND OUR RECURRING
OPERATING LOSSES RAISE SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A
GOING CONCERN.

We believe that our current cash may not be sufficient to meet our anticipated
operating cash needs for the 12 months commencing January 1, 2001 and there can
be no assurance that new funds can be secured by December 31, 2001. The support
of our vendors, customers, stockholders and employees will continue to be key to
our future success. There can be no assurance that we will be able to monetize
our non-core assets, raise additional financing to meet our cash and operational
needs or reduce our operating expenses to address this going concern issue.

Since our inception, we have incurred significant operating losses and we
believe we will continue to incur operating losses for the foreseeable future.
We also expect to incur negative cash flows for the foreseeable future as a
result of our operating losses and our need to fund future capital expenditures.

We have received a report from our independent accountants containing an
explanatory "going concern" paragraph stating that our recurring losses from
operations since inception raise substantial doubt about our ability to
continue our business as a going concern. Management's plans to continue as a
going concern rely heavily on achieving revenue targets, further
rationalizations, our ability to monetize our non-core assets which includes
selling certain divisions and or raising additional financing, as well as,
reducing our operating expenses. Management is currently exploring a number of
strategic

                                       40
<PAGE>

alternatives and is also continuing to identify and implement internal actions
to improve our liquidity. These alternatives may include selling core assets,
which could result in significant changes in our business plan.

To the extent we encounter additional opportunities to raise cash, to do so, we
may need to sell a portion of our current investments in affiliates, or we may
sell additional equity or debt securities which would result in further dilution
of our stockholders. Stockholders may experience extreme dilution due to our
current stock price and the significant amount of financing we need to raise and
these securities may have rights senior to those of holders of our common stock.
We do not have any contractual restrictions on our ability to incur debt. Any
indebtedness could contain covenants, which restrict our operations.

We have extremely limited access, if any, to the capital markets to raise
capital. The capital markets have been unpredictable in the past, especially for
early stage companies such as ours. In addition, it is difficult to raise
capital in the current market conditions. The amount of capital that a company
such as ours is able to raise often depends on variables that are beyond our
control, such as share price of our stock and its trading volume. As a result,
there is no guarantee that our efforts to secure financing will be available on
terms attractive to us, or at all. Due to our operating losses, it will be
difficult to obtain debt financing. If we are able to consummate a financing
arrangement, there is no guarantee that the amount raised will be sufficient to
meet our future needs. If adequate funds are not available on acceptable terms,
when needed, or at all, our business, results of operation, financial condition
and continued viability will be materially adversely effected.

THE LOW PRICE OF OUR COMMON  STOCK COULD RESULT IN ITS  DELISTING  FROM THE
NASDAQ NATIONAL MARKET.

The shares of our common stock are currently listed on the Nasdaq national
market. Due to the recent decline in the share price of our common stock and our
continued operating losses, we received a letter from Nasdaq's stating that they
have determined that we have failed to meet Nasdaq's minimum listing
requirements and as a result, our common stock could be delisted. Nasdaq listing
requirements include a series of financial tests relating to net tangible
assets, public float, number of market makers and shareholders, and maintaining
a minimum bid price for our share price of $1.00. Our share price has traded at
levels below $1.00 for more than 30 consecutive days and there is no guarantee
that it will return to a minimum bid price of $1.00 or higher.

Our failure to meet NASDAQ's maintenance criteria may result in the delisting of
our common stock from Nasdaq. In such event, trading, if any, in the securities
may then continue to be conducted in the non-NASDAQ over-the-counter market in
what are commonly referred to as the electronic bulletin board and the "pink
sheets". As a result, an investor may find it more difficult to dispose of or
obtain accurate quotations as to the market value of the securities. In
addition, we would be subject to a Rule promulgated by the Securities and
Exchange Commission that, if we fail to meet criteria set forth in such Rule,
imposes various practice requirements on broker-dealers who sell securities
governed by the Rule to persons other than established customers and accredited
investors. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser

                                       41
<PAGE>

and have received the purchaser's written consent to the transactions prior to
sale. Consequently, the Rule may have a materially adverse effect on the ability
of broker-dealers to sell the securities, which may materially affect the
ability of shareholders to sell the securities in the secondary market.

Our ability to make drawdowns under the common stock purchase agreement with
Maya Cove Holdings would be limited or eliminated in the event that we fail to
continue tading on the NASDAQ stock market. In addition, delisting could make
trading our shares more difficult for investors, potentially leading to
further declines in share price. It would also make it more difficult for us
to raise additional capital. We would also incur additional costs under state
blue sky laws to sell equity if we are delisted.

HIGH VOLATILITY OF STOCK PRICE.

The market price of our common stock has fluctuated in the past and may continue
to be volatile. In addition, the stock market has experienced extreme price and
volume fluctuations. The market prices of the securities of Internet-related
companies have been especially volatile. Investors may be unable to resell their
shares of our common stock at or above the purchase price. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against
that company. Many companies in our industry have been subject to this type of
litigation in the past. We may also become involved in this type of litigation.
Litigation is often expensive and diverts management's attention and resources,
which could materially and adversely affect our business, financial condition
and results of operations.

REVENUE GROWTH IN PRIOR PERIODS MAY NOT BE INDICATIVE OF FUTURE GROWTH.

Although we achieved significant total revenue growth during 1999 and 2000, our
online advertising revenue decreased in 2000 due to the softness in the
advertising market which has continued to decline into the first quarter of 2001
and is expected to continue through the second quarter of 2001. Commencing in
the third quarter 2000, our online advertising revenues decreased by $14.8
million compared to second quarter 2000, and decreased an additional $4.0
million in the fourth quarter of 2000. Our limited operating history makes
prediction of future revenue growth difficult. Accurate predictions of future
revenue growth are also difficult because of the rapid changes in our markets
and the possible need by us to sell assets to fund operations. Accordingly,
investors should not rely on past revenue growth rates as a prediction of future
revenue growth.

WE HAVE A LIMITED OPERATING HISTORY ON WHICH AN INVESTOR CAN EVALUATE OUR
BUSINESS.

We were formed as a result of the combination of three companies in February
1998. None of the companies nor any company that we have since acquired had an
operating history of more than four years prior to acquisition or merger. We,
therefore, have an extremely limited operating history. You must consider the
risks, expenses and difficulties typically encountered by companies with limited
operating histories, particularly companies in new and rapidly expanding markets
such as Internet advertising. These risks include our ability to:

      o     develop new relationships  and maintain existing  relationships
            with our Web sites, advertisers, and other third parties;

                                       42
<PAGE>

      o     further develop and upgrade our technology;

      o     respond to competitive developments;

      o     implement and improve  operational,  financial  and  management
            information systems; and

      o     attract, retain and motivate qualified employees.

WE ANTICIPATE CONTINUED LOSSES AND WE MAY NEVER BE PROFITABLE.

We have not achieved profitability in any period and we may not be able to
achieve or sustain profitability in the future. We incurred net losses
attributable to common stockholders of $779.9 million and $39.1 million for the
years ended December 31, 2000 and 1999, respectively. Each of our predecessors
had net losses in every year of their operation. We anticipate that we will
incur operating losses for the foreseeable future due to a high level of planned
operating and capital expenditures. Although our consolidated revenue has grown
from year to year, such growth may not continue and may not lead to
profitability. Even if we do achieve profitability, we cannot assure you that we
can sustain or increase profitability on a quarterly or annual basis in the
future.

OUR FUTURE REVENUES AND RESULTS OF OPERATIONS MAY BE DIFFICULT TO FORECAST.

Our results of operations have fluctuated and may continue to fluctuate
significantly in the future as a result of a variety of factors, many of which
are beyond our control. These factors include:

      o     the addition of new or loss of existing clients;

      o     changes in fees paid by advertisers and direct marketers;

      o     changes in service fees payable by us to owners of Web sites or
            email lists, or ad serving fees payable by us to third parties;

      o     the demand by advertisers, Web publishers and direct marketers for
            our advertising solutions;

      o     the introduction of new Internet marketing services by us or our
            competitors;

      o     variations in the levels of capital or operating expenditures and
            other costs relating to the maintenance or expansion of our
            operations, including personnel costs;

      o     changes in governmental regulation of the Internet; and

      o     general economic conditions.

                                       43
<PAGE>

Our future revenues and results of operations may be difficult to forecast due
to the above factors. In addition, our expense levels are based in large part on
our investment plans and estimates of future revenues. Any increased expenses
may precede or may not be followed by increased revenues, as we may be unable
to, or may elect not to, adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. As a result, we believe that period-to-period
comparisons of our results of operations may not be meaningful. You should not
rely on past periods as indicators of future performance. In future periods, our
results of operations may fall below the expectations of securities analysts and
investors, which could adversely affect the trading price of our common stock.

OUR FINANCIAL PERFORMANCE AND REDUCTION OF OUR WORKFORCE MAY AFFECT THE
MORALE AND PERFORMANCE OF OUR PERSONNEL.

We have incurred significant net losses since our inception. In an effort to
reduce our cash expenses, we began to implement certain restructuring
initiatives and cost reductions. In November 2000 and January 2001, we reduced
our workforce by approximately 200 and 100 employees, respectively. In April
2001, the board of directors approved a restructuring plan calling for an
additional reduction in workforce of approximately 100 employees. We have
also left positions unfilled when certain employees have left the company. In
addition, recent trading levels of our common stock have decreased the value
of the stock options granted to employees pursuant to our stock option plan.
As a result of these factors, our remaining personnel may seek employment
with larger, more stable companies they perceive to have better prospects.
Our failure to retain qualified employees to fulfill our current and future
needs could impair our future growth and have a material adverse effect on
our business.

OUR  FINANCIAL  PERFORMANCE  MAY  AFFECT  OUR  ABILITY  TO  ENTER  INTO NEW
BUSINESS RELATIONSHIPS AND TO COLLECT REVENUES.

The publicity we receive in connection with our financial performance and our
measures to remedy negative press, may negatively affect our reputation and our
business partners' and other market participants' perception of our company. If
we are unable to maintain the existing relationships and develop new ones, our
revenues and collections could suffer materially.

OUR BUSINESS MAY NOT GROW IF THE INTERNET ADVERTISING MARKET DOES NOT
CONTINUE TO DEVELOP.

The Internet as a marketing medium has not been in existence for a sufficient
period of time to demonstrate its effectiveness. Our business would be adversely
affected if the Internet advertising continues to remain soft or fails to
develop in the near future. There are currently no widely accepted standards to
measure the effectiveness of Internet marketing other than clickthrough rates,
which generally have been declining. We cannot be certain that such standards
will develop to sufficiently support Internet marketing as a significant
advertising medium. Actual or perceived ineffectiveness of online marketing in
general, or inaccurate measurements or database information in particular, could
limit the long-term growth of online advertising and cause our revenue levels to
decline.

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<PAGE>


OUR BUSINESS MAY SUFFER IF WE ARE UNABLE TO SUCCESSFULLY IMPLEMENT OUR BUSINESS
MODEL

A significant part of our business model is to generate revenue by providing
interactive marketing solutions to advertisers, ad agencies and Web publishers.
The profit potential for this business model is unproven. To be successful, both
Internet advertising and our solutions will need to achieve broad market
acceptance by advertisers, ad agencies and Web publishers. Our ability to
generate significant revenue from advertisers will depend, in part, on our
ability to contract with Web publishers that have Web sites with adequate
available ad space inventory. Further, these Web sites must generate sufficient
user traffic with demographic characteristics attractive to our advertisers. The
intense competition among Internet advertising sellers has led to the creation
of a number of pricing alternatives for Internet advertising. These alternatives
make it difficult for us to project future levels of advertising revenue and
applicable gross margin that can be sustained by us or the Internet advertising
industry in general. Intensive marketing and sales efforts may be necessary to
educate prospective advertisers regarding the uses and benefits of, and to
generate demand for, our products and services, including our newer products and
services such as Website Results. Enterprises may be reluctant or slow to adopt
a new approach that may replace, limit or compete with their existing direct
marketing systems. In addition, since online direct marketing is emerging as a
new and distinct business apart from online advertising, potential adopters of
online direct marketing services will increasingly demand functionality tailored
to their specific requirements. We may be unable to meet the demands of these
clients. Acceptance of our new solutions will depend on the continued emergence
of Internet commerce, communication and advertising, and demand for its
solutions. We cannot assure you that demand for its new solutions will emerge or
become sustainable.

BANNER ADVERTISING, FROM WHICH WE CURRENTLY DERIVE MUCH OF OUR REVENUE,
MAY NOT BE AN EFFECTIVE ADVERTISING METHOD IN THE FUTURE.

The majority of our revenues are derived from the delivery of banner
advertisements. Online banner advertising has dramatically decreased since the
middle of 2000 and has continued to decline into the first quarter of 2001 and
is expected to continue through the second quarter of 2001, which could have a
material adverse effect on our business. If advertisers determine that banner
advertising is an ineffective or unattractive advertising medium, we cannot
assure you that we will be able to effectively make the transition to any other
form of Internet advertising. Also, there are "filter" software programs that
limit or prevent advertising from being delivered to a user's computer. The
commercial viability of Internet advertising, and our business, results of
operations and financial condition, would be materially and adversely affected
by Web users' widespread adoption of such software. In addition, many online
advertisers have been experiencing financial difficulties, which could
materially impact our revenues and our ability to collect our receivables.

GROWTH OF OUR BUSINESS DEPENDS ON THE DEVELOPMENT OF ONLINE DIRECT
MARKETING.

Adoption of online direct marketing, particularly by those entities that have
historically relied upon traditional means of direct marketing, such as
telemarketing and direct mail, is an important part of our business model.
Intensive marketing and sales efforts may be necessary to educate prospective
advertisers regarding the uses and benefits of our products and services to
generate demand for our direct marketing services. Enterprises may be reluctant
or slow to

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<PAGE>

adopt a new approach that may replace, limit, or compete with their existing
direct marketing systems. In addition, since online direct marketing is emerging
as a new and distinct market apart from online advertising, potential adopters
of online direct marketing services will increasingly demand functionality
tailored to their specific requirements. We may be unable to meet the demands of
our clients.

IF WE FAIL TO SUCCESSFULLY CROSS-MARKET OUR PRODUCTS OR TO DEVELOP NEW PRODUCTS,
WE MAY NOT INCREASE OR MAINTAIN OUR CUSTOMER BASE OR OUR REVENUE.

We offer a broad range of solutions to our customers. The failure of our
cross-marketing efforts may diminish the benefits we realize from the
acquisition or development of these various products and services. In addition,
we intend to develop new products and services that combine the knowledge and
resources of our Media, Mail and Technology divisions. We cannot assure you that
these products or services will be developed or, if developed, will be
successful or that we can successfully integrate or realize the anticipated
benefits of these developments. As a result, we may not be able to increase or
maintain our customer base. We cannot assure you that we will be able to
overcome the obstacles in developing new products and services, or that there
will be a demand for the new products or services developed by us. An inability
to overcome such obstacles or a failure of such demand to develop could
materially and adversely affect our business, financial condition and results of
operations or could result in loss of key personnel.

LOSS OF OUR MAJOR WEB SITES WOULD SIGNIFICANTLY REDUCE OUR REVENUES.

The 24/7 Network generates a substantial portion of our revenues, and we expect
that the 24/7 Network will continue to account for a substantial portion of our
revenue for the foreseeable future. The 24/7 Network consists of a limited
number of our Web sites that have contracted for our services under agreements
cancelable generally upon a short notice period. For the twelve month periods
ended December 31, 2000 and 1999, approximately 39%. and 32%, respectively, of
our total revenues were derived from advertisements on our top ten Web sites.
For the twelve month period ended December 31, 2000, the top ten Web sites
included AT&T WorldNet Service, Juno Online Services, Inc., Earthlink Network,
Inc., DesktopDollars, Inc., Community Connect Inc., Mapquest.com, Inc.,
Goto.com, All Advantage.com, Netzero.net, and Regent Network Services, Inc. We
experience turnover from time to time among our Web sites, and we cannot be
certain that the Web sites named above will remain associated with us or that
such Web sites will not experience a reduction in online traffic on their sites.
We cannot assure you that we will be able to replace any departed Web site in a
timely and effective manner with a Web site with comparable traffic patterns and
user demographics. Our business, results of operations and financial condition
would be materially adversely affected by the loss of one or more of the Web
sites that account for a significant portion of our revenue from the 24/7
Network.

LOSS OF OUR ADVERTISERS OR AD AGENCIES WOULD REDUCE OUR REVENUES.

We generate our revenues from a limited number of advertisers and ad agencies
that purchase space on our Web sites. We expect that a limited number of these
entities may continue to account for a significant percentage of our revenues
for the foreseeable future. For the twelve-month period ended December 31, 2000,
our top ten advertisers and ad agencies accounted for

                                       46
<PAGE>

approximately 36% of our total revenues. Advertisers and ad agencies typically
purchase advertising under purchase order agreements that run for a limited
time. Typically, we enter into short-term contracts with advertisers and ad
agencies. Since these contracts are short-term, we will have to negotiate new
contracts or renewals in the future that may have terms that are not as
favorable to us as the terms of existing contracts. We cannot be certain that
current advertisers and ad agencies will continue to purchase advertising from
us or that we will be able to attract additional advertisers and ad agencies
successfully, or that agencies and advertisers will make timely payment of
amounts due to us. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products or services to address
the needs of our prospective clients. Our business, results of operations and
financial condition would be materially adversely affected by the loss of one or
more of our advertisers that account for a significant portion of our revenue.

WE HAVE GROWN OUR BUSINESS THROUGH ACQUISITION.

We were formed in February 1998 to consolidate three Internet advertising
companies and have since acquired twelve more companies. In combining these
entities, we have faced risks and continue to face risks of integrating and
improving our financial and management controls, ad serving technology,
reporting systems and procedures, and expanding, training and managing our work
force. This process of integration may take a significant period of time and
will require the dedication of management and other resources, which may
distract management's attention from our other operations. We may continue
pursuing selective acquisitions of businesses, technologies and product lines as
a key component of our growth strategy. Any future acquisition or investment may
result in the use of significant amounts of cash, potentially dilutive issuances
of equity securities, incurrence of debt and amortization expenses related to
goodwill and other intangible assets. In addition, acquisitions involve numerous
risks, including:

      o     the difficulties in the integration and assimilation of the
            operations, technologies, products and personnel of an acquired
            business;

      o     the diversion of management's attention from other business
            concerns;

      o     the availability of favorable acquisition financing for future
            acquisitions; and

      o     the potential loss of key employees of any acquired business.

      Our inability to successfully integrate any acquired company could
adversely affect our business.


OUR ADVERTISING CUSTOMERS AND THE COMPANIES WITH WHICH WE HAVE STRATEGIC
RELATIONSHIPS MAY EXPERIENCE ADVERSE BUSINESS CONDITIONS THAT COULD ADVERSELY
AFFECT OUR BUSINESS.

As a result of unfavorable conditions in the public equity markets, some of our
customers may have difficulty raising sufficient capital to support their
long-term operations. As a

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<PAGE>

result, these customers have reduced their spending on Internet advertising,
which has materially and adversely affected our business, financial condition
and results of operations. In addition, from time to time, we have entered into
strategic business relationships with other companies, the nature of which
varies, but generally in the context of customer relationships. These companies
may experience similar adverse business conditions that may render them unable
to meet our expectations for the strategic business relationship or to fulfill
their contractual obligations to us. Such an event could have a material adverse
impact on our business, financial condition and results of operations.

OUR REVENUES ARE SUBJECT TO SEASONAL FLUCTUATIONS.

We believe that our revenues are subject to seasonal fluctuations because
advertisers generally place fewer advertisements during the first and third
calendar quarters of each year and direct marketers mail substantially more
marketing materials in the third quarter each year. Furthermore, Internet user
traffic typically drops during the summer months, which reduces the number of
advertisements to sell and deliver. Expenditures by advertisers and direct
marketers tend to vary in cycles that reflect overall economic conditions as
well as budgeting and buying patterns. Our revenue could be materially reduced
by a decline in the economic prospects of advertisers, direct marketers or the
economy in general, which could alter current or prospective advertisers'
spending priorities or budget cycles or extend our sales cycle. Due to such
risks, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indicator of our future results.

OUR TECHNOLOGY SOLUTIONS MAY NOT BE SUCCESSFUL AND MAY CAUSE BUSINESS
DISRUPTION.

24/7 Connect is our proprietary next generation ad serving technology that is
intended to serve as our sole ad serving solution. We launched 24/7 Connect in
early 2000, and we must, among other things, ensure that this technology will
function efficiently at high volumes, interact properly with our database, offer
the functionality demanded by our customers and assimilate our sales and
reporting functions. This development effort could fail technologically or could
take more time than expected. Our 24/7 Connect technology resides on a computer
system located in our data centers in Virginia, and our 24/7 Exactis technology
resides in our Denver, Colorado office. These systems' continuing and
uninterrupted performance is critical to our success. Customers may become
dissatisfied by any system failure that interrupts our ability to provide our
services to them, including failures affecting our ability to deliver
advertisements without significant delay to the viewer. Sustained or repeated
system failures would reduce the attractiveness of our solutions to advertisers,
ad agencies and Web publishers and result in contract terminations, fee rebates
and makegoods, thereby reducing revenue. Slower response time or system failures
may also result from straining the capacity of our deployed software or hardware
due to an increase in the volume of advertising delivered through our servers.
To the extent that we do not effectively address any capacity constraints or
system failures, our business, results of operations and financial condition
could be materially and adversely affected. Our operations are dependent on our
ability to protect our computer systems against damage from fire, power loss,
water damage, telecommunications failures, vandalism and other malicious acts,
and similar unexpected adverse events. In addition, interruptions in our
solutions could result from the failure of our telecommunications providers to
provide the necessary data communications capacity in the time frame we require.
Despite precautions that we have

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<PAGE>

taken, unanticipated problems affecting our systems have from time to time in
the past caused, and in the future could cause, interruptions in the delivery of
our solutions. Our business, results of operations and financial condition could
be materially and adversely affected by any damage or failure that interrupts or
delays our operations.

FUTURE SALES OF OUR COMMON STOCK MAY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.

As of March 29, 2001, we had 43,519,674 shares of common stock outstanding. We
cannot predict the effect, if any, that future sales of common stock or the
availability of shares of common stock for future sale, will have on the market
price of our common stock prevailing from time to time. Sales of substantial
amounts of common stock (including shares issued upon the exercise of stock
options), or the perception that such sales could occur, may materially and
adversely affect prevailing market prices for its common stock.

OUR FAILURE TO SUCCESSFULLY COMPETE MAY HINDER OUR GROWTH.

The markets for Internet advertising and related products and services are
intensely competitive. Our failure to successfully compete may hinder our
growth. We believe that our ability to compete depends upon many factors both
within and beyond our control, including:

      o     the timing and market acceptance of new products and enhancements of
            existing services developed by us and our competitors;
      o     changing demands regarding customer service and support;
      o     shifts in sales and marketing efforts by us and our competitors; and
      o     the ease of use, performance, price and reliability of our services
            and products.

      Many of our competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
technical and marketing resources than ours. In addition, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products or
services to address the needs of our prospective clients. We cannot be certain
that we will be able to successfully compete against current or future
competitors. In addition, the Internet must compete for a share of advertisers'
total budgets with traditional advertising media, such as television, radio,
cable and print, as well as content aggregation companies and other companies
that facilitate Internet advertising. To the extent that the Internet is
perceived to be a limited or ineffective advertising or direct marketing medium,
advertisers and direct marketers may be reluctant to devote a significant
portion of their advertising budgets to Internet marketing, which could limit
the growth of Internet marketing.

CHANGES  IN  LAWS  AND  STANDARDS  RELATING  TO  DATA  COLLECTION  AND  USE
PRACTICES  AND THE PRIVACY OF INTERNET  USERS AND OTHER  INDIVIDUALS  COULD
HARM OUR BUSINESS.

The U.S. federal and various state governments have recently proposed
limitations on the collection and use of information regarding Internet users.
In October 1998, the European Union adopted a directive that may limit our
collection and use of information regarding Internet users in Europe. The
effectiveness of our 24/7 Connect technology could be limited by any regulation
limiting the collection or use of information regarding Internet users. Since
many

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<PAGE>

of the proposed laws or regulations are just being developed, we cannot yet
determine the impact these regulations may have on its business. In addition,
growing public concern about privacy and the collection, distribution and use of
information about individuals has led to self-regulation of these practices by
the Internet advertising and direct marketing industry and to increased federal
and state regulation. The Network Advertising Initiative, or NAI, of which 24/7
Media is a member along with other Internet advertising companies, has developed
self-regulatory principles for online preference marketing. These principles
were recently endorsed by the Federal Trade Commission, and are in the process
of being adopted by the NAI companies. The Direct Marketing Association, or DMA,
the leading trade association of direct marketers, has adopted guidelines
regarding the fair use of this information which it recommends participants,
such as us, through our services, in the direct marketing industry follow. We
are also subject to various federal and state regulations concerning the
collection, distribution and use of information regarding individuals. These
laws include the Children's Online Privacy Protection Act, and state laws that
limit or preclude the use of voter registration and drivers license information,
as well as other laws that govern the collection and use of consumer credit
information. Although our compliance with the DMA's guidelines and applicable
federal and state laws and regulations has not had a material adverse effect on
us, we cannot assure you that the DMA will not adopt additional, more burdensome
guidelines or that additional, more burdensome federal or state laws or
regulations, including antitrust and consumer privacy laws, will not be enacted
or applied to us or our clients, which could materially and adversely affect our
business, financial condition and results of operations.

IF WE LOSE OUR CEO OR OTHER SENIOR MANAGERS OUR BUSINESS WILL BE ADVERSELY
EFFECTED.

Our success depends, to a significant extent, upon our senior management and key
sales and technical personnel, particularly David J. Moore, Chief Executive
Officer. The loss of the services of one or more of these persons could
materially adversely affect our ability to develop our business. Our success
also depends on our ability to attract and retain qualified technical, sales and
marketing, customer support, financial and accounting, and managerial personnel.
Competition for such personnel in the Internet industry is intense, and we
cannot be certain that we will be able to retain our key personnel or that we
can attract, integrate or retain other highly qualified personnel in the future.
We have experienced in the past, and may continue to experience in the future,
difficulty in hiring and retaining candidates with appropriate qualifications,
especially in sales and marketing positions.

WE MAY BE UNABLE TO CONTINUE TO SUCCESSFULLY MANAGE RAPID GROWTH.

In recent years, we have experienced significant growth both internally and
through acquisition. We may, where appropriate, continue to increase the scope
of our operations both domestically and internationally, in both sales and
marketing as well as technological development. We expect that we will need to
continue to improve our financial and managerial controls, reporting procedures
and systems. Our recent growth and expansion in operations have placed a
significant strain on our managerial, operational and financial resources. To
successfully compete in the evolving Internet industry, we must:

      o     continue to improve our financial and management controls;
      o     enhance our reporting systems and procedures;
      o     continue to scale our ad serving systems and upgrade their
            functional

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<PAGE>

            capabilities; and expand, train and manage our work force; and
      o     train, retain and manage our work force.

      We cannot be certain that our systems, procedures or controls will be
adequate to support our operations, or that management will be able to respond
effectively to such growth. Our future results of operations also depend on the
efficient management of our sales, marketing and customer support departments.

OUR INTERNATIONAL OPERATIONS MAY POSE LEGAL AND CULTURAL CHALLENGES.

We have operations in a number of international markets, including Canada,
Europe and Asia. To date, we have limited experience in marketing, selling and
distributing our solutions internationally. International operations are subject
to other risks, including:

      o     changes in regulatory requirements;
      o     reduced protection for intellectual property rights in some
            countries;
      o     potentially adverse tax consequences;
      o     general import/export restrictions relating to encryption technology
            and/or privacy;
      o     difficulties and costs of staffing and managing foreign operations;
      o     political and economic instability;
      o     fluctuations in currency exchange rates; and
      o     seasonal reductions in business activity during the summer months in
            Europe and certain other parts of the world.

In addition to these factors, due to our minority stake in the 24/7 Network in
Asia, we are relying on chinadotcom corporation to conduct operations, build the
network, aggregate Web publishers and coordinate sales and marketing efforts.
The success of the 24/7 Network in Asia is directly dependent on the success of
chinadotcom corporation and its dedication of sufficient resources to our
relationship.

DEPENDENCE ON PROPRIETARY RIGHTS AND RISK OF INFRINGEMENT.

Our success and ability to compete are substantially dependent on our internally
developed technologies and trademarks, which we protect through a combination of
patent, copyright, trade secret and trademark law. We have received two patents
in the United States, and have filed and intend to file additional patent
applications in the United States. In addition, we apply to register our
trademarks in the United States and internationally. We cannot assure you that
any of our patent applications or trademark applications will be approved. Even
if they are approved, such patents or trademarks may be successfully challenged
by others or invalidated. If our trademark registrations are not approved
because third parties own such trademarks, our use of such trademarks will be
restricted unless we enter into arrangements with such third parties that may be
unavailable on commercially reasonable terms.

We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our

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<PAGE>

solutions or technologies. We cannot assure you that the steps we have taken
will prevent misappropriation of our solutions or technologies, particularly in
foreign countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States.

We have licensed, and we may license in the future, elements of our trademarks,
trade dress and similar proprietary rights to third parties. While we attempt to
ensure that the quality of our brand is maintained by these business partners,
such partners may take actions that could materially and adversely affect the
value of our proprietary rights or our reputation. We cannot assure you that any
of our proprietary rights will be viable or of value in the future since the
validity, enforceability and scope of protection of certain proprietary rights
in Internet-related industries is uncertain and still evolving.

We may be subject to claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by us or the Web publishers with
Web sites in the 24/7 Network. Such claims and any resultant litigation could
subject us to significant liability for damages and could result in the
invalidation of our proprietary rights. In addition, even if we prevail, such
litigation could be time-consuming and expensive to defend, and could result in
the diversion of our time and attention, any of which could materially and
adversely affect our business, results of operations and financial condition.
Any claims or litigation from third parties may also result in limitations on
our ability to use the trademarks and other intellectual property subject to
such claims or litigation unless we enter into arrangements with the third
parties responsible for such claims or litigation which may be unavailable on
commercially reasonable terms.

In December 1999, DoubleClick, Inc. filed a patent infringement lawsuit against
our subsidiary, Sabela Media, Inc. in the United States District Court for the
Southern District of New York. The suit alleged that Sabela was infringing, and
inducing and contributing to the infringement by third parties of, a patent held
by DoubleClick entitled "Method for Delivery, Targeting and Measuring
Advertising Over Networks". In May 2000, we filed a patent infringement
litigation suit against DoubleClick which alleged that DoubleClick infringed,
and was inducing and contributing to the infringement of a patent owned by us.
We sought damages in an unspecified amount, an injunction against infringement
of the patent, and our attorneys fees and costs. In October 2000, we settled the
patent litigation initiated by DoubleClick against Sabela and the patent
litigation initiated against DoubleClick by us. Consequently, both of these
lawsuits have been dismissed with prejudice. As part of the settlement, we and
DoubleClick granted each other certain rights in certain of the respective
patents. Under the settlement agreement, no other terms of the settlement are
permitted to be disclosed.

INTELLECTUAL PROPERTY LIABILITY.

We may be liable for content available or posted on the Web sites of our
publishers. We may be liable to third parties for content in the advertising we
serve if the music, artwork, text or other content involved violates the
copyright, trademark or other intellectual property rights of such third parties
or if the content is defamatory. Any claims or counterclaims could be time
consuming, result in costly litigation or divert management's attention.

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<PAGE>


PRIVACY CONCERNS MAY PREVENT US FROM COLLECTING DEMOGRAPHIC OR OTHER CONSUMER
DATA.

Growing concerns about the use of "cookies" and data collection may limit our
ability to develop user profiles. Web sites typically place small files of
information commonly known as "cookies" on a user's hard drive, generally
without the user's knowledge or consent. Cookie information is passed to the Web
site through the Internet user's browser software. Our 24/7 Connect technology
targets advertising to users through the use of identifying data, or "cookies"
and other non-personally-identifying information. 24/7 Connect enables the use
of cookies to deliver targeted advertising, to help compile demographic
information, and to limit the frequency with which an advertisement is shown to
the user. Most currently available Internet browsers allow users to modify their
browser settings to prevent cookies from being stored on their hard drive, and a
small minority of users are currently choosing to do so. Users can also delete
cookies from their hard drive at any time. Some Internet commentators and
privacy advocates have suggested limiting or eliminating the use of cookies. Any
reduction or limitation in the use of cookies could limit the effectiveness of
our sales and marketing efforts and impair our targeting capabilities. Recently,
Microsoft Corporation announced that it intends to change the design and
instrumentation of its Web browser in such a way as to give users the option to
accept or reject third party cookies. Giving users the option to decline such
cookies could result in a reduction of the number of Internet users we are
capable of profiling anonymously. Such changes also could adversely affect our
ability to determine the reach of advertising campaigns sold and delivered by us
and the frequency with which users of sites in the 24/7 Network see the same
advertisement. A change, such as that announced by Microsoft, would primarily
affect third-party ad networks like the 24/7 Network, potentially making portal
web sites such as Yahoo.com and MSN.com a relatively more attractive advertising
venue.

If the use or effectiveness of cookies is limited, we would likely have to
switch to other technology that would allow us to gather demographic and
behavioral information. While such technology currently exists, it is
substantially less effective than cookies. Replacement of cookies could require
significant reengineering time and resources, might not be completed in time to
avoid negative consequences to our business, financial condition or results of
operations, and might not be commercially feasible. In addition, privacy
concerns may cause some Web users to be less likely to visit Web sites that
contribute data to our databases. This could have a material adverse effect on
our financial condition. In addition, we are developing our database to collect
data derived from user activity on our networks and from other sources. We
collect and compile information in databases for the product offerings of all
our businesses. Individuals or entities may claim in the future, that our
collection of this information is illegal. Although we believe that we have the
right to use and compile the information in these databases, we cannot assure
you that our ability to do so will remain lawful, that any trade secret,
copyright or other intellectual property protection will be available for our
databases, or that statutory protection that is or becomes available for
databases will enhance our rights. In addition, others may claim rights to the
information in our databases. Further, pursuant to our contracts with Web
publishers using our solutions, we are obligated to keep certain information
regarding each Web publisher confidential and, therefore, may be restricted from
further using that information in our business.

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<PAGE>

WE MAY HAVE TO CHANGE OUR BUSINESS PLANS BASED UPON CHANGES IN INFORMATION
COLLECTION PRACTICES.

There has been public debate about how fair information collection practices
should be formulated for the online and offline collection, distribution and use
of information about a consumer. Some of the discussion has focused on the fair
information collection practices that should apply when information about an
individual that is collected in the offline environment is associated with
information that is collected over the Internet about that individual. We are
working with industry groups, such as the NAI and the Online Privacy Alliance,
to establish such standards with the U.S. government regarding the merger of
online and offline consumer information. We cannot assure you that we will be
successful in establishing industry standards acceptable to the U.S. government
or the various state governments, or that the standards so established will not
require material changes to our business plans. We also cannot assure you that
our business plans, or any U.S. industry standards that are established, will
either be acceptable to any non-U.S. government or conform to foreign legal and
business practices. As a consequence of governmental legislation or regulation
or enforcement efforts or evolving standards of fair information collection
practices, we may be required to make changes to our products or services in
ways that could diminish the effectiveness of the product or service or their
attractiveness to potential customers. In addition, given the heightened public
discussion about consumer online privacy, we cannot assure you that our products
and business practices will gain market acceptance, even if they do conform to
industry standards.

CHANGES IN GOVERNMENT REGULATION COULD DECREASE OUR REVENUES AND INCREASE OUR
COSTS.

Laws and regulations directly applicable to Internet communications, commerce
and advertising are becoming more prevalent, and new laws and regulations are
under consideration by the United States Congress and state legislatures. Any
legislation enacted or restrictions arising from current or future government
investigations or policy could dampen the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications,
commercial and advertising medium. State governments or governments of foreign
countries might attempt to regulate our transmissions or levy sales or other
taxes relating to our activities. The European Union has enacted its own privacy
regulations that may result in limits on the collection and use of certain user
information by us. The laws governing the Internet, however, remain largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet and
Internet advertising. In addition, the growth and development of Internet
commerce may prompt calls for more stringent consumer protection laws, both in
the United States and abroad, that may impose additional burdens on companies
conducting business over the Internet. Our business, results of operations and
financial condition could be materially and adversely affected by the adoption
or modification of laws or regulations relating to the Internet.

DEPENDENCE ON THE WEB INFRASTRUCTURE.

Our success will depend, in large part, upon the maintenance of the Web
infrastructure, such as a reliable network backbone with the necessary speed,
data capacity and security, and timely development of enabling products such as
high speed modems, for providing reliable Web

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<PAGE>

access and services and improved content. We cannot assure you that the Web
infrastructure will continue to effectively support the demands placed on it as
the Web continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users. Even if the necessary infrastructure
or technologies are developed, we may have to spend considerable amounts to
adapt our solutions accordingly. Furthermore, the Web has experienced a variety
of outages and other delays due to damage to portions of its infrastructure.
Such outages and delays could impact the clients using our solutions and the
level of user traffic on Web sites on our networks.

RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE.

The Internet and Internet advertising markets are characterized by rapidly
changing technologies, evolving industry standards, frequent new product and
service introductions, and changing customer demands. Our future success will
depend on our ability to adapt to rapidly changing technologies and to enhance
existing solutions and develop and introduce a variety of new solutions to
address our customers' changing demands. We may experience difficulties that
could delay or prevent the successful design, development, introduction or
marketing of our solutions. In addition, our new solutions or enhancements must
meet the requirements of our current and prospective customers and must achieve
significant market acceptance. Material delays in introducing new solutions and
enhancements may cause customers to forego purchases of our solutions and
purchase those of our competitors.

EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT THE ACQUISITION OF OUR
COMPANY.

Some of the provisions of our certificate of incorporation, our bylaws and
Delaware law could, together or separately:

      o     discourage potential acquisition proposals;
      o     delay or prevent a change in control;
      o     impede the ability of our stockholders to change the composition of
            our board of directors in any one year; and
      o     limit the price that investors might be willing to pay in the future
            for shares of our common stock.


ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      See Part IV, Item 14 of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

      There have been no changes in or disagreements with our auditors on
accounting principles or financial statement disclosure.

                                       55
<PAGE>

                                         PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

The following table provides information concerning our current named executive
officers and directors:

<TABLE>
<CAPTION>

NAME                                AGE    POSITION AND OFFICES

<S>                                 <C>    <C>
David J. Moore                      49     Chief Executive Officer and a Director
R. Theodore Ammon                   52     Chairman of the Board
John F. Barry III                   48     Director
Arnie Semsky                        54     Director
Charles W. Stryker, Ph.D.           53     Director
Douglas C. Wagner                   35     Director
Mark E. Moran                       39     Senior Vice President, General Counsel and
                                           Secretary
</TABLE>


      David J. Moore has been our Chief Executive Officer and a Director since
February 1998. Mr. Moore was President of Petry Interactive from December 1995
to February 1998. From 1993 to 1994, Mr. Moore was President of Geomedica, an
online service for physicians, which he sold to Reuters. From 1982 to 1992, Mr.
Moore was a Group Vice President at Hearst/ABC-Viacom Entertainment Services,
where he participated in the launch of Cable Health Network, Lifetime
Television, Lifetime Medical Television, a service targeted to physicians, and
HealthLink Television, a physician waiting room television service. From 1980 to
1982, Mr. Moore had a television advertising sales position with Turner
Broadcasting. Mr. Moore received a B.A. degree in Communications from Northern
Illinois University.

      R. Theodore Ammon, Chairman of our Board, is the founding partner of
Chancery Lane Capital LLC, a New York based private investment firm, since its
inception in 1995. Chancery Lane has invested in numerous public and private
companies. From 1990 to 1992, Mr. Ammon was a General Partner of Kohlberg Kravis
Roberts & Co., a New York and San Francisco-based investment firm, and an
executive of such firm prior to 1990. Mr. Ammon also serves on the board of
directors of each of Host Marriott Corporation and CAIS Internet, Inc., Moore
Corporation Limited and serves on numerous boards of privately held companies.
Mr. Ammon is involved in a number of not for profit organizations, including as
a member of the Board of Directors of The Municipal Art Society of New York,
Chairman of the Board of Jazz @ Lincoln Center, and the Board of Trustees of
Bucknell University. Mr. Ammon received a B.A. degree in Economics from Bucknell
University.

            John F. Barry III, a Director, is presently the Managing General
Partner of Prospect Street Ventures, a private equity and venture capital firm,
which he joined in 1990. From 1988 to 1989, he was the head of investment
banking at L.F. Rothschild & Co. From 1983 to 1988, he was a corporate finance
specialist at Merrill Lynch and from 1979 to 1983, he was a securities attorney
with Davis Polk & Wardwell. Mr. Barry serves on the boards of

                                       56
<PAGE>

directors of nine information technology companies, including Skyline
Multimedia, Inc. Mr. Barry is also the chairman of Bondnet Trading Systems, Inc.
Mr. Barry received a J.D. degree from Harvard Law School and a B.A. degree in
History from Princeton University.

      Arnie Semsky, a Director, has been self-employed as a media advisor since
January 1999. He previously served as the Executive Vice President, Worldwide
Media Director and Board member of the BBDO Worldwide unit of Omnicom Group for
twenty years. Prior to that he was Vice President, National TV for Grey
Advertising. Mr. Semsky is a senior advisor for ESPN and the ESPN/ABC Sports
Customer Marketing and Sales unit. Mr. Semsky currently serves on the Board of
Directors of iPing.com and the John A. Reisenbach Foundation. He is on the Board
of Advisors of several Internet companies including Breakthrough Commerce, LLC;
BrandEra.com; On2.com; and CoolHunter.com. Mr. Semsky received a B.A. degree in
English from Pace University.

      Charles W. Stryker, Ph.D. a Director, is President and CEO of Naviant,
Inc. Naviant's business is focused on providing information which will enable
marketers to precisely target their customers and prospects in both the physical
and on-line worlds. Dr. Stryker served as President of IQ2.net and Zona, both
subsidiaries of IntelliQuest Information Group Inc. from October 1997 to
November 1999. From 1991 to 1997, Dr. Stryker was President and CEO of the
Information Technology Forum, Inc. a management consulting firm specializing in
the development of content based electronic products and services. During this
period, he was also the founder and Executive Director of the MkIS User Forum.
The Forum is an international trade group composed of executives responsible for
design and implementation of their corporate marketing systems. Dr. Stryker
received a B.S. degree and a M.S. degree in Electrical Engineering and a Ph.D.
in Computer Science from New York University.

      Douglas C. Wagner has served as President of 24/7 Website Results since
Website Results, Inc. was acquired by 24/7 Media Inc. in August of 2000. He had
served as the C.E.O. of Website Results since July of 1999. Prior to joining
Website Results, Mr. Wagner was President of Phoenix Financial, LLC a financial
services firm in Baltimore, Maryland, from January of 1999 through June of 1999.
From September of 1996 through December of 1998, Mr. Wagner owned and operated
several Internet related businesses through Pinnacle Enterprises, Inc. Mr.
Wagner worked as a District Manager for Monumental Insurance Company from June
of 1995 through August of 1996. While completing his Masters Education, (fall
1991 through spring 1995) he worked for The Pennsylvania State University in
several management positions, the last position held was Food and Beverage
Director for the University owned Hotel. Mr. Wagner received a B.S. in
Management and an M.B.A. in Marketing and Finance from The Pennsylvania State
University.

Mark E. Moran has been Senior Vice President and General Counsel since April
1998. From June 1993 to April 1998, Mr. Moran was an associate attorney at
Proskauer Rose LLP. From April 1986 to May 1993, Mr. Moran was a financial
analyst in the Securities Processing Division of The Bank of New York. Mr. Moran
received a J.D. degree from Fordham Law School, a M.B.A. degree in Finance from
Fordham Graduate School of Business, and a B.A. degree in Economics from The
University of Virginia.

                                       57
<PAGE>

KEY EMPLOYEES

      Cynthia L. Brown was appointed executive vice president of technology of
24/7 Media, Inc. in November 2000, shortly after Exactis.com was acquired by
24/7 Media, Inc. Ms. Brown had previously served as vice president of
engineering of Exactis.com since June 1999. From September 1997 to May 1999, Ms.
Brown served as a founding partner of Anova Partners, a management consulting
firm specializing in technology and Internet-based companies. From June 1993 to
August 1997, Ms. Brown was the president and chief operating officer of System
One Technical Incorporated, a software vendor company, prior to its merger with
MC Health Care Holdings. From June 1983 to May 1993, Ms. Brown held various
positions with Tandem Telecommunications, a subsidiary of Tandem Computers Inc.
and Applied Communications, Inc. From June 1981 to May 1983, Ms. Brown was
employed by Data General Corporation, a computer storage company, as a systems
engineer. Ms. Brown holds a B.A. from Park College in Kansas City, Missouri.

      E. Thomas Detmer served as our president and chief operating officer from
October 2000 until March 2001. Detmer currently serves and had previously served
as president and CEO of Exactis.com since January 1999. Prior to January 1999,
he served three years on the Exactis.com board of directors. He brings more than
20 years of direct marketing experience to the e-mail marketing industry.
Previously, Mr. Detmer was president of BehaviorBank/Atlantes, a division of
Experian, the world's leading provider of information solutions to businesses
and consumers. Mr. Detmer founded Atlantes in 1992, which was acquired by
Experian in 1997. Prior to Atlantes, Mr. Detmer was founder and president of the
publishing division of Telelink Systems, a telemarketing company. Additionally,
Mr. Detmer spent 10 years with Polk/NDL, a venture-funded consumer information
management and resale company. He holds a B.A. degree from Williams College and
an M.B.A. from the University of Denver.

      Geoff Judge has been the Senior Vice President of U.S. Sales and
Operations since February 2001, was Senior Vice President of Network Development
Group since April 2000, and was Senior Vice President of Affiliate Relations
since February 1998. Mr. Judge was President of Interactive Imaginations from
September 1997 to February 1998 and was Executive Vice President, Marketing and
Sales from May 1997 to September 1997 at Interactive Imaginations. From 1995 to
1997, Mr. Judge was Vice President, Marketing for iMarket Inc., a software
company. From 1994 to 1995, Mr. Judge was Vice President--Marketing at Doubleday
Direct, where he managed the membership base of the company's nine book clubs.
From 1985 to 1994, Mr. Judge was at American Express in numerous roles including
Vice President and General Manager, Travel & Corporate Insurance Group, where he
managed an operating group of over 70 people, and a $90 million portfolio of
products that were direct marketed to cardmembers. Mr. Judge received a M.B.A.
degree from the Columbia University Graduate School of Business and a B.A.
degree in Economics from Northwestern University.

      Anthony Plesner has been the Senior Vice President, Strategic Planning,
since October, 2000. Mr. Plesner brings to 24/7 Media more than 15 years of
experience directing finance, business development and operations at a series of
information and software-focused organizations. Prior to joining 24/7 Media, he
was responsible for finance and business development with Medscape, a leading
healthcare information and services organization.

                                       58
<PAGE>

Prior to joining Medscape, Mr. Plesner founded nicheConsulting, an organization
focused on supporting its clients through assistance with/implementation of key
programs - strategy, business partnering, operational efficiencies. Preceding
nicheConsulting, Mr. Plesner held a variety of key roles at Reuters, the
worldwide information organization, where he was responsible for managing key
operations - finance, business development and planning - from early stage
through significant growth, both in the core activities of the company as well
as in its new internet and content offerings. Mr. Plesner received an M.B.A.
from the Katz Graduate School of Business at the University of Pittsburgh and a
B.A. degree in economics and economic history from Manchester University (Great
Britain).

      Michael G. Rowsom has been an Executive Vice President of 24/7 Media, Inc.
since July, 2000, and previously was the Senior Vice President/General Manager
of 24/7 Mail since August 1999. He formerly served as Vice President of
Marketing for Intelligent Interactions, prior to its acquisition by 24/7 Media
in April 1998, where he was responsible for company positioning, strategic
product development, partnerships, and marketing. Earlier, Mr. Rowsom held the
position of Vice President of Marketing at Hearst New Media, where he oversaw
New Media marketing, strategic development, intracompany and intercompany
business development, partnerships, content syndications, and the marketing of
the Homemarts brand Web-site. Mr. Rowsom holds a Bachelor's degree in marketing
from Rollins College.

      Mark Schaszberger has been the President of the IMAKE division of our
company since January 2000. Prior to joining our company, Mr. Schaszberger was
the CEO and Chief Operating Officer of IMAKE Solutions and Services, Inc., where
he was responsible for the IMAKE's information technology capabilities, its
computer laboratory and source code repository, product development and
enhancements and marketing and sales in the telecommunications, Internet and web
services and digital entertainment industries. He has over 18 years of
experience with the information technologies, telecommunications networks, video
and audio data and computer simulations. Mr. Schaszberger, before founding
IMAKE's Media Division in 1993, was employed by IBM Corporation and received
patents in the Data Server, Control Server and Gateway Architecture System and
Method to Broadcasting Digital Video on Demand. He holds a Master's degree in
Computer Science from the University of Maryland and a Bachelor's degree in
Computer Science and Engineering from the University of Virginia

      Stuart D. Shaw, currently acting Chief Financial Officer, has been Senior
Vice President of Finance & Administration since February 1998. He was Vice
President and Chief Financial Officer of Petry Interactive, Inc. from October
1997 to February 1998. From 1991 to 1997, Mr. Shaw was Director of Financial
Reporting, then Vice President of Customer Resources for Penguin Books, a trade
publisher. From 1989 to 1991, Mr. Shaw was Controller for Warren, Gorham &
Lamont, a publisher of professional resource literature. From 1983 to 1989, Mr.
Shaw was an auditor with Arthur Andersen. Mr. Shaw received a B.B.A. degree in
Public Accounting from Pace University. Mr. Shaw is a Certified Public
Accountant.


COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE.

      The Audit Committee, composed of Messrs. Ammon, Semsky and Barry, who are
not employed by us and are, thus, independent directors, does the following:

                                       59
<PAGE>

      o     makes recommendations concerning the engagement of independent
            public accountants;

      o     reviews with the independent public accountants the plans and
            results of the audit engagement;

      o     approves professional services provided by the independent public
            accountants;

      o     reviews the independence of the independent public accountants;

      o     considers the range of audit and non-audit fees; and

      o     reviews the adequacy of our internal accounting controls.

COMPENSATION COMMITTEE.

      The Compensation Committee, composed of Messrs. Ammon, Barry and Stryker,
directors who qualify as outside directors under Section 162(m) of the Code and
as non-employee directors under Rule 16b-3(c) of the Exchange Act, approves the
salaries and other benefits of our executive officers and administers any of our
non-stock based bonus or incentive compensation plans, excluding any cash awards
intended to qualify for the exception for performance-based compensation under
Section 162(m) of the Code. It also administers any of our stock-based incentive
plans, including the 1998 stock incentive plan and is responsible for granting
any cash awards intended to qualify for the exception for performance-based
compensation under Section 162(m) of the Code. Furthermore, the compensation
committee consults with our management regarding pension and other benefit
plans, and compensation policies and our practices.

COMPENSATION OF DIRECTORS

      Directors do not receive salaries or cash fees for serving as directors or
for serving on committees. All members of the board of directors who are not
employees or consultants are reimbursed for their expenses for each meeting
attended and are eligible to receive stock options pursuant to the 1998 stock
incentive plan. Under the 1998 stock incentive plan, in 1998 each existing
non-employee director was granted a non-qualified option to purchase 18,750
shares of common stock at the fair market value on the date of grant, and each
new non- employee director will be granted a non-qualified option to purchase
18,750 shares of common stock at the fair market value on the date of grant. On
September 7, 2000 each non-employee director was granted a non-qualified option
to purchase 4,688 shares of commons stock at a fair market value on the date of
grant, or a pro rata portion thereof if the director did not serve the entire
year. Upon the date of each annual stockholders' meeting, each existing
non-employee director shall be granted a non-qualified option to purchase 4,688
shares of common stock, or a pro rata portion thereof if the director did not
serve the entire year since the date of the last annual meeting. All options
granted to non-employee directors will vest over four years from the date of
grant, assuming the non-employee director is a director on those dates, and all
such options generally will be exercisable for a period of ten years from the
date of grant.

                                       60
<PAGE>

EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS

      We have entered into employment agreements with our executive officers and
each of our key employees named in this document providing for annual
compensation in excess of $100,000. The material terms of such employment
agreements generally are as follows:

      o     the employment term runs through December 31, 2001, except as stated
            below and is automatically renewable for successive one-year terms
            unless either party gives written notice to the other at least six
            months prior to the expiration of the then employment term;

      o     during the employment term and thereafter, we will indemnify the
            executive to the fullest extent permitted by law, in connection with
            any claim against such executive as a result of such executive
            serving as one of our officers or directors or in any capacity at
            our request in or with regard to any other entity, employee benefit
            plan or enterprise;

      o     any dispute or controversy arising under or in connection with the
            employment agreement (other than injunctive relief) shall be settled
            exclusively by arbitration;

      o     we may terminate the agreement at any time with or without cause (as
            defined in the agreement) and, if an executive is terminated without
            cause (including our giving notice of non-renewal), the executive
            will receive severance pay in an amount generally equal to six
            months' base salary and bonus, plus continued medical benefits for a
            period equal to the severance period as well as acceleration of
            outstanding options; and

      o     if termination is the result of the executive's death or disability,
            we will pay to the executive or his estate an amount equal to six
            months' base salary at his then current rate of pay (reduced in the
            case of disability by his long-term disability policy payments).

      The agreement of David J. Moore extends through January 1, 2002. Mr.
Moore's agreement provides for an annual base salary of $225,000 and a target
bonus of $325,000 for 2001. In 1998, Mr. Moore was also awarded 56,250 shares of
restricted stock that have vested over three years since grant. In connection
with this issuance, we are recognizing compensation expense of $90,000 ratably
over the three-year vesting period. If we terminate Mr. Moore without cause, he
is entitled to receive severance pay in an amount equal to two times base
salary, plus the maximum bonus for which he is eligible during the fiscal year
of termination.

      The agreements of our other executive officers and named key employees
provide for base salaries between $140,000 and $165,000 and target incentive
bonuses for 2001, based on attainment of corporate goals.


                                       61
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

      The following table provides information about the compensation paid or
payable by us for services rendered in all capacities to our Chief Executive
Officer and our executive officers for 2000.

<TABLE>
<CAPTION>
                                            ANNUAL                    LONG TERM
                                      COMPENSATION                 COMPENSATION

                                                                     SECURITIES              ALL
NAME AND                           ANNUAL                 OTHER      UNDERLYING            OTHER
PRINCIPAL POSITION         YEAR    SALARY    BONUS    COMPENSATION   OPTIONS (#)    COMPENSATION
------------------         ----    ------    -----    ------------   -----------    ------------

<S>                        <C>     <C>       <C>      <C>             <C>           <C>
David J. Moore (1)         1998    $259,137  $343,750          0            0          (1)
  Chief Executive Officer  1999    $225,000  $375,000          0      125,000            0
                           2000    $225,000  $325,000          0      125,000          (1)


Mark E. Moran (2)          1998    $125,142  $112,500          0       31,250
  Senior Vice
    President, General     1999    $150,000  $ 36,000          0       75,000            0
    Counsel
                           2000    $157,500  $100,000          0       75,000          (3)


C. Andrew Johns (3)        1998    $105,192  $ 66,706          0       31,250            0
   Chief Financial
     Officer               1999    $150,000  $112,500          0       75,000            0
                           2000    $157,500  $100,000          0       50,000          (4)


Jacob I.  Friesel (4)      1998    $153,125  $150,391          0            0            0
  Executive Vice
    President              1999    $180,250  $164,063          0       75,000            0
                           2000    $245,000  $135,500          0       75,000          (5)

E. Thomas Detmer (5)       2000    $155,629  $ 56,000          0       90,000            0
  Chief Operating
    Officer

</TABLE>

(1)   IN 1998, MR. MOORE RECEIVED 56,250 SHARES OF RESTRICTED STOCK THAT VEST
      EQUALLY OVER THREE YEARS. MR. MOORE'S 125,000 OPTIONS ISSUED IN JANUARY
      2000 WERE CANCELLED IN MAY 2000 IN EXCHANGE FOR 41,666 SHARES OF
      RESTRICTED STOCK THAT VEST OVER FOUR YEARS FROM JANUARY 2, 2000.
(2)   MR. MORAN'S 75,000 OPTIONS ISSUED IN JANUARY 2000 WERE CANCELLED IN MAY
      2000 IN EXCHANGE FOR 25,000 SHARES OF RESTRICTED STOCK THAT VEST OVER FOUR
      YEARS FROM JANUARY 2, 2000. MR. MORAN BECAME AN EXECUTIVE OFFICER IN
      NOVEMBER 2000.
(3)   MR. JOHNS' 75,000 OPTIONS ISSUED IN 1999 EXPIRED PURSUANT TO THEIR TERMS
      IN JANUARY 2001. MR. JOHNS' 50,000 OPTIONS ISSUED IN JANUARY 2000 WERE
      CANCELLED IN MAY 2000 IN EXCHANGE FOR 16,667 SHARES OF RESTRICTED STOCK
      THAT WERE FULLY VESTED ON DECEMBER 31, 2000. MR. JOHNS CEASED EMPLOYMENT
      WITH US ON DECEMBER 31, 2000.
(4)   MR. FRIESEL CEASED HIS EMPLOYMENT WITH US ON OCTOBER 16, 2000, AND HIS
      75,000 OPTIONS ISSUED IN 1999 WERE FULLY VESTED ON OCTOBER 16, 2000, AND
      HIS 75,000 OPTIONS ISSUED IN JANUARY 2000 WERE CANCELLED IN MAY 2000 IN
      EXCHANGE FOR 25,000 SHARES OF RESTRICTED STOCK THAT WERE FULLY VESTED UPON
      HIS RETIREMENT DATE OF OCTOBER 16, 2000.
(5)   MR. DETMER COMMENCED HIS EMPLOYMENT WITH US ON JUNE 27, 2000 UPON THE
      ACQUISITION OF EXACTIS.COM. ON MARCH 23, 2001, MR. DETMER CEASED HIS
      EMPLOYMENT AS OUR CHIEF OPERATING OFFICER AND BECAME PRESIDENT OF OUR
      SUBSIDIARY, EXACTIS.COM. THE COMPENSATION SET FORTH IN THE ABOVE TABLE
      IS FOR ALL OF 2000 FOR BOTH EXACTIS AND 24/7 MEDIA.

                                       62
<PAGE>

OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>

                                                                      POTENTIAL REALIZABLE
                                                                            TOTAL VALUE AT
                                                                                   ASSUMED
                                                                           ANNUAL RATES OF
                                                                        STOCK APPRECIATION
                                                 INDIVIDUAL GRANTS         FOR OPTION TERM

                                   PERCENT OF
                                      OPTIONS
                       NUMBER OF   GRANTED TO
                      SECURITIES    EMPLOYEES
                      UNDERLYING           IN    EXERCISE
                         OPTIONS       FISCAL       PRICE  EXPIRATION
NAME                GRANTED(#)(1)     YEAR(2)   ($/SHARE)   DATE(3)         5%         10%
----                -------------     -------   ---------   -------         --         ---
<S>                      <C>            <C>     <C>         <C>       <C>         <C>
David J. Moore           125,000        2.0%    $48.38      1/1/10    1,670,813   3,692,059

Mark E. Moran             75,000        1.2%    $48.38      1/1/10    1,002,488   2,215,236
C. Andrew Johns           50,000        0.8%    $48.38      1/1/10      668,325   1,476,824
Jacob I. Friesel          75,000        1.2%    $48.38      1/1/10    1,002,488   2,215,236
E. Thomas Detmer(4)       90,000        1.4%    $11.07     6/28/10      275,259     608,251
</TABLE>

(1) ALL OPTIONS GRANTED TO MESSRS. MOORE, MORAN, JOHNS AND FRIESEL IN 2000 WERE
GRANTED PURSUANT TO THE 1998 STOCK INCENTIVE PLAN. THE ABOVE GRANTS WERE
CANCELLED IN THEIR ENTIRETY IN EXCHANGE FOR A GRANT OF RESTRICTED STOCK IN MAY
2000.
(2) THE TOTAL NUMBER OF OPTIONS GRANTED TO DIRECTORS AND EMPLOYEES IN 2000 WAS
6,201,191.
(3) EACH OPTION MAY BE SUBJECT TO EARLIER TERMINATION IF THE OFFICER'S
EMPLOYMENT WITH US IS TERMINATED.
(4) MR DETMER'S OPTIONS WERE ISSUED UNDER THE EXACTIS.COM 1999 STOCK OPTION
PLAN, AND WERE EXCHANGED FOR THE ABOVE NUMBER OF OPTIONS TO PURCHASE COMMON
STOCK OF 24/7 MEDIA, INC.

                  AGGREGATED OPTION EXERCISES DURING YEAR ENDED
                                DECEMBER 31, 2000
                        AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>

                  SECURITIES                                           NUMBER OF
                  UNDERLYING                                      IN-THE MONEY OPTIONS
                  SHARES                 UNEXERCISED OPTIONS        AT DECEMBER 31,
                  ACQUIRED              AT DECEMBER 31, 2000            2000(1)
                  ON          VALUE         EXERCISABLE               EXERCISABLE
     NAME         EXERCISE   REALIZED      UNEXERCISABLE             UNEXERCISABLE
     ----         --------   --------      -------------             -------------

<S>               <C>         <C>        <C>           <C>           <C>          <C>
David J. Moore          0           0     62,500        62,500        $0           $0

Mark E. Moran      15,625    $218,750     37,500        53,125        $0           $0
C. Andrew Johns    15,625    $267,578     53,125        53,125        $0           $0
Jacob I. Friesel        0           0     37,500        37,500        $0           $0
E. Thomas Detmer        0           0    259,369       276,150        $0           $0
</TABLE>

(1)   REPRESENTS THE DIFFERENCE BETWEEN THE CLOSING MARKET PRICE OF THE COMMON
      STOCK AS REPORTED BY NASDAQ ON DECEMBER 31, 2000 OF $0.5312 PER SHARE AND
      THE EXERCISE PRICE PER SHARE OF IN-THE-MONEY OPTIONS MULTIPLIED BY THE
      NUMBER OF SHARES UNDERLYING THE IN-THE-MONEY OPTIONS

                                       63
<PAGE>

1998 STOCK INCENTIVE PLAN AND 2001 STOCK INCENTIVE PLAN FOR NON-OFFICERS

BACKGROUND; PURPOSE; ELIGIBILITY.

      The following provisions are applicable to both of our 1998 Stock
Incentive Plan and 2001 Stock Incentive Plan for Non-Officers, except as noted,
and are intended only as a summary. The incentive plans are intended to foster
stock ownership by employees and directors and thereby attract, retain and
reward such employees and directors. All of our employees, consultants and
non-employee directors that satisfy requirements are eligible to be granted
awards under the incentive plans.

ADMINISTRATION.

      The incentive plans are administered by the compensation committee of our
board of directors. The compensation committee has full authority and
discretion, subject to the terms of the incentive plans, to determine who is
eligible to receive awards and the amount and type of awards. Terms and
conditions of awards are set forth in written grant agreements. No option may
have an exercise price less than the fair market value of the common stock at
the time of original grant (or, in the case of an incentive stock option granted
to a ten percent stockholder, 110% of fair market value). Awards under the
incentive plans may not be made on or after the tenth anniversary of the date of
its adoption, but awards granted prior to such date may extend beyond that date.
All options granted under the incentive plans expire no more than ten years from
the date of grant.

AVAILABLE SHARES AND OTHER UNITS.

      A maximum of 8,860,855 and 2,500,000 shares of common stock may be issued
pursuant to the 1998 Plan and 2001 Plan, respectively. The maximum number of
incentives that may be granted to any individual for each fiscal year during the
term of the incentive plans is 250,000. As of December 31, 2000, there were
outstanding options to purchase an aggregate of 3,956,357 shares and zero shares
of common stock under the 1998 Plan and 2001 Plan, respectively. In general,
upon the cancellation or expiration of an award, the unissued shares of common
stock subject to such awards will again be available for awards under the
incentive plans.

      The number of shares of common stock available for the grant of awards and
the exercise price of an award may be adjusted to reflect any change in our
capital structure or business by reason of certain corporate transactions or
events.

AMENDMENTS.

      The incentive plans may be amended by the board of directors, except that,
generally, stockholder approval is required to take the following actions:

      o     increase the aggregate number of shares of common stock reserved for
            awards or the maximum individual limits for any fiscal year;

                                       64
<PAGE>

      o     change the classification of employees and non-employee directors
            eligible to receive awards;

      o     decrease the minimum option price of any option;

      o     extend the maximum option period under the incentive plans; or

      o     change any rights with respect to non-employee directors.

STOCK OPTIONS.

      Under the incentive plans, the compensation committee may grant options to
purchase shares of common stock. Options may be incentive stock options or
non-qualified stock options. The compensation committee will determine the
number of shares subject to the option, the term of the option, the exercise
price per share, the vesting schedule, and the other material terms of the
option.

RESTRICTED STOCK.

      The 1998 incentive plan authorizes the compensation committee to award
shares of restricted stock. Upon the award of restricted stock, the recipient
has all rights of a stockholder, unless otherwise specified by the compensation
committee at the time of grant, subject to the conditions and restrictions
generally applicable to restricted stock.

CHANGE OF CONTROL.

      Unless otherwise determined by the compensation committee of the board of
directors at the time of grant, in the event that we merge with another company,
upon the sale of substantially all of our assets or securities representing 40%
or more of the total combined voting power of our then outstanding securities,
or upon changes in membership of the board of directors during any two-year
period, then:

      o     each option will be fully vested and immediately exerciseable, or
            each option may be repurchased by us for an amount of cash equal to
            the excess of the change of control price (as defined in the
            incentive plans) over the exercise price; and

      o     the restrictions on shares of restricted stock shall lapse as if the
            applicable restriction period had ended.

THE 2001 EQUITY COMPENSATION PLAN

      On February 26, 2001, we adopted the 24/7 Media, Inc. 2001 Equity
Compensation Plan to enable us to offer and issue to certain employees, former
employees, advisors and consultants of the company and its affiliates our common
stock in payment of amounts owed by us to such third parties. The aggregate
number of shares of common stock that may be issued pursuant to the 2001 Equity
Compensation Plan shall not exceed 1,250,000 shares.

                                       65
<PAGE>

We may from time to time
issue to employees, former employees, advisors and consultants to the company or
its affiliates shares of our common stock in payment or exchange for or in
settlement or compromise of amounts due by us to such persons for goods sold and
delivered or to be delivered or services rendered or to be rendered. Shares of
our common stock issued pursuant to the 2001 Equity Compensation Plan will be
issued at a price per share of not less than ninety-five percent (95%) of the
fair market value per share on the date of issuance and on such other terms and
conditions as determined by us. Our Chief Executive Officer is authorized to
issue shares pursuant to and in accordance with the terms of the 2001 Equity
Compensation Plan, and the plan may be amended at any time by us.


                                       66
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      The following table sets forth information regarding beneficial ownership
of the common stock as of March 29, 2001, by: (i) each person who we know to own
beneficially more than 5% of the common stock; (ii) each of our directors and
executive officers and (iii) our current directors and executive officers as a
group.

<TABLE>
<CAPTION>

                                                                          Number
                                                                              of
BENEFICIAL OWNER(1)                                                  Shares    Percentage

<S>                                                                <C>            <C>
    David J. Moore (2)(3)                                            985,384       2.26%
    R. Theodore Ammon (4)                                          1,560,937       3.51%
    Mark E. Moran (2)(5)                                             169,375           *
    John F. Barry III (6)                                          1,765,937       3.98%
    Arnie Semsky (7)                                                   5,859           *
    Charles W. Stryker (8)                                            29,358           *
           Doug Wagner (2)(9)                                        171,900           *
    All directors and executive officers as a group (7 persons)    4,656,875      10.25%
</TABLE>


* REPRESENTS LESS THAN 1% OF THE OUTSTANDING COMMON STOCK.

(1) APPLICABLE PERCENTAGE OWNERSHIP IS BASED ON 43,519,674 SHARES OF COMMON
STOCK OUTSTANDING AS OF MARCH 29, 2001. BENEFICIAL OWNERSHIP IS DETERMINED IN
ACCORDANCE WITH THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION AND
GENERALLY INCLUDES VOTING OR INVESTMENT POWER WITH RESPECT TO SECURITIES,
SUBJECT TO COMMUNITY PROPERTY LAWS, WHERE APPLICABLE. SHARES OF COMMON STOCK
SUBJECT TO OPTIONS OR WARRANTS THAT ARE EXERCISABLE WITHIN 60 DAYS OF MARCH 29,
2001 AND BENEFICIALLY OWNED BY THE PERSON HOLDING SUCH OPTIONS AND WARRANTS ARE
TREATED AS OUTSTANDING FOR THE PURPOSE OF COMPUTING THE PERCENTAGE OWNERSHIP FOR
SUCH PERSON, BUT ARE NOT TREATED AS OUTSTANDING FOR THE PURPOSE OF COMPUTING THE
PERCENTAGE OWNERSHIP OF ANY OTHER PERSON.

(2) THE ADDRESS OF MESSRS. MOORE, MORAN AND WAGNER IS C/O 24/7 MEDIA, INC., 1250
BROADWAY, NEW YORK, NEW YORK 10001.

(3) INCLUDES 45,938 UNVESTED SHARES OF RESTRICTED COMMON STOCK ISSUED PURSUANT
TO THE 1998 INCENTIVE PLAN AND 41,666 SHARES OF RESTRICTED STOCK ISSUED PURSUANT
TO THE 1998 STOCK INCENTIVE PLAN THAT VEST OVER FOUR YEARS FROM JANUARY 1, 2000;
EACH SUCH GRANT OF RESTRICTED STOCK IS SUBJECT TO FORFEITURE PURSUANT THERETO.
INCLUDES OPTIONS TO ACQUIRE 86,875 SHARES OF COMMON STOCK AND 211,463 SHARES OF
COMMON STOCK HELD BY A FAMILY TRUST AND OTHER TRUSTS HELD FOR THE BENEFIT OF
FAMILY MEMBERS, BENEFICIAL OWNERSHIP OF WHICH IS DISCLAIMED BY MR. MOORE. MR.
MOORE'S WIFE IS THE TRUSTEE OF EACH SUCH TRUST.

(4) REPRESENTS 669,351 SHARES, CLASS A WARRANTS TO PURCHASE 437,676 SHARES,
CLASS B WARRANTS TO PURCHASE 437,676 SHARES HELD BY CLI ASSOCIATES LLC AND 1,000
SHARES AND OPTIONS TO ACQUIRE 15,234 SHARES HELD BY MR. AMMON. MR. AMMON IS THE
CHAIRMAN OF OUR BOARD OF DIRECTORS AND IS THE FOUNDING PARTNER OF CHANCERY LANE
CAPITAL LLC. MR. AMMON EXPRESSLY DISCLAIMS BENEFICIAL OWNERSHIP OF THE SHARES
HELD BY CHANCERY LANE CAPITAL LLC. THE ADDRESS OF EACH OF THIS ENTITY IS CLI
ASSOCIATES LLC, 3 EAST 54TH STREET, NEW YORK, NEW YORK 10022.

(5) INCLUDES 25,000 SHARES OF RESTRICTED STOCK ISSUED PURSUANT TO THE 1998 STOCK
INCENTIVE PLAN THAT VEST OVER FOUR YEARS FROM JANUARY 1, 2000 THAT IS SUBJECT TO
FORFEITURE PURSUANT THERETO. INCLUDES OPTIONS TO ACQUIRE 60,625 SHARES OF COMMON
STOCK.

(6) REPRESENTS 656,513 SHARES OF COMMON STOCK, CLASS A WARRANTS TO PURCHASE
328,257 SHARES OF COMMON STOCK

                                       67
<PAGE>

AND CLASS B WARRANTS TO PURCHASE 328,257 SHARES HELD BY PROSPECT STREET NYC
DISCOVERY FUND, L.P.; 218,838 SHARES, CLASS A WARRANTS TO PURCHASE 109,419
SHARES AND CLASS B WARRANTS TO PURCHASE 109,419 SHARES HELD BY PROSPECT STREET
NYC CO-INVESTMENT FUND, L.P.; AND OPTIONS TO ACQUIRE 15,234 SHARES HELD BY MR.
BARRY. MR. BARRY IS ONE OF OUR DIRECTORS AND IS THE MANAGING GENERAL PARTNER OF
PROSPECT STREET NYC DISCOVERY FUND, L.P. MR. BARRY DOES NOT OWN ANY SHARES OF
OUR COMMON STOCK IN HIS INDIVIDUAL CAPACITY AND EXPRESSLY DISCLAIMS BENEFICIAL
OWNERSHIP OF THE SHARES HELD BY PROSPECT STREET NYC DISCOVERY FUND, L.P. AND
PROSPECT STREET NYC CO-INVESTMENT FUND, L.P. THE ADDRESS OF EACH OF THESE
ENTITIES IS C/O PROSPECT STREET VENTURES, 10 EAST 40TH ST., 44TH FLOOR, NEW
YORK, NEW YORK 10016.

(7) INCLUDES OPTIONS TO ACQUIRE 5,859 SHARES OF COMMON STOCK. THE ADDRESS OF MR.
SEMSKY IS C/O 24/7 MEDIA, INC. 1250 BROADWAY, 28TH FLOOR, NEW YORK, NEW YORK
10001.

(8) REPRESENTS OPTIONS TO ACQUIRE 10,546 SHARES OF COMMON STOCK. THE ADDRESS OF
MR. STRYKER IS C/O NAVIANT, INC., 14 CAMPUS BOULEVARD, SUITE 200, NEWTOWN
SQUARE, PA 19073.

(9) INCLUDES OPTIONS TO ACQUIRE114,062 SHARES OF COMMON STOCK.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During 2000, there were
no transaction or series of transactions that the company was or is a party in
which amount involved exceeded or exceeds $60,000 and in which any director,
executive officer, holder of more than 5% of any class of our voting securities,
or any member of the immediate family of any of the foregoing persons had or
will have a direct or indirect material interest.


COMPLIANCE WITH REPORTING REQUIREMENTS. Under the securities laws of the United
States, our directors, executive officers, and any persons holding more than ten
percent of our common stock are required to report their ownership of the our
and any changes in that ownership to the Securities and Exchange Commission.
Specific due dates for these reports have been established and we are required
to report in this report any failure to file by these dates during 2000. Based
solely on its review of such forms received by it from such persons for their
2000 transactions, we believe that all filing requirements applicable to such
directors, executive officers and greater than ten percent beneficial owners
were complied with.


                                       68
<PAGE>

                                     PART IV

ITEM 14.    EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS, AND REPORTS ON FORM
            8-K.

            (a)   See Index to Consolidated Financial Statements immediately
                  following Exhibit Index.

            (b)   Current Reports on Form 8-K filed during the fourth quarter of
                  2000 and in 2001.

                  Report on Form 8-K dated March 21, 2001 (file no. 0-29765).

                  Report on Form 8-K dated December 29, 2000 (file no.
                  0-29765).


            (c)   Exhibits. See Exhibit Index immediately following signature
                  pages.

                                       69
<PAGE>

                                24/7 MEDIA, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Independent Auditors' Report......................................  F-2

Consolidated Balance Sheets.......................................  F-3

Consolidated Statements of Operations.............................  F-4

Consolidated Statements of Stockholders' Equity
  and Comprehensive Income (Loss).................................  F-5

Consolidated Statements of Cash Flows.............................  F-7

Notes to Consolidated Financial Statements........................  F-8

Financial Statement Schedule - Valuation and Qualifying Accounts..  S-1


                                      F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
24/7 Media, Inc.:

We have audited the accompanying consolidated balance sheets of 24/7 Media, Inc.
and subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and comprehensive income (loss)
and cash flows for each of the years in the three-year period ended December 31,
2000. In connection with our audits of the consolidated financial statements, we
also have audited the consolidated financial statement schedule as listed in the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of 24/7 Media, Inc. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.

The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the consolidated financial statements, the
Company has suffered recurring losses from operations since inception that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to this matter are also described in Note 1. The consolidated
financial statements and financial statement schedule do not include any
adjustments that might result from the outcome of this uncertainty.


                                                            /s/ KPMG LLP
New York, New York
March 16, 2001


                                      F-2
<PAGE>

                                24/7 MEDIA, INC.

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                       DECEMBER 31,
                                                                               ---------------------------
                                                                                  2000              1999
                                                                               ----------       -----------

                                     ASSETS

<S>                                                                            <C>               <C>
 Current assets:
  Cash and cash equivalents (including restricted cash of $800
    and $0, respectively)                                                      $   29,697        $  42,786
  Accounts receivable, less allowances of $8,815 and $2,522, .............         48,511           34,004
  Prepaid expenses and other current assets ..............................          4,336            4,846
                                                                               ----------        ---------

    Total current assets..................................................         82,544           81,636

 Property and equipment, net .............................................         45,537           18,595
 Intangible assets, net ..................................................        124,792           62,398
 Investments..............................................................         11,267          366,630
 Deferred cost of partner agreements, net ................................           --              4,260
 Other assets ............................................................          4,787              493
                                                                               ----------        ---------

     Total assets ........................................................     $  268,927        $ 534,012
                                                                               ==========        =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT liabilities:
   Accounts payable ......................................................     $   22,518        $  24,504
   Accrued liabilities ...................................................         33,958           13,875
   Current installments of obligations under capital leases ..............             99               49
   Deferred revenue ......................................................          4,095            2,019
                                                                               ----------        ---------

     Total current liabilities ...........................................         60,670           40,447

   Obligations under capital leases, excluding current installments ......            154               13
   Deferred tax liability ................................................           --             95,656
   Minority interest .....................................................            105              105

 Commitments and contingencies

   Stockholders' equity:
     Preferred stock, $.01 par value; 10,000,000 shares authorized
       and no shares issued and outstanding ..............................
     Common stock, $.01 par value; 70,000,000 shares authorizaed;
       42,475,807 and 22,422,516 shares issued and outstanding
       respectively ......................................................            425              224
     Additional paid-in capital ..........................................      1,069,445          282,806
     Deferred stock compensation .........................................         (5,578)            (232)
     Accumulated otehr comprehensive income ..............................          3,425          194,790
     Accumulated deficit .................................................       (859,719)         (79,797)
                                                                               ----------        ---------

     Total stockholders' equity ..........................................        207,998          397,791
                                                                               ==========        =========

     Total liabilities and stockholders' equity ..........................     $  268,927        $ 534,012
                                                                               ==========        =========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

                                24/7 MEDIA, INC.

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

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                     ------------------------------------------------
                                                                         2000             1999               1998
                                                                     ------------      ------------      ------------
<S>                                                                  <C>               <C>               <C>
Revenues:
  Network.....................................................       $    125,256      $     81,158      $     19,744
  Email.......................................................             29,269             8,853             1,003
  Technology..................................................             30,630              --                --
  Other.......................................................               --                --                 119
                                                                     ------------      ------------      ------------
    Total revenues............................................            185,155            90,011            20,866
                                                                     ------------      ------------      ------------
Cost of revenues:
  Network.....................................................            102,365            61,000            15,970
  Email.......................................................             20,642             4,963               179
  Technology..................................................              9,886              --                --
                                                                     ------------      ------------      ------------
    Total cost of revenues....................................            132,893            65,963            16,149
                                                                     ------------      ------------      ------------

    Gross profit..............................................             52,262            24,048             4,717
                                                                     ------------      ------------      ------------
Operating expenses:
  Sales and marketing (exclusive of $2,331 in 2000
    reported below as stock-based compensation)...............             52,406            23,396             8,235
  General and administrative (exclusive of $2,579, $313 and $66,
    respectively, reported below as stock-based compensation).             61,719            24,575             8,827
  Product development (exclusive of $3,645 in 2000
    reported below as stock-based compensation)...............             18,215             1,891             2,097
  Amortization of goodwill, intangible assets and advances....            129,684            16,939             5,722
  Stock-based compensation....................................              8,555               313               569
  Merger related costs........................................              5,513              --               5,000
  Restructuring and exit costs................................             11,956              --                --
  Impairment of intangible assets.............................            500,220              --                --
                                                                     ------------      ------------      ------------

    Total operating expenses..................................            788,268            67,114            30,450
                                                                     ------------      ------------      ------------

    Loss from operations......................................           (736,006)          (43,066)          (25,733)

Interest income, net..........................................              1,359             3,025               576
Gain on sale of investments...................................             52,059              --                --
Gain on exchange of patent rights, net........................              4,053              --                --
Impairment of investments.....................................           (101,387)             --                --
                                                                     ------------      ------------      ------------

    Net loss before minority interest.........................           (779,922)          (40,041)          (25,157)

Minority interest in loss of consolidated subsidiaries........               --                 979              --
                                                                     ------------      ------------      ------------
    Net loss..................................................           (779,922)          (39,062)          (25,157)

Cumulative dividends on mandatorily convertible preferred stock              --                --                (276)
                                                                     ------------      ------------      ------------
Net loss attributable to common stockholders..................       $   (779,922)     $    (39,062)     $    (25,433)
                                                                     ============      ============      ============
Net loss per share--basic and diluted.........................       $     (23.38)     $      (1.96)     $      (2.48)
                                                                     ============      ============      ============
Weighted average shares outstanding...........................         33,363,613        19,972,446        10,248,677
                                                                     ============      ============      ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>

                                24/7 MEDIA, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         AND COMPREHENSIVE INCOME (LOSS)
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                  Convertible                  Common Stock
                                                                Preferred Stock                    Voting               Additional
                                                          ---------------------------    ---------------------------      Paid-in
                                                             Shares         Amount          Shares         Amount         Capital
                                                          ------------   ------------    ------------   ------------   ------------
<S>                                                            <C>       <C>                <C>         <C>            <C>
Balance as of December 31, 1997........................        158,144   $          2       1,864,383   $         18   $     12,129
Net loss...............................................           --             --              --             --             --
  convertible notes payable - related parties..........           --             --              --             --               12
Issuance of warrants to former officer.................           --             --              --             --              450
Issuance of warrants to consultant.....................           --             --              --             --               20
Issuance of common stock for acquired businesses.......           --             --         5,278,167             53         10,769
Issuance of stock options to employees.................           --             --              --             --              332
Issuance of common stock to officer....................           --             --            56,250              1             89
Amortization of deferred stock compensation............           --             --              --             --             --
Issuance of common stock to consultants................           --             --             5,909           --               22
Offering costs in connection with mandatorily
redeemable convertible preferred stock.................           --             --              --             --             (229)
Senior convertible notes payable - related parties
  converted into common stock..........................           --             --           828,036              8          2,666
Convertible preferred stock converted into
  common stock.........................................       (158,144)            (2)        542,908              5             (3)
Conversion of warrants into common stock...............           --             --           191,349              2             (2)
Imputed interest on loans payable - related parties....           --             --              --             --                9
Accrual of cumulative dividends on mandatorily
  redeemable convertible preferred stock...............           --             --              --             --             --
Issuance of common stock in initial public
  offering, net........................................           --             --         3,550,000             36         44,735
Conversion of mandatorily redeemable convertible
  preferred stock into common stock....................           --             --         3,807,533             38         17,169
Exercise of stock options..............................           --             --           106,108              1            271
Issuance of common stock to chinadotcom ...............           --             --           203,851              2          3,564
Pooling adjustment (see note 1)........................           --             --              --             --             --
                                                          ------------   ------------    ------------   ------------   ------------
Balance as of December 31, 1998........................           --             --        16,434,494            164         92,003
Net loss...............................................           --             --              --             --             --
Unrealized gains on marketable securities, net of tax..           --             --              --             --             --
Comprehensive income
Amortization of deferred stock compensation............           --             --              --             --             --
Exercise of stock options..............................           --             --           631,221              6          2,997
Issuance of warrants...................................           --             --              --             --            5,858
Gain on issuance of stock by subsidiary................           --             --              --             --            2,271
Issuance of stock in secondary offering, net...........           --             --         2,339,000             23        100,443
Issuance of common stock for acquired businesses.......           --             --         1,856,872             19         55,300
Investment in Network Commerce.........................           --             --           476,410              5         23,641
Conversion of warrants into common stock ..............           --             --           684,519              7             93
Stock compensation.....................................           --             --              --             --              200
                                                          ------------   ------------    ------------   ------------   ------------
Balance as of December 31, 1999........................           --             --        22,422,516            224        282,806
Net loss...............................................           --             --              --             --             --
Net change in marketable securities
Cumulative foreign currency translation................           --             --              --             --             --
Comprehensive loss.
Exercise of stock options..............................           --             --           335,758              3          5,329
Issuance of common stock for acquired businesses.......           --             --        16,699,865            167        738,215
Conversion of warrants into common stock...............           --             --           359,839              4             (4)
Forfeiture of warrants.................................           --             --              --             --           (1,797)
Forfeiture of options..................................           --             --              --             --           (1,532)
Revaluation of warrants................................           --             --              --             --             (246)
Issuance of common stock for investments...............           --             --         2,516,864             25         40,361
Issuance of common stock to employees..................           --             --            31,000           --            1,530
Issuance of common stock for services..................           --             --            62,921              1            334
Issuance of restricted common stock....................           --             --            47,044              1          4,449
Amortization of deferred stock compensation............           --             --              --             --             --
                                                          ------------   ------------    ------------   ------------   ------------
Balance as of December 31, 2000........................           --     $       --        42,475,807   $        425   $  1,069,445
                                                          ============   ============    ============   ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>

                                24/7 MEDIA, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   AND COMPREHENSIVE INCOME (LOSS) - CONTINUED
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                          Deferred        Other                         Total
                                                            Stock      Comprehensive   Accumulated   Stockholders'
                                                        Compensation      Income         Deficit        Equity
                                                        ------------   -------------   -----------   -------------
<S>                                                       <C>            <C>            <C>            <C>
Balance as of December 31, 1997........................   $    --        $    --        $ (15,096)     $  (2,947)
Net loss...............................................        --             --          (25,157)       (25,157)
  convertible notes payable - related parties .........        --             --             --               12
Issuance of warrants to former officer.................        --             --             --              450
Issuance of warrants to consultant.....................        --             --             --               20
Issuance of common stock for acquired businesses.......        --             --             --           10,822
Issuance of stock options to employees.................        (332)          --             --             --
Issuance of common stock to officer....................         (90)          --             --             --
Amortization of deferred stock compensation............          77           --             --               77
Issuance of common stock to consultants................        --             --             --               22
Offering costs in connection with mandatorily
redeemable convertible preferred stock.................        --             --             --             (229)
Senior convertible notes payable - related parties
converted into common stock............................        --             --             --            2,674
Convertible preferred stock converted into
  common stock.........................................        --             --             --             --
Conversion of warrants into common stock...............        --             --             --             --
Imputed interest on loans payable - related parties....        --             --             --                9
Accrual of cumulative dividends on mandatorily
redeemable convertible preferred stock.................        --             --             (276)          (276)
Issuance of common stock in initial public
  offering, net........................................        --             --             --           44,771
Conversion of mandatorily redeemable convertible
  preferred stock into common stock....................        --             --             --           17,207
Exercise of stock options..............................        --             --             --              272
Issuance of common stock to chinadotcom................        --             --             --            3,566
Pooling adjustment (see note 1)........................        --             --             (206)          (206)
                                                          ---------      ---------      ---------      ---------
Balance as of December 31, 1998........................        (345)          --          (40,735)        51,087
Net loss                                                       --             --          (39,062)       (39,062)
Unrealized gains on marketable securities, net of tax          --          194,790           --          194,790
                                                                                                       ---------
Comprehensive income                                                                                     155,728
                                                                                                       ---------
Amortization of deferred stock compensation ...........         113           --             --              113
Exercise of stock options..............................        --             --             --            3,003
Issuance of warrants...................................        --             --             --            5,858
Gain on issuance of stock by subsidiary................        --             --             --            2,271
Issuance of stock in secondary offering, net...........        --             --             --          100,466
Issuance of common stock for acquired businesses.......        --             --             --           55,319
Investment in Network Commerce.........................        --             --             --           23,646
Conversion of warrants into common stock...............        --             --             --              100
Stock compensation.....................................        --             --             --              200
                                                          ---------      ---------      ---------      ---------
Balance as of December 31, 1999........................        (232)       194,790        (79,797)       397,791
Net loss...............................................        --             --         (779,922)      (779,922)
Net change in marketable securities....................        --         (190,985)          --         (190,985)
Cumulative foreign currency translation................        --             (380)          --             (380)
                                                                                                       ---------
Comprehensive loss                                                                                      (971,287)
                                                                                                       ---------
Exercise of stock options..............................        --             --             --            5,332
Issuance of common stock for acquired businesses.......      (9,727)          --             --          728,655
Conversion of warrants into common stock...............        --             --             --             --
Forfeiture of warrants.................................        --             --             --           (1,797)
Forfeiture of options..................................       1,532           --             --             --
Revaluation of warrants................................        --             --             --             (246)
Issuance of common stock for investments...............        --             --             --           40,386
Issuance of common stock to employees..................        --             --             --            1,530
Issuance of common stock for services..................        --             --             --              335
Issuance of restricted common stock....................      (4,450)          --             --             --
Amortization of deferred stock compensation............       7,299           --             --            7,299
                                                          ---------      ---------      ---------      ---------
Balance as of December 31, 2000........................   $  (5,578)     $   3,425      $(859,719)     $ 207,998
                                                          =========      =========      =========      =========
</TABLE>

          See accompanying notes to consoldiated financial statements.

                                       F-6

<PAGE>

                                24/7 MEDIA, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                Years Ended December 31
                                                                                ---------------------------------------------------
                                                                                   2000              1999                   1998
                                                                                ------------    -------------         -------------
<S>                                                                              <C>               <C>                <C>
Cash flows from operating activities:
Net loss                                                                          $(779,922)        $ (39,062)         $  (25,157)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization                                                        11,777             2,297                 672
Write-off of acquired in-process technology                                           4,797              -                  5,000
Provision for doubtful accounts and sales reserves                                    6,293             2,415                 702
Amortization of goodwill and other intangible assets                                127,467            15,097               5,722
Amortization of partner agreements                                                    2,217             1,596                 -
Non-cash compensation                                                                 8,555               559                 569
Gain on sale of investments                                                         (52,059)             -                    -
Gain on exchange of patent rights, net                                               (4,053)             -                    -
Impairment of investments                                                           101,387              -                    -
Impairment of intangible and other assets                                           500,220              -                    -
Non-cash restructuring and exit costs                                                 6,376              -                    -
Minority interest                                                                      -                (979)                 -
Amortization of debt discount                                                          -                 -                    158
Accrued interest on notes                                                              -                 -                     24
Pooling adjustments (see note 1)                                                       -                 -                   (206)

Changes in operating assets and liabilities, net of
  effects of Acquisitions:
  Accounts receivable                                                                (12,976)           (26,565)             (6,781)
  Prepaid assets and other current assets                                              2,823             (1,239)               (439)
  Other assets                                                                           563               (289)               (166)
  Accounts payable and accrued liabilities                                            (5,315)            22,404               4,976
  Deferred revenue                                                                    (5,613)             1,742                  38
                                                                                ------------      -------------         ------------
    Net cash used in operating activities                                            (87,463)           (22,024)            (14,888)
                                                                                ------------      -------------         ------------
 Cash flows from investing activities:
 Cash acquired in (paid for) acquisitions, net                                        23,952             (7,028)             (1,491)
 Proceeds from sale of investments                                                    65,901               -                   -
 Proceeds from exchange of patent rights, net of expenses                              4,053               -                   -
 Proceeds from sale of marketable securities                                           9,613               -                   -
 Loans to employees                                                                      350               -                   -
 Capital expenditures, including capitalized software                                (28,267)           (18,622)             (1,499)
 Cash paid for investments                                                            (6,120)           (45,095)             (3,000)
                                                                                ------------      -------------         ------------
 Net cash provided by (used in) investing activities                                  69,482            (70,745)             (5,990)
                                                                                ------------      -------------         ------------

Cash flows from financing activities:
Proceeds from exercise of stock options and conversion of warrants                     5,332              1,762                 272
Payment of capital lease obligations                                                     (60)               (54)               (170)
Proceeds from secondary offering of common stock, net                                    -              100,466                 -
Proceeds from issuance of preferred stock of subsidiary                                  -                  105                 -
Repayment of notes payable-related parties                                               -                 (593)               (296)
(Payments)/proceeds from short-term borrowings                                           -                 (180)                340
Net proceeds from issuance of Mandatorily Redeemable Series A
Preferred Stock                                                                          -                  -                10,060
Deferred offering costs                                                                  -                  -                  (321)
Proceeds from senior convertible notes payable-related parties                           -                  -                   150
Proceeds from issuance of common stock, net                                              -                  -                44,771
                                                                                ------------      -------------         ------------
    Net cash provided by financing activities                                          5,272            101,506               54,806
                                                                                ------------      -------------         ------------

    Net change in cash and cash equivalents                                          (12,709)             8,737               33,928
 Effect of foreign currency on cash                                                     (380)              -                    -
 Cash and cash equivalents at beginning of period                                     42,786             34,049                  121
                                                                                ------------      -------------         ------------
Cash and cash equivalents at end of period                                      $     29,697      $      42,786         $     34,049
                                                                                ============      =============         ============
</TABLE>

         See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>


                                24/7 MEDIA, INC.
                    NOTES TO CONSOLIDATE FINANCIAL STATEMENTS
                           DECEMBER 31, 2000 AND 1999


(1)  SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Summary of Operations and Going Concern

24/7 Media together with its subsidiaries is a provider of customer acquisition
and customer retention marketing solutions for Web publishers, online
advertisers, advertising agencies, e-marketers and e-commerce merchants. The
Company operates in three principal lines of business: 24/7 Network, 24/7 Mail
and 24/7 Technology Solutions.

The 24/7 Network operates globally, with operations in the United States,
Europe, Canada, Latin America, and, along with the Company's partner,
chinadotcom corporation ("chinadotcom"), the Asia-Pacific Region, providing ad
sales solutions for Web-based advertising including banner ads, sponsorships,
loyalty reward programs and promotions. 24/7 Mail has operations in the United
States, Canada and Europe where the Company serves as a list manager for
permission-based email lists. 24/7 Technology Solutions operates globally,
providing third-party ad serving, email based direct marketing services,
targeted search traffic delivery, broadband solutions and professional services.
The Company launched 24/7 Technology Solutions early in 2000 when the Company
acquired Sabela Media, Inc. ("Sabela") and IMAKE Software and Services, Inc.
("IMAKE") in January 2000 (see note 2). The Company added to its technology
offerings later in the year with the acquisitions of Exactis.com ("Exactis") and
Website Results ("WSR")(see note 2).

The Company's business is characterized by rapid technological change, new
product development and evolving industry standards. Inherent in the Company's
business are various risks and uncertainties, including its limited operating
history, unproven business model and the limited history of commerce and
advertising on the Internet. The Company's success may depend, in part, upon the
continued expansion of the Internet as a communications medium, prospective
product development efforts and the acceptance of the Company's solutions by the
marketplace.

The Company's independent public accountants have included a "going concern"
explanatory paragraph in their audit report accompanying the 2000 consolidated
financial statements which have been prepared assuming that the Company will
continue as a going concern. The explanatory paragraph states that the Company's
recurring losses from operations since inception raise substantial doubt about
the Company's ability to continue as a going concern and that the consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Management believes that its current cash and cash equivalents may not be
sufficient to meet its anticipated operating cash needs for the next 12
months commencing January 1, 2001 and there can be no assurance that new
funds can be secured on commercially reasonable terms acceptable to the
Company, when needed, or at all. Management believes that, despite the
financial hurdles and funding uncertainties going forward, it has a business
plan that, if successfully funded and executed, can improve operating results
and the Company's subsequent cash requirements. Management also believes that
the support of the Company's vendors, customers, stockholders and

                                       F-8

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

employees, among others, continue to be key factors affecting the Company's
future success. Management's plan to continue as a going concern relies heavily
on achieving revenue targets, further rationalizations, its ability to monetize
its non-core assets which includes selling certain divisions and/or raising
additional financing, as well as, reducing its operating expenses. In addition,
management is currently exploring a number of strategic alternatives and is also
continuing to identify and implement internal actions to improve the Company's
liquidity. These alternatives may include selling core assets which could result
in significant changes in its business plan. The Company has limited operating
capital and no current access to credit facilities. The Company's continued
operations therefore will depend on its ability to raise additional funds
through sale of certain divisions, bank borrowings or equity or debt financing.
There can be no assurance that the Company will be able to sell additional
equity or issue debt securities in the future or that additional financing will
be available to the Company on commercially reasonable terms, when needed, or at
all.

Organization and Basis of Presentation

The Company was incorporated in Delaware on January 23, 1998 as a wholly owned
subsidiary of Interactive Imaginations, Inc. On February 25, 1998, pursuant to
an Agreement and Plan of Merger dated February 2, 1998, the Company
simultaneously consummated the merger of each of Petry and Advercomm with and
into the Company (the mergers, together with the concurrent investment of
approximately $10.0 million by certain third party investors as well as with an
existing investor of Interactive Imaginations, the "Initial Merger"). Effective
February 25, 1998, 24/7 Media commenced operation of The 24/7 Network, a network
of high profile Web sites to which advertisements are served. On April 9, 1998,
Interactive Imaginations (24/7 Media's then parent) was merged with and into the
Company in a manner similar to a pooling of interests.

In connection with the Initial Merger, Interactive Imaginations entered into a
Securities Purchase Agreement, dated February 25, 1998, with certain investors
(including David J. Moore, the Company's President and Chief Executive Officer),
for the sale and issuance of preferred shares and warrants in a private
placement for total proceeds of $10,060,002, of which the preferred shares
automatically converted into 2,641,849 shares of common stock at a conversion
price of approximately $3.81 per share upon consummation of the Company's
initial public offering in August 1998 (the "IPO"). For each $10,000 invested,
the investors received 10,000 shares of Series A Preferred Stock, approximately
1,313 Class A Warrants, exercisable into common stock at an exercise price of
$7.62 per share, and approximately 1,313 Class B Warrants, exercisable into
common stock at an exercise price of $11.42 per share. Also in connection with
the Initial Merger, Interactive Imaginations entered into a Shareholders'
Agreement, dated February 25, 1998, among The Travelers Insurance Company (an
existing investor in Interactive Imaginations), Prospect Street NYC Discovery
Fund, L.P., Big Flower Digital Services, Inc. and certain individual investors
(the "Shareholders' Agreement"), which included standard terms and conditions
and provided these shareholders with a right to elect three members of the seven
member board of directors of the Company and a right of first refusal with
respect to transfers of Company securities. The Shareholders' Agreement was
terminated in its entirety upon the consummation of the IPO. In connection with
the Initial Merger, certain shareholders of the Company were granted
registration rights with respect to their shares of common stock. In connection
with the Initial Merger, no single former shareholder group obtained more than
50

                                      F-9

<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

percent of the outstanding shares of the Company. However, the Company's former
common shareholder interest group received the largest portion of the voting
rights in the combined entity and, therefore, was deemed to be the accounting
acquirer.

Principles of Consolidation

The Company's consolidated financial statements as of December 31, 2000 and 1999
and for each of the years in the three year period ended December 31, 2000
include the accounts of the Company and its majority-owned and controlled
subsidiaries from their respective dates of acquisition (see note 2). The
interest of shareholders other than those of the Company is recorded as minority
interest in the accompanying consolidated statements of operations and
consolidated balance sheets. When losses applicable to minority interest holders
in a subsidiary exceed the minority interest in the equity capital of the
subsidiary, these losses are included in the Company's results, as the minority
interest holder has no obligation to provide further financing to the
subsidiary. All significant intercompany transactions and balances have been
eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. These estimates and assumptions relate to
estimates of collectibility of accounts receivable, the realization of goodwill
and other intangible assets, accruals and other factors. Actual results could
differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid securities, with original maturities of
three months or less, to be cash equivalents. Cash and cash equivalents
consisted principally of money market accounts. At December 31, 2000, cash and
cash equivalents includes $0.8 million in restricted cash, related to leases,
that becomes available within the next year. In addition, there is $2.4 million
related to these leases that becomes available at varying dates through December
31, 2002, which are included in other assets on the consolidated balance sheet.
As of December 31, 2000 and 1999, the Company maintained $0.6 million and $0.1
million, respectively, in letters of credit.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
generally three to five years. Leasehold improvements are amortized using the
straight-line method over the estimated useful lives of the assets or the term
of the leases, whichever is shorter. Leased property meeting certain criteria is
capitalized and the present value of the related lease payments is recorded as a
liability. Amortization of capitalized leased assets is computed on the
straight-line method over the term


                                      F-10

<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


of the leases or the estimated useful lives of the assets, whichever is shorter.

Intangible Assets

Goodwill and intangible assets relate to the Company's acquisitions accounted
for under the purchase method of accounting. Under the purchase method of
accounting, the excess of the purchase price over the identifiable net tangible
assets of the acquired entity is recorded as identified intangible assets and
goodwill. Intangible assets are estimated by management to be primarily
associated with the acquired workforce, contracts, technological know how and
goodwill. As a result of the rapid technological changes occurring in the
Internet industry and the intense competition for qualified Internet
professionals and customers, recorded intangible assets are amortized on the
straight-line basis over the estimated period of benefit, which is two to four
years (see notes 2 and 3).

Capitalized Software

In accordance with American Institute of Certified Public Accountants' Statement
of Position No. 98-1, Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use ("SOP No. 98-1"), the Company requires all costs
related to the development of internal use software other than those incurred
during the application development stage to be expensed as incurred. SOP No.
98-1 also provides guidance on the capitalization of costs incurred during the
application development stage for computer software developed or obtained for
internal use. As of December 31, 2000, the Company has capitalized approximately
$16.6 million in connection with the 24/7 Connect ad serving system, of which
$5.3 million and $11.3 million was capitalized during the years ended December
31, 2000 and 1999, respectively. Capitalized computer software is depreciated
using the straight-line method over the estimated useful life of the software,
generally 4 years.

Investments

The Company accounts for investments in marketable securities in accordance with
Statements of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Available-for-sale securities are
carried at fair value, with the unrealized gains or losses, net of tax, reported
as a separate component of stockholders' equity. Realized gains and losses and
the cost of available-for-sale securities sold are computed on the basis of the
specific identification method. Realized gains and losses and declines in value
judged to be other-than-temporary, are included in impairment of investments.

Investments in non-marketable equity securities of companies in which the
Company owns less than 20% of a company's stock and does not have the ability to
exercise significant influence are accounted for on the cost basis. Such
investments are stated at the lower of cost or market value. On an ongoing
basis, the Company assesses the need to record impairment losses on investments
and records such losses when the impairment is determined to be
other-than-temporary (see notes 4 and 16).

Income Taxes


                                      F-11

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


The Company accounts for income taxes using the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in results of operations in
the period that the tax change occurs.

Deferred Revenue

Deferred revenue consists of prepaid advertising fees, although the majority of
the Company's advertising customers generally pay after the services have been
provided. For deferred revenue related to Sony, see note 10.

Foreign Currency Translation

Assets and liabilities denominated in foreign functional currencies are
translated at the exchange rate as of the balance sheet date. Translation
adjustments are recorded as a separate component of stockholders' equity.
Revenues, costs and expenses denominated in foreign functional currencies are
translated at the weighted average exchange rate for the period. The Company's
translation adjustment was $380,000, $0 and $0 for the years ended December 31,
2000, 1999, and 1998 respectively.

Revenue and Expense Recognition

MEDIA
The Company's network revenues are derived principally from short-term
advertising agreements in which it delivers advertising impressions for a fixed
fee to third-party Web sites comprising the 24/7 Network. Revenues from
advertising are recognized in the period the advertising impressions are
delivered provided that no significant Company obligations remain outstanding
and collection of the resulting receivable is probable.

Third party Web sites that register Web pages with the Company's networks and
display advertising banners on those pages are commonly referred to as
"Affiliated Web sites." These third party Web sites are not "related party"
relationships or transactions as defined in Statement of Financial Accounting
Standards No. 57, "Related Party Disclosures." The Company pays Affiliated Web
sites a fee for providing advertising space to the Company's networks. The
Company becomes obligated to make payments to such Affiliated Web sites, which
have contracted to be part of the Company's networks, in the period the
advertising impressions are delivered. Such expenses are classified as cost of
revenues in the consolidated statements of operations.


                                      F-12

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


EMAIL
The Company's email related revenues are derived principally from short-term
delivery based agreements in which the Company delivers advertisements to email
lists for advertisers and Web sites. Revenues are recognized as services are
delivered provided that no significant Company obligations remain outstanding
and collection of the resulting receivable is probable..

The Company also has agreements with various list owners in which the Company
services its advertisers and other customers through the use of these lists.
Revenues are recognized as services are delivered provided that no significant
Company obligations remain outstanding and collection of the resulting
receivable is probable. The royalties paid for the use of these email lists are
classified as cost of revenues.

TECHNOLOGY
The Company's technology revenues are derived from adserving, software
consulting, service, development and maintenance contracts. Revenues under fixed
price contracts are recognized on a percentage of completion basis based on
labor hours incurred to total estimated contract hours. Revenues under time and
materials contracts are recognized as the hours are incurred. Fixed monthly
maintenance contracts are recognized in the corresponding months. Service
revenue is derived from driving traffic to a client website or the delivery of
email messages for clients and is recognized upon delivery. For revenue
recognition related to Sony, see note 10.

At December 31, 2000 and 1999, accounts receivable included approximately $4.0
million and $7.8 million, respectively, of unbilled receivables, which are a
normal part of the Company's business, as receivables are generally invoiced
only after the revenue has been earned. The decrease in unbilled receivables
from December 31, 1999 to December 31, 2000 resulted from the decrease in
revenues generated in the fourth quarter of 2000. The terms of the related
advertising contracts typically require billing at the end of each month. All
unbilled receivables as of December 31, 2000 have been subsequently billed.

Product Development Costs

Product development costs and enhancements to existing products are charged to
operations as incurred.

Stock-Based Compensation

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of APB No. 25, "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost
is recognized based on the difference, if any, on the date of grant between the
fair value of the Company's common stock and the amount an employee must pay to
acquire the common stock.

In April 2000, the FASB issued FASB interpretation No. 44, (`FIN 44') Accounting
for Certain Transactions Involving Stock Compensation - an interpretation of APB
Opinion No. 25. This

                                      F-13

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


interpretation, which is effective from July 1, 2000, is intended to clarify
certain problems that have arisen in practice since the issuance of APB 25
including the definition of employee for the purpose of applying APB 25, the
criteria for determining whether a plan qualifies as a non-compensatory plan,
the accounting consequence of various modifications to the terms of a previously
fixed stock option award and the accounting for an exchange of stock
compensation awards in a business combination. The adoption of FIN 44 did not
have a material impact on the Company's consolidated financial statements,
except for the accounting for exchanges of stock compensation awards in its
business combinations (see note 2)

The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the equity instruments issued in accordance with the EITF
96-18, Accounting For Equity Instruments That Are Issued To Other Than Employees
For Acquiring, or in Conjunction With Selling, Goods or Services.

Impairment of Long-Lived Assets

The Company assesses the need to record impairment losses on long-lived assets,
including fixed assets, goodwill and other intangible assets, to be held and
used in operations whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, the Company estimates the undiscounted future cash flows to result
from the use of the asset and its ultimate disposition. If the sum of the
undiscounted cash flows is less than the carrying value, the Company recognizes
an impairment loss, measured as the amount by which the carrying value exceeds
the fair value of the asset. Assets to be disposed of are carried at the lower
of the carrying value or fair value less costs to sell.

On an on-going basis, management reviews the value and period of amortization or
depreciation of long-lived assets, including goodwill and other intangible
assets. During this review, the Company reevaluates the significant assumptions
used in determining the original cost of long-lived assets. Although the
assumptions may vary from transaction to transaction, they generally include
revenue growth, operating results, cash flows and other indicators of value.
Management then determines whether there has been an impairment of the value of
long-lived assets based upon events or circumstances, which have occurred since
acquisition. The impairment policy is consistently applied in evaluating
impairment for each of the Company's wholly owned subsidiaries and investments.

In 2000, the Company wrote off $500.2 million in goodwill and intangible assets
(see note 3). It is reasonably possible that the impairment factors evaluated by
management will change in subsequent periods, given that the Company operates in
a volatile business environment. This could result in significant additional
impairment charges in the future.

Restructuring Activities

Restructuring activities are accounted for in accordance with the guidance
provided in the consensus opinion of the Emerging Issues Task Force ("EITF") in
connection with EITF Issue


                                      F-14

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


94-3 ("EITF 94-3"). EITF 94-3 generally requires, with respect to the
recognition of severance expenses, management approval of the restructuring
plan, the determination of the employees to be terminated, and communication of
benefit arrangement to employees (see note 5).

Advertising Expense

The Company expenses the cost of advertising and promoting its services as
incurred. Such costs are included in sales and marketing on the statement of
operations and totaled $8.7 million, $2.6 million and $1.4 million for the years
ended December 31, 2000, 1999 and 1998, respectively.

Comprehensive Income (Loss)

Comprehensive income is presented in the consolidated statement of
stockholders' equity. Total comprehensive income (loss) for the year ended
December 31, 2000 and 1999 was $(971.3) million and $155.7 million,
respectively. Comprehensive loss resulted primarily from net losses of
$(779.9) million and $(39.1) million, respectively, as well as a change in
unrealized gains (losses), net of tax, of marketable securities of $(191.0)
million and $194.8 million, respectively, and foreign currency translation
adjustments of $(0.4) million in 2000. The net change in unrealized gains
(losses) for the year ended December 31, 2000 of $(191.0) million is
comprised of net unrealized holding losses arising during the period of
$215.6 million related to chinadotcom, a reclassification adjustment of $52.1
million for gains on the sale of chinadotcom and a reclassification
adjustment of $27.5 million for other-than-temporary losses related to
available-for-sale securities of Network Commerce and i3Mobile. The net
change in unrealized losses for the year ended December 31, 1999 of $194.8
million is due, solely to unrealized holding gains net of tax related to
chinadotcom. There was no difference between the Company's comprehensive
loss and its net loss for the year ended December 31, 1998.

Financial Instruments and Concentration of Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents, accounts
receivable, certain investments, accounts payable and accrued liabilities. At
December 31, 2000 and 1999, the fair value of these instruments approximated
their financial statement carrying amount because of the short term maturity of
these instruments. Substantially all of the Company's cash equivalents were
invested in money market accounts and other highly-liquid instruments. For the
years ended December 31, 2000 and 1999, the Company derived $46.5 million and
$6.8 million, respectively, in revenue denominated in foreign currencies. The
Company has not experienced any material adverse impact due to fluctuations in
foreign currency rates.

No single customer accounted for a material portion (>10%) of total revenues for
the years ended December 31, 2000 and 1999. For the year ended December 31,
1998, one customer accounted for approximately 13% of the Company's total
revenue. No single customer accounted for a material portion (>10%) of the
accounts receivable balance at December 31, 2000 or December 31, 1999.  The
Company generally requires no collateral. The Company maintains reserves for
potential credit losses; historically, management believes that such losses
have been adequately reserved for.

                                      F-15


<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


Loss Per Share

Loss per share is presented in accordance with the provisions of Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("EPS"). Basic EPS
excludes dilution for potentially dilutive securities and is computed by
dividing income or loss available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock and resulted in the
issuance of common stock. Diluted net loss per share is equal to basic net loss
per share since all potentially dilutive securities are anti-dilutive for each
of the periods presented. Diluted net loss per common share for the year ended
December 31, 2000, 1999 and 1998 does not include the effects of options to
purchase 6.9 million, 3.3 million and 1.7 million shares of common stock,
respectively; 2.9 million, 3.3 million and 3.8 million common stock warrants,
respectively, on an "as if" converted basis, as the effect of their inclusion is
anti-dilutive during each period.

Net loss applicable to common stockholders for the year ended December 31,
1998 has been increased to give effect to $276,000 of cumulative dividends on
mandatorily redeemable convertible preferred stock through the date of its
conversion into common stock with the Company's IPO in August 1998.
Reclassifications

Certain reclassifications have been made to prior year consolidated financial
statements to conform to current year's presentation.

(2)  BUSINESS COMBINATIONS

Acquisitions of Petry and Advercomm

On February 25, 1998, in connection with the Initial Merger, the Company
acquired all of the outstanding stock of Petry and Advercomm in separate
transactions in exchange for 2,623,591 and 1,705,334 shares of the Company's
common stock. The fair value of each share of common stock issued was estimated
to be $1.60, which was supported by an independent valuation of the Company's
common stock as of February 25, 1998. The acquisitions have been accounted for
using the purchase method of accounting, and accordingly, the purchase price has
been allocated to the tangible and identifiable intangible assets acquired and
liabilities assumed on the basis of their fair values on the acquisition date.
The acquisitions have been primarily structured as tax free exchanges of stock;
therefore, the differences between the recognized fair value of the acquired
assets, including intangible assets, and their historical tax bases is not
deductible for income tax purposes.

Acquisition of Intelligent Interactions

During April 1998, the Company entered into an Agreement and Plan of Merger (the
"II Merger") to acquire all of the outstanding stock of Intelligent
Interactions.


                                      F-16

<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


Upon consummation of the II Merger, each share of common stock of Intelligent
Interactions was converted into approximately 16.3 shares of common stock, 2.3
Class A Warrants, 2.3 Class B Warrants and 1.2 Class C Warrants of the Company.
Therefore, the Company issued 949,242 shares of common stock, 265,212 of Class A
Warrants, 265,212 of Class B Warrants and 136,553 of Class C Warrants. The
warrants have exercise prices of $7.62, $11.42 and $3.81 per share,
respectively, and expire in five years.

The Company's Class A, B, and C Warrants were determined to have a fair value of
$0, $0, and $0.72 per share, respectively, using the Black-Scholes option
pricing model and supported by an independent valuation of the Warrants issued
in the transaction.

Each share of Preferred Stock, Series A Preferred Stock, Series AA Preferred
Stock or Series AAA Preferred Stock of Intelligent Interactions was converted
into approximately 18 shares of Mandatorily Redeemable Convertible Preferred
Stock-Series A, par value $.01 per share, 2.7 Class A Warrants, 2.7 Class B
Warrants and 1.4 Class C Warrants of the Company. Total Mandatorily Redeemable
Convertible Preferred Shares issued were 3,561,505 shares which converted into
0.2626 shares of the Company's common stock, or 935,269 shares of common stock
in connection with the Company's IPO. Each shareholder of record of the
Mandatorily Redeemable Convertible Shares had the right to cause the Company to
redeem at the option of the shareholder all or part of the shareholder's
outstanding shares by paying cash of $1.00 per share plus accrued dividends no
later than the fifth anniversary of the original issue date. The convertible
note payable was also converted into Mandatorily Redeemable Convertible
Preferred Stock-Series A and detachable warrants were terminated as a result of
the merger.

Additionally, the Company assumed 212,804 stock options for the purchase of
common stock in accordance with the II Merger. The stock options have exercise
prices ranging from $0.16 to $0.48, as defined in the II Merger Agreement, and
expire in no more than 10 years.

The acquisition has been accounted for using the purchase method of accounting.
Based upon an independent appraisal, $5,000,000 of the purchase price was
allocated to in-process technology and was immediately charged to operations
because such in-process technology had not reached the stage of technological
feasibility at the acquisition date and had no alternative future use. The fair
value of the Company's equity securities issued as consideration for the
Intelligent Interactions acquisition was determined based upon a number of
factors, including the sale of 10,060,002 shares of Mandatorily Convertible
Redeemable Preferred Stock-Series A on February 25, 1998 (excluding detachable
warrants) for $10,060,002 in cash. The fair value of the Company's Mandatorily
Convertible Redeemable Preferred Stock was estimated to be $1.06 per preferred
share ($4.24 per common share on an as if converted basis) and its common stock
at $4.00 per share. The higher fair value attributable to the Mandatorily
Convertible Preferred Shares versus common shares is due to the convertible
feature of the Preferred Shares.

Acquisition of CliqNow!

As of June 1, 1998, the Company acquired the CliqNow! division of K2 Design,
Inc., an Internet advertising network comprised of medium to large Web sites
organized into eight topical channels, for $4,240,000, plus acquisition costs of
$96,000, with $1,240,000 payable in cash and

                                      F-17

<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


$3,000,000 payable in Series B Convertible Redeemable Preferred Stock ("Series
B"). The Company issued 3,000 shares of Preferred Stock which, by its terms,
automatically converted into 230,415 shares of common stock upon consummation of
the IPO, at the IPO price per share, net of the underwriting discount, or $13.02
per share, which was deemed to be the fair value of the securities.

Acquisition of CardSecure

On December 29, 1998, the Company acquired an initial 67% ownership stake (on an
as converted basis) in CardSecure, Inc., a company which provides eCommerce
enabling technology as well as Web site hosting services, through a $500,000
cash investment. The Company's investment in CardSecure was conveyed as part of
the consideration for its investment in Network Commerce (formerly Shopnow.com)
(see note 4).

Acquisitions of InterAd and Netbookings

On January 20, 1999, the Company invested $3.9 million in the aggregate to
purchase a 60% interest in 24/7 Media Europe, Ltd. (formerly InterAd Holdings
Limited), which operates The 24/7 Media Europe Network. Approximately $1.9
million was paid in cash to acquire shares directly from 24/7 Europe. The
remaining balance included $1.2 million which was used to acquire shares from
existing shareholders and $846,000 in cash which was subsequently used to repay
a loan payable. On June 22, 1999, the Company made an additional investment of
$500,000 in the common stock of 24/7 Media Europe.

In August of 1999, the Company issued approximately 41,677 shares and 24/7 Media
Europe issued shares to acquire Netbooking, a Finnish Internet advertising
company, which diluted the Company's investment in 24/7 Media Europe to 58% as
of December 31, 1999.

On January 1, 2000, the Company acquired the remaining interest in 24/7 Media
Europe through the issuance of common stock. The Company issued 428,745 shares
of 24/7 Media common stock, valued at approximately $24.1 million, resulting in
additional goodwill and other intangible assets of $24.1 million. The goodwill
and other intangible assets are being amortized over the remaining period of
benefit of three years.

Acquisition of Sift

On March 8, 1999, 24/7 Media acquired Sift, Inc., a provider of email based
direct marketing services, for approximately 763,000 shares of 24/7 Media's
common stock plus the assumption of previously-outstanding stock options which
were converted into options to acquire approximately 100,000 shares of the
Company's common stock.

The acquisition of Sift has been accounted for as a pooling-of-interests and,
accordingly, the Company's historical consolidated financial statements have
been restated to include the accounts and results of operations of Sift. The
results of operations previously reported by the separate businesses and the
combined amounts presented in the accompanying consolidated financial statements
are presented below.


                                      F-18

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


                                                  1998
                                             -------------
                                             (in thousands)
Net revenues:
24/7 Media ..................................   $ 19,863
Sift ........................................      1,003
                                                --------
Combined ....................................   $ 20,866
                                                ========

Net loss attributable to common shareholders:
24/7 Media ..................................   $(24,999)
Sift ........................................       (434)
                                                --------
Combined ....................................   $(25,433)
                                                --------


The Company restated its results of operations for the years ended December 31,
1998 by combining Sift's financial statements for the year ended August 31, 1998
(Sift's fiscal year end) with 24/7 Media's consolidated financial statements for
the year ended December 31, 1998. The Company restated the consolidated balance
sheet as of December 31, 1998 to include 24/7 Media's balance sheet and Sift's
balance sheet as of December 31, 1998. An adjustment was also made to
stockholders' equity as of December 31, 1998 to record Sift's results of
operations for Sift's quarter ended November 30, 1997 and one month ended
December 31, 1998. The equity accounts of the separate entities were combined.
As the common stock and additional paid in capital accounts of the combining
enterprise exceeded the par value of the common stock issued in the business
combination, the excess was added to our additional paid in capital. There were
no significant transactions between the Company and Sift prior to the
combination.

Acquisition of ClickThrough

On July 26, 1999, the Company acquired ClickThrough Interactive
("ClickThrough"), a leading Canadian Internet advertising sales network. The
acquisition was accomplished through the issuance of 150,000 redeemable
non-voting preferred shares of the Company's subsidiary and a cash payment of
$750,000. The subsidiary's redeemable non-voting preferred shares are
exchangeable into an equal number of shares of the Company's common stock at the
option of the holders or the Company, of which 76,875 have been converted
through of December 31, 2000.

Acquisition of ConsumerNet

On August 17, 1999, the Company acquired Music Marketing Network Inc. d/b/a
ConsumerNet ("ConsumerNet"), a leading provider of email marketing solutions.
The aggregate purchase price of approximately $52.0 million consists of
approximately 1.7 million shares of 24/7 Media common stock valued at
approximately $47.0 million, $3.2 million in cash (including acquisition costs
of $320,000) and the assumption of previously outstanding options. The fair
value of the options of approximately $1.8 million was determined using the
Black-Scholes option pricing model.


                                      F-19

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

Acquisition of IMAKE

On January 13, 2000, the Company acquired IMAKE, a provider of technology
products that facilitate the convergence of Internet technologies with broadband
video programming. The purchase price of approximately $34.7 million, excluding
contingent consideration of 916,000 shares, consists of 400,000 shares
originally valued at approximately $18.7 million, fair value of options assumed
of $9.9 million, $5.8 million of deferred compensation and $0.3 million in
acquisition costs. The deferred compensation relates to 124,000 shares of
restricted stock issued to employees of IMAKE. The contingent shares will be
issued when certain revenue targets are attained, as amended. The valuation of
in-process technology of $4.7 million in connection with the acquisition of
IMAKE is based on an independent appraisal which determined that the e.merge
technology acquired from IMAKE had not been fully developed at the date of
acquisition. As a result, the Company will be required to incur additional costs
to successfully develop and integrate the e.merge platform. The remaining
purchase price in excess of the value of identified assets and liabilities
assumed of $24.9 million has been allocated $1.0 million to workforce and $23.9
million to goodwill. Goodwill and workforce are being amortized over their
expected period of benefit which is four years for goodwill and two years for
workforce. The acquisition was accounted for as a purchase business combination,
effective as of January 1, 2000, for accounting purposes.

On July 20, 2000, the Company issued 880,000 contingent shares. The shares had a
value of $11.9 million, which was considered additional goodwill. At September
30, 2000, an additional 18,000 contingent shares were earned pursuant to the
agreement, resulting in $0.2 million of additional goodwill. The additional
amounts of goodwill are being amortized over the remaining period of benefit.

Acquisition of Sabela

On January 9, 2000, the Company acquired Sabela, a global ad serving, tracking
and analysis company with products for online advertisers and Web publishers.
The purchase price of approximately $65.0 million consists of approximately 1.2
million shares of 24/7 Media common stock valued at approximately $58.3 million,
cash consideration of $2.1 million, fair value of warrants assumed of $1.2
million, fair value of options assumed of $1.7 million and $1.7 million in
acquisition costs. The purchase price in excess of the value of identified
assets and liabilities assumed of $64.7 million has been allocated $7.1 million
to technology, $1.1 million to workforce and $56.5 million to goodwill. Goodwill
and other intangible assets are being amortized over their expected period of
benefit which is four years for goodwill and technology; and two years for
workforce. The acquisition was accounted for as a purchase business combination,
effective as of January 1, 2000, for accounting purposes.

Acquisition of AwardTrack

On February 11, 2000, the Company acquired AwardTrack, Inc. ("AwardTrack"),
which offers a private label loyalty customer relationship management program
that enables Web retailers and content sites to issue points to Web users as a
reward for making purchases, completing surveys


                                      F-20

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

or investigating promotions. The purchase price of approximately $69.3 million
consists of approximately 1.1 million shares of 24/7 Media common stock valued
at approximately $64.0 million, fair value of options assumed of $4.6 million
and $0.7 million in acquisition costs. The purchase price in excess of the value
of identified assets and liabilities assumed of $69.4 million has been allocated
$7.7 million to technology, $0.5 million to tradename, $0.4 million to workforce
and $60.8 million to goodwill. Goodwill and other intangible assets are being
amortized over their expected period of benefit which is four years for
goodwill, technology and tradename; and two years for workforce. The acquisition
was accounted for as a purchase business combination effective as of February
11, 2000 for accounting purposes.

Acquisition of Exactis

On June 28, 2000, the Company acquired all of the outstanding common stock of
Exactis.com, Inc., a provider of email based direct marketing services, in
exchange for Company common stock. Exactis.com stockholders received shares of
24/7 Media common stock based on an exchange ratio of 0.6 shares of 24/7 Media
common stock for each share of Exactis.com common stock. The purchase price of
approximately $475.6 million consists of approximately 8.2 million shares of
24/7 Media common stock valued at approximately $383.0 million, fair value of
options assumed of $82.9 million, fair value of warrants assumed of $2.3
million, deferred compensation of $2.9 million and acquisition costs of $4.5
million. The purchase price in excess of the value of identified assets and
liabilities assumed of $428.8 million has been allocated $60.8 million to
technology, $1.0 million to tradename, $3.2 million to workforce, $2.1 million
to customer base and $361.7 million to goodwill. Goodwill and other intangible
assets are being amortized over their expected period of benefit which is four
years for goodwill, technology, customer base and tradename; and two years for
workforce. The acquisition was accounted for as a purchase business combination
effective as of June 30, 2000 for accounting purposes.

Acquisition of WSR

On August 24, 2000, the Company acquired WSR, which engages in the business of
delivering targeted search traffic on behalf of its clients. The purchase price
of approximately $66.7 million, excluding contingent consideration of 2.8
million shares, consists of approximately 4.3 million shares of 24/7 Media
common stock valued at approximately $61.3 million, fair value of options
assumed of $4.1 million and acquisition costs of $1.3 million. The purchase
price in excess of the value of identified assets acquired of $63.0 million has
been allocated $1.1 million to deferred compensation and $61.9 to goodwill which
is being amortized over its expected period of benefit of four years. The
acquisition was accounted for as a purchase business combination.

Acquisition of Kendro Communications

On April 1, 2000, 24/7 Media Europe NV a subsidiary of the Company acquired
Kendro Communications, a Swiss based banner network service, for
approximately 26,000 shares of the Company's common stock valued at
approximately $487,000, excluding contingent consideration of up to $6.7
million to be paid in the Company's common stock subject to performance
standards and other contractual requirements. The performance standards are

                                      F-21
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

based on revenues of the acquired business for the fiscal years ended March 31,
2001 and 2002, and the price of the Company's common stock at March 31, 2001 and
2002, respectively, and will be payable by 24/7 Europe within fourteen days
after the delivery of audited revenue statements provided that the sellers are
employees of the Company (see note 16).

Acquisition of iPromotions

On April 17, 2000, the Company acquired iPromotions, Inc., a Seattle based
promotions and sweepstakes management firm. The purchase price of $3.5 million
consists of $2.0 million in cash, approximately 33,000 shares of common stock
valued at approximately $654,000, fair value of options assumed of $736,000 and
$100,000 in acquisition costs.

Summary

Except for Sift, each of the Company's acquisitions, and the purchase of the
remaining interest in Europe have been accounted for using the purchase method
of accounting, and accordingly, each purchase price has been allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed on
the basis of their fair values on the respective acquisition dates. The
following summarizes the purchase price allocation for each of the acquisitions:


                                      F-22
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)

                           DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                       NET TANGIBLE
                                        ACQUISITION      ASSETS       IN-PROCESS      DEFERRED     INTANGIBLES/    USEFUL LIFE
      ACQUIRED ENTITY                      COSTS      (LIABILITIES)   TECHNOLOGY    COMPENSATION     GOODWILL         (IN YEARS)
-------------------------------------   -----------   -------------   ----------    ------------   ------------    -------------
<S>                                     <C>           <C>             <C>           <C>            <C>             <C>

YEAR ENDED DECEMBER 31, 1998:
Petry ...............................     $  4,293       $(1,635)       $  -           $  -          $  5,928              2
Advercomrn ..........................        2,291            85           -              -             2,706              2
Intelligent Interactions ............        7,671          (154)        5,000            -             2,825              2
C1iqNow! ............................        4,336           160           -              -             4,176              2
Card Secure .........................          500          (522)          -              -             1,022              3
                                          --------       -------       ------          ------        --------
                                          $ 19,591       $(2,066)      $5,000          $  -          $ 16,657
                                          ========       =======       ======          ======        ========

YEAR ENDED DECEMBER 31, 1999:
InterAd (24/7 Media Europe) .........     $  1,991       $  (725)      $  -            $  -          $  2,716              4
Less: Sale of Card Secure ...........         (500)          522          -               -            (1,022)             3
C1ickThrough ........................        5,875           (69)         -               -             5,944              3
ConsurnerNet ........................       52,043        (1,015)         -               -            53,058              4
Netbookings .........................        5,748            26          -               -             5,722              3
                                          --------       -------       ------          ------        --------
                                          $ 65,157       $(1,261)      $  -            $  -          $ 66,418
                                          ========       =======       ======          ======        ========
YEAR ENDED DECEMBER 31, 2000:
IMAKE ...............................     $ 46,750       $  (793)      $4,700          $5,785        $ 37,058             2-4
24/7 Media Europe ...................       24,117          -             -               -            24,117              3
Sabela ..............................       65,026           317          -               -            64,709             2-4
AwardTrack ..........................       69,293           (82)         -               -            69,375             2-4
Exactis .............................      475,636        43,939          -             2,870         428,827             2-4
WSR .................................       66,675         3,720          -             1,072          61,883              4
Kendro ..............................          527            17          -               -               510              4
iPromotions .........................        3,489          (127)          97             -             3,519             2-4
                                          --------       -------       ------          ------        --------
                                          $751,513       $46,991       $4,797          $9,727        $689,998
                                          ========       =======       ======          ======        ========
</TABLE>

The following unaudited pro forma consolidated amounts give effect to the
Company's 2000 and 1999 acquisitions accounted for by the purchase method of
accounting as if they had occurred at the beginning of the respective period by
consolidating the results of operations of the acquired entities for the year
ended December 31, 2000 and 1999.

The unaudited pro forma consolidated statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods presented
and should not be construed as being representative of future operating results.

<TABLE>
<CAPTION>
                                                             Year Ended           Year Ended
                                                            December 31,         December 31,
                                                                2000                 1999
                                                           --------------       --------------
                                                           (in thousands except per share data)
<S>                                                        <C>                  <C>

     Total Revenue ....................................     $   204,441          $   116,175
     Net loss .........................................        (858,483)            (235,919)
     Net loss attributable to common shareholders .....        (858,483)            (235,919)
     Net loss per common share ........................     $    (20.23)         $     (6.12)
     Weighted average common shares used in
        net loss per share calculation(1) .............      42,432,076           38,543,346
</TABLE>


                                      F-23
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

(1) The weighted average common shares used to compute pro forma basic and
diluted net loss per common share for the period ended December 31, 2000
includes the 1,129,344, 1,249,487, 898,000, 8,156,843, and 4,260,000 shares
issued for AwardTrack, Sabela, IMAKE, Exactis and WSR, respectively as if the
shares were issued on January 1, 2000. The weighted average common shares used
to compute pro forma basic and diluted net loss per common share for the period
ended December 31, 1999 includes the actual weighted average common shares
outstanding for the historical period ended December 31, 2000, plus the
1,738,330, 41,677, 428,745, 1,422,000, 1,249,487, 1,129,344, 8,156,843 and
4,260,000 common shares issued in connection with each of the acquisitions of
ConsumerNet, Netbookings, 24/7 Media Europe, IMAKE, Sabela, AwardTrack, Exactis
and WSR, respectively, as if each acquisition occurred on January 1, 1999.

Merger Related Costs

Merger related costs for the year ended December 31, 2000 shown separately on
the consolidated statement of operations include a $4.7 million write-off of
in-process technology associated with the IMAKE acquisition and approximately
$0.8 million of integration related costs. Merger related costs in 1998 relate
to in-process technology acquired with Intelligent Interactions, which was
immediately charged to operations because such in-process technology had not
reached the state of technological feasibility at the acquisition date and had
no alternative future use.

(3)  BALANCE SHEET COMPONENTS

Property and Equipment, Net

                                                    December 31
                                                 ----------------
                                                 2000        1999
                                                 -----       ----
                                                  (in thousands)

      Computer equipment...................   $ 26,525     $ 8,224
      Ad serving system....................     24,098      11,306
      Furniture and fixtures...............      5,672       1,529
      Leasehold improvements...............      3,579       1,454
                                              --------     -------
                                                59,874      22,513
      Less accumulated depreciation and
       amortization........................    (14,337)     (3,918)
                                              --------     -------
                                              $ 45,537     $18,595
                                              ========     =======

At December 31, 2000 and 1999, computer equipment includes equipment with a cost
of $0.5 million and $0.2 million, respectively, acquired under a capital lease
(see note 13). The net book value of the related equipment at December 31, 2000
and 1999 was $0.4 million and $0.1 million, respectively.

Intangible Assets, Net
The Company's management performs on-going business reviews and, based on
quantitative and qualitative measures, assesses the need to record impairment
losses on long-lived assets used in operations when impairment indicators are
present. Where impairment indicators were identified,


                                      F-24
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

management determined the amount of the impairment charge by comparing the
carrying values of goodwill and other long-lived assets to their fair values.

Through August 2000, the Company completed numerous acquisitions that were
financed principally with shares of the Company's common stock, and were valued
based on the price of the Company's common stock at that time (see note 2).
During the fourth quarter of 2000, the Company reevaluated the carrying value of
its businesses. The Company's revaluation was triggered by the continued
decline in the Internet Advertising and marketing sectors throughout 2000. In
addition, each of these entities had experienced significant and continuing
declines in operating and financial metrics over the last two quarters of
2000, primarily due to the continued weak overall demand of on-line
advertising and marketing services, in comparison to the metrics forecasted
at the time of their respective acquisitions. These factors significantly
impacted current projected revenue generated from these businesses. The
Company's evaluation of impairment was also based on achievement of the
unit's business plan objectives and milestones, the fair value of each
business unit relative to its carrying value, the financial condition and
prospects of each business unit and other relevant factors. The business plan
objectives and milestones that were considered included, among others, those
related to financial performance, such as achievement of planned financial
results, and other non-financial milestones such as successful deployment of
technology or launching of new products and the loss of key employees. The
impairment analysis also considered when these properties were acquired and
that the intangible assets recorded at the time of acquisition are being
amortized over useful lives of 2 - 4 years. The amount of the impairment
charge was determined by comparing the carrying value of goodwill and other
long-lived assets to fair value at December 31, 2000.

Where impairment was indicated, the Company determined the fair value of its
business units based on a market approach, which included an analysis of market
price multiples of companies engaged in similar businesses. To the extent that
market comparables were not available, the Company used discounted cash flows in
determining the value. The market price multiples are selected and applied to
the business based on the relative performance, future prospects and risk
profile of the business in comparison to the guideline companies. The
methodology used to test for and measure the amount of the impairment charge was
based on the same methodology used during the Company's initial acquisition
valuations. As a result, during management's review of the value and periods of
amortization of both goodwill and certain other intangibles it was determined
that the carrying value of goodwill and certain other intangible assets were not
recoverable. The other intangible assets that were determined to be impaired
related to the decline in fair market value of acquired technology, a
significant reduction in the acquired customer bases and turnover of workforce
which was in place at the time of the acquisition of these companies.


                                      F-25
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

As a result, the Company's management determined that the fair value of goodwill
and other intangible assets attributable to IMAKE, iPromotions, Exactis and WSR
were less than their recorded carrying values. In addition, the Company has
abandoned operations of its AwardTrack subsidiary and entered into negotiations
for the sale of its Sabela subsidiary. As such, as the Company has recorded
Sabela's assets at their estimated realizable value. As a result of these
actions, the Company has written off all remaining goodwill and intangible
assets related to

AwardTrack and Sabela. Accordingly, the Company recognized $500.2 million in
impairment charges to adjust the carrying values of these entities in the fourth
quarter of 2000. Of this amount, $367.2 million related to Exactis, $55.5
million to AwardTrack, $47.9 million to Sabela, $21.3 million to WSR, $5.4
million to IMAKE and $2.9 million to iPromotions. The impairment factors
evaluated by management may change in subsequent periods, given that the
Company's business operates in a highly volatile business environment. This
could result in significant additional impairment charges in the future.

After giving effect to the aforementioned impairment charges of $500.2 million,
the remaining amount of goodwill and other intangibles, net, as of December 31,
2000 was $124.8 million: $35.0 million related to WSR, $34.9 million related to
ConsumerNet, $23.8 million related to IMAKE, $21.0 million related to Europe
which includes Netbookings and Kendro, $7.0 million related to Exactis, and $3.1
million related to ClickThrough.

                                                   DECEMBER 31
                                               ----------------------
                                               2000              1999
                                               ----              ----
                                                   (IN THOUSANDS)

     Goodwill............................    $122,871          $ 83,075
     Technology..........................      50,471               -
     Other intangible assets.............       6,375               -
                                             --------          --------
                                              179,717            83,075
     Less accumulated amortization.......     (54,925)          (20,677)
                                             --------          --------
                                             $124,792          $ 62,398
                                             ========          ========


Accrued Liabilities

                                                   DECEMBER 31
                                               ----------------------
                                               2000              1999
                                               ----              ----
                                                   (IN THOUSANDS)

     Affiliate fees......................    $ 11,067          $  2,231
     Incentives, commissions and
      expenses (1).......................       5,501             5,000
     Restructuring.......................       4,493               -
     Accrued fixed assets................       2,190               -
     Accrued other.......................      10,707             6,644
                                             --------          --------
                                             $ 33,958          $ 13,875
                                             ========          ========

(1) Incentives, commissions and expenses include commissions earned by the
Company's sales staff for the most recent period, as well as out-of-pocket
expenses incurred by those employees. All such balances as of December 31, 2000
and 1999, except $739,000 and $0, respectively, have subsequently been paid.


                                      F-26
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

(4)  INVESTMENTS

On December 30, 1998, the Company acquired a 10% equity interest, in chinadotcom
by issuing 203,851 shares of the Company's common stock, valued at approximately
$6.6 million, plus $3 million in cash. In July 1999, the Company purchased an
additional 450,000 shares for $9.0 million. In July 1999, chinadotcom completed
its initial public offering. Accordingly, the Company's investment in
chinadotcom was reclassified as an available-for-sale security and has been
reflected at its fair market value from that date.

On April 5, 1999, the Company entered into a securities purchase agreement with
Network Commerce (formerly ShopNow.com). Pursuant to this agreement, 24/7 Media
acquired approximately 18% of Network Commerce in exchange for consideration of
$5.1 million in cash, 476,410 shares of 24/7 Media's common stock with a value
equal to $23.6 million and 24/7 Media's investment in CardSecure. In September
1999, Network Commerce completed its initial public offering. Accordingly, the
Company's investment in Network Commerce was reclassified as an
available-for-sale security and has been reflected at its fair value from that
date.

On August 24, 2000, the Company acquired a 19.9% interest in 24/7 Media-Asia, a
subsidiary of chinadotcom , in exchange for 2.5 million shares of the Company's
common stock valued at $39.4 million. Pursuant to the exchange agreement,
chinadotcom is entitled to one Class I member on the Company's board, with a
term expiring in 2002. The Company cannot sell its interest in Media-Asia nor
can chinadotcom sell any of the 2.5 million shares received for a period of
twelve months. Each of the parties received the right of first refusal to
purchase the others shares, except in the case of an IPO. The Company agreed to
provide funding of up to approximately $2.0 million in additional capital in
proportion to its equity interest, provided 24/7 Media-Asia's 80.1% stockholder,
chinadotcom, provides up to approximately $8.0 million in additional capital. In
addition, 24/7 Media received an option to put back the Company's shares in
Media-Asia for approximately 1.8 million shares of chinadotcom (i) upon change
of control of chinadotcom or (ii) upon the third anniversary of the agreement if
an IPO of Media-Asia doesn't occur within conditions as specified in the
agreement. The Company has recorded its investment in Media-Asia as a cost basis
investment.

In August 2000, the Company acquired a 19.9% interest in AT-Asia, a subsidiary
of chinadotcom, through the Company's subsidiary AwardTrack ("AT"). The Company
and chinadotcom have committed to make a minimum investment of $4.0 million
based on the Company's pro-rata shares. The Company is required to make an
initial investment of approximately $0.2million. In addition, the Company has
the option to purchase within the first twelve months additional shares to
increase the Company's ownership percentage to 45% in exchange for $1 million.

The Company has entered into licensing and service agreements with Media-Asia
relating to use of the 24/7 Media name, use of the 24/7 Mail brand and related
technology and rights to sell associated suite of products, and service
agreements to provide 24/7 Connect. The Company also entered into a license and
service agreement with AT-Asia to use the AT technology and the AT products and
rights to sublicense the AT technology and products to third party websites in
the Territory, as defined in the agreement. The respective agreements call for
exclusive licensing


                                      F-27
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

rights which would terminate if minimum revenue amounts aren't met or if
meaningful operations are not established within a twelve month period. Many of
these agreements call for upfront initial licensing fees. Due to the exclusive
nature of these license arrangements, the Company is required to recognize any
upfront licensing fees over the applicable licensing periods or the expected
term of the agreement which ranges from three to five years. Upfront licensing
fees under the respective agreements amounted to $0.8 million of which $0.5
million related to AwardTrack is currently in dispute. As of December 31, 2000,
none of the upfront fees have been received and therefore are not reflected in
the 2000 consolidated balance sheet or statement of operations. Some of the
agreements also call for minimum royalty amounts.

The Company and Media-Asia also agreed upon amounts still owed to the Company
relating to Network royalties under the former agreement for all of 1999 and
through December 31, 2000 of which $1.0 million has been received and is
reflected in the consolidated statement of operations for the year ended
December 31, 2000. Minimum royalty amounts relating to the aforementioned
agreements for the years ended December 31, 2001 and 2002 are $1.6 million and
$2.4 million respectively.

On December 15, 2000, in accordance with the Company's formal plan of
restructuring, the Company abandoned operations of its subsidiary, AwardTrack.
As a result, the Company is currently in breach of its licensing agreement and
is in negotiations with chinadotcom to dissolve AT-Asia and eliminate any
further funding requirements. It is not possible at this time to determine the
extent of expenses related to this breach, if any, however the Company does not
believe it to be material.

During the fourth quarter of 2000, the Company wrote down certain of its
investments and recognized impairment charges of approximately $101.4 million
for other-than-temporary declines in value of certain investments. The Company's
management made an assessment of the carrying value of its cost-based
investments and determined that they were in excess of their carrying values due
to the significance and duration of the decline in valuations of comparable
companies operating in the Internet and technology sectors. The write downs of
cost based investments were $73.9 million, of which $38.8 million related to
Media-Asia, $23.5 million related to Idealab!, $5.6 million to Naviant, $3.0
million to Bidland.com and $3.0 million in other investments. The Company's
management also recognized that the decline in value of its available-for-sale
investments in Network Commerce and i3Moble were other-than-temporary and
recorded an impairment of $26.4 million and $1.1 million, respectively. These
impairment charges are included in "Impairment of investments" within other
income (expense) in the Company's 2000 consolidated statement of operations.


                                      F-28
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

Investments at December 31, 2000 and 1999 are comprised of:

                                               2000                1999
                                               ----                ----
                                                    (IN THOUSANDS)

     Available-for-sale securities, at
      fair value...........................  $ 9,137             $335,630
     Investments, at cost..................    2,130               31,000
                                             -------             --------
     Total.................................  $11,267             $366,630
                                             =======             ========


During the year ended December 31, 2000, the Company sold approximately 5.2
million shares of chinadotcom stock at prices ranging from $6.63 to $40.48 per
share. The shares had a cost basis of $13.8 million, which resulted in a gain on
sale of investments of approximately $52.1 million. At December 31, 2000, the
Company's available-for-sale investments of $9.1 million is comprised of the
following: $5.5 million relating to approximately 1.2 million shares of
chinadotcom; $3.2 million relating to approximately 4.3 million shares of
Network Commerce, and $0.4 million relating to approximately 94,000_shares of
i3Mobile (see note 16).

(5)  RESTRUCTURING CHARGE

During the fourth quarter of 2000, a restructuring charge of approximately $12.0
million was recorded by the Company in accordance with the provisions of EITF
94-3, and Staff Accounting Bulletin No. 100. The Company's restructuring
initiatives are to reduce employee headcount, consolidate operations and reduce
office space in order to better align its sales, development and administrative
organization and to position the Company for profitable growth consistent with
management's long-term objectives. This restructuring involved the involuntary
termination of approximately 200 employees, the exiting of six sales office
locations, a significant reduction of space at two additional offices, and the
abandonment of the Company's AwardTrack subsidiary. In addition, the Company has
entered into negotiations to sell Sabela and has recorded its assets at their
estimated realizable value. The Company is contingently liable for approximately
$2.6 million of equipment obligations assumed by the purchaser of Sabela. Should
the buyer default, the liability would revert to the Company. No provision
has been made for this amount.

Consequently, the Company has recorded a $12.0 million charge to operations
during the fourth quarter of 2000 consisting of severance of approximately $3.5
million, lease exit costs of approximately $1.7 million, acceleration of
restricted stock grants of approximately $0.9 million and the write down of
assets to net realizable value primarily related to AwardTrack and Sabela and
certain leasehold improvements of $5.5 million, and other exit costs of
approximately $0.4 million. This amount includes non-cash charges of
approximately $6.4 million. The Company expects to pay the majority of these
costs in the first quarter of 2001 and all remaining amounts by the end of the
third quarter of 2001.

The following sets forth the activities in the Company's restructuring reserve
which is included in accrued expenses in the 2000 consolidated balance sheet:


                                      F-29
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


<TABLE>
<CAPTION>
                                                   BEGINNING   CURRENT YEAR   CURRENT YEAR   ENDING
                                                    BALANCE     PROVISION     UTILIZATION    BALANCE
                                                   ---------   ------------   ------------   -------
<S>                                                <C>         <C>            <C>            <C>

Employee termination benefits...................    $  -         $ 3,492         $1,046      $2,446
Acceleration of restricted stock................       -             875            875         -
Office closing costs............................       -           1,738            -         1,738
Disposal of assets..............................       -           5,501          5,501         -
Other exit costs................................       -             350             41         309
                                                    ------       -------         ------      ------
                                                    $  -         $11,956         $7,463      $4,493
                                                    ======       =======         ======      ======
</TABLE>


(6) INCOME TAXES

The following is a breakdown of the Company's source of loss for income tax
purposes:

                                             YEARS ENDED DECEMBER 31,
                                            ---------------------------
                                            2000       1999        1998
                                            ----       ----        ----
                                                  (in thousands)

U.S. loss..............................   $762,074   $ 28,932   $ 25,157
Foreign loss...........................     17,848     10,130       -
                                          --------   --------   --------
                                          $779,922   $ 39,062   $ 25,157
                                          ========   ========   ========


         At December 31, 2000, the Company had approximately $107.3 million of
US and $21.1 million of foreign net operating loss carryforwards. Such
carryforwards expire in various years through 2020. As a result of various
equity transactions during 2000, 1999 and 1998, management believes the Company
has undergone an "ownership change" as defined by section 382 of the Internal
Revenue Code. Accordingly, the utilization of substantially all of the net
operating loss carryforwards are limited.

         The tax effects of temporary differences and tax loss carryforwards
that give rise to significant portions of federal and state deferred tax assets
and deferred tax liabilities at December 31, 2000 and 1999 are presented below.


                                      F-30
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                   2000             1999
                                                                   ----             ----
                                                                       (in thousands)
<S>                                                            <C>              <C>
Deferred tax assets:
 Net operating loss carryforward ............................   $ 47,370         $ 23,849
  Deferred revenue ..........................................        -                252
  Reserve for sales allowance ...............................        487              397
  Accounts receivable principally due to
   allowance for doubtful accounts ..........................      1,237              361
  Amortization of goodwill and other intangibles ............      1,451            1,091
  Accrued compensation ......................................      1,327              691
  Accrued restructuring .....................................      1,707              -
  Stock option expenses .....................................      5,012              -
Other........................................................         19               20
                                                                --------         --------

Gross deferred tax assets ...................................     58,610           26,661
Less: valuation allowance ...................................    (52,988)         (11,917)
                                                                --------         --------
  Net deferred tax assets ...................................      5,622           14,744

Deferred tax liabilities:
  Unrealized gain on marketable securities ..................     (2,330)        (110,370)
  Plant and equipment, principally due to
   differences in depreciation ..............................     (1,500)             (23)
  Deferred revenue ..........................................     (1,787)              (7)
  Other .....................................................         (5)             -
                                                                --------         --------
  Gross deferred tax liabilities ............................     (5,622)        (110,400)
                                                                --------         --------
  Net deferred tax asset (liability) ........................   $    -          $ (95,656)
                                                                ========         ========
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during periods in which
those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments.

Due to the Company's operating losses and Section 382 limitations, there is
substantial uncertainty surrounding whether the Company will ultimately
realize its deferred tax assets. Accordingly, these assets have been fully
reserved. During 2000 and 1999, the valuation allowance increased by $41.1
million and decreased by $3.9 million, respectively. Of the total valuation
allowance of $53.0 million, tax benefits, recognized in the future of
approximately $5.2 million will be applied directly to additional paid-in
capital. This amount relates to the tax effect of employee stock option
deductions included in the Company's net operating loss carryforward.

                                      F-31
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

(7)  DEBT INSTRUMENTS

SENIOR CONVERTIBLE NOTES PAYABLE--RELATED PARTIES

During 1997, the Company received $2,500,000 in proceeds from the issuance of
senior convertible notes payable primarily to affiliates of stockholders of the
Company, bearing an interest rate of 8% compounded semi-annually. The notes,
including interest thereon, were due on the earlier of prepayment, redemption,
conversion of the notes into common stock or May 15, 1999, the maturity date.
Each of the notes was issued with detachable warrants allowing such holders to
purchase shares of the Company's common stock at prices ranging from $1.60 to
$11.48 per share. The value attributed to the warrants of $201,000 was recorded
as debt discount and was being amortized to interest expense using the imputed
interest method over the term of the notes. The Company determined the value of
the warrants based upon its estimate of its effective borrowing rates at the
date of each issuance (which rates were 12% prior to September 1, 1997 and 15%
subsequent to September 1, 1997).

The notes were convertible into common stock at conversion prices, as defined in
the original note agreements, ranging from $1.60 to $11.48 per share upon
occurrence of certain events, subject to anti-dilution provisions. The original
conversion price for the $1,500,000 of notes issued prior to September 1, 1997
was $11.48 per share. The $1,000,000 of notes issued between September 1, 1997
and December 31, 1997 had a $1.60 per share conversion rate. The conversion
prices were determined by negotiations among the parties. On December 22, 1997,
$94,000 of the notes, including interest thereon, were converted into 59,184
shares of common stock at $1.60 per share. During 1997, the Company recorded
$43,000 of interest expense in connection with the amortization of the debt
discount and conversion of the aforementioned notes.

During January 1998, the Company received $150,000 in proceeds from the issuance
of senior convertible notes payable with terms similar to the notes issued
during 1997. The notes were convertible into 43,321 shares of common stock at
$3.48 per share, subject to anti-dilution provisions. The value attributable to
4,310 warrants, to purchase shares of the Company's common stock at $3.48 per
share, of $12,000 was recorded as debt discount. The Company determined the
value of the warrants based upon its estimate of its effective borrowing rate of
15% at the date of issuance.

In connection with the Securities Purchase Agreement and the Merger, $2,056,000
of the Senior Convertible Notes Payable--Related Parties, plus accrued interest
thereon, were converted into 750,586 shares of common stock, and approximately
$500,000 of such notes, plus accrued interest thereon, were converted into
77,450 shares of Common stock. With regard to the $1,500,000 of notes issued
prior to September 1, 1997, the original conversion price of $11.48 per share
was adjusted to $8.36 per share under the anti-dilution provisions triggered by
the subsequent financings at lower conversion prices per share.

Additionally, in accordance with the terms and conditions of the Securities
Purchase Agreement (which terms and conditions were determined by negotiations
among the various parties to the agreement), 177,679 warrants were exchanged for
99,119 shares of common stock.


                                      F-32
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

RELATED PARTY

Loan Payable

The Company had a note payable to a stockholder of $593,000 as of December 31,
1998. The loan was payable upon demand, and interest was charged at prime plus
2%. The loan was subsequently repaid in full in March 1999.

On December 31, 1998, the Company settled all of its obligations to Petry Media
Corporation which arose in connection with the Company's acquisition of Petry in
February 1998 for a lump sum payment of $829,000. Accordingly, the difference
between the lump sum payment of $829,000 and the Company's recorded obligations
for its outstanding loan payable and accrued royalties payable in the amount of
$184,000 and $218,000, respectively, was attributed to the contingent purchase
obligation and resulted in an adjustment of $427,000 to the Petry purchase
price. Such amount increased goodwill and was amortized on a straight line basis
over its remaining amortization period through February 2000.

Loans Receivable

The Company has promissory notes receivable from certain employees aggregating
approximately $653,000. The notes range in due dates from one to three years
with interest rates ranging from 8-18%. These notes are included in "Other
assets" on the 2000 consolidated balance sheet.

SHORT-TERM BORROWINGS

In May 1998, the Company secured a line of credit up to an amount of $200,000
bearing interest at 8.0% and secured by the Company's assets. The line was
repaid in May 1999.

(8)  EQUITY INSTRUMENTS

WARRANTS

On April 9, 1997, the Company granted warrants to a consultant to purchase 4,375
of the Company's common stock at an exercise price of $49.72 per share. The fair
value, using a Black-Scholes Option Model, of the warrants was deemed
insignificant on the date of grant.

In connection with the issuance of Senior Convertible Notes Payable--Related
Parties, warrants to purchase 169,316 common shares, at prices ranging from
$1.60 to $11.48, were outstanding as of December 31, 1997 and such warrants
expire no later than three years from the date of issuance. The Company recorded
the fair value of the warrants as original issue debt discount.

As of February 24, 1998, Interactive Imaginations and an executive officer
entered into a Confidential Separation Agreement and General Release
("Release Agreement") pursuant to which the executive officer's employment
with Interactive Imaginations was terminated.

                                      F-33
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

The terms of the Release Agreement generally provide that the executive
officer and Interactive Imaginations agreed to release and discharge the
other party (and its successors and assigns) from all causes of action,
claims, judgments, obligations, damages or liabilities. Interactive
Imaginations agreed to issue to the executive officer Class C Warrants to
purchase up to 625,000 shares of common stock at an exercise price of $3.81
per share. Accordingly, the Company recorded $450,000 of expense during the
first quarter of 1998 in connection with this transaction based upon an
independent valuation of the Class C Warrants. In addition, Interactive
Imaginations agreed to extend the term from January 31, 2000 to January 31,
2005 in respect of a fully vested option held by the executive officer to
purchase 13,000 shares of Interactive Imaginations common stock at $1.72 per
share. During January 1999, the executive officer exercised his Class C
Warrants to purchase 625,000 shares of common stock in exchange for 546,775
shares of common stock in a cashless exercise.

In February 1998, the Company issued to a consultant a warrant to purchase
28,750 shares of common Stock at an exercise price of $3.48 per share in
exchange for services. Under the terms and conditions of the Securities Purchase
Agreement (as determined by negotiations among the parties to such agreement),
such warrants were converted into 12,650 shares of common stock. The Company
recorded compensation expense of $20,000, based upon the fair market value
($1.60 per common share as determined by an independent valuation of the
Company's Common Stock) of the 12,650 shares of common stock into which the
warrants were converted under the terms and conditions of the Securities
Purchase Agreement.

Upon consummation of the agreement and plan of merger ("II Merger") to acquire
all of the outstanding stock of Intelligent Interactions in April of 1998, each
share of common stock of Intelligent Interactions was converted into
approximately 16.3 shares of common stock, 2.3 Class A Warrants, 2.3 Class B
Warrants and 1.2 Class C Warrants of the Company. Therefore, the Company issued
949,242 shares of common stock, 265,212 of Class A Warrants, 265,212 of Class B
Warrants and 136,553 of Class C Warrants. The warrants have exercise prices of
$7.62, $11.42 and $3.81 per share, respectively and expire in five years. The
Company's Class A, B, and C Warrants were determined to have a fair value of $0,
$0, and $0.72 per share, respectively, using the Black-Scholes Option Model and
supported by an independent valuation of the Warrants issued in the transaction.
Each share of Preferred Stock, Series A Preferred Stock, Series AA Preferred
Stock or Series AAA Preferred Stock of Intelligent Interactions was converted to
approximately 18 shares of Mandatorily Redeemable Convertible Preferred
Stock--Series A, par value $.01 per share, 2.7 Class A Warrants, 2.7 Class B
Warrants and 1.4 Class C Warrants of the Company.

During the third quarter of 1998, certain investors in the II Merger exchanged
185,159 warrants for 92,230 shares of common stock as provided for in the
original terms of the II Merger Agreement. The Company exchanged one equity
security (common shares) for another equity security (warrants) of equivalent
value which resulted in no financial statement impact other than to record the
par value of the common stock issued by increasing common stock and reducing
additional paid in capital.

In March 1999, the Company issued warrants to purchase up to 150,000 shares of
common stock to NBC-Interactive Neighborhood as part of a three-year exclusive
agreement to sell advertising


                                      F-34
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

on NBC Network television stations and their associated Web sites at the local
market level. In October 1999, 24/7 Media issued warrants to purchase up to
150,000 shares of the Company's common stock to AT&T WorldNet Service as part of
a 15-month extension, plus a one-year renewal option of the current strategic
agreement (see note 10).

Warrant activity during the periods indicated is as follows:

                                                                   WEIGHTED
                                                                   AVERAGE
                                                     WARRANTS   EXERCISE PRICE
                                                     --------   --------------
     Outstanding at December 31, 1997 ............    180,228       $  3.84
     Granted......................................  3,985,595          8.35
     Exercised....................................   (362,838)         6.21
     Canceled.....................................       -              -
                                                    ---------       -------

     Outstanding at December 31, 1998.............  3,802,985          8.32
     Granted......................................    300,000         29.44
     Exercised....................................   (796,300)         4.54
     Canceled.....................................       -              -
                                                    ---------       -------

     Outstanding at December 31, 1999.............  3,306,685         11.17
     Granted......................................       -              -
     Assumed in acquisition.......................    154,303          8.38
     Exercised....................................   (398,759)         8.68
     Canceled.....................................   (225,000)        30.57
                                                    ---------       -------

     Outstanding at December 31, 2000.............  2,837,229       $ 11.57
                                                    =========       =======


Warrants generally expire five years from the date of grant.

REVERSE STOCK SPLIT

On July 20, 1998, the Company effected a 1-for-4 reverse stock split.
Accordingly, all references in the financial statements to the number of shares
of common stock and to per share amounts have been restated to reflect these
changes.

COMMON STOCK

As part of an employment agreement, an officer of the Company was given
approximately 12,500 shares of common stock which were to be issued pro rata on
a monthly basis, over a three-year period beginning in July 1996, as additional
compensation. On October 31, 1997, the officer signed a termination agreement
with the Company whereby the officer received the remaining 8,333 of the 12,500
shares. The Company recorded compensation expense at the time of each issuance
of common stock based upon the Company's estimate of the fair value using the
conversion rates of the Company's most recent issuance of convertible debt. The
fair market value of the shares issued at the date of each issuance was
approximately $11.48 per share in 1996 and $11.48 per share for issuances prior
to September 1, 1997 and $1.60 per share for


                                      F-35
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

issuances between September 1, 1997 and October 31, 1997. As a result, for the
year ended December 31, 1997, the Company recorded compensation expense of
$32,000.

In February 1998, the Company awarded to the President 56,250 shares of
restricted common stock which were granted at the fair market value of the
Company's common stock of $1.60 per share as determined by an independent
appraisal of the Company's common stock in connection with the Initial Merger.
In connection with this issuance, the Company is recognizing compensation
expense of $90,000 ratably over the three-year vesting period. For the years
ended December 31, 2000, 1999 and 1998, the Company recognized $30,000, $30,000
and $25,000 in compensation expense, respectively.

In August 1998, the Company completed an offering of 3,550,000 shares of its
common stock, par value $.01 per share, in an initial public offering at an
offering price of $14.00 per share. Net proceeds to the Company from this
initial public offering totaled $44.8 million, after offering costs of $1.4
million.

On May 3, 1999, the Company completed a secondary offering of the Company's
common stock. In this offering, the Company sold 2,339,000 primary shares, and
selling shareholders sold 1,161,000 shares. Net proceeds for the sale of primary
shares was approximately $100.5 million.

On January 18, 2000, the Company issued 31,000 shares of common stock to
employees of the Company valued at approximately $1.5 million and accrued $0.3
million in related taxes. The related compensation expense of approximately $1.8
million is included as part of stock-based compensation in the 2000 statements
of operations, however, it would normally be reported as $0.7 million in general
and administrative and $1.1 million in sales and marketing expenses.

On May 23, 2000, the Company offered certain members of management the option of
exchanging their January 1, 2000 option grants for restricted stock in a ratio
of one share for three options. As a result, the Company cancelled 832,500
options and issued approximately 285,000 shares of restricted stock to these
employees of the Company, which vest over a period of three to four years. Such
grants resulted in a deferred compensation expense of approximately $4.5
million, which is being amortized over the vesting period of those shares. As of
December 31, 2000, 47,044 of the 285,0000 shares were granted to employees
according to their vesting schedule. As part of the restructuring in November
2000, certain employees with restricted stock were terminated. The restricted
stock held by the terminated employees vested immediately, resulting in a charge
of approximately $0.9 million which has been reflected in "Restructuring and
exit costs" in the consolidated statement of operations (see note 4).

On October 24, 2000, the Company issued 62,921 shares to investment bankers for
services rendered in connection with the acquisition of WSR. The value of these
shares was approximately $335,000.

The Company also issued shares of common stock as part of the purchase price for
various acquisitions and investments as discussed in Notes 2 and 4,
respectively.

CONVERTIBLE PREFERRED SHARES


                                      F-36
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


In November 1996, the Company designated 500,000 Convertible Preferred Shares,
par value $.01 per share, out of the 2,000,000 Preferred Shares which were
authorized in March 1996, the rights and preferences of which were generally
senior to the Company's common shares and were more fully described in the
Company's Amended Certificate of Incorporation (the "Amended Certificate").
Thereafter, the Company completed a private placement of 140,722 Preferred
Shares for an aggregate price of $4,039,000. Such consideration consisted of the
cancellation of outstanding Notes (described above) in the aggregate principal
amount of $1,500,000 plus $2,539,000 in cash. Each Preferred Share was
convertible into 2.5 Common Shares (subject to an anti-dilution adjustment as
set forth in the Amended Certificate) upon the occurrence of certain events in
respect of the Company or the holders of Preferred Shares. In January 1997, the
Company issued 17,422 shares of Preferred Stock for a payment of $500,000 in
cash.

As of December 31, 1997, the 158,144 issued and outstanding preferred shares
were convertible into 395,360 common shares, respectively.

The Preferred Shares, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company were entitled to receive an amount
equal to $28.70 per share, to be paid out of the assets of the Company available
for distribution before any such payments were to be made on any shares of the
Company's common hares or any other capital stock of the Company other than the
Preferred Shares, plus any declared and unpaid dividends.

The Preferred Shares were subject to mandatory conversion, and would
automatically convert into common shares, as noted above. On February 25, 1998,
in accordance with the terms and conditions of the Securities Purchase
Agreement, all 158,144 issued and outstanding Preferred Shares were converted
into 542,908 common shares, after giving effect to anti-dilution provisions.

MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

 On February 25, 1998, the Company entered into a Securities Purchase Agreement
for the sale and issuance of 10,060,002 shares of Mandatorily Redeemable
Convertible Preferred Stock--Series A ("Mandatorily Redeemable Convertible
Preferred Stock" or "Series A"), par value $.01 per share, 1,320,904 Class A
Warrants to purchase common stock at an exercise price of $7.62 per share and
1,320,904 Class B Warrants to purchase common stock at an exercise price of
$11.42 per share in a private placement for total proceeds of $10,060,002. Such
warrants are immediately exerciseable and expire on February 25, 2003. No value
has been attributed to the Class A and Class B warrants based upon an
independent valuation of the securities.

After giving effect to the Securities Purchase Agreement, including the Merger,
the capital stock of the Company consisted of: (i) 100,000,000 common shares, of
which 6,870,300 shares were issued and outstanding, 2,641,808 shares were
reserved for issuance upon conversion of issued and outstanding Mandatorily
Redeemable Convertible Preferred Stock or "Series A," 1,320,904 shares were
reserved for issuance upon exercise of issued and outstanding Class A Warrants,
1,320,904 shares were reserved for issuance upon exercise of issued and
outstanding Class B Warrants, 643,750 were reserved for issuance upon exercise
of issued and outstanding Class C


                                      F-37
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

Warrants, 35,609 were reserved for issuance upon exercise of issued and
outstanding unclassified warrants, 62,757 (subject to adjustment) were reserved
for issuance upon exercise of outstanding convertible debentures, and 1,437,500
shares were reserved for issuance to key employees, officers and directors of,
and consultants to, the Company under stock incentives that had been granted or
were available for grant by the Company pursuant to the 1998 Stock Incentive
Plan; and (ii) 30,000,000 preferred shares, of which 10,060,002 were
outstanding, all of which were designated as Mandatorily Redeemable Convertible
Preferred Stock or Series A shares, all of which were in a private placement.

Each share of Series A was convertible, at the option of the holder, at any time
and without the payment of additional consideration into common stock determined
by the sum of (i) the Payment Price of $1.00 per Series A Share divided by the
conversion price of $3.81 per common share (as adjusted), plus (ii) all accrued
and unpaid dividends with respect to such Share divided by the dividend
conversion price which is equal to twice the conversion price of $3.81.

The Series A Shares ranked (i) prior to the common stock of the Company; (ii)
PARI PASSU with any Securities (as defined in the Securities Purchase
Agreement); and (iii) junior to any Senior Securities, in each case as to
dividends and other distributions of assets and upon liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary. The Series A
shareholders were entitled to receive, when and as declared by the Board of
Directors out of funds legally available, dividends at a rate of $0.04 per share
per annum. Such dividends were subsequently canceled pursuant to the Securities
Purchase Agreement because the Company consummated a qualified initial public
offering (as defined in the Securities Purchase Agreement) prior to January 31,
1999.

The Series A Shares were subject to certain anti-dilution protection, if the
Company raised funds in the future, while the Preferred Stock was still
outstanding, at a common stock-equivalent value which was less than the
conversion price of the Preferred Stock.

Series A shareholders had one vote for each full common share into which a
Series A Share would be convertible.

In connection with the Company's IPO, all of the Company's 13,621,507 Series A
Shares automatically converted into 3,577,118 shares of common stock. Such
amounts included: i) 10,060,002 Series A Shares issued in connection with the
Initial Merger which converted into 2,641,849 shares of common stock; and ii)
3,561,505 Series A Shares issued in connection with the Intelligent Interactions
acquisition which converted into 935,269 shares of common stock, each of which,
by their terms, automatically converted into Common Stock in connection with the
Company's IPO. In addition, the 3,000 shares of Series B Convertible Redeemable
Preferred Stock issued in connection with the CliqNow! acquisition, by its
terms, automatically converted into 230,415 shares of Common Stock in connection
with the Company's IPO (see note 2). The total number of common shares issued in
connection with the automatic conversion of the Company's mandatorily redeemable
convertible preferred stock in connection with the IPO was 3,807,553 shares of
common stock.


                                      F-38
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

Shares reserved for future issuance as of December 31, 2000 are as follows:

                                                                    RESERVED
                                                                     SHARES
                                                                    --------
     Reserved for issued and outstanding Class A Warrants.......   1,324,608
     Reserved for issued and outstanding Class B Warrants.......   1,341,818
     Reserved for issued and outstanding Class C Warrants.......      29,830
     Reserved for issued and outstanding unclassified warrants..     140,973
     Reserved for stock incentives under the 1998 Stock
      Incentive Plan............................................  10,879,640


(9)  STOCK INCENTIVE PLAN

During 1998, the board of directors and stockholders of the Company approved the
1998 Stock Incentive Plan as amended (the "Plan"). The following is a summary of
the material features of the Plan. This Plan replaced the 1995 Stock Option
Plan--Amended, which had been established in 1995 and amended in 1996.

All employees of and consultants to the Company are eligible under the Plan.
Eligibility under the Plan shall be determined by the Stock Incentive Committee.
The Plan provides for the grant of any or all of the following types of awards:
(i) stock options, including incentive stock options and non-qualified stock
options; (ii) stock appreciation rights, in tandem with stock options or free
standing; and (iii) restricted stock. In addition, the Plan provides for the
non-discretionary award of stock options to non-employee directors of the
Company.

As a result of the acquisition of Exactis, the Company acquired Exactis' 1996,
1997 and 1999 stock option plans (the "Exactis Plans"). No further options will
be granted under these plans. Options currently outstanding under the Exactis
Plans will continue to be outstanding under the terms of the Exactis Plans until
exercised or terminated.

During 2000, the total number of options that may be issued or used for
reference purposes pursuant to the Plan was increased to 8,860,855. The amount
was increased by 109,331 for the pooling with Sift and 77,134, 297,000, 42,299,
88,698, 76,750, 2,051,410, 349,250 for the acquisitions of ConsumerNet, IMAKE,
Sabela, AwardTrack, iPromotions, Exactis and WSR, respectively, for a total of
11,952,727. The maximum number of shares of common stock subject to each of
stock options or stock appreciation rights that may be granted to any individual
under the Plan is 250,000 for each fiscal year during the term of the Plan. If a
stock appreciation right is granted in tandem with a stock option, it shall be
applied against the individual limits for both stock options and stock
appreciation rights, but only once against the maximum number of shares
available under the Plan.

The Company applies APB Opinion No. 25 in accounting for its Plan. The Company
recorded a deferred compensation charge of approximately $332,000 in the second
quarter of 1998 in connection with the grant of stock options to employees,
representing the difference between the deemed fair value of the Company's
common stock for accounting purposes and the exercise price of such options at
the date of grant. Such amount is presented as a deduction from of


                                      F-39
<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

stockholders' equity (deficit) and amortized to expense over the vesting period
of the applicable options, generally four years. The Company granted such
options at a weighted average exercise price of $5.74 per share.

The per share weighted-average fair value of stock options granted during 2000,
1999 and 1998 was $24.17, $22.21, and $4.44, respectively, on the date of grant
using the Black-Scholes method with the following weighted-average assumptions:
2000 - risk free interest rate 4.61%, and an expected life of 4 years; 1999 -
risk-free interest rate 6.58%, and an expected life of 2 years or 4 years,
depending on the option grant; 1998 - risk-free interest rate 5.20%, and an
expected life of 4 years. As permitted under the provision of SFAS No. 123, and
based on the historical lack of a public market for the Company's options, no
volatility was reflected in the options pricing calculation for options granted
prior to the IPO. For option grants in 1998 subsequent to the Company's August
1998 IPO, a volatility factor of 150% was used. For option grants in 1999, a
volatility factor of 99% was used for 4-year grants and 101% for 2-year grants.
For options granted in 2000, a volatility factor of 150% was used.

Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net loss
attributable to common stockholders would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                      2000        1999         1998
                                                 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S>                                              <C>          <C>          <C>
Net loss attributable to common stockholders:
  As reported...............................      $ (779,922)  $ (39,062)   $ (25,433)
  Pro forma.................................        (825,962)    (52,003)     (25,807)
Net loss per share:
  As reported...............................      $   (23.38)  $   (1.96)   $   (2.48)
  Pro forma.................................          (24.76)      (2.60)       (2.52)
</TABLE>


Stock option activity during the periods indicated is as follows:

                                      F-40

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


                                                              WEIGHTED AVERAGE
                                             OPTIONS           EXERCISE PRICE

Outstanding at December 31, 1997.......      423,421         $          2.58
Granted ...............................    1,469,046                    6.82
Exercised .............................     (106,108)                   2.57
Canceled...............................     (112,357)                   2.87
                                           ---------         ---------------
Outstanding at December 31, 1998.......    1,674,002                    6.28
Granted................................    2,659,791                   32.18
Exercised..............................     (631,221)                   4.85
Canceled...............................     (438,957)                  18.43
                                           ---------         ---------------
Outstanding at December 31, 1999.......    3,263,615                   25.85
Granted................................    6,199,003                   20.63
Exercised..............................     (335,758)                  15.50
Canceled...............................   (2,205,765)                  35.62
                                           ---------         ---------------
Outstanding at December 31, 2000.......    6,921,095         $         20.29
                                           =========         ===============

Vested at December 31, 1999............      517,891         $         19.20
                                           =========         ===============
Vested at December 31, 2000............    1,700,319         $         19.10
                                           =========         ===============
Options available for grant at
  December 31, 2000....................    3,958,545
                                           =========

The following table summarizes information about stock options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>
                                     WEIGHTED
 RANGE OF                             AVERAGE               WEIGHTED                             WEIGHTED
 EXERCISE           NUMBER           REMAINING           AVERAGE EXERCISE         NUMBER         AVERAGE
  PRICES         OUTSTANDING      CONTRACTUAL LIFE           PRICE             EXERCISABLE    EXERCISE PRICE
-----------     -------------    ------------------     ------------------    -------------   --------------
<S>                <C>          <C>                    <C>                   <C>             <C>
  $.40-6.94         1,119,328             8.0 years     $             4.07          399,377   $         3.97
  7.20-17.75        2,914,779             9.3                        12.25          451,885             9.12
  18.25-34.25       1,792,587             8.5                        27.35          712,316            29.07
  34.50-64.44       1,094,401             8.8                        46.75          136,741            44.34
                -------------    ------------           ------------------    -------------   --------------
                    6,921,095             8.8           $            20.29        1,700,319   $        19.10
                =============    ============           ==================    =============   ==============
</TABLE>



(10)  SIGNIFICANT CONTRACTS

NBC

In March 1999, the Company signed an exclusive agreement with NBC-Interactive
Neighborhood (NBC-IN) that would allow the Company to sell advertising on NBC
network television stations and their associated Web sites at the local market
level in exchange for services to be provided by the Company. As part of this
agreement, the Company issued to NBC warrants to purchase up to 150,000 shares
of common stock for $26.05 per share. The first 75,000 warrants vested on March
11, 1999 and will expire on March 11, 2002. The remaining


                                      F-41

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


75,000 shares covered by this warrant were to vest in eighteen increments of
approximately 4,167 shares each on the first day of every month beginning with
October 1, 2000 and ending on March 1, 2002 at $26.05 per share. In August 2000,
as a result of the termination of the agreement, 75,000 unvested warrants
expired. Consequently, the Company reversed the original value ascribed to the
warrants issued in connection with this partner agreement of $1.8 million, which
remained unamortized, against additional paid in capital.

AT&T

On October 1, 1999, an agreement was reached with AT&T WorldNet to extend the
current strategic marketing arrangement. The agreement included banner
advertising services, email campaigns and other marketing promotion services
for a term of one year with an optional one year extension. Under this
agreement the Company was subject to certain performance obligations. If the
Company fails to meet these performance obligations additional charges
maybe incurred. The Company issued warrants to purchase 150,000 shares of our
common stock in connection with the agreement. The warrants vest upon
attaining certain revenue targets and the extension of the contract. The
warrants relating to the initial term of the agreement for the purchase of
75,000 shares were valued at approximately $2.0 million based on an
independent valuation. Due to the nature of the agreement, these warrants
were being revalued each month based on the Company's share price. A ratable
portion of the warrants has been expensed, as applicable, with the offset to
additional paid in capital. During 2000, as a result of the monthly
revaluation a benefit of $246,000 was recorded against additional paid in
capital. The Black-Scholes pricing model was used with the following
assumptions at the date of issuance: risk free interest rate of 6%, dividend
yield of 0%, expected life of 4.3 years and volatility of 90%. Because the
vesting of the second warrants to purchase 75,000 shares was dependent upon
the extension of the original term and no obligation exists for either party
to extend the agreement, no value had been ascribed to the warrants due to
the contingency associated with the extension provision. As of December 31,
2000, no extension was signed and the warrants expired unvested. On April 1,
2001, final payment of $1.4 million relating to earned royalties was due and
payable. The Company has notified AT&T that the Company will pay this amount
in full in equal monthly installments through the remainder of 2001.

SONY

In December 1998, Exactis sold its online publishing business, including rights
to the InfoBeat brand, the consumer newsletters and the subscriber lists to Sony
Music, a Group of Sony Music Entertainment Inc. Exactis also entered into a
service agreement to manage the production and delivery of the InfoBeat
newsletters for Sony Music through December 2001. Exactis received $11.8 million
under the sales agreement and related service agreement. The agreements also
provides for additional minimum payments of $3.0 million over the term of the
service agreement. The separate fair values of the sales and service agreements
were not objectively determinable. Therefore, the proceeds of the sales and
service agreements are being recognized as technology service revenue over the
term of the service agreement based on the monthly minimum number of email
messages to be provided under the service agreement. At December 31, 2000,
approximately $2.2 million is reflected as deferred revenue on the consolidated
balance sheet related to the Sony Music agreements.


                                      F-42

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


chinadotcom

The Company has entered into various licensing and royalty agreements with
subsidiaries of chinadotcom. See note 4.

FASTWEB

Effective December 1, 1999, the Company entered into an agreement with FastWeb
relating to the management and marketing of FastWeb's opt-in email database. The
initial term of the contract was for one year ending November 30, 2000. The
Company was obligated to make four quarterly payments of $0.6 million, plus a
royalty for revenues exceeding certain thresholds relating to the use of
FastWeb's database. The Company recorded $2.2 million and $0.2 million in cost
of revenue during 2000 and 1999, respectively, relating to this contract.

SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosure of cash flow information

During 2000, 1999 and 1998, the amount of cash paid for interest was $47,000,
$68,000 and $4,000, respectively.

NON-CASH FINANCING ACTIVITIES

Warrants to purchase 398,759 shares of the Company's common stock at an average
of $8.68 per share were exercised during the year ended December 31, 2000 in
exchange for 359,839 shares of the Company's common stock in cashless exercises
of warrants.

Warrants to purchase 625,000 shares of the Company's common stock at $3.81 per
share were exercised in January 1999 in exchange for 546,775 shares of the
Company's common stock in a cashless exercise of warrants. During September
1999, warrants to purchase 134,382 shares of the Company's common stock at
prices ranging from $3.81 to $11.42 were exchanged in a cashless exercise for
101,074 shares of the Company's common stock

During 1998, the Company issued an aggregate of 5,278,167 shares of common
stock, 3,561,505 Series A Shares, 3,000 Series B Shares, 265,212 Class A
Warrants, 265,212 Class B Warrants and 136,553 Class C Warrants in connection
with the Acquisitions.

During 1998, the Company converted all outstanding shares of convertible
preferred stock into 4,350,441 shares of common stock, converted $2,556,000 of
senior convertible notes payable--related parties, plus accrued interest, into
828,036 shares of common stock and outstanding warrants were converted into
191,349 shares of common stock.

During 1998 and 2000, the Company entered into capital leases for equipment of
approximately $85,000 and $250,000, respectively.


                                      F-43

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


(12) 401(k) PLAN

The Company established a 401(k) Plan on January 1, 1999, that is available to
all employees after six months of employment. Employees may contribute up to 20%
percent of their salary and the Company does not currently match employee
contributions. The only expense the Company incurred in 1999 related to the
401(k) Plan was for administrative services, which were not material.

(13)  COMMITMENTS AND CONTINGENCIES

COMMITMENTS

The Company leases various facilities and certain equipment under operating
lease agreements. These lease agreements include the space for the Company's
corporate headquarters, the Company's sales offices and various types of
equipment for varying periods of time, with the last lease expiring in March
2010. Rent expense from all operating leases amounted to $6.8 million, $3.0
million and $0.8 million for the years ended 2000, 1999 and 1998, respectively.

The Company is contingently liable for approximately $2.6 million of
equipment obligations assumed by the purchaser of Sabela (see note 5)

Future minimum payments under noncancelable operating leases and capital leases
at December 31, 2000 are as follows:

                                          CAPTIAL LEASES     OPERATING LEASES
                                         -----------------  ------------------
                                                   (IN THOUSANDS)

Year Ending December 31,
2001....................................     $       121       $         8,181
2002....................................              55                 7,145
2003....................................              55                 6,577
2004....................................              55                 6,080
2005....................................              14                 5,007
Thereafter..............................               -                14,582
                                             -----------       ---------------
Total minimum lease payments............     $       300       $        47,572
                                                               ===============
Less amount representing interest.......              47
                                             -----------
Present value of minimum lease payment..     $       253
                                             ===========
Less current portion....................              99
                                             -----------
Long-term portion.......................     $       154
                                             ===========


The Company entered into a Consulting Agreement, dated as of January 1, 1998
with Neterprises, Inc. ("Consulting Agreement"), pursuant to which the President
and sole stockholder of Neterprises, Inc., and at that time a director of the
Company, agreed to provide management and consulting services to Interactive
Imaginations for a term of up to one year in connection with the identification
and evaluation of potential strategic relationships and potential acquisition
targets. In return for such services, the President received a lump sum payment
of $180,000 and a monthly fee of $12,500. This agreement was not renewed in
1999.

The Company's ad serving software and hardware are housed at GlobalCenter and
Exodus in various locations. The agreements provide for Internet connectivity
services, the lease of certain

                                      F-44


<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

hardware, the licensing of certain software, and the lease of secure space to
store and operate such equipment. Required monthly payments are approximately
$250,000 to March 2001, $210,000 to August 2001 and $150,000 to December 2001,
when the agreement expires.

The Company has various employment agreements with employees, the majority of
which are for one year with automatic renewal. The obligation under these
contracts is approximately $3.6 million for 2001, $0.2 million in 2002 and $0.1
million in 2003. All European employees have employment contracts as required by
local law. The majority of these contracts allow for resignation or termination
by either party at any time. They also require severance for involuntary
termination ranging from one to six months. As of December 31, 2000, there were
approximately 250 employees in Europe whose annualized base salaries were
approximately $10.8 million.

LITIGATION

Exchange of Patent Rights, Net

In December 1999, DoubleClick, Inc. filed a patent infringement lawsuit against
our subsidiary, Sabela Media, Inc., in the United States District Court for the
Southern District of New York. The suit alleged that Sabela was infringing, and
inducing and contributing to the infringement by third parties of a patent held
by DoubleClick entitled "Method for Delivery, Targeting and Measuring
Advertising Over Networks". DoubleClick was seeking treble damages in an
unspecified amount, a preliminary and permanent injunction from further alleged
infringement and attorney's fees and costs. On May 4, 2000, the Company filed
suit in the U.S. District Court for the Southern District of New York against
DoubleClick Inc. alleging infringement by DoubleClick of our U.S. Patent No.
6,026,368, entitled "On-Line Interactive System and Method for Providing
Content and Advertising Information to a Targeted Set of Viewers."

On November 6, 2000, the Company and DoubleClick, Inc settled the DoubleClick,
Inc. v. Sabela Media, Inc. and 24/7 Media, Inc. v. DoubleClick, Inc. patent
litigation. Both lawsuits have been dismissed with prejudice. As part of the
settlement, 24/7 Media and DoubleClick have granted each other certain rights in
certain of their respective patents. Under the settlement agreement, no other
terms of the settlement were disclosed. Proceeds were recorded net of related
legal expenses in the fourth quarter. As a result of the agreement, $4.1 million
is included in "Gain on exchange of patent rights, net" in the 2000 consolidated
statement of operations.

On December 26, 2000, Christina A. Wells, Garen Razoian, and Stephen J.
Simkovich filed a lawsuit in the Superior Court of California, Los Angeles
County, against the Company, Website Results, The Pinnacle Group, Michael
Osborn, Ronald Penna, and Kevin Smith. Plaintiffs alleged claims for (i) breach
of express contract; (ii) breach of implied in fact contract; (iii) negligent
management; (iv) fraud and misrepresentation; (v) breach of covenant of good
faith and fair dealing; (vi) conversion; (vii) loss of benefit of the bargain
and business opportunity; (viii) declaratory relief; (ix) intentional infliction
of emotional distress; and (x) negligent infliction of emotional distress. The
thrust of the complaint is that the defendants failed to pay certain commissions
promised to plaintiffs. Plaintiffs claim to have suffered over $1 million in

                                      F-45

<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


damages and seek punitive damages as well. The Company is mounting a vigorous
legal defense that may include counterclaims, and has submitted a demurrer
seeking to dismiss all tort-based claims. The Company does not believe that
the outcome of this litigation will have a materially adverse impact on the
Company's financial position or its results of operations.

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the Company's
financial position, results of operations or liquidity.
(14)  SEGMENTS

The Company's business is comprised of network sales, email services and
technology sales. The network sales segment generates the majority of its
revenues by delivering advertisements and promotions to affiliated Web sites.
The revenue related to the email segment of the business is comprised of
marketing services to target online users compiled by list management. The
technology segment generates revenue by providing third party ad serving, email
delivery service bureau, search engine traffic delivery, broadband software
solutions and technology services. The Company's management reviews corporate
assets and overhead expenses for each segment. The summarized segment
information as of and for the years ended December 31, 2000, 1999 and 1998 is as
follows:

<TABLE>
<CAPTION>
                                   NETWORK        MAIL     TECHNOLOGY       TOTAL
                                 -----------  ----------  ------------    ---------
                                                  (IN THOUSANDS )
<S>                              <C>          <C>          <C>          <C>
2000
Revenues ......................   $ 125,256    $  29,269    $  30,630    $ 185,155
Segment loss from operations ..    (156,160)     (18,246)    (561,600)    (736,006)
Amortization of goodwill,
intangibles and advances ......      31,548       13,269       84,867      129,684
Impairment of intangible assets      58,345         --        441,875      500,220
Total assets ..................     102,387       51,114      115,426      268,927

1999
Revenues ......................   $  81,158    $   8,853    $    --      $  90,011
Segment loss from operations ..     (37,517)      (5,549)        --        (43,066)
Amortization of goodwill,
intangibles and advances ......      11,969        4,970         --         16,939
Total assets ..................     476,939       57,073         --        534,012

1998
Revenues (1) ..................   $  19,744    $   1,003    $    --      $  20,866
Segment loss from operations ..     (25,299)        (434)        --        (25,733)
Amortization of goodwill,
intangibles and advances ......       5,722         --           --          5,722
Total assets ..................      62,766          342         --         63,108
</TABLE>


(1) Included in the 1998 total columns is $119,000 in other revenues. This
amount is not

                                      F-46


<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

included in the network, e-mail or technology segment columns.

Prior to 1999, the Company operated only in the United States. In 1999, the
Company acquired subsidiaries in Canada and Europe, which operate as part of the
global network business. Revenue and long-lived asset information by geographic
area as of and for the year ended December 31, 2000 and 1999 are as follows:

                                          US        INTERNATIONAL     TOTAL

 2000
 Revenues.......................       $   138,653   $    46,502    $  185,155
 Long-lived assets .............           101,953        25,848       127,801

 1999
 Revenues ......................       $    83,214   $     6,797    $   90,011
 Long-lived assets .............           439,359        13,017       452,376


(15)  SELECTED QUARTERLY FINANCIAL DATA--UNAUDITED

The following is a summary of selected quarterly financial data for the years
ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                2000 Quarter Ended
                                                  ---------------------------------------------
                                                   March 31   June 30   September 3December 31
                                                  ---------------------------------------------
                                                                  (In Thousands)
<S>                                                  <C>          <C>          <C>          <C>
Revenues .........................................   $  46,231    $  52,187    $  48,127    $  38,610
Operating loss ...................................     (36,003)     (33,845)     (72,174)    (593,984)
Net loss attributable to common stockholder ......     (23,847)     (22,165)     (56,787)    (677,123)
Net loss per common share - basic and diluted ....   $   (0.93)   $   (0.82)   $   (1.49)   $  (15.96)

                                                                2000 Quarter Ended
                                                  ---------------------------------------------
                                                   March 31   June 30   September 3December 31
                                                  ---------------------------------------------
                                                                  (In Thousands)
Revenues .........................................   $  11,450    $  17,155    $  24,313    $  37,093
Operating loss ...................................      (7,532)      (8,023)     (12,702)     (14,809)
Net loss attributable to common stockholders .....      (7,244)      (7,163)     (11,668)     (12,987)
Net loss per common share - basic and diluted ....   $   (0.42)   $   (0.37)   $   (0.55)   $   (0.58)
</TABLE>

(16) SUBSEQUENT EVENTS--UNAUDITED

Option Grants

On January 1, 2001, the Company issued approximately 5.5 million stock options
at the fair market value on the date of grant to employees of the Company.
One-fourth of these options vested on February 28, 2001.

                                      F-47


<PAGE>


                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


Sale of Available-for-Sale Securities

As of April 10, 2001, the Company sold its remaining stake in chinadotcom,
approximately 1.2 million shares. Proceeds from the sales were $6.4 million
resulting in a pre-tax gain of approximately $4.6 million. The Company also sold
approximately 2.2 million shares of Network Commerce and approximately 25,000
shares of i3Mobile. Proceeds were $0.3 million resulting in a loss on sale of
investments of $1.5 million.

Stock Plans

On January 2, 2001, the Board of Directors of the Company approved the 24/7
Media, Inc. 2001 Stock Incentive Plan for Non-Officers ("2001 Plan").

All employees of and consultants to the Company and its affiliates are eligible
to be granted non-qualified stock options under this plan, provided that such
persons are not officers. Eligibility under the 2001 Plan and award amounts
shall be determined by the Stock Incentive Committee.

A maximum of 2.5 million shares of common stock may be issued or used for
reference purposes pursuant to the 2001 Plan. The maximum number of shares of
common stock subject to each stock option grant to any individual under the 2001
Plan is 250,000 for each fiscal year during the term of the plan.

On February 26, 2001, the Board of Directors of the Company approved the 24/7
Media, Inc. 2001 Equity Compensation Plan ("2001 Equity Plan"), to offer and
issue to certain employees, former employees, advisors and consultants of the
Company and its affiliates common stock of the Company in payment of amounts
owed by the Company to such third parties. The aggregate number of shares of
common stock that may be issued shall not exceed 1.25 million shares.

Website Results

On March 15, 2001, the Company signed an amendment to the WSR purchase agreement
dated August 24, 2000. The amendment changed the earn out criteria as it related
to the contingent consideration to be based on revenue rather than EBIT, as
defined in the original agreement. Based on the new criteria 710,000 shares
related to the period ended December 31, 2000 were issued on March 23, 2001
valued at approximately $0.2 million. In addition, employee loans amounting to
$0.3 million were forgiven. These amounts will be recorded as compensation
expense in the first quarter of 2001 and an additional cash earn out of up to
$1.5 million in cash was put into place for two employees who were the former
principal stockholders of WSR. Payments under the cash earn out are based on
availability of monthly cash flows of WSR, as defined in the agreement. These
amounts will be recognized as compensation expense when earned.

Common Stock Purchase Agreement

                                      F-48

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999


On March 21, 2001, 24/7 Media, Inc, (the "Company") entered into a Common Stock
Purchase Agreement and a Registration Rights Agreement with Maya Cove Holdings
Inc. ("Maya"). Pursuant to the terms of these agreements, beginning on the date
that a registration statement covering a number of shares estimated to be issued
under the Common Stock Purchase Agreement is declared effective by the SEC, and
continuing for 18 months thereafter, the Company has the right, but not the
obligation, subject to the satisfaction or waiver of certain conditions as set
forth in the Common Stock Purchase Agreement, to sell up to $50 million of its
common stock to Maya pursuant to such periodic draw downs as the Company may
elect to make (the "Equity Line"). Maya will purchase such shares at a discount
of between 3.0% and 3.5%, depending on the market capitalization of the
Company's outstanding common stock at the time of issuance. The minimum amount
that may be drawn down at any one time is $250,000.

Additionally, the Company issued a warrant certificate to Maya to purchase up to
100,000 shares of the Company's common stock. The warrant is exercisable for a
period of three years from the date of issuance. The warrant exercise price will
be equal to 150% of the average closing bid of the Company's common stock for
the fifteen trading days prior to the date of closing. The common stock
underlying the warrant will be registered in the registration statement
referenced above.

Pacific Crest Securities, Inc., acted as the Company's financial advisor
("Advisor") with respect to negotiating and consummating the Equity Line. In
addition to agreeing to reimburse the Advisor for out-of-pocket expenses related
to the Advisor's services, the Company has agreed to pay the Advisor a cash fee
equal to 2.5% of the purchase price paid for whatever shares of common stock are
sold in the draw downs. In connection with the services rendered by the Advisor
in obtaining the Equity Line, the Advisor also was issued a warrant to purchase
up to 100,000 shares of the Company's common stock. The warrant exercise price
per share will be equal to 150% of the average closing bid price of the
Company's common stock for the fifteen trading days prior to the date of closing
and the warrant shall be exercisable for three years.

The aggregate number of shares that the Company may sell and issue under the
Common Stock Purchase Agreement is limited by the listing requirements of the
Nasdaq Stock Market. Under the Nasdaq requirements, the Company may not issue
shares under the Common Stock Purchase Agreement in excess of 19.99% of the
shares of its common stock outstanding on March 21, 2001, without receiving the
prior approval of the Company's stockholders. The Equity line is subject to
the Company remaining listed on the Nasdaq. Due to the decline in the share
price of the Company's common stock, the Company received a letter from
Nasdaq stating that they have determined that the Company failed to meet
Nasdaq's minimum listing requirements. The Company could be delisted if it
does not satisfy their requirements by July 5, 2001.

Kendro's Contingent Consideration

In connection with 24/7 Media Europe NV's acquisition of Kendro
Communications, the purchase price excluded contigent consideration of up to
$6.7 million.  If all requirements are met, then, based on the closing price
of the Company's common stock on March 30, 2001, and a preliminary estimate
of revenues of the acquired company by the Company versus the sellers'
estimate of revenues for the twelve month period ended March 31, 2001, the
number of shares that would be required to be delivered to the sellers ranges
from 3.2 million shares up to 5.1 million shares. These amounts will be
recorded as compensation expense in the first quarter of 2001.

Restructuring

On April 9, 2001, the Board of Directors approved a new restructuring plan
whose objective is to leverage the Company's infrastructure and
improve/preserve the Company's cash position. The plan calls for the
divestitures of our non-core assets, a reduction of the Company's headcount
of approximately 100 employees, closing of one office and downsizing of four
other offices as will as the elimination of certain redundancies related to
our technology costs.

                                      F-49

<PAGE>

                                24/7 MEDIA, INC.
             NOTES TO CONSOLIDATE FINANCIAL STATEMENTS - (CONTINUED)
                           DECEMBER 31, 2000 AND 1999

                                    SCHEDULE
                                24/7 MEDIA, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                   BALANCE AT      ADDITIONS                   BALANCE AT
                                  BEGINNING OF     CHARGED TO                    END OF
                                     PERIOD         EXPENSE     DEDUCTIONS       PERIOD
<S>                                <C>          <C>           <C>             <C>
2000
Allowance for doubtful accounts .   $ 1,152      $   10,489     $ (4,854)      $    6,787
Reserve for sales allowance .....     1,370           1,175         (517)           2,028
                                    -----------------------------------------------------
Total ...........................   $ 2,522      $   11,664     $ (5,371)      $    8,815

1999
Allowance for doubtful accounts .   $   268      $    1,151     $   (267)      $    1,152
Reserve for sales allowance .....       368           1,264         (262)           1,370
                                    -----------------------------------------------------
Total ...........................   $   636      $    2,415     $   (529)      $    2,522

1998
Allowance for doubtful accounts .   $    64      $      347     $   (143)      $      268
Reserve for sales allowance .....       185             355         (172)             368
                                    -----------------------------------------------------
Total ...........................   $   249      $      702     $   (315)      $      636
</TABLE>



                                      S-1

<PAGE>

                                   SIGNATURES

KNOW ALL MEN BY THESE PRESENT, that each person or entity whose signature
appears below constitutes and appoints David J. Moore and Mark E. Moran, and
each of them, its true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for it and in its name, place and stead, in
any and all capacities, to sign any and all amendments to this report on Form
10-K 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 it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes may lawfully do or cause to be
done by virtue thereof.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of New York,
State of New York on April 10, 2001.

                                24/7 MEDIA, INC.

                                       By: /s/ David J. Moore
                                       David J. Moore
                                       Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form 10-K has been signed below on April 10, 2001 by the following persons in
the capacities indicated:

              Signature                                Title

/s/ David J. Moore                     Chief Executive Officer and Director
-------------------------              (Principal Executive Officer)
David J. Moore


/s/ R. Theodore Ammon                  Chairman of the Board
-------------------------
R. Theodore Ammon


/s/ John F. Barry                      Director
-------------------------
John F. Barry


/s/ Arnie Semsky                       Director
-------------------------
Arnie Semsky


/s/ Charles W. Stryker                 Director
-------------------------
Charles W. Stryker, Ph.D.

<PAGE>


/s/ Mark E. Moran
-------------------------              Senior Vice President, General Counsel
Mark E. Moran                          and Secretary


/s/ Doug Wagner
-------------------------              Director
Doug Wagner


/s/ Stuart D. Shaw                     Senior Vice President, Finance and
-------------------------              Administration and
Stuart D. Shaw                         acting Chief Financial Officer


<PAGE>

(c) Exhibit Index.

Exhibits and Financial Statement Schedule/Index

   Exhibit  Number   Description

         3.1         +Amended and Restated Certificate of Incorporation of
                     the Company.
         3.2         +By-laws of the Company.
         10.1        +1998 Stock Incentive Plan.
         10.2        #2001 Stock Incentive Plan for Non-Officers.
         10.3        #2001 Equity Compensation Plan.
         10.2        +Form of Stock Option Agreement.
         10.12       +GlobalCenter Master Service Agreement, dated May 1, 1998.
         10.22       **Agreement  and Plan of Merger dated as of January 9,
                     2000 among the Company,  Killer-App  Holding Corp.,
                     Sabela Media, Inc., Freshwater Consulting Ltd., James
                     Green and Galmos Holdings Ltd.
         10.23       **Agreement and Plan of Merger dated as of December 31,
                     1999 among the Company, Mercury Holding Company, IMAKE
                     Software & Services, Inc., IMAKE Consulting, Inc., Mark
                     L. Schaszberger and Trami Tran.
         10.24       **Agreement and Plan of Merger dated as of February 2,
                     2000 among the Company, 24/7 Awards Holding Corp.,
                     AwardTrack, Inc., MemberWorks Incorporated, Brian Anderson,
                     National Discount Brokers Group, Inc., Jeffrey Newhouse,
                     John Watson, Gregory Hassett, Randy Moore and Jack Daley.
         10.25       *** Agreement and Plan of Merger dated as of February 29,
                     2000 by and among 24/7 Media, Inc., Evergreen Acquisition
                     Sub Corp. and Exactis.com, Inc.
         10.26       ****Agreement and Plan of Merger, dated August 24, 2000,
                     between 24/7 Media, Inc., WSR Acquisition Sub, Inc.,
                     Website Results, Inc. and the stockholders of Website
                     Results.
         23.1        Consent of KPMG LLP.


    + Incorporated by reference to Exhibits to the Registrant's Registration
    Statement on Form S-1 dated August 23, 1998 (File No. 333-56085).
    ++ Incorporated by reference to Exhibits to the Registrant's Registration
    Statement on Form S-1 dated March 19, 1999. (File No. 333-70857).
    # Incorporated by reference to Exhibits to the Registrant's Registration
    Statement on Form S-8 dated February 28, 2001 (File No. 333-56308).
    * Confidential treatment has been requested for certain provisions of this
    Exhibit pursuant to Rule 406 under the Securities Act of 1933, as amended.
    The omitted portions have been separately filed with the Commission.
    **Incorporated by reference to Exhibit 2.1 to the Registrant's
    filings on Form 8-K dated January 25, 2000, January 27, 2000 and
    February 28, 2000.


<PAGE>

    *** Incorporated by reference to Exhibits to the Registrant's
    Registration Statement on Form S-4 dated April 20, 2000 (File No.
    333-35306).
    **** Incorporated by reference to Exhibit 2.1 to the Registrant's filings on
    Form 8-K dated August 24, 2000.