<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

       FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                   (Mark One)
            [X] Annual Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934
                    For the fiscal year ended March 31, 2000
                                       or
          [ ] Transition Report Pursuant to Section 13 or 15(d) of the
                       Securities Exchange Act of 1934
             For the transition period from ___________________ to

                         Commission file number 0-24408

                                 IJNT.net, Inc.
             (Exact Name of Registrant as Specified in Its Charter)

               Delaware                                      33-0611753
   (State or Other Jurisdiction of                        (I.R.S. Employer
    Incorporation or Organization                      Identification Number)

                           2030 Main Street, Suite 500
                            Irvine, California 92614
               (Address of Principal Executive Offices) (Zip Code)

        Registrant's telephone number including area code: (949) 260-8100

        Securities Registered Pursuant to Section 12(b) of the Act: None

           Securities Registered Pursuant to Section 12(g) of the Act:

                                                    Name of Each Exchange
         Title of Each Class                         on Which Registered
         -------------------                         -------------------
     Common Stock $.001 par value                   Nasdaq National Market

      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 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 the Form 10-K or by amendment to this
Form 10-K. [ ]

      The aggregate market value of the Common Stock held by non-affiliates of
the registrant based upon the closing sales price of its Common Stock on June
19, 2000 on the Nasdaq National Market was $69,554,018 based on the closing
price of $5.28.

      The number of shares of Common Stock outstanding as of June 19, 2000 was
20,845,123.

                       DOCUMENTS INCORPORATED BY REFERENCE
      Specifically identified portions of the Company's Proxy Statement, to be
mailed to the stockholders in connection with the Company's annual meeting of
stockholders, scheduled to be held on July 25, 2000, are incorporated by
reference in Part III of this report. Except for the portions expressly
incorporated by reference, the Company's Proxy Statement shall not be deemed to
be part of this report.

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                                     PART I

      THIS ANNUAL REPORT ON FORM 10-K INCLUDES "FORWARD-LOOKING STATEMENTS",
INCLUDING STATEMENTS CONTAINING THE WORDS "BELIEVES", "ANTICIPATES", "EXPECTS"
AND WORDS OF SIMILAR IMPORT. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL
FACT INCLUDED IN THIS ANNUAL REPORT INCLUDING, WITHOUT LIMITATION, SUCH
STATEMENTS UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AND ELSEWHERE HEREIN,
REGARDING THE COMPANY OR ANY OF THE TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE
TIMING, FINANCING, STRATEGIES AND EFFECTS OF SUCH TRANSACTIONS AND THE COMPANY'S
GROWTH STRATEGY AND ANTICIPATED GROWTH, ARE FORWARD-LOOKING STATEMENTS.
IMPORTANT FACTS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
EXPECTATIONS ARE DISCLOSED IN THIS ANNUAL REPORT UNDER THE HEADING RISK FACTORS
UNDER ITEM 1.


ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------

                                    BUSINESS

OVERVIEW

      IJNT.net, Inc. (the "Company") is an emerging facilities-based integrated
communications carrier using digital subscriber line, or DSL, technology to
offer broadband data and voice telecommunication services to small and
medium-sized businesses and high-end residential consumers, particularly
multiple tenant units ("MTUs") and multiple dwelling units ("MDUs"). We are
deploying a scalable, network in targeted geographic areas where high demand
exists for our services and which are underserved by other carriers.

      We began operations in 1997 as a provider of high-speed wireless Internet
access primarily to small and medium-sized businesses, MDUs and telecommuters.
We initially offered one-way Internet access and began offers of two-way access
in early 1998. We selected Salt Lake City as our initial market because its
topography offered excellent line-of-sight transmission to nearly the entire
population of 1.3 million. We subsequently expanded our wireless Internet
services to Texas and California.

      In early 1998, we began offering dial-up Internet access to complement our
wireless services. We also acquired Man Rabbit House Multimedia, Inc. ("MRHM"),
a web-site design firm, to offer web-site and e-commerce design and development
services to better serve the needs of our business customers. See discussion of
the intended disposition of MRHM at "Disposition of MRHM" and "Management's
Discussion and Analysis."

      In the fourth quarter of 1998, we formed Urjet Backbone Network, Inc.
("UBN") to operate as a competitive local exchange carrier and to provide fiber
connectivity services through the Internet. In late 1998, we commenced
discussions with Nortel Networks, Inc. ("Nortel") to finance construction of
portions of our broadband network and to offer DSL services using Nortel
products. Such negotiations resulted in the execution of a credit agreement with
Nortel in July 1999. Since July 1999, we have focused our primary capital and
management efforts to implement our DSL service strategy.

      To date, we have completed installation of the primary components of our
high-capacity Nortel DMS-500 switch at our Los Angeles network operations center
and a redundant Internet protocol ("IP") core and asynchronous transport mode
("ATM") network, completed co-location site selection and applications for our
Los Angeles market build, hired an experienced telecommunications operations
group, built our customer care center, completed phase one of our back office
operating support systems, and secured a substantial equipment financing
arrangement with Nortel Networks, Inc. We also have leased or acquired access to
fiber routes co-location facilities in and between a number of major western
cities, including Los Angeles, San Francisco, San Jose, Seattle, Salt Lake City,
Dallas and Houston. We currently have competitive local exchange carrier, or
CLEC, operating authority or pending applications in all states within our
targeted western United States region.

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OUR BUSINESS STRATEGY

      Our goal is to become a leading provider of integrated broadband data and
telecommunications services to small and medium-sized businesses and residential
users in our target markets. We seek to be among the first to offer such bundled
telecommunications services in the majority of our markets. Our future success
will depend on our ability to implement this strategy. We believe our
carrier-grade voice switch, our expanding network, our experienced management
team and our customized operational support system will allow us to implement
our growth strategy. The key elements of our business strategy are as follows:

      BECOME A LEADING SINGLE-SOURCE PROVIDER OF INTEGRATED TELECOMMUNICATIONS
      SERVICES IN OUR TARGET MARKETS

      The key to our success and growth is our ability to become a leading
single-source provider of bundled telecommunications services in each of our
target markets. For the most part, the customers we are targeting rely on two or
more vendors for their long distance, local phone and Internet connectivity
needs. We believe that customers prefer a single source for all of their
telecommunications requirements. We also believe that our integrated voice and
data services, for the first time, will provide small and medium-sized business
customers with the affordable broadband services necessary for success in the
rapidly evolving world of electronic commerce. We believe our customers will be
attracted to our bundled service offering, our consolidated billing and our
single point of contact for customer service, repairs and billing inquiries.

      We intend to offer carrier grade voice services bundled with DSL Internet
access. We also expect to offer voice over IP ("VoIP"), or voice over DSL
("VoDSL") services, in certain geographical areas.

      By providing bundled broadband communications services, we expect to
better meet the needs of our customers, accelerate our target markets, improve
customer retention and capture a larger portion of our customers' total
telecommunications expenditures. We also believe that our combined voice and
data technology will offer attractive pricing when compared to our competition
or the price of purchasing the services separately.

      TARGET UNDERSERVED CUSTOMERS

      We believe that small and medium-sized businesses and high-end residential
users, such as telecommuters and those with home-based businesses, offer the
greatest opportunity for our integrated voice and data communications solutions.
The vast majority of these users currently depend on traditional dial-up modems
for network access. Additionally, many larger enterprises have remote locations
and home-based workers who are not able to enjoy the full advantages of the
office network realized by their colleagues at the corporate offices. We will
offer integrated voice and data communications, high-speed access to the
Internet and private networks. We also intend to offer new applications and
features that increase worker productivity and network security.

      BUILD A CAPITAL-EFFICIENT NETWORK INFRASTRUCTURE

      Our strategy is to expand our network where most economically or
strategically justifiable. We believe that this strategy is expected to increase
long-term operating margins, allow for greater control of our network and
enhance service quality. As we expand our infrastructure with fiber, switches,
and co-locations, the portion of our traffic that is carried on our own network
will increase. We select and build co-locations to maximize coverage of our
target customers of small and medium-sized businesses and high-end residential
users.

      USE A COST-EFFICIENT MARKETING MODEL

      We believe we can rapidly grow our subscriber base most efficiently by
targeting MDU/MTU customers. We anticipate that we will be able to co-locate our
network equipment on their premises and gain immediate access to the inside
wiring without co-locating equipment in an incumbent local exchange carrier
("ILEC") central office. This arrangement allows rapid access to large groups of
customers, who in many cases will be subscribing for premium value-added
services in addition to basic DSL service. Additionally, we are able to
economically provide services in such environments and to provision such
services with minimal ILEC involvement.

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      We believe our direct-response model for marketing and provisioning
services to residential and very small businesses (fewer than nine employees)
will be the most efficient method of reaching such customers. This
direct-response method consists of very targeted advertising to prospective
customers whose phone service is provided from central offices where we have
established co-locations. This approach reduces the expenditure of advertising
funds and customer care on customers outside our area of service. Upon
completion of our system, prospective customers will be able to subscribe
through our UBNetworks.com website, which we expect will be among the first
fully automated systems for subscribing, qualifying the DSL line, provisioning
services and handling customer billing and technical questions.

      We also intend to enter into strategic relationships with regional
integrators which will be commissioned to sell our broadband solutions to their
existing business customers.

      EXPAND OUR GEOGRAPHIC REACH

      Initially, we intend to serve the Los Angeles and Orange County,
California markets. In late 2000 and in 2001, we intend to expand into other
markets in the western United States. We believe the western United States is
particularly attractive due to a number of factors, including the large
population, the rapidly growing metropolitan areas, the high percentage of small
and medium-sized businesses and the large demand for high-speed Internet access
in this region. We also intend to expand into other regions of the United States
as opportunities arise.

      DEVELOP STRONG BRAND AWARENESS

      We believe that marketing and brand identity in the DSL and high-speed
Internet access markets have lacked the memorability and strength of association
found in other consumer product markets. We have therefore hired not only
marketing experts with telecommunications experience, but those with wide
ranging experience in consumer products outside of telecommunications, whose
expertise is in developing strong brand identity and consumer "mind share." We
believe that a strong brand identity will differentiate our products and
services from those of our competitors in the minds of the public, which we
believe will benefit our company over simple technical comparisons.

      LEVERAGE THE EXPERIENCE OF OUR MANAGEMENT TEAM

      Our management team has significant experience in the telecommunications
industry in general and, in particular, in the critical functions of network
operations, sales and marketing, back office and operational support systems,
finance and customer service. Our management team obtained such experience at
nationally recognized industry leaders, including Pacific Bell, SBC
Communications, Teligent, Sprint, MCI, Millicom International and Comstar
Cellular.

MARKET DEPLOYMENT

      We select markets that we believe have high concentrations of customers
with demonstrated need and the ability to pay for our broadband services and
which we believe are underserved by our competition. We measure such need and
ability through our internally developed proprietary model, which takes into
account a variety of industry-specific and non-industry specific factors
relating to market size, receptivity and demographics. Based on information
compiled from a number of databases available through various third-party
consulting firms and publication sources, we rank each MSA within the larger
geographical regions that we are targeting. We also rank each co-location
facility and building in which we plan to deploy our equipment within each MSA.

      We plan to introduce our services initially in Los Angeles and its
surrounding regions. We are completing the construction and implementation of
our central switching facilities in Los Angeles. We plan to introduce our
services sequentially in other markets.

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OUR SERVICE OFFERINGS

      Our services are designed to meet the needs of small to medium-sized
businesses and high-end residential users.

      DSL SERVICES

      We generally expect to bundle our DSL services with our long distance and
local phone service. However, DSL services may be offered on a stand-alone
basis. Our DSL services are expected to include the following:

DSL SERVICES TO SMALL AND          We will offer our small and medium-sized
MEDIUM-SIZED BUSINESSES            business customers a full range of high-speed
                                   "always on" Synchronous DSL ("SDSL"),
                                   Asynchronous DSL ("ADSL"), and IDSL services.
                                   SDSL provides speeds ranging from 256 Kbps to
                                   2.32 Mbps both to and from the end user. ADSL
                                   provides speeds to the end user ranging from
                                   320 Kbps to 1.2 Mbps, but slower speeds from
                                   the end user ranging from 160 Kbps to 320
                                   Kbps. IDSL will be offered to those users
                                   located more than 3.5 miles from our nearest
                                   co-location and provides speeds of 144 Kbps,
                                   five times faster than 28.8 dial-up modems.
                                   We also intend to offer virtual private
                                   networks, video streaming, video
                                   conferencing, web hosting, wireless and
                                   dial-up services described below.

DSL SERVICES TO MDUS/MTUs          We will offer customers in MDUs and MTUs the
                                   same high-speed SDSL and ADSL Internet
                                   connection services as those offered to small
                                   and medium-sized businesses. We intend to
                                   co-locate our network access equipment at the
                                   customer's or landlord's building.

DSL SERVICES TO HIGH-END           We will offer high-end residential users ADSL
RESIDENTIAL USERS                  services having downstream and upstream
                                   speeds of 640 Kbps/160 Kbps or 1.2 Mbps/320
                                   Kbps. ISDL services will be available for
                                   residential users located more than 3.5 miles
                                   from our co-location facility. Our plug and
                                   play modems from Nortel permit voice and data
                                   over the same line.

VoDSL                              We intend our voice services to be offered
                                   predominantly over our Nortel DMS circuit
                                   switches. However, we also expect to provide
                                   local and long distance phone service over
                                   packet-based VoDSL and VoIP facilities. Such
                                   VoDSL and VoIP services may permit us to
                                   offer bundled services at a lower cost or
                                   while we are building our circuit-based
                                   switches in other markets.


      LOCAL AND LONG DISTANCE TELEPHONE CALLING SERVICES

      We expect to launch our local calling services in September 2000 in Los
Angeles. We expect such services to include local dial tone, simplified local
rates, local number portability, listing in white and yellow page directories,
access to 911 and directory assistance. Also available through the service will
be certain enhanced features, such as three-way conference calling, line
rollover, call forwarding, call waiting, caller identification and voice mail.
Our voice mail service is expected to include free call forwarding, remote
access, paging notification, personalized greetings and password protection. We
also plan to originate and terminate interexchange calls placed or received by
our customers.

      We expect to offer a full range of domestic and international long
distance services, including "1+" outbound calling, six second incremental
billing, inbound toll free service, and such complementary services as calling
cards with operator assistance and conference calling. To provide easy to
understand billing to our clients, we plan to also offer one rate on any call
within the continental United States.

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      WIRELESS INTERNET ACCESS

      Historically, our primary service offering has been wireless Internet
access. We have integrated our existing wireless high-speed Internet access with
the DSL network build-out. As we enter new markets to provide DSL services, we
will also in many cases set up wireless high-speed Internet systems operating at
or near our main office in each MSA in order to continue to provide the
versatility and options for our customers that they have come to expect. We
currently offer Wireless T-1 services in two markets.

      A wireless T-1 service is operated currently on systems in the 2.4
gigahertz public-access frequency band. In a radius of approximately 5 to 7
miles around our wireless point of presence (POPs), we can offer up to 1.5
megabit per second bi-directional Internet connections without wires. The
customer's location must have a clear line of site to our POP; and the user must
place a small antenna in a window, mounted to a wall, or on the roof of the
customer's location. This antenna is connected to a small radio unit that is
wired to a network interface card in the user's computer. The service offers
spread-spectrum frequency hopping technology for excellent network security and
symmetrical download and upload speeds. We offer a range of speeds over this
service, determined by the customer's issue and by the customer's distance from
our point of presence. Wireless T-1 service can serve a small office network as
a stand-alone connection, or can serve as a redundant backup for another type of
connection, where continuity of service is a concern. Voice services can be
offered over this wireless connection, but we have not offered the voice option
to date over wireless.

      TRADITIONAL DIAL-UP ACCESS

      We currently offer national dial-up access through relationships with
Level (3) Communications and others. We do not expect to devote significant
resources to providing such services. However, many of our commercial DSL
customers will expect dial-up services for use by traveling employees and in
other circumstances where DSL is not available. Therefore, we will maintain our
dial-up service offerings to complement our DSL services.

      WEB HOSTING

      We offer a variety of web hosting services to enable our clients to
maintain a high quality, highly reliable Internet presence without investing
capital in data center space, multiple high speed connections or other capital
intensive infrastructure. These services include dedicated web hosting, shared
web hosting, and equipment co-location.

      WEBSITE AND E-COMMERCE SITE DESIGN AND DEVELOPMENT

      Through our subsidiary, Man Rabbit House Multimedia, Inc., we provide a
broad range of web-site design development and related services.

      DISPOSITION OF MAN RABBIT HOUSE MULTIMEDIA, INC.

      We have determined to sell or otherwise dispose of Man Rabbit House
Multimedia, Inc. We have received an appraisal of its business and are currently
in discussion to effectuate a sale. We expect to continue, although to a lesser
extent, to provide such services to our customers after the successful
disposition of MRHM, by utilizing internal resources or by outsourcing such
services.

SALES AND MARKETING

      We plan to focus our marketing efforts in the geographical regions covered
by the co-location facilities in which we deploy our equipment. Our narrow cast
marketing focus is designed to minimize our marketing expenditures while
attracting customers located in those regions that we are prepared to serve. We
plan to coordinate our marketing efforts with the regional introduction of our
services. In so doing, we will enhance our ability to respond quickly to
customer demands and reduce the likelihood that we will be unable to deliver our
services to prospective customers that encounter our advertising. Whereas the
capacity to process a flow of orders and institute service for new customers
generally is a limiting factor for other providers of integrated
telecommunications services, we believe our responsiveness in the marketplace
will be key to the development of our reputation for quality and reliability. We
intend to market our services primarily through the following three methods:
direct response; direct sales; and strategic reseller relationships targeting
specific vertical markets.

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      DIRECT SALES FORCE

      We also began to assemble an experienced sales force to market our
services directly to larger businesses and users in MDU and MTU environments.
Our sales force will be organized around our regional offices. System
integrators and IT managers of businesses will be the focus of our business
sales efforts. Our regionally based sales force will use a consultative selling
approach to offer clients a full range of sophisticated and cost-effective
telecommunications solutions.

      DIRECT RESPONSE

      We expect to primarily rely on direct consumer response to our
advertising, or direct-response marketing, to generate sales to residential and
small business consumers. Under this direct-response approach, we will target
our services in our selected regions through the use of various forms of
advertising, including print ads, mailings, on-line banners, interactive ads and
a campaign of television and radio advertising. We believe that our
UBNetworks.com website, when completed, will be the first Internet site that
permits fully automated DSL line qualification, provisioning and service
ordering, as well as an interface for existing customers to view account
information and have their billing and technical questions answered. Interested
consumers will be able to respond directly by telephone or through our Web site.
We believe this form of marketing will generate responses from a high percentage
of residential and small business users at a lower cost per subscriber than
other methods.

      STRATEGIC ALLIANCES WITH NETWORK INTEGRATORS

      We are in the process of building relationships with strategic sales
partners, particularly network integrators, whose business customers depend on
them for integrated Internet and networking solutions. We expect to market our
services to various resellers, independent marketing representatives,
associations and affinity groups. We expect to offer commission incentives or
discount prices to such resellers, which in turn will sell such services at
retail prices to their customers.

      Our sales and marketing approach is designed to build long-term business
relationships with our customers, with the intent of becoming the single-source
provider of their telecommunications services. We train our sales force in-house
with a customer-focused program that promotes increased sales through both
customer attraction and retention.

CUSTOMER CARE SYSTEM

      GENERAL

      Historically, provisioning, billing and network maintenance and
surveillance systems have been the greatest obstacles to developing efficient
and scalable broadband networks. Therefore, we made these functions a prime
focus of our efforts by commencing the design and implementation of a
comprehensive customer care system before commencing commercial service. Among
the most crucial aspects of every DSL and telecommunications provider's business
is the establishment of a provisioning, billing and customer care systems that
accomplish the following goals:

      o  Allow rapid automated evaluation and qualification of a prospective
         subscriber's copper phone line for DSL services by interfacing with the
         incumbent carriers' line information databases;

      o  Automate the process of contacting the incumbent carrier to provision
         the line and, where necessary, turn the line over to us;

      o  Automate the connection of the customer's line to our network and the
         generation, storage and delivery of each subscriber's billing
         information and billing statements;

      o  Automate the detection of network problems and line outages and
         maintenance functions; and

      o  Provide all of the customer's provisioning, billing and maintenance
         information in a format that allows a single customer care
         representative (or the customer via a web-based interface) to review
         and interact with the information, to minimize the number of personnel
         involved in an incidence of subscriber trouble, and to enable one
         customer care representative to cure any typical subscriber problem
         immediately.

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      Through the use of a common customer care platform, we expect that our
customer care associates will be able to solve the majority of customer issues
on the initial customer contact. The customer care associate will be able to
retrieve order, billing, and network information from a common system platform.
Our network management software working behind the scenes will allow our
customer care associate to perform end to end testing on a customer line. The
customer care associate will be able to view the entire circuit from our
equipment all the way to the customer's PC to isolate the case of trouble. Our
customer care system is expected to provide all of the necessary real-time
information and test capabilities to resolve and prevent customer service
issues. This design is expected to eliminate hand-offs and provide integrated
service to our customers with the initial contact. We believe that we will be
able to resolve network-related problems much more quickly than our competitors,
which will translate into increased customer satisfaction.

      QUALIFYING A CUSTOMER FOR SERVICE

      UBN's Customer Care Center has chosen to implement an automated triple
verification approach to assure accuracy in determining if a customer is
eligible to receive DSL or other bandwidth services. All three verification
steps will be integrated in one easy to use platform (Siebel) for our customer
care agents. The first will be our facility database to determine the MDU and
campus environments our company serves. The second will be a business logic tool
that determines the acceptable distance for services as well as boundary
calculations provided by Sagent. Sagent will provide ongoing address
standardization, geocoding and a wire center lookup by utilizing both Centrus
RealTime and custom Active Server Page code. Customer friendly portions of these
applications will be available on the UBN home page to prequalify potential
customers. To assure even greater accuracy the Customer Care Center also will
have access to the Regional Bell Operating Company or other ILEC qualification
tools.

      NOTIFYING THE INCUMBENT CARRIER

      When providing service to a customer where our DSL network node equipment
is not located within the customer's building, we will electronically notify the
incumbent dial-tone provider. If the dial-tone provider is another CLEC, we will
electronically pass the information over via a common platform that many CLECs
use today. This software will send notification automatically to the appropriate
CLEC once our customer care associate has completed the order. In the case of
the RBOCs, each has its own legacy-based, usually manual, order entry system. We
will have a web-based front-end system that will take the appropriate
information and complete the information fields within the RBOC systems to
enable DSL service.

      DELIVERY AND BILLING OF SERVICES

      We have chosen a suite of Operational Support Systems ("OSS") that are
expected to allow for business process automation, real time analysis,
Internet-based communications, and application integration. The core support
system was developed by Vitria Technologies. This system combines the
appropriate information from the customer and our own network elements to
provision the customer line in an automated and efficient manner. There are two
main systems that will interact with Vitria to deliver and bill services to our
customer. All information needed to deliver and bill for services will be
directly entered into a common system interface provided by Siebel. Siebel is
the operating system that customers (via the Internet) or our customer care
associates use to enter specific customer and product information. The basic
information includes address, type of products and services, and desired
connection speed. Vitria then automatically translates and passes this
information to the appropriate network systems to provide working service. In
order to qualify a customer for billing services and to generate a bill, the
information gathered by Vitria from Siebel is delivered to Portal. The Portal
billing system automatically verifies customer credit history, debits the
customer's credit card or checking account and can send a detailed bill to the
customer by e-mail transmittal and/or generate a printed billing statement.
Portal can be customized to use information from actual customer history and
usage to present the customer with a customized set of offered pricing and usage
sensitive features for both consumers and business.

NETWORK ARCHITECTURE AND TECHNOLOGY

      OVERVIEW

      We pursue a capital-efficient network deployment strategy that involves
owning switches while acquiring or leasing fiber optic transmission facilities
on an incremental basis to satisfy customer demand. Our strategy has been to
build the first components of our network to serve a number of target markets.
We believe that, where economically or strategically justified, owning network
components, rather than relying on the facilities of third parties, will enable
us to have more flexibility in meeting customer needs for new products and
services, generate higher operating margins, obtain origination and termination
fees from other carriers and maintain greater control over our network
operations and service quality.

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      Our network structure is designed to have the following characteristics:

      o  Redundant to ensure consistent performance.
      o  Easily scalable from each network access point and from MSA to MSA.
      o  Accommodates new features and services.
      o  Ability to continuously monitor all network elements to quickly
         identify and repair network problems.
      o  Highest level of security.

      INTEGRATED NETWORK ARCHITECTURE

      We will provide services to our customers over a single integrated network
that supports local and long distance voice services over traditional circuit
facilities, high-speed data, including DSL. We believe that the integrated
design of our local, long distance and data networks significantly will reduce
our cost of providing services. Our integrated network architecture includes
equipment located at customer premises, ILEC or CLEC copper wire (also known as
unbundled network elements), equipment located in the central offices of ILECs
and CLECs, carrier grade voice switches, gateway and long distance switches,
digital subscriber line access multiplexers, or DSLAMs, Internet protocol-based
routers and switches, application servers, asynchronous transfer mode, or ATM,
switches, and synchronous optical network, or SONET, fiber rings.

      LONG DISTANCE SWITCHING PLATFORM - NORTEL SWITCHES

      We are in the process of deploying a Nortel DMS-500 switch in Los Angeles.
We intend to deploy additional switch facilities as needed to serve our target
markets.

      FIBER AND TRANSPORT

      We have acquired an indefeasible right of use ("IRU") for fiber optic
cable in a certain portion of our network. We also lease long-haul network
transport capacity from major network-based carriers and local access from the
incumbent local carriers in their respective territories. We also use
competitive access provider facilities where available and economically
justified. We expect to lease additional transport circuits for certain
metropolitan area fiber rings or SONET services to interconnect our
co-locations, switching nodes, and long haul SONET backbone. To ensure seamless
off-net termination and origination, we also utilize interconnection agreements
with major carriers.

      We have also built and own our ATM circuits and equipment, unlike many
providers that lease these ATM network elements. Ownership of our ATM network
reduces our susceptibility to ATM network congestion and strengthens our ability
to maintain and restore network performance.

      CO-LOCATION FACILITIES

      Central Office Co-location. Within each co-location facility we are in the
process of deploying both equipment to support switched voice services and
DSLAMs to support high-speed and DSL service offerings. By designing our
co-locations in this manner we are able to allocate the overhead costs
associated with deploying co-locations across multiple products and revenue
streams. This co-location architecture can be extended to support emerging
applications as customer requirements dictate.

      MDU/MTU Co-location. Our SONET ring architecture and range of broadband
delivery services are expected to make it possible for us to locate some of our
network access points in co-location environments other than traditional central
offices. We expect to locate these sites in educational and business campuses,
MDU/MTU environments, community redevelopment projects and other locations where
copper lines aggregate outside central offices. In most instances, these access
point locations will permit us to have and control access to the facility at all
times while saving significant portions of the cost otherwise associated with
our co-location space.

      "LAST MILE" AND CUSTOMER PREMISES EQUIPMENT

      Our integrated network begins with our customer. To reach our customers,
we purchase or lease simple copper loops, or, if customer traffic justifies, T-1
facilities, as unbundled network elements, or UNEs, from the ILEC. By utilizing
UNEs, we obtain access and termination revenues as if we owned the copper loop
to our customer and are able to rapidly connect the customer directly to our
co-location. We provide our customer with a modem that we connect to a digitally

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conditioned copper loop that we have purchased or leased as a UNE. To enable us
to purchase these UNEs, we negotiate interconnection agreements with the ILEC in
each of our targeted jurisdictions. We currently have in place interconnection
agreements with GTE and Pacific Bell in our initial target market in California
and we are negotiating additional interconnection agreements.

      NETWORK SURVEILLANCE AND REPORTING AUTOMATION

      The various network elements will be managed by several network management
systems to provide a variety of information regarding the operating status of
each element. These systems all have a common base architecture that allows us
to use a single system interface to capture the relevant information. This
system interface automatically captures the desired minor, major and critical
alarms generated by every network element. This system interface will then pass
this information to our core support system, Vitria, which in turn is expected
to deliver the information to our customer care associates and billing system
for appropriate action. Because alarms can be customized to each network element
and prioritized, this system is designed to permit proactive network management
and allow the prevention of problems or their repair in early stages before
significant outages occur.

      Our entire network will be managed from the network operations center,
with web-based remote monitoring capability for most network elements also
available. We will provide end-to-end network management using advanced network
management tools on a continuous basis, which will enable us to address
performance or connectivity issues before they affect the end-user. Our
engineers and technicians will be able to "see" not only each network element,
but its connection and performance status at any time, so that a network problem
can be pinpointed and immediately repaired or bypassed.

      From the network operations center, we will monitor the equipment and
circuits in each metropolitan network, each central office and remote switching
site and each individual end-user line or wireless connection. Our network
operations center is located at One Wilshire in Los Angeles, the site of the
MAE-LA metropolitan access exchange on the Internet backbone. We anticipate that
construction of additional network monitoring facilities may be necessary to
service other target markets.

      NETWORK SECURITY

      Access to corporate networks via dial-up modems presents significant
security risks, since any telephone can be used to access such a network simply
by dialing the number. Businesses and other organizations therefore must spend
significant effort and resources to prevent unauthorized access. They also
usually limit remote access users to reading e-mail or other non-sensitive
applications. Our network permits secure availability of all internal
applications and information for use at remote locations. Our permanent virtual
circuits can connect individual end-users at fixed locations to a single
business. This reduces the possibility of unauthorized access and allows our
customers to transmit sensitive information and applications safely over our DSL
lines and wireless connections.

COMPETITION

      The markets for business and consumer Internet access and voice connection
services are intensely competitive. We expect that these markets will become
increasingly competitive in the future. The principal bases of competition in
our markets include:

      o  price/performance;
      o  breadth of service availability;
      o  reliability of service;
      o  network security;
      o  ease of access and use;
      o  content bundling;
      o  customer support;
      o  brand recognition;
      o  operating experience;
      o  relationships with Internet service providers and other third parties;
         and
      o  capital resources.

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<PAGE>

      We face competition from traditional telephone companies, cable modem
service providers, competitive telecommunications companies, traditional and new
national long distance carriers, Internet service providers, on-line service
providers and wireless and satellite service providers.

      INCUMBENT LOCAL EXCHANGE CARRIERS

      Traditional telephone companies in our target markets, such as Pacific
Bell, SBC, GTE, and USWest have begun offering DSL services or have announced
their intention to provide DSL services in the near term. As a result, the
traditional telephone companies represent strong competition in all of our
target service areas, and we expect this competition to intensify. The
traditional telephone companies have an established brand name and reputation
for high quality in their service areas, possess sufficient capital to deploy
DSL equipment rapidly, own the telephone wires themselves and can bundle digital
data services with their existing voice services to achieve economies of scale
in serving their customers. The traditional telephone companies are also in a
position to offer service from central offices where we may be unable to secure
space and offer service because of asserted or actual space restrictions.

      CABLE MODEM SERVICE PROVIDERS

      Cable modem service providers such as Cox Cable (Excite@Home), Time Warner
Cable (RoadRunner) and Charter Cable are deploying high-speed Internet access
services over hybrid fiber/coaxial cable networks. Hybrid fiber coaxial cable is
a combination of fiber optic and coaxial cables, and has become the primary
architecture utilized by cable operators in recent upgrades of their systems.
Where deployed, these networks provide similar and in some cases higher-speed
Internet access than we provide. They also may offer these services at lower
price points than our services. We believe the cable modem service providers
face a number of challenges that we and other providers of DSL services avoid.
For example, different regions within a metropolitan area may be served by
different cable modem service providers, making it more difficult to offer the
blanket coverage required by potential business customers. Also, most of the
current cable infrastructure in the United States must be upgraded to support
cable modems, a process which we believe is significantly more expensive and
time-consuming than the deployment of DSL-based networks. Additionally, there
are perceived and actual degradations of service over a cable modem system when
large numbers of subscribers join the service in a limited geographic area
because each subscriber does not generally receive dedicated bandwidth, but
shares the bandwidth of the same channel used by many other simultaneous users.

      COMPETITIVE TELECOMMUNICATIONS COMPANIES

      Many competitive telecommunications companies such as Covad
Communications, NorthPoint Communications, Rhythms NetConnections, Internet
Connections and FreeDSL and others offer high-speed digital services using a
business strategy with similarities to ours. Some of these competitors have
begun offering DSL-based access services and others are likely to do so in the
future. Some of our competitors have extensive fiber networks in many
metropolitan areas, primarily providing high-speed digital and voice circuits to
large corporations. They also have interconnection agreements with the
traditional telephone companies pursuant to which they have acquired central
office space in many markets we are also targeting.

      NATIONAL LONG DISTANCE CARRIERS

      Interexchange carriers, such as AT&T, Sprint, MCI WorldCom and Qwest, have
deployed large-scale Internet access networks and ATM networks, sell
connectivity to businesses and residential customers, and have high brand
recognition. They also have interconnection agreements with many of the
traditional telephone companies and a number of spaces in central offices from
which they are currently offering or could begin to offer competitive DSL
services.

      INTERNET SERVICE PROVIDERS

      Regional and national Internet service providers provide Internet access
to residential and business customers, generally using the existing public
switched telephone network at integrated services digital network speeds or
below. Some Internet service providers have also begun offering DSL-based
services, including Internet Connection and FreeDSL. Our largest DSL competitors
have generally used a wholesale strategy, providing their services to end users
only through resellers, to whom they must pay substantial incentives and
premiums in order to acquire many subscribers rapidly and at low per-subscriber
margins. Recently, at least one provider in our service area has begun offering
free DSL.

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<PAGE>

      ON-LINE SERVICE PROVIDERS

      On-line service providers include companies such as AOL, Excite@Home, MSN
(a subsidiary of Microsoft Corp.) and WebTV (a subsidiary of Microsoft Corp.)
that provide, over the Internet and on proprietary online services, content and
applications ranging from news and sports to consumer video conferencing. These
services are designed for broad consumer access over telecommunications-based
transmission media, which enable the provision of digital services to the
significant number of consumers who have personal computers with modems. In
addition, they provide Internet connectivity, ease-of-use and consistency of
environment. Many of these on-line service providers have developed their own
access networks for modem connections. As these on-line service providers extend
their access networks to DSL or other high-speed service technologies, they
become competitors of ours.

      WIRELESS AND SATELLITE DATA SERVICE PROVIDERS

      Wireless and satellite data service providers are developing wireless and
satellite-based Internet connectivity. We may face competition from terrestrial
wireless services, including 2.5 - 2.7 Gigahertz (GHz) and 28 GHz wireless cable
systems (Multi-channel Microwave Distribution System (MMDS) and Local
Multi-channel Distribution System (LMDS)), and 18 GHz and 39 GHz point-to-point
microwave systems. The FCC has auctioned spectrum for LMDS services in all
markets. This spectrum is expected to be used for wireless cable and telephony
services, including high-speed digital services. In addition, companies such as
Teligent Inc., Advanced Radio Telecom Corp. and WinStar Communications, Inc.,
hold point-to-point microwave licenses to provide fixed wireless services such
as voice, data and videoconferencing.

      We also may face competition from satellite-based systems. Motorola
Satellite Systems, Inc., Hughes Communications (a subsidiary of General Motors
Corporation), Teledesic and others have filed applications with the FCC for
global satellite networks which can be used to provide broadband voice and data
services, and the FCC has authorized several of these applicants to operate
their proposed networks.

                              GOVERNMENT REGULATION

      THE FOLLOWING SUMMARY OF REGULATORY DEVELOPMENTS AND LEGISLATION DESCRIBES
THE PRIMARY PRESENT AND PROPOSED FEDERAL, STATE, AND LOCAL REGULATION AND
LEGISLATION THAT IS RELATED TO THE INTERNET SERVICE AND TELECOMMUNICATIONS
INDUSTRIES AND WOULD HAVE A MATERIAL EFFECT ON OUR BUSINESS. EXISTING FEDERAL
AND STATE REGULATIONS ARE CURRENTLY SUBJECT TO JUDICIAL PROCEEDINGS, LEGISLATIVE
HEARINGS AND ADMINISTRATIVE PROPOSALS THAT COULD CHANGE, IN VARYING DEGREES, THE
MANNER IN WHICH OUR INDUSTRIES OPERATE. WE CANNOT PREDICT THE OUTCOME OF THESE
PROCEEDINGS OR THEIR IMPACT UPON THE INTERNET SERVICE AND TELECOMMUNICATIONS
INDUSTRIES OR UPON US.

OVERVIEW

      Our telecommunications services will be subject to federal, state and
local regulation. The FCC exercises jurisdiction over all facilities and
services of telecommunications common carriers to the extent those facilities
are used to provide, originate, or terminate interstate or international
communications. State regulatory commissions exercise jurisdiction over
facilities and services to the extent those facilities are used to provide,
originate or terminate intrastate communications. In addition, as a result of
the passage of the Telecommunications Act of 1996 (the "Telecommunications
Act"), state and federal regulators share responsibility for implementing and
enforcing the domestic pro-competitive policies of the Telecommunications Act.
In particular, state regulatory commissions have substantial oversight over the
provision of interconnection and non-discriminatory network access to
established or incumbent local exchange carriers, or ILECs. Local governments
often regulate public rights-of-way necessary to install and operate networks.

      INTRODUCTION OF SERVICES

      Before offering services in a market, we must secure certification from
state regulatory commissions. Typically, we must file tariffs, or price lists,
for the services that we will offer. The certification process varies from state
to state, but the fundamental requirements largely are the same. State
regulators require new entrants to demonstrate that they have adequate financial
resources to establish and maintain good customer service. New entrants also are
required to show that they have the requisite technical and managerial ability
required to establish and operate a telecommunications network. We received the
necessary certification to operate our network in each of the western States in
which we initially intend to operate. We intend to file applications for such
authority in all States.

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<PAGE>

      Before providing local service, we must negotiate and execute an
interconnection agreement with an established telephone company. These
agreements cover a number of aspects including:

      o  the price we pay to lease access to the traditional telephone company's
         telephone wires;
      o  the special conditioning the traditional telephone company provides on
         certain of these lines to enable the transmission of digital signals;
      o  the price and terms of central office space for locating our equipment
         in the traditional telephone company's central offices;
      o  the price we pay and access we have to the traditional telephone
         company's transport facilities;
      o  the operational support systems and interfaces that we can use to place
         orders, report network problems and monitor the traditional telephone
         company's response to our requests;
      o  the dispute resolution process that we use to resolve disagreements on
         the terms of the interconnection contract; and
      o  the term of the interconnection agreement, its transferability to
         successors, its liability limits and other general aspects of the
         traditional telephone company relationship.

      By May 15, 2000, we had entered into interconnection agreements with or
otherwise obtained interconnection rights from several major traditional
telephone companies in California and Texas. Traditional telephone companies may
not always agree to our requested provisions in interconnection agreements and
we do not expect to consistently prevail in obtaining all of our desired
provisions in such agreements either voluntarily or through the interconnection
arbitration process. We are currently negotiating agreements with several
traditional telephone companies in order to launch our services into targeted
metropolitan statistical areas. The traditional telephone companies are also
permitting competitive telecommunications companies to adopt previously signed
interconnection agreements. Until now, we have adopted the interconnection
agreement of other competitive telecommunications companies.

      Many of our interconnection agreements have a term of three years. We will
have to renegotiate these agreements when they expire. Although we expect to
renew the interconnection agreements that require renewal and believe the
Telecommunications Act and the agreements themselves limit the ability of
traditional telephone companies not to renew such agreements, we may not succeed
in extending or renegotiating our interconnection agreements on favorable terms.
The interconnection agreements are subject to state commission, FCC and judicial
oversight. These government authorities have the authority to modify the terms
of the interconnection agreements in a way that could hurt our business.

FEDERAL REGULATION

      INTERNET

      Our Internet operations are not currently subject to direct regulation by
the FCC or any other telecommunications regulatory agency, although they are
subject to regulations applicable to businesses generally. However, the future
Internet service provider regulatory status continues to be uncertain. In an
April 1998 report, the FCC concluded that while some Internet service providers
should not be treated as telecommunications carriers, some services offered over
the Internet, such as phone-to-phone telephony, may be functionally
indistinguishable from traditional telecommunications service offerings, and
that their non-regulated status may have to be re-examined. Moreover, although
the FCC has decided not to allow local telephone companies to impose per-minute
access charges on Internet service providers, and that decision has been upheld
by the reviewing court, further regulatory and legislative consideration of this
issue is likely. The imposition of access charges would affect our costs of
serving dial-up clients and could have a material adverse effect on our
business, financial condition and results of operations. In addition, Congress
and other federal entities have adopted or are considering other legislative and
regulatory proposals that would further regulate the Internet. Various states
have adopted and are considering Internet-related legislation. Increased United
States regulation of the Internet may slow its growth or reduce potential
revenues, particularly if other governments follow suit, which may increase the
cost of doing business over the Internet.

      We believe that, under the Telecommunications Act, competitive local
exchange carriers are entitled to receive compensation from established
telephone companies for delivering traffic bound for Internet service provider
customers of the competitive local exchange carriers, despite the objections of
established telephone companies. While most states have required established
telephone companies to pay this compensation to competitive local exchange
carriers the FCC has established a proceeding to consider an appropriate
compensation mechanism for interstate Internet traffic. In addition, there is a
risk that state public utility commissions that have previously considered this
issue and ordered the payment of reciprocal compensation by the established
telephone companies to the competitive local exchange carriers may be asked by
the established telephone companies to revisit their determinations, or may
revisit their determinations on their own motion.

                                       13
<PAGE>

      OTHER TELECOMMUNICATIONS SERVICES

      We are regulated at the federal level as a nondominant common carrier
subject to minimal regulation under Title II of the Communications Act of 1934,
as amended by the Telecommunications Act. The Communications Act, as amended,
provides for comprehensive reform of the nation's telecommunications laws and is
designed to enhance competition in the local telecommunications marketplace by
requiring established telephone companies to provide us with access and
interconnection to their facilities and open their local markets to competition.

      One of our current market advantages is our ability to offer both local
and long distance service. Under the Telecommunications Act, regional Bell
operating companies, or RBOCs, have the opportunity to provide long distance
services in the same region in which they offer local service only if they
comply with market-opening conditions. Established telephone companies are no
longer prohibited from providing specified cable TV services. In addition, the
Telecommunications Act eliminates particular restrictions on utility holding
companies, thus clearing the way for them to diversify into telecommunications
services.

      Before a RBOC can provide in-region long distance services, it must obtain
FCC approval. To obtain such approval, the RBOCs must comply with specific
market opening conditions and demonstrate such entry is in the public interest.
To date, only Bell Atlantic has been granted such authority, and only in the
state of New York. The provision of in-region long distance services by the
regional Bell operating companies could permit them to offer "one-stop shopping"
of bundled local and long distance services, thereby eliminating our current
marketing advantage.

FCC RULES IMPLEMENTING THE LOCAL COMPETITION PROVISIONS OF THE
TELECOMMUNICATIONS ACT

      Over the last four years, the FCC has established a framework of national
rules enabling local competition. Some of those rules have important bearing on
our business, particularly:

      INTERCONNECTION

      Established telephone companies are required to provide interconnection
for telephone exchange or exchange access service, or both, to any requesting
telecommunications carrier at any technically feasible point. The
interconnection must be at least equal in quality to that provided by the
company to itself or subsidiaries, affiliates or any other party to which it
provides interconnection, and must be provided on rates, terms and conditions
that are just, reasonable and nondiscriminatory.

      We have obtained or will obtain agreements with some established telephone
companies. These agreements must be renegotiated periodically. Renewal terms may
be less favorable and could affect our overall costs.

      ACCESS TO UNBUNDLED ELEMENTS

      Established telephone companies are required to lease portions of their
networks to requesting telecommunications carriers by providing them with
nondiscriminatory access to network elements on an unbundled basis at any
technically feasible point, on rates, terms, and conditions that are just,
reasonable, and nondiscriminatory. This is important, because it minimizes our
need to make major investments in building our network. At a minimum,
established telephone companies must provide competitors with access to various
network elements used to originate and terminate telephone calls, call routing
database facilities, and computerized operations support systems.

      For example, the FCC recently adopted additional rules that direct
established telephone companies to share their local telephone lines so that
competitors could make use of the high frequency portion of the line. This will
enable competitive carriers like us to use DSL technology to provide high-speed
data services over the same telephone lines simultaneously used by established
telephone companies to provide basic telephone service, a technique referred to
as "line sharing." The short term effect of this order is difficult to predict,
as the FCC left it to the states to determine how this should be done, and what
rates the incumbent local exchange carriers may charge. This process could take
some time, even without considering any appeals of this order that may be filed.
In the long term, however, this rule could have the effect of sharply reducing
our costs of providing DSL service.

                                       14
<PAGE>

      CO-LOCATION

      Established telephone companies are required to provide space in their
switching offices so that requesting telecommunications carriers can physically
"co-locate" equipment necessary for interconnection or access to unbundled
network elements at the company's premises, except that the established
telephone company may provide off-site "virtual" co-location, if it demonstrates
that physical co-location is not practical for technical reasons, or because of
space limitations.

OTHER REGULATIONS

      In general, the FCC has a policy of encouraging new competitors, such as
us, in the telecommunications industry and preventing anti-competitive
practices. Therefore, the FCC has established different levels of regulation of
dominant carriers, the established telephone companies, and nondominant
carriers, integrated communications providers and competitive local exchange
carriers.

      TARIFFS

      As a nondominant carrier, we may install and operate facilities for the
transmission of domestic interstate communications without the time and expense
of obtaining prior FCC authorization. Our primary regulation obligations are to
file schedules of rates and terms of service ("tariffs") and making periodic
reports. A filed tariff benefits us because it relieves us from negotiating
contracts with each customer.

      In October 1996, the FCC adopted the Detariffing Orders, which eliminated
the requirement that nondominant interstate carriers like us maintain tariffs on
file with the FCC for domestic interstate services, and provided that, after a
nine-month transition period, relationships between interstate carriers and
their clients would be set by contract, not tariff. These rules have been upheld
on appeal and became effective May 1, 2000. Non-dominant interstate services
providers will no longer be able to rely on the simple filing of tariffs with
the FCC as a means of providing notice to clients of prices, terms and
conditions under which they offer their domestic interstate services. FCC
tariffs for domestic interstate traffic must be withdrawn by January 31, 2001.
As a result, we will be required to put in place replacement contracts with each
customer.

      ACCESS CHARGES

      The FCC has also made various reforms to the existing rate structure for
charges assessed on long distance carriers for allowing them to connect to local
networks. These changes will reduce access charges and will shift charges, which
had historically been based on minutes-of-use, to flat-rate, monthly per line
charges on end-user customers rather than long distance carriers. As a result,
the aggregate amount of access charges paid by long distance carriers to access
providers like us may decrease.

      At the same time, the FCC, noting the proliferation of fixed monthly
charges on the bills of long distance customers, has recently initiated a public
inquiry on the impact of these charges on consumers.

      Moreover, major long distance carriers are attempting to undermine our
ability to set access charges as we choose. In October 1998, AT&T initiated a
proceeding in which it sought a declaration from the FCC that AT&T may avoid
competitive local exchange carrier access charges by declining to direct calls
to the customers of those competitive local exchange carriers. In addition, AT&T
and Sprint have sent letters to virtually every competitive local exchange
carrier stating that competitive local exchange carriers access charges for
in-bound long distance calls are unreasonable, and demanding a reduction in
rates to a "competitive" level. If competitive local exchange carriers are
unwilling to comply, AT&T and Sprint threaten to no longer deliver those calls.
In July 1999, the FCC issued a decision holding that a competitive
telecommunications provider was entitled to be paid its tariffed rate for
outbound access services provided to AT&T. It did not address the issue of
in-bound service. If long distance providers may in fact refuse to purchase
competitive telecommunications providers switched assess services, competitive
telecommunications providers like us may be adversely affected.

                                       15
<PAGE>

STATE REGULATION

      We believe that most, if not all, states in which we propose to operate
will require a registration, certification or other authorization to offer
intrastate services. Many of the states in which we operate or intend to operate
are in the process of addressing issues relating to the regulation of
competitive local exchange carriers. We will also be subject to tariff filing
requirements. In most states, we are required to file tariffs setting forth the
terms, conditions and prices for services that are classified as intrastate.

      In addition to tariff filing requirements, some states also impose
reporting, client service and quality requirements, as well as unbundling and
universal service requirements. In addition, we will be subject to the outcome
of generic proceedings held by state utility commissions to determine new state
regulatory policies. Some states, including some of our target states, have
adopted or have pending proceedings to adopt specific universal service funding
obligations. These state proceedings may result in obligations that are equal to
or more burdensome than the federal universal service obligations.

      We are also subject to requirements in some states to obtain prior
approval for, or notify the state commission of, specified events such as
transfers of control, sales of assets, corporate reorganizations, issuances of
stock or debt instruments and related transactions.

LOCAL AUTHORIZATIONS

      When constructing a network, such as fiber optic cables, we generally must
obtain municipal franchises and other permits. These rights are typically the
subject of non-exclusive agreements of finite duration and provide for the
payment of fees or the provision of services to the municipality. In addition,
we must secure rights-of-way, pole attachments and other access rights, which
are typically provided under non-exclusive multi-year agreements that generally
contain renewal options. In some municipalities we will be required to pay
license or franchise fees based on a percentage of gross revenues or on a per
linear foot basis, as well as post- performance bonds or letters of credit.

INTELLECTUAL PROPERTY

      We regard certain aspects of our products, services and technology as
proprietary and attempt to protect them with copyrights, tradenames, trademarks,
trade secret laws, restrictions on disclosure and other methods. We have not
applied for or received any patents. These methods may not be sufficient to
protect our technology. We also generally enter into confidentiality or license
agreements with our employees and consultants, and generally control access to
and distribution of our documentation and other proprietary information. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use our products, services or technology without authorization, or to
develop similar technology independently.

      Further, effective copyright, trademark and trade secret protection may be
unavailable or limited in certain foreign countries. The global nature of the
Internet makes it virtually impossible to control the ultimate destination of
our proprietary information. Steps taken by us may not prevent misappropriation
or infringement of our technology. In addition, litigation may be necessary in
the future to enforce our intellectual property rights to protect our trade
secrets or to determine the validity and scope of the proprietary rights of
others. Such litigation could result in substantial costs and diversion of
resources.

      In addition, others may sue us with respect to infringement of their
intellectual property rights. We believe that we do not infringe any patent or
intellectual property of any other person. However, any lawsuits alleging
intellectual property infringement could significantly harm our business.

EMPLOYEES

      At June 30, 2000, we had 157 employees, excluding temporary personnel and
consultants. None of our employees are represented by a labor union, and we
consider our relations with our employees to be good. Our ability to achieve our
financial and operational objectives depends in large part upon the continued
service of our senior management and key technical, sales, marketing and
managerial personnel, and our continuing ability to attract and retain highly
qualified technical, sales, marketing and managerial personnel. Competition for
such qualified personnel is intense, particularly in software development,
network engineering and product management. In addition, in the event that our
employees unionize, we could incur higher ongoing labor costs and disruptions in
our operations in the event of a strike or other work stoppage.

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                                  RISK FACTORS

OUR LIMITED OPERATING HISTORY CREATES SUBSTANTIAL UNCERTAINLY ABOUT FUTURE
RESULTS.

      We have never before operated a telecommunications facility and its first
facility located in Los Angeles, California has just become operational. We
recently organized our principal operating subsidiary, UrJet Backbone Networks,
Inc. ("UBN"), in the last quarter of 1998. We currently provide wireless,
dial-up and T-1 Internet access services in nine markets and we have never
before offered Internet access services using DSL technology. As a result of our
limited operating history, prospective investors have limited operating and
financial data about us on which to base an evaluation of our performance and an
investment in our preferred stock. Our ability to provide an integrated package
of bundled telecommunications services on a widespread basis and to generate
operating profits and positive operating cash flow will depend on our ability,
among other things, to:

      o  market integrated telecommunications services and generate demand for
         them among targeted client categories;
      o  develop, enhance, promote and carefully manage our brand;
      o  respond appropriately and timely to competitive developments;
      o  develop our operational support and other back office systems;
      o  obtain state authorizations to operate as a competitive local exchange
         carrier and any other required governmental authorizations;
      o  attract and retain an adequate client base;
      o  secure additional financing;
      o  attract and retain qualified personnel; and
      o  enter into and implement interconnection agreements with established
         telephone companies on satisfactory terms.

      We cannot assure you that we will be able to achieve any of these
objectives, generate sufficient revenue to achieve or sustain profitability,
meet our working capital and debt service requirements or compete successfully
in the telecommunications industry.

WE HAVE A HISTORY OF LOSSES AND NEGATIVE CASH FLOWS, AND WE ANTICIPATE OUR
LOSSES TO INCREASE AND CONTINUE FOR THE FORESEEABLE FUTURE.

      We have incurred significant operating losses and negative cash flows from
operating activities each year since the commencement of our operations in 1997.
Through March 31, 2000, we had an accumulated deficit of $44.6 million. We have
not achieved profitability. During the fiscal year ended March 31, 2000, we
incurred net losses of $32.4 million and sustained negative cash flows from
operating activities of $12.2 million, resulting in a loss of $1.84 per share
applicable to our common stockholders. We expect to make significant
expenditures in connection with the development of our business, the
acquisition, development and expansion of our network infrastructure, and the
deployment of our services and systems. As a result, we expect our losses to
continue and increase in the foreseeable future, and we expect to incur
significant future operating losses and negative cash flows from operating
activities.

      Our historical losses also have translated into negative earnings before
interest, taxes, depreciation and amortization, or EBITDA, which is used to
determine our compliance with certain conditions and covenants in our credit
agreements. We expect that our EBITDA will be negative while we emphasize
development, construction and expansion of our telecommunications services
business and until we establish a sufficient revenue-generating client base. We
expect that each of our markets will generally produce losses and negative
EBITDA for at least 18 to 24 months after operations commence in such market,
and we expect to experience increasing operating losses, net losses and negative
EBITDA as we expand our operations.

      If our revenue growth is slower than we anticipate or our operating
expenses are higher than expected, our losses will increase significantly. We
cannot assure you that we will achieve or sustain profitability or generate
positive cash flow and sufficient EBITDA to meet our working capital and debt
service requirements, which could increase our borrowing costs and losses
substantially, and have a material adverse effect on our business, financial
condition and operating results.

                                       17
<PAGE>

OUR INABILITY TO SATISFY OUR DEBT OBLIGATIONS COULD HARM OUR BUSINESS, FINANCIAL
CONDITION AND OPERATING RESULTS.

      We expect to borrow substantial amounts to finance the development and
expansion of our network. As a result, we expect to increase our debt
obligations significantly in a short span of time. Our ability to repay our
indebtedness will depend on our future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors. Some of these factors will be beyond our control.

      If we are unable to service our indebtedness or other obligations, we will
be forced to examine alternative financing strategies. These strategies may
include reducing or delaying capital expenditures, restructuring or refinancing
indebtedness or seeking additional debt or equity financing. We cannot assure
you that we would be capable of implementing any of these strategies on
satisfactory terms. Our level of indebtedness could have important consequences
to our stockholders, including the following:

      o  We will have significant and increasing cash interest expense and
         significant principal repayment obligations with respect to outstanding
         indebtedness.
      o  Our degree of leverage and debt service obligations could limit our
         ability to plan for, and make us more vulnerable than some of our
         competitors are to the effects of, an economic downturn or other
         adverse developments.
      o  We may need to dedicate cash flow from our operations to debt service
         payments, making these funds unavailable for other purposes.
      o  Our ability to obtain additional financing in the future for working
         capital, capital expenditures, debt service requirements or other
         purposes could be impaired.
      o  We will have a competitive disadvantage relative to the other companies
         in our industry with less debt.

OUR INDEPENDENT AUDITORS HAVE EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO
CONTINUE AS A GOING CONCERN

      Our consolidated financial statements have been prepared assuming we will
continue as a going concern. During the year ended March 31, 2000, we
experienced a net loss of $32.4 million and had negative cash flows from
operations of $12.2 million. In addition, we had substantial working capital and
shareholders deficits at March 31, 2000. Lastly, we have significant present and
future working capital demands, which will require substantial equity and debt
financing which have not yet been secured. These factors, among others, raise
substantial doubt about our ability to continue as a going concern. Our
independent auditors have also expressed substantial doubt as to our ability to
continue as a going concern. The consolidated financial statements included
elsewhere herein do not include any adjustments that might result from the
outcome of this uncertainty.

      In an effort to reverse the negative financial conditions noted above, we
intend to secure a series of debt and equity financings during 2000 expected to
exceed $200 million. Additionally, we intend to expand our operations through
the establishment of switch-based telecommunications facilities in
pre-designated markets, and develop our management and sales teams, and our
corporate infrastructure. We believe these events will provide the working
capital required to purchase necessary equipment, establish the requisite
infrastructure and fund operations until such time as we become profitable.

      There can be no assurances that we will be able to successfully implement
our plans, including generating profitable operations, generating positive cash
flows from operations and obtaining additional debt and equity capital to meet
present and future working capital demands.

OUR CURRENT INDEBTEDNESS SUBJECTS US TO FINANCIAL AND OPERATING RESTRICTIONS
THAT COULD HARM OUR BUSINESS.

      Our current credit agreement with Nortel imposes operating and financial
restrictions on us. These restrictions limit our ability to:

      o  incur additional indebtedness;
      o  issue stock of any subsidiaries;
      o  create liens on assets;
      o  pay dividends on the common stock of our principal operating
         subsidiary, UrJet Backbone Network, Inc., redeem capital stock or make
         other distributions;
      o  sell assets;
      o  make capital expenditures;
      o  engage in mergers or acquisitions; and
      o  make investments.

                                       18
<PAGE>

      Failure to comply with any of these restrictions could limit the
availability of borrowings or result in default under our current credit
agreement with Nortel. For the years ended March 31, 1999 and 2000, and for the
remaining term of our current credit agreement, Nortel agreed to amend the
financial covenants in our current credit agreement to grant us additional
operating flexibility. If Nortel had not agreed to grant us such flexibility, we
would have been in material noncompliance with our current credit agreement. We
cannot give any assurance that we will obtain a waiver or amendment for any
future noncompliance with our current credit agreement. Our failure or inability
to comply with all material requirements under our present credit arrangements
with Nortel and others could harm our business and financial condition. The
terms of any debt or equity financing undertaken by us to satisfy future cash
requirements could further restrict our operational flexibility, our ability to
incur additional indebtedness and adversely affect our financial condition.

OUR INABILITY TO ENSURE THE PROMPT COLLECTION OF PAYMENTS FOR SERVICES THAT WE
RENDER COULD HARM OUR BUSINESS.

      Because we generally render our services before receiving payment, we
depend on the prompt collection of payment of our customers' bills. In turn, we
depend on the creditworthiness of our customers and adequate revenue assurance
programs. The failure of our customers to pay their bills on time or our failure
to assess the creditworthiness of our customers accurately and implement
adequate revenue assurance programs could materially and adversely affect our
business, consolidated financial condition and operating results.

OUR ABILITY TO ACHIEVE OUR STRATEGIC OBJECTIVES WILL DEPEND IN LARGE PART ON THE
SUCCESSFUL, TIMELY AND COST-EFFECTIVE EXPANSION OF OUR NETWORK.

      We must continue to develop and expand our network infrastructure as the
number of clients and the amount of information they wish to transport as well
as the number of services we offer increases. The expansion and development of
our network infrastructure will require substantial financial, operational and
management resources. We may be unable to expand our network adequately to meet
the demand for increased usage. If we do not expand our network rapidly enough,
additional stress may be placed on our network hardware, traffic management
systems and operating facilities. Our network may be unable to service a
substantial number of additional clients while maintaining high performance and
competitive data transmission speeds.

      A variety of factors, uncertainties and contingencies that are beyond our
control such as the availability of transmission capacity, price of transmission
capacity, continued deployment of our ATM-enabled network, local regulations and
the availability of third-party sales and support channels will affect the
continued expansion of our network. Currently, there is substantial volatility
in the market price for transmission capacity. We are investing significant
capital in acquiring transmission capacity at current fixed prices. These prices
are anticipated to decline in the future. We cannot assure you that actual
expansion costs or the time required to complete our network will not
substantially exceed current estimates. A failure to continue to expand our
network would have a material adverse effect on our ability to service our
clients and to grow our business.

WE MAY BE UNABLE TO FINANCE THE COSTS ASSOCIATED WITH THE CONSTRUCTION OF OUR
NETWORK IF WE ARE UNABLE TO OBTAIN ACCESS TO CREDIT.

      Nortel Networks, Inc. ("Nortel"), currently provides us with two credit
facilities, which includes a $7.0 million line of credit and a $37.0 million
credit facility for equipment financing. The maximum allowable amount on a
consolidated basis, for both facilities, is $37.0 million. While we have
borrowed and currently owe in excess of $7.6 million under the line of credit
facility, Nortel is not obligated to provide us funds under the $37.0 million
credit facility until we generate at least $30.0 million of additional equity
capital or subordinated debt and contribute at least that amount to the equity
capital of our operating subsidiary, UBN. Nortel's obligations under the credit
facility also are subject to the satisfaction of certain other customary
conditions. Until and unless we raise the required funds and satisfy the
remaining conditions under our credit agreement with Nortel, we will not be
entitled to additional funds under the existing credit facility. Additionally,
we cannot guarantee that Nortel will establish the proposed line of credit or
that we will satisfy applicable conditions to access funds under such line of
credit.

      We depend on the availability of debt financing from Nortel to finance the
costs associated with the construction of our network. We may be forced to
discontinue or curtail our operations or to modify, delay or abandon the ongoing
development and expansion of our network if we are unable to secure additional
debt financing from Nortel or others.

                                       19
<PAGE>

WE MAY BE FORCED TO CURTAIL OR DISCONTINUE OPERATIONS OR TO MODIFY, DELAY OR
ABANDON OUR ONGOING EXPANSION AND DEVELOPMENT IF WE ARE UNABLE TO SECURE
ADDITIONAL FUNDS TO FINANCE OUR WORKING CAPITAL REQUIREMENTS AND THE COSTS
ASSOCIATED WITH THE DEVELOPMENT AND EXPANSION OF OUR BUSINESS ENTERPRISE.

      We anticipate that our present cash reserves, together with available
credit under our existing equity or credit facilities will be sufficient to
finance our operating costs and expenses for a period of one month. However, the
expansion and development of our business and the deployment of our networks,
services and systems will require significant capital expenditures, working
capital, debt service and cash flow deficits.

      The actual amount and timing of our future capital requirements may differ
materially from our estimates as a result of, among other things, the demand for
our services and regulatory, technological and competitive developments,
including additional market developments and new opportunities, in our industry.
Our revenues and costs also may depend on factors that are not within our
control, including (without limitation) regulatory changes, changes in
technology, and increased competition. Due to the uncertainty of these factors,
actual revenues and costs may vary from expected amounts, possibly to a material
degree, and such variations are likely to affect our future capital
requirements.

      We also expect that we may require additional financing or require
financing sooner than anticipated if our development plans change or prove to be
inaccurate or to complete our planned roll-out in nine additional markets. We
also may require additional financing in order to develop new services or to
otherwise respond to changing business conditions or unanticipated competitive
pressures. Sources of additional financing may include commercial bank
borrowings, vendor financing, or the private or public sale of equity or debt
securities. We cannot assure you that we will be successful in raising
sufficient additional capital on favorable terms or at all or that the terms of
any indebtedness we may incur will not impair our ability to develop our
business. Failure to raise sufficient funds may require us to curtail or
discontinue our operations or to modify, delay or abandon our planned future
expansion or expenditures, which could have a material adverse effect on our
business, financial condition and operating results.

WE EXPECT OUR BUSINESS TO GROW RAPIDLY, AND ANY INABILITY TO MANAGE SUCH GROWTH
EFFECTIVELY COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS, FINANCIAL
CONDITION AND OPERATING RESULTS.

      We have experienced and are currently experiencing a period of significant
growth of facilities, personnel and operations. This growth has placed, and our
anticipated future growth in our operations will continue to place, a
significant strain on our management, financial controls, operating and
accounting systems, personnel and other resources. We currently rely on a
relatively small core management team. As we grow, we must not only manage
demands on this team but also increase its management resources, among other
things, to continue to expand, train and manage our employee base and maintain
close coordination among our technical, accounting, finance, marketing and sales
staff. We also expect the demands on our network infrastructure and technical
support resources to grow rapidly with our expanding client base, and we may
experience difficulties responding to client demand for our services and
providing technical support in accordance with clients' expectations. We are
upgrading our network infrastructure and technical support services to address
increased client demand. Our network infrastructure, technical support and other
resources may be insufficient to facilitate our growth.

      If we do not manage our growth successfully, we may be unable to
adequately support our clients' communications needs in the future.

      We cannot assure you that we will implement and maintain efficient
operational and financial systems, procedures and controls or obtain, integrate
and utilize successfully the employees and management, and the operational,
financial and other resources necessary to manage a developing and expanding
business in our evolving, highly regulated and increasingly competitive
industry. Any failure to expand these areas and to implement and improve such
systems, procedures and controls in an efficient manner at a pace consistent
with the growth of our business could have a material adverse effect on our
business, financial condition and operating results.

      If we were unable to hire sufficient qualified personnel or develop,
acquire and integrate successfully our operational and financial systems,
procedures and controls, our clients could experience delays in connection of
service and/or lower levels of client service, our resources may be strained and
we may be subjected to additional expenses. Our failure to meet client demands
and to manage the expansion of our business and operations could have a material
adverse effect on our business, financial condition and operating results.

                                       20
<PAGE>

OUR NETWORK INFRASTRUCTURE IS VULNERABLE TO DISRUPTIONS AND SECURITY BREACHES.

      We and other network services providers may in the future experience
interruptions in service as a result of fire, natural disasters, power loss, or
the accidental or intentional actions of service users, current and former
employees, and others. Although we continue to implement industry-standard
disaster recovery, security and service continuity protection measures,
including the physical protection of our plant and equipment, similar measures
taken by us or by others have been insufficient or circumvented in the past. We
cannot assure you that these measures will be sufficient or that they will not
be circumvented in the future. Unauthorized use of our network could also
potentially jeopardize the security of confidential information stored in the
computer systems of or transmitted by our clients. Furthermore, addressing
security problems may result in interruptions, delays or cessation of services
to our clients. These factors may result in material liability by us to our
clients.

ANY FAILURE OF OUR INTEGRATED OPERATIONAL SUPPORT SYSTEM, WHICH WE ARE
DEVELOPING, WOULD IMPEDE OUR ABILITY TO MONITOR AND SERVICE OUR NETWORKS,
PROVISION CLIENT ORDERS AND BILL CLIENTS, WHICH COULD HARM OUR BUSINESS.

      We are developing an integrated operational support system at our network
operating center and switching facility in Los Angeles to monitor our network
infrastructure, systems and related components and to monitor operating costs,
bill clients, provision client orders and achieve operating efficiencies. Our
operational support system will consist of sophisticated information and
processing systems and computing components developed by Vitria, Portal, Siebel
and other third-party vendors. We plan to replicate the same or a similar
support system at the other network operating centers that we intend to
construct in our targeted markets. Our support system is not operational and we
are unable to guarantee that it will become operational and function. If we are
unable to complete the development and integration of our operational support
system successfully, or if our operational support system does not function
properly or if it fails for any extended period of time, we would be unable to
monitor our network infrastructure and service our networks properly in the case
of a malfunction or breakdown. Such system malfunction or failure also would
impair our ability to process client orders and bill clients for services
rendered. Our inability to service our networks, meet client demands and to bill
clients for services rendered would have a material adverse effect on our
business, financial condition and operating results.

OUR INABILITY TO COMPETE EFFECTIVELY IN OUR MARKETS COULD HARM OUR BUSINESS.

      The telecommunications industry is highly competitive, and one of the
primary purposes of the Telecommunications Act is to foster further competition.
In each of our markets, we compete principally with the established telephone
company serving such market. We currently do not have a significant market share
in any of our markets. The established telephone companies have long-standing
relationships with their clients, financial, technical and marketing resources
substantially greater than ours and the potential to fund competitive services
with cash flows from a variety of businesses. These competitors also currently
benefit from existing regulations that favor the established telephone companies
over integrated communications providers and competitive local exchange carriers
in some respects. Furthermore, one large group of established telephone
companies, the regional Bell operating companies, recently have been granted,
under particular conditions, pricing flexibility from federal regulators with
regard to some services with which we compete. This may present established
telephone companies with an opportunity to subsidize services that compete with
our services and offer competitive services at lower prices. It is likely that
we will also face competition from other integrated communications providers and
facilities-based competitive local exchange carriers, and many other competitors
in some of our markets. We believe that our target markets will support only a
limited number of competitors and that operations in such markets with multiple
competitive providers are likely to be unprofitable for one or more of such
providers. We expect to experience declining prices and increasing price
competition. We cannot assure you that we will be able to achieve or maintain
adequate market share or margins, or compete effectively, in any of our markets.
Moreover, substantially all of our current and potential competitors have
financial, technical, marketing, personnel and other resources, including brand
name recognition, substantially greater than ours as well as other competitive
advantages over our business, financial condition and results of operations. Any
of the foregoing factors could materially and adversely affect our business,
financial condition and operating results.

OUR BUSINESS PROSPECTS MAY SUFFER IF WE ARE NOT ABLE TO KEEP UP WITH THE RAPID
TECHNOLOGICAL DEVELOPMENTS IN OUR INDUSTRY.

      The communications industry is subject to rapid and significant
technological changes, such as continuing developments of alternative
technologies for providing high-speed data communications. We cannot predict the
effect of technological changes on our business. We may rely in part on third
parties, including some of our competitors and potential competitors, for the
development of and access to communications and networking technologies. We

                                       21
<PAGE>

expect that new services and technologies applicable to our market will emerge.
New products and technologies may be superior and/or render obsolete the
products and technologies that we currently use to deliver our services. Our
future success will depend, in part, on our ability to anticipate and adapt to
technological changes and evolving industry standards. We may be unable to
obtain access to new technologies on acceptable terms or at all, and we may be
unable to obtain access to new technologies and offer services in a competitive
manner. Any new products and technologies may not be compatible with our
technologies and business plan. We believe that the global communications
industry should set standards to allow for the compatibility of various products
and technologies. The industry, however, may not set standards on a timely basis
or at all.

WE DEPEND ON THE SERVICES OF OUR SENIOR MANAGEMENT TEAM AND KEY OPERATIONAL
PERSONNEL.

      Our future success depends to a significant extent on the continued
services of our senior management team, particularly Michael Sternberg, Nancy
Hobbs, Jeffrey Matsen, Jerral R. Pulley, Steve Pierson, and other members of our
executive management team. We also depend on the technical expertise and
know-how of key operational personnel responsible for the daily operation and
maintenance of our network and systems. The loss of the services of any of our
key executives or operational personnel, or any other present or future key
employee, could have a material adverse effect on the management of our
business. We do not maintain "key person" life insurance for any of our
personnel.

COMPETITION FOR HIGHLY-SKILLED PERSONNEL IS INTENSE AND THE SUCCESS OF OUR
BUSINESS DEPENDS ON OUR ABILITY TO ATTRACT, RETAIN AND MANAGE KEY PERSONNEL.

      Our future success depends on our continuing ability to attract, retain
and motivate highly-skilled employees. As we continue to grow, we will need to
hire additional personnel in all areas. Competition for personnel throughout the
data and voice communications industries is intense. We may be unable to attract
or retain key employees or other highly qualified employees in the future. We
have from time to time in the past experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining highly skilled
employees with appropriate qualifications. If we do not succeed in attracting
sufficient new personnel or retaining and motivating our current personnel, our
ability to provide our services could be adversely affected.

OUR QUARTERLY OPERATING RESULTS MAY VARY, WHICH MAY CAUSE VOLATILITY OR A
DECLINE IN THE PRICE OF OUR COMMON STOCK.

      Our revenue, expenses and operating results may vary significantly from
quarter to quarter due to a number of factors, not all of which are in our
control. These factors include:

      o  the size and timing of significant equipment and transmission capacity
         purchases and other capital expenditures, as well as other costs
         associated with the development and expansion of our infrastructure;
      o  the timing of new service offerings;
      o  the rate at which customers subscribe to our services;
      o  subscriber turnover rates;
      o  the prices we pay for the services we provide to our subscribers;
      o  the demand for Internet services and particularly the demand for DSL
         services;
      o  price competition or changes in our pricing policies or those of our
         competitors and pricing changes in the Internet, cable and
         telecommunication industries;
      o  the introduction of new Internet access and telecommunications services
         by us or our competitors;
      o  the timing and completion of our network expansion;
      o  the availability and cost of financing to continue and complete our
         network expansion;
      o  market acceptance of data and voice communications generally and of new
         and enhanced versions of our services in particular;
      o  the length of our contract cycles; and
      o  our success in expanding our sales and related sales force, and
         expanding our distribution channels.

      Additional factors that may affect our quarterly operating results
generally include technical difficulties or network downtime, general economic
conditions and economic conditions specific to the Internet, Internet media and
corporate intranet.

      Our operating results are particularly sensitive to fluctuations in
revenues. Because we will rely on revenue forecasts when committing to a
significant portion of our future expenditures, we may be unable to adjust our
spending in the event of revenue shortfalls. Consequently, such shortfalls could
materially and adversely affect our business, financial condition and operating

                                       22
<PAGE>

results. We also plan on increasing our operating expenditures to finance the
cost of our network build-out and to fund increased sales and marketing efforts,
general and administrative activities and to strengthen our infrastructure. To
the extent that these expenses are not accompanied by a commensurate increase in
revenue, our quarterly results could fluctuate significantly in the future.

      Due to the factors noted above and the other risks discussed in this
section, you should not rely on period-to-period comparisons of our operating
results. Quarterly results are not necessarily meaningful and you should not
rely on them as an indication of future performance. It is possible that in some
future periods our operating results may be below the expectations of public
market analysts and investors. In that case, the price of our common stock may
fall substantially.

OUR INABILITY TO DEVELOP OR FINANCE STRATEGIC ALLIANCES OR ACQUISITIONS NEEDED
TO COMPLEMENT OUR EXISTING BUSINESS COULD IMPEDE OUR EXPANSION AND HARM OUR
BUSINESS.

      As part of our growth strategy, we may seek to develop strategic alliances
and to make investments or acquire assets or other businesses that will relate
to and complement our existing business. We are unable to predict whether or
when any strategic alliance will occur or the likelihood of a material
transaction being completed on favorable terms and conditions. Our ability to
finance acquisitions and strategic alliances may be constrained by our degree of
leverage at the time of such acquisition. In addition, our credit facility may
limit significantly our ability to make acquisitions or enter into strategic
alliances and to incur indebtedness in connection with acquisitions and
strategic alliances.

      We cannot assure you that any acquisition will be made or that we will be
able to obtain the funds necessary to finance the costs associated with any such
acquisition. We currently have no definitive agreements with respect to any
material acquisition, although from time to time we may have discussions with
other companies and assess opportunities on an ongoing basis. We currently are
evaluating additional acquisitions as well. However, there can be no assurance
that we will complete successfully any or all of the acquisitions being
contemplated or what the consequences thereof would be.

      In addition, if we were to proceed with one or more significant strategic
alliances, acquisitions or investments in which the consideration consists of
cash, we could use a substantial portion of our available cash to consummate the
strategic alliances, acquisitions or investments. The financial impact of
acquisitions, investments and strategic alliances could have a material adverse
effect on our business, financial condition and operating results and could
cause substantial fluctuations in our quarterly and yearly operating results.
Furthermore, if we use our common stock as consideration for acquisitions our
stockholders could experience dilution of their existing shares.

POTENTIAL ACQUISITIONS MAY BE DIFFICULT TO ASSIMILATE INTO OUR OPERATIONS, USE A
SIGNIFICANT AMOUNT OF AVAILABLE CASH, RESULT IN DILUTION TO OUR STOCKHOLDERS AND
ADVERSELY AFFECT OUR OPERATING RESULTS.

      As part of our business strategy, we may seek to acquire complementary
assets or businesses or develop strategic alliances. Any future acquisition or
strategic alliance would be accompanied by the risks commonly encountered in
such transactions. Such risks include, among others:

      o  the difficulty of assimilating the acquired operations and personnel;
      o  the potential disruption of our ongoing business and diversion of
         resources and management time;
      o  the inability of management to maximize our financial and strategic
         position by the successful incorporation of licensed or acquired
         technology and rights into our service offerings;
      o  the inability of management to maintain uniform standards, controls,
         procedures and policies;
      o  the entrance into markets in which we have little or no direct prior
         experience; and
      o  the potential impairment of relationships with employees or clients as
         a result of changes in management or otherwise arising out of such
         transactions.

      We cannot assure you that we will be able to integrate acquired businesses
or assets successfully. In addition, effecting acquisitions could require use of
a significant amount of our available cash. Furthermore, we may have to issue
equity or equity-linked securities to pay for future acquisitions, and any such
issuance could dilute the percentage ownership interest of our existing and
future shareholders. In addition, acquisitions and investments may have negative
effects on our operating results due to acquisition-related charges and
amortization of acquired technology and other intangibles. Any of these
acquisition-related risks or costs could harm our business, operating results
and financial condition.

                                       23
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OUR INTELLECTUAL PROPERTY PROTECTION MAY BE INADEQUATE TO PROTECT OUR
PROPRIETARY RIGHTS AND WE MAY BE SUBJECT TO INFRINGEMENT CLAIMS THAT COULD
MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.

      Our inability to protect our proprietary rights could have a material
adverse effect on our business, financial condition and operating results. The
steps we have taken to protect our rights may be inadequate to protect our
technology or other intellectual property. We currently have no patents or
patent applications pending. We also rely on non-patented trade secrets and
know-how to maintain our competitive position. We seek to protect this
information by confidentiality agreements with employees, consultants and
others. These agreements may be breached or terminated, leaving us with
inadequate remedies. Our competitors may learn or discover our trade secrets.
Our competitors may develop technologies independently that substantially are
equivalent or superior to ours. Third parties, including our competitors, may
assert infringement claims against us and, in the event of an unfavorable ruling
on any claim, we may be unable to obtain a license or similar agreement to use
technology we need to conduct our business. Our management personnel and key
employees previously were employees of other telecommunications companies,
including Pacific Bell. In many cases, these individuals are conducting
activities for us in areas similar to those in which they were involved before
joining us. As a result, our employees or we could be subject to allegations of
violation of trade secrets and other similar claims. If such claims materialize,
it could materially and adversely affect our business, financial condition and
operating results, and restrict our ability to continue our operations.

WE MAY BE SUBJECT TO CLAIMS FOR VIOLATIONS OF FEDERAL AND STATE SECURITIES LAWS.

      In conjunction with the issuance and sale of securities, we may have
inadvertently violated certain provisions of various federal and state
securities laws. Further, we may have omitted from our quarterly or annual
reports material facts. Such violations and omissions may expose us to claims by
securities regulators and/or purchasers of our securities. Any such claims, if
asserted, could have a material impact on our consolidated financial condition
or results of operations.

    WE ARE SUBJECT TO THE FOLLOWING RISKS INHERENT IN THE TELECOMMUNICATIONS
                          AND BROADBAND DATA INDUSTRIES

OUR INABILITY TO SECURE AND MAINTAIN INTERCONNECTION AGREEMENTS ON FAVORABLE
TERMS COULD HARM OUR BUSINESS.

      We must have in place agreements for the interconnection of our network
with the networks of the incumbent telephone companies and the competitive local
exchange carrier covering each market in which we intend to offer local service.
In some cases we may be able to piggy-back on the terms of existing agreements.
At other times, however, we may be required to negotiate such interconnection
and co-location agreements with established carriers and telephone companies,
which can take considerable time, effort and expense and are subject to federal,
state and local regulation. We currently have in place interconnection
agreements with Pacific Bell and GTE in our initial market in California. We
cannot assure you that we will be able to negotiate or renew interconnection
agreements on a timely basis and on satisfactory terms and conditions. Our
failure to secure and maintain these agreements could materially and adversely
affect our ability to become a single-source provider of broadband data and
telecommunications services.

IF THE MARKETS FOR OUR BROADBAND DATA AND COMMUNICATIONS SERVICES FAIL TO
DEVELOP OR GROW SLOWER THAN WE EXPECT, WE MAY BE UNABLE TO GENERATE SIGNIFICANT
REVENUE OR WE MAY GENERATE REVENUE LATER THAN EXPECTED, WHICH COULD HARM OUR
BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS.

      The markets for broadband data and communications services are in the
early stages of development. It is difficult to predict the rate at which these
new and evolving markets will grow. We cannot assure you that our services will
receive market acceptance or that prices and demand for these services will be
sufficient to achieve or sustain profitable operations. If the markets for our
services fail to develop or grow more slowly than anticipated, we may be unable
to generate revenue or we may generate revenue later than expected, which would
have a material adverse effect on our business, financial condition and
operating results.

OUR INABILITY TO ACHIEVE OR SUSTAIN MARKET ACCEPTANCE FOR OUR SERVICES AT
DESIRED PRICING LEVELS COULD HARM OUR BUSINESS, FINANCIAL CONDITION AND
OPERATING RESULTS.

      Prices for telecommunications services have historically fallen and we
expect this trend to continue. Consequently, we cannot predict to what extent we
may need to reduce our prices to remain competitive or whether we will be able
to sustain future pricing levels as our competitors introduce competing services
or similar services at lower prices. Our failure to achieve or sustain market
acceptance at desired pricing levels could impair our ability to achieve
profitability or positive cash flow, which would harm our business, financial
condition and operating results.

                                       24
<PAGE>

DSL TECHNOLOGY MAY NOT OPERATE AS EXPECTED ON INCUMBENT LOCAL CARRIER NETWORKS
AND MAY INTERFERE WITH OR BE AFFECTED BY OTHER TRANSPORT TECHNOLOGIES.

      We will depend significantly on the quality of the copper telephone lines
we obtain from established telephone companies and carriers that provide
services in our target markets, and their maintenance of these lines to provide
DSL services. We cannot assure you that we will be able to obtain the copper
telephone lines and the services we require from these established telephone
companies on a timely basis or at quality levels, prices, terms and conditions
satisfactory to us or that such established telephone companies will maintain
the lines in a satisfactory manner.

      Additionally, all transport technologies using copper telephone lines have
the potential to interfere with, or to be interfered with by, other traffic on
adjacent copper telephone lines. This interference could degrade the performance
of our services or make us unable to provide service on selected lines. In
addition, incumbent carriers may claim that the potential for interference by
DSL technology permits them to restrict or delay our deployment of DSL services.
The telecommunications industry and regulatory agencies are still developing
procedures to resolve interference issues between competitive carriers and
incumbent carriers, and these procedures may not be effective. We may be unable
to negotiate successfully with incumbent carriers the procedures to resolve
interference. Interference, or claims of interference, if widespread, would
adversely affect our speed of deployment, reputation, brand image, service
quality and client retention and satisfaction and may have a material adverse
effect on our business, financial condition and results of operations.

THE LAW RELATING TO THE LIABILITY OF ONLINE SERVICES COMPANIES AND INTERNET
ACCESS PROVIDERS FOR DATA AND CONTENT CARRIED ON OR DISSEMINATED THROUGH THEIR
NETWORKS IS CURRENTLY UNSETTLED.

      It is possible that claims could be made against online services companies
and Internet access providers under United States and/or foreign law for
defamation, negligence, copyright or trademark infringement, or other theories
based on data or content disseminated through their networks, even if a user
independently originated this data or content. Several private lawsuits seeking
to impose liability on online services companies and Internet access providers
have been filed in United States and foreign courts. While the United States has
passed laws protecting Internet access providers from liability for actions by
independent users in limited circumstances, this protection may not apply in any
particular case at issue. In addition, some countries, such as China, regulate
or restrict the transport of voice and data traffic in their jurisdiction. The
risk to us, as an Internet access provider, of potential liability for data and
content carried on or disseminated through our system could require us to
implement measures to reduce our exposure to this liability. This may require us
to expend substantial resources or to discontinue some of our services. Our
ability to monitor, censor or otherwise restrict the types of data or content
distributed through our network is limited. Failure to comply with any
applicable law or regulations in particular jurisdictions could result in fines,
penalties or the suspension or termination of our services in these
jurisdictions. The negative attention focused on liability issues as a result of
these lawsuits and legislative proposals could adversely the growth of public
Internet use adversely. Our professional liability insurance may not be adequate
to compensate or may not cover us at all if we incur liability for damages due
to data and content carried on or disseminated through our network. Any cost not
covered by insurance that are incurred as a result of this liability or alleged
liability, including any damage awarded and cost of litigation, could harm our
business and prospects.

DELAYS IN RECEIVING TRANSMISSION CAPACITY FROM SUPPLIERS COULD IMPAIR SERVICE
LEVELS AND OUR GROWTH.

      We lease transmission capacity from suppliers (including, without
limitation, incumbent telephone companies, incumbent local exchange carriers,
competitive local exchange carriers, and inter-exchange carriers such as MCI
WORLDCOM, Inc., Quest Communications International Inc., Star Telecom, Level 3
Communications, Inc., UUNET and Electric Lightwave), both to connect client
premises to our network and for other network connections. We have from time to
time experienced delays in receiving the requisite transmission capacity from
suppliers. We cannot assure you that we will be able to obtain such services in
the future within the time frames required by us and at a reasonable cost. Our
inability to obtain transmission capacity in time and at a reasonable cost in a
particular jurisdiction, or any interruption of local access services, could
have an adverse effect on our business, financial condition and operating
results.

                                       25
<PAGE>

DELAYS IN EQUIPMENT DELIVERY OR LOSS OF OUR EQUIPMENT SUPPLIERS COULD ADVERSELY
AFFECT OUR NETWORK.

      Nortel and Cisco are the primary providers of the switches and routers
used in our network. These suppliers also sell products to our competitors and
may become competitors themselves. We may experience delays in receiving
components from our suppliers or difficulties in obtaining their products at
commercially reasonable terms. If we are required to seek alternate sources of
switches and routers, we are likely to experience delays in obtaining the
requisite equipment we need and may be required to pay higher prices for that
equipment, increasing the cost of expanding and maintaining our network.

THE FCC AND STATE REGULATIONS MAY LIMIT THE SERVICES WE CAN OFFER AND RESTRICT
THE OPERATION AND EXPANSION OF OUR BUSINESS.

      Our networks and the provision of telecommunications services are subject
to significant regulation at the federal, state and local levels. The costs of
complying with these regulations and the delays in receiving required regulatory
approvals or the enactment of new adverse regulation or regulatory requirements
may have a material adverse effect on our business, financial condition and
operating results.

      We cannot assure you that the FCC or state commissions will grant required
authority or refrain from taking action against us if we are found to have
provided services without obtaining the necessary authorizations. If we do not
fully comply with the rules of the FCC or state regulatory agencies, third
parties or regulators could challenge our authority to do business. Such
challenges could cause us to incur substantial legal and administrative
expenses.

      Our Internet operations are not currently subject to direct regulation by
the FCC or any other governmental agency, other than regulations applicable to
businesses generally. However, the FCC recently indicated that the regulatory
status of some services offered over the Internet may have to be re-examined.
New laws or regulations relating to Internet services, or existing laws found to
apply to them, may have a material adverse effect on our business, financial
condition or results of operations.

      The Telecommunications Act remains subject to judicial review and
additional FCC rulemaking, and thus it is difficult to predict what effect the
legislation will have on our operations. There are currently many regulatory
actions underway and being contemplated by federal and state authorities
regarding interconnection pricing and other issues that could result in
significant changes to the business conditions in the telecommunications
industry. We cannot assure you that these changes will not have a material
adverse effect on our business, financial condition or results of operations.

UNCERTAIN FEDERAL AND STATE TAXES AND SURCHARGES ON OUR SERVICES MAY INCREASE
OUR PAYMENT OBLIGATIONS AND HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

      Telecommunication service providers pay a variety of surcharges and fees
on their gross revenue from interstate and intrastate services. The surcharges
and fees we are required to pay may increase due to periodic revisions of the
applicable surcharges by federal and state regulators. A finding that we
misjudged the applicability of the surcharges and fees could increase our
payment obligations and have a material adverse effect on our business,
financial condition and operating results.

ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

      Our corporate headquarters is located in Irvine, California, and we lease
office and facility space in numerous locations, primarily for sales offices and
network equipment installations. At June 30, 2000, we occupied approximately
93,647 square feet of office and facility space at 14 separate locations in
California, Texas and Utah. Such leases expire on various dates through February
2010. All of our facilities are leased. Our monthly rental obligation for all of
our properties is approximately $202,600. We believe that our leased facilities
are adequate to meet our current needs and that additional facilities are
readily available to meet the needs of any required expansion in both our
existing and target markets.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

      The Company has been subject to routine litigation in the ordinary course
of its business. We are not currently subject to any pending litigation that we
believe would either individually or in the aggregate have any material affect
upon our consolidated operations or consolidated financial condition.

                                       26
<PAGE>

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

      No matters were submitted to a vote of security holders during the fourth
quarter of the year ended March 31, 2000.

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

      Since April 25, 2000, the Company's common stock has been quoted on the
NASDAQ National Market under the symbol "IJNT." From December 9, 1997 to April
25, 2000, the Company's common stock was quoted on the NASDAQ OTC Bulletin
Board. The following table presents, for the periods indicated, the high and low
sales prices per share of the Company's common stock as reported on the NASDAQ
OTC Bulletin Board and the NASDAQ National Market system.

<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS ENDED
                                         -------------------------------------------------------------------
                                            JUNE 30,       SEPTEMBER 30,     DECEMBER 31,       MARCH 31,
                                              1999              1999             1999             2000
                                              ----              ----             ----             ----
<S>                                          <C>               <C>              <C>              <C>
High................................         $ 4.00            $ 5.69           $ 12.72          $ 20.25
Low.................................         $ 1.84            $ 2.38            $ 2.09           $ 8.63

                                         -------------------------------------------------------------------
                                            JUNE 30,       SEPTEMBER 30,     DECEMBER 31,       MARCH 31,
                                              1998              1998             1998             1999
                                              ----              ----             ----             ----
High................................         $ 7.00           $ 12.25            $ 5.63           $ 3.63
Low.................................         $ 3.25            $ 3.25            $ 1.97           $ 2.00
</TABLE>

      As of June 30, 2000, there were an estimated 569 shareholders of record of
the Company's common stock.

DIVIDEND POLICY

      We do not expect to pay any cash dividends on our Common Stock for the
foreseeable future. We currently intend to retain future earnings, if any, to
finance the expansion of our business. Any determination to pay cash dividends
in the future will be at the discretion of our Board of Directors and will
depend upon our results of operations, financial condition, contractual
restrictions and other factors deemed relevant at that time by our Board of
Directors.

RECENT SALES OF UNREGISTERED SECURITIES

      During the fourth quarter of the year ended March 31, 2000, the Company
issued the following securities without registration under the Securities Act,
in addition to those previously disclosed in the Quarterly Reports.

      On March 30, 2000, the Board of Directors of the Company granted 2.8
million options pursuant to the Management and Equity Plans to purchase shares
of common stock to an aggregate of 169 employees and consultants. Of the options
granted, 60% generally vest over a 4 year period, with options granted to
certain members of senior management vesting over 2 and 3 year periods. The
remaining 40% vested immediately. The 60% of the options were granted at prices
ranging from $10.81 to $12.75 per share, which equaled or exceeded the market
price of the Company's common stock at the date of grant. The remaining 40% of
the options were granted at prices ranging from $3.00 to $12.75 per share, with
0.9 million options at exercise prices that were substantially below the market
price of the Company's common stock at the date of grant. The Company recorded
compensation and consulting expense relating to such options in the fourth
quarter of fiscal 2000 totaling $7.6 million.

      Such grants are subject to stockholder approval of the Plans at the Annual
Meeting of Stockholders, scheduled for July 25, 2000. The Company intends to
file a registration statement on Form S-8 upon approval of the Plans by the
stockholders.

                                       27
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
-------------------------------

      The selected financial data presented below for the years ended March 31,
2000, 1999 and 1998 have been derived from the consolidated financial statements
of the Company, which are included elsewhere in this Form 10-K. The consolidated
financial statements as of and for the year ended March 31, 2000 were audited by
BDO Siedman, LLP, independent certified public accountants. The consolidated
financial statements as of March 31, 1999 and for each of the years in the two
year period then ended, were audited by Smith & Company, independent certified
public accountants. This selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's consolidated financial statements
(including the notes thereto) included elsewhere in this Form 10-K.

<TABLE>
                                            IJNT.net, Inc.
                            Condensed Consolidated Statements of Operations
                           For the Years Ended March 31, 2000, 1999 and 1998
                      (Amounts in thousands, except share and per share amounts)
<CAPTION>

                                                              MARCH 31,   MARCH 31, 1999     MARCH 31,
                                                                2000       (AS RESTATED)       1998
                                                           -------------   -------------   -------------
<S>                                                        <C>             <C>             <C>
Revenues...............................................    $      2,617    $      1,552    $        147
                                                           -------------   -------------   -------------
Operating expenses:....................................
    Network expenses...................................           3,347             543              66
    Payroll and related expenses.......................          14,318           2,421             774
    Selling, general and administrative expenses.......          12,107           5,549           1,622
    Depreciation and amortization......................           3,045           1,219              83
                                                           -------------   -------------   -------------
        Total operating expenses.......................          32,817           9,732           2,545
                                                           -------------   -------------   -------------
Operating loss.........................................         (30,200)         (8,180)         (2,398)

Interest income........................................             183              65              13
Interest expense, including amortization of deferred
   financing costs.....................................          (2,368)           (147)            (10)
                                                           -------------   -------------   -------------
Net loss...............................................         (32,385)         (8,262)         (2,395)

Preferred stock beneficial conversion feature,
   related warrants and dividends......................          (1,027)           (364)              -
                                                           -------------   -------------   -------------
Net loss applicable to common shareholders.............    $    (33,412)   $     (8,626)   $     (2,395)
                                                           =============   =============   =============
Net loss per share, basic and diluted..................    $      (1.84)   $      (0.58)   $      (0.21)
                                                           =============   =============   =============
Weighted-average number of shares, basic and diluted..       18,199,114      14,890,130      11,528,021
                                                           =============   =============   =============

Other Data:
EBITDA    .............................................    $    (25,928)   $     (6,138)   $     (1,963)
Capital Expenditures...................................    $     16,218    $        965    $          -
Consolidated Cash Flow Data:
   Used in operating activities........................    $    (12,158)   $     (4,962)   $     (1,679)
   Used in investing activities........................    $    (12,244)   $     (1,315)   $        (18)
   Provided by financing activities....................    $     24,675    $      7,117    $      1,760
</TABLE>

                                       28
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
--------------------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------

      IN ADDITION TO HISTORICAL INFORMATION, MANAGEMENT'S DISCUSSION AND
ANALYSIS INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS, INCLUDING, BUT NOT LIMITED
TO, THOSE RELATED TO THE GROWTH AND STRATEGIES, FUTURE OPERATING RESULTS AND
FINANCIAL POSITION AS WELL AS ECONOMIC AND MARKET EVENTS AND TRENDS OF THE
COMPANY. ALL FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY, INCLUDING SUCH
STATEMENTS HEREIN, INCLUDE MATERIAL RISKS AND UNCERTAINTIES AND ARE SUBJECT TO
CHANGE BASED ON FACTORS BEYOND THE CONTROL OF THE COMPANY. ACCORDINGLY, THE
COMPANY'S ACTUAL RESULTS AND FINANCIAL POSITION COULD DIFFER MATERIALLY FROM
THOSE EXPRESSED OR IMPLIED IN ANY FORWARD-LOOKING STATEMENT AS A RESULT OF
VARIOUS FACTORS, INCLUDING WITHOUT LIMITATION FACTORS DESCRIBED IN THE COMPANY'S
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION REGARDING RISKS AFFECTING
THE COMPANY'S FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2000

      The Company's operating results may continue to fluctuate significantly in
the future, depending on a variety of factors, including the timely deployment
and expansion of new network architectures, the incurrence of related capital
costs and the introduction of new services by the Company and its competitors.
Additional factors that may contribute to variability of the operating results
include: The pricing and mix of services offered by the Company, customer
retention rate, market acceptance of new and enhanced offerings of the Company,
user demand for network and internet access services, ability to manage
potential growth and expansion and the ability to identify, acquire and
integrate successfully suitable acquisition candidates. In response to
competitive pressures, the Company may take certain pricing or marketing actions
that could have an adverse affect on the Company's business. As a result,
variations in the timing and amounts of revenue could have a material adverse
affect on the Company's quarterly operating results. Due to the foregoing
factors, the Company believes the period-to-period comparisons of its operating
results are not necessarily meaningful and that such comparisons cannot be
relied upon as indicators of future performance.

      Total revenues increased 69% or $1.0 million to $2.6 million for the year
ended March 31, 2000 compared to revenues of $1.6 million for the year ended
March 31, 1999. Revenue contributed by wireless and dial up services was 61% of
the total revenue for the year ended March 31, 2000 compared to 75% of total
revenue for the previous year. The decrease in wireless and dial up as a
percentage of total revenue is due to a greater increase in the revenue
generated by the web development subsidiary, Man Rabbit House Multimedia, Inc.
("MRHM") than by the wireless operations. See additional information relating to
acquisitions in the consolidated financial statements included elsewhere herein.
Revenue contributed by MRHM was 39% of the total revenue for the year ended
March 31, 2000 compared to 25% for the previous year. The revenue generated by
MRHM increased to $1.0 million in the current fiscal year from $0.4 million in
the previous fiscal year. MRHM operations were included in the Company's results
for only eight months in the previous fiscal year (year of acquisition) as
compared to twelve months in the current fiscal year. In addition, the business
has grown during the current year with more clients served. The revenue
generated by the wireless and dial up business lines increased $0.4 million to
$1.6 million for the year ended March 31, 2000 from $1.2 million for the year
ended March 31, 1999. The increase was primarily generated in the Houston
facility due to significant growth in the customer base.

      Subsequent to March 31, 2000, the Company's Board of Directors has
directed management to effect the disposition of MRHM. MRHM had total assets and
net assets approximating $0.6 million and $0.3 million, respectively, as of
March 31, 2000, and a net loss from operations approximating $1.7 million for
the year ended March 31, 2000. MRHM provides a variety of web design and web
hosting services. Management of the Company expects to continue, although to a
lesser extent, to provide such services after the successful disposition of
MRHM. Management of the Company has not identified MRHM as a separate business
line which requires discontinued operations accounting. MRHM has two office
leases, which require minimum lease payments aggregating $1.6 million over the
next five years. Management of the Company has obtained an independent valuation
of MRHM from a nationally recognized valuation firm totaling $0.9 million. Such
valuation does not take into consideration one of the office leases, which
requires minimum lease payments aggregating $1.2 million over the next five
years. To date, management of the Company has not identified any impairment with
respect to its anticipated disposition of MHRM.

      The Company incurred network expenses totaling $3.3 million for the year
ended March 31, 2000 compared to $0.5 million for the year ended March 31, 1999,
an increase of 516% or $2.8 million. UBN generated $2.0 million of this
increase, comprised of significant network development costs incurred to install
circuit lines and establish co-location sites to deploy the Los Angeles
market-area network in preparation for offering high speed data and voice
communication services. It is anticipated that total network expenses will
continue to increase for the foreseeable future, although the Company plans to
generate additional revenue to offset, or partially offset, such costs.

                                       29
<PAGE>

      The Company incurred payroll and related expenses of $14.3 million for the
year ended March 31, 2000 compared to $2.4 million for the year ended March 31,
1999, an increase of 491% or $11.9 million. This is primarily due to the
issuance of stock options (see discussion below) and to an increase in headcount
from 90 employees at March 31, 1999 to 182 employees at March 31, 2000. The most
significant headcount increase was experienced in the UBN subsidiary as the
Company added staff to support its network deployment and business expansion
objectives. In addition, during the year ended March 31, 2000, a total of
137,677 shares of the Company's common stock have been issued to various
employees as incentive grants or due to terms of employment agreements. The
total fair value of the stock of $0.9 million has been charged to operations as
compensation expense.

      On March 30, 2000, the Company granted 2,803,000 options pursuant to the
Management and Equity Plans to purchase shares of common stock to various
officers and employees. Of the options granted, 60% generally vest over a 4 year
period, with options granted to certain members of senior management vesting
over 2 and 3 year periods. The remaining 40% vested immediately. The 60% of the
options were granted at prices ranging from $10.81 to $12.75 per share, which
equaled or exceeded the market price of the Company's common stock at the date
of grant. The remaining 40% of the options were granted at prices ranging from
$3.00 to $12.75 per share, with 906,000 options at exercise prices that were
substantially below the market price of the Company's common stock at the date
of grant. The Company recorded compensation expense relating to such options in
the fourth quarter of fiscal 2000 totaling $7.2 million.

      The Company incurred total selling, general and administrative expenses
("SG&A") of $12.1 million for the year ended March 31, 2000, compared with $5.5
million for the year ended March 31, 1999, an increase of $6.6 million or 118%.
Increases were noted primarily in consulting and professional fees ($2.6
million), recruiting ($0.3 million), advertising ($0.3 million), travel and
entertainment ($0.4 million), telephone and computer expenses ($0.8 million),
rent ($1.0 million) and accrued settlement costs ($0.8 million). Consulting and
professional fees increased in part due to the issuance by the Company of
295,536 shares of the Company's common stock in exchange for financial, legal,
marketing and technological professional services. The cost of the services
provided of $1.3 million has been charged to operations. Additionally, the
Company issued a total of 5,000 shares of its common stock to certain members of
the Board of Directors as consideration for accepting the appointment of
director. The total fair value of the stock of $0.1 million has been charged to
operations as SG&A expense. Other increases in professional fees were
experienced in legal, accounting and other services which were paid with cash or
options. Travel and entertainment increased commensurate with the increase in
headcount as well as the opening of new facilities. Telephone and computer
expenses increased due to headcount as well as the increase in the number of
sites from which the Company operates. The increase in rent is directly
attributable to the increase in sites, particularly in downtown Los Angeles,
which is the primary location for the UBN subsidiary and the Nortel DMS 500
switch.

      On March 30, 2000, the Company granted 37,500 options pursuant to the
Management and Equity Plans to purchase shares of common stock to a consultant.
Of the options granted, 60% vest over a four year period. The remaining 40%
vested immediately. The options were granted at a price of $12.75 per share,
which exceeded the market price of the Company's common stock at the date of
grant. Management of the Company valued the options granted to this non-employee
at fair value using the Black-Scholes Option Pricing Model and recorded
consulting expense relating to such options in the fourth quarter of fiscal 2000
totaling $0.3 million.

      The Company incurred depreciation and amortization expense of $3.0 million
for the year ended March 31, 2000 compared to $1.2 million for the previous
year, an increase of $1.8 million or 150%. The increase is due in part to the
large amounts of fixed assets placed into service during fiscal 2000,
particularly for computer equipment and network equipment. Although the network
in Los Angeles is not generating revenue yet, it is functional for testing, so
the Company began depreciation during the quarter ended December 31, 1999. In
addition, the Company recognized $1.0 million in depreciation expense related to
a change in useful life from five years to three years for computers and other
equipment.

      The Company incurred interest expense of $2.4 million in the year ended
March 31, 2000 on various notes outstanding during the year. Interest expense
was incurred primarily in relation to the credit agreement entered into with
Nortel Networks, Inc. ("Nortel") in July 1999. This credit facility is discussed
in greater detail in "Liquidity and Capital Resources" below. Of the $2.3
million in Nortel interest, $1.4 million represented the amortization of
deferred financing costs, while $0.9 million related to actual interest expense.

      The Company incurred a net loss of $32.4 million for the year ended March
31, 2000, compared to a net loss of $8.3 million for the year ended March 31,
1999 due to the factors described above. The Company does not anticipate
generating net income in the near future.

                                       30
<PAGE>

      The Company has net Federal and state operating loss carryforwards equal
to approximately $31.0 million and $14.0 million, respectively. The Company has
not recognized any of these tax benefits as an asset due to the uncertainty of
future income. The Company may be substantially restricted in its ability to
utilize these net operating losses due to changes in ownership of the Company.

      To date, the Company has declared no dividends with respect to its common
stock. The Company does not intend to declare dividends for the foreseeable
future. Furthermore, pursuant to state law, the Company may be restricted from
paying dividends to its shareholders for the foreseeable future as a result of
its accumulated deficit as of March 31, 2000.

RESULTS OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1999

      Total revenues increased 956% or $1.5 million to $1.6 million for the year
ended March 31, 1999 compared to revenues of $0.1 million for the year ended
March 31, 1998. Revenue contributed by wireless and dial up services was 75% of
the total revenue for the year ended March 31, 1999 compared to 100% of total
revenue for the previous year. The decrease in wireless and dial up as a
percentage of total revenue is due to revenue generated by the web development
subsidiary, MRHM. See additional information relating to acquisitions in the
consolidated financial statements included elsewhere herein. Revenue contributed
by MRHM was 25% of consolidated revenues for the year ended March 31, 1999.

      The Company incurred network expenses totaling $0.5 million for the year
ended March 31, 1999 compared to $0.1 million for the year ended March 31, 1998,
an increase of 723% or $0.4 million. This increase is due to the overall
increase in the wireless and dial up services revenue for the same period.

      The Company incurred payroll and related expenses of $2.4 million for the
year ended March 31, 1999 compared to $0.8 million for the year ended March 31,
1998, an increase of 213% or $1.6 million. The increase is primarily due to
growth in headcount in all areas of the Company to support its growth
objectives. In addition, a total of 20,200 shares of the Company's common stock
have been issued to various employees as incentive grants or due to terms of
employment agreements. The total fair value of the stock issued of $0.1 million
has been charged to operations as compensation expense.

      The Company incurred total SG&A of $5.5 million for the year ended March
31, 1999, compared with $1.6 million for the year ended March 31, 1998, an
increase of $3.9 million or 242%. The increase is due to continued expansion of
the sales and marketing efforts, professional fees and the increases in
operating costs of the Company's nine offices throughout the United States.
Also, during the year ended March 31, 1999, the Company issued 433,673 shares of
the Company's common stock in exchange for financial, legal, marketing and
technological professional services. The cost of the services provided of $1.6
million has been charged to operations.

      The Company issued 546,621 shares of its common stock to acquire
subsidiaries (treated as purchase transactions) during the years ended March 31,
1999 and 1998. All of the acquisitions have been accounted for as purchases in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations". The purchase consideration paid, in the aggregate for all
transactions, exceeded the fair values of the net assets acquired by $1.2
million. The Company determined that such goodwill was impaired, and
accordingly, expensed $0.8 million and $0.4 million during the years ended March
31, 1999 and 1998, respectively, to SG&A costs. See additional information
relating to acquisitions in the consolidated financial statements included
elsewhere herein.

      The Company incurred depreciation and amortization expense of $1.2 million
for the year ended March 31, 1999 compared to $0.1 million for the previous
year, an increase of $1.1 million or 1,369%. The increase is due to the large
amounts of fixed assets placed into service during fiscal 1999, particularly for
computer equipment In addition, the Company recognized $0.3 million in
depreciation expense related to a change in useful life from 5 years to 3 years
for computers and other equipment. Also, the Company recognized impairment of
frequency licenses totaling $0.7 million, see Note 1 of the consolidated
financial statements included elsewhere herein.

      The Company incurred interest expense of $0.1 million in the year ended
March 31, 1999 on various notes outstanding during the year.

      The Company incurred a net loss of $8.3 million for the year ended March
31, 1999, compared to a net loss of $2.4 million for the year ended March 31,
1998. The Company does not anticipate generating net income in the near future.

                                       31
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

      Cash used in operating activities was $12.2 million for the year ended
March 31, 2000 compared to $5.0 million for the year ended March 31, 1999. Cash
was impacted primarily by the Company's operating loss for the year ended March
31, 2000, partially offset through the payment of certain expenses with stock
($2.3 million) and options ($7.6 million), depreciation and amortization ($4.4
million) and delaying the payment of certain accounts payable.

      The Company's operations have required substantial capital investment for
the procurement, design and construction of the voice and data network
infrastructure, the purchase of telecommunications equipment, and the design and
development of the operational support system. Capital expenditures were
approximately $16.2 million (including amounts financed through capital leases
and accounts payable) for the year ended March 31, 2000 and $1.0 million for the
year ended March 31, 1999. The Company expects that the capital expenditures and
working capital requirements will be substantially higher in future periods in
connection with the purchase of infrastructure equipment, the development and
expansion of our network, and the development of new markets.

       Cash invested in licenses and other assets during the years ended March
31, 2000 and 1999 was $1.0 million and $0.2 million, respectively. The
expenditures during fiscal 2000 relate to the purchase of an Indefeasible Right
of Use license (see Notes 1 and 3 to the consolidated financial statements
included elsewhere herein). There was minimal cash used in investing activities
for the year ended March 31, 1998.

      Cash was provided primarily by the sale of common and preferred stock of
the Company (see discussion below). Warrants to purchase 512,821 shares of the
Company's common stock were exercised during the year ended March 31, 1999,
providing $1.0 million in cash. In addition, for the year ending March 31, 1999,
the collection of stock subscriptions receivable, which were outstanding at the
end of the previous fiscal year, provided $0.8 million in cash. See further
discussion below of stock transactions and financing proceeds for the years
ended March 31, 2000 and 1999.

GOING CONCERN

      The Company's consolidated financial statements have been prepared
assuming the Company will continue as a going concern. During the year ended
March 31, 2000, the Company experienced a net loss of $32.4 million and had
negative cash flows from operations of $12.2 million. In addition, the Company
had substantial working capital and shareholders deficits at March 31, 2000.
Lastly, the Company has significant present and future working capital demands,
which will require substantial equity and debt financing which have not yet been
secured. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The consolidated financial
statements included elsewhere herein do not include any adjustments that might
result from the outcome of this uncertainty.

      In an effort to reverse the negative financial conditions noted above,
management of the Company intends to secure a series of debt and equity
financings during 2000 expected to exceed $200 million. Additionally, the
Company intends to expand its operations through the establishment of
switch-based telecommunications facilities in pre-designated markets, and
develop its management and sales teams, and its corporate infrastructure.
Management of the Company believes these events will provide the working capital
required to purchase necessary equipment, establish the requisite infrastructure
and fund operations until such time as the Company becomes profitable.

      There can be no assurances that the Company will be able to successfully
implement its plans, including generating profitable operations, generating
positive cash flows from operations and obtaining additional debt and equity
capital to meet present and future working capital demands.

SATELLITE OFFICES

      The Company has wireless and dial-up internet service operations in five
satellite offices located in Concord and Petaluma, California, Beaumont and
Houston, Texas and Salt Lake City, Utah. The satellite offices have incurred
substantial losses from operations. The Board of Directors has instructed
management to evaluate such offices to determine whether they should be retained
and restructured, or sold. The net book value of the fixed assets of the
satellite offices approximated $1.2 million at March 31, 2000. The satellite
offices have various office leases, which require minimum lease payments
aggregating $1.5 million over the next five years. Management has not completed
its assessment of the satellite offices, which is required in order to make a

                                       32
<PAGE>

recommendation as to whether the satellite offices should be retained and
restructured, or sold. As a result, management has not made a determination as
to whether the assets of the satellite offices have been impaired. There is an
uncertainty as to the actual amount the Company will ultimately receive in its
realization of the assets of the satellite offices, if they are sold. As a
result, such assets may ultimately be determined to be impaired. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

EQUIPMENT FINANCING AND LINE OF CREDIT ARRANGEMENT

      In July 1999, UBN, a subsidiary of the Company, entered into a credit
agreement (the "Agreement") with Nortel which provides for a line-of-credit of
up to $7.0 million ("Tranche A") as well as a term loan of up to $37.0 million
("Tranche B"). However, the maximum combined borrowing under the Agreement
cannot exceed $37.0 million. Furthermore, the Company is not able to borrow
under Tranche B until a $30.0 million equity infusion to UBN has been completed.
If such infusion is not completed by October 30, 2000, the Tranche B commitment
will terminate. The Agreement is collateralized by all of the assets and the
common stock of UBN. A substantial portion of the Company's assets are located
in its UBN subsidiary. The Agreement further restricts UBN from dividending or
loaning funds to IJNT or its other subsidiaries (see parent only financial
statements at Note 11 to the consolidated financial statements included
elsewhere herein).

      Borrowings under Tranche A can be used for working capital and general
corporate purposes, bear interest at 13% and mature on July 30, 2000. As of
March 31, 2000, $7.6 million (including interest) was outstanding under Tranche
A and no additional borrowings were available.

      Borrowings under Tranche B can only be used to finance purchases of Nortel
goods and services and bear interest at the prime rate (9% at March 31, 2000)
plus 3.75%. Tranche B is payable in twelve equal quarterly payments beginning in
October 2000. As of March 31, 2000, no borrowings were outstanding under Tranche
B as the Company had not completed the required equity infusion. However, as of
March 31, 2000, the Company owes Nortel $6.6 million for purchases of equipment
and services. Additionally, as of March 31, 2000, Nortel had delivered
approximately $3.7 million of transmission equipment that was not completely
installed until subsequent to March 31, 2000. The Company has not recorded this
liability or the related fixed assets (see Note 2 to the consolidated financial
statements included elsewhere herein) as of March 31, 2000 as the Company
believes that its obligation should not be recognized until such time as the
equipment is completely installed. Had the Company recorded the $3.7 million in
transmission equipment as of March 31, 2000, the unfinanced Nortel purchases
would have totaled $10.3 million at March 31, 2000. If the Company is able to
complete the required equity infusion, these borrowings will be classified as
Tranche B borrowings. If the required equity infusion is not completed, the
Company will be required to pay for these purchases pursuant to normal vendor
terms.

      In connection with the Agreement, the Company issued a warrant to purchase
492,094 shares of the Company's common stock. The fair value of the warrants of
approximately $1.9 million, as well as certain other costs related to the
Agreement, were capitalized as deferred financing costs and are being amortized
over the life of the Tranche A loan. See Notes 3 and 7 to the consolidated
financial statements included elsewhere herein.

      The Agreement has certain restrictive financial covenants. Such covenants
include minimum tangible net worth requirements, maximum asset to net worth
ratios, minimum net income requirements and other restrictions with respect to
financial ratios. At March 31, 2000, the Company was substantially not in
compliance with all such covenants, but has subsequently entered into an
amendment to the Agreement which revised all such covenants effective March 31,
2000 and for all future periods.

      Furthermore, the Agreement has restrictions related to specific
activities, including, but not limited to, limitations on leases, timely payment
of accounts payable and timely submission of certain reports to Nortel. At March
31, 2000, the Company was in not in compliance with several of such covenants,
but has subsequently entered into an amendment to the Agreement which revised
all such covenants effective March 31, 2000 and for all future periods.

STOCK ISSUED FOR ASSETS AND INTANGIBLES

      During the year ended March 31, 1999 the Board of Directors authorized the
issuance of 507,719 shares of common stock to various individuals to purchase
assets and intangibles. The shares were valued at market prices ranging from
$2.13 to $3.31 as of the day of Board approval. The Company recorded frequency
licenses and other assets in the amount of $1.4 million. Certain of these shares
were issued to related parties. See Notes 3, 7 and 9 of the consolidated
financial statements included elsewhere herein.

                                       33
<PAGE>

PRIVATE PLACEMENTS, FISCAL 1999 AND 1998

      During the years ended March 31, 1999 and 1998, the Company sold shares of
common stock through various private placements in Germany which are exempt from
registration pursuant to Regulation S of the Securities Act. The Company also
sold shares of common stock through a domestic private placement. The Company
issued an aggregate of 1.4 million and 1.3 million shares for net consideration
of $3.2 million (net of commissions of $3.1 million) and $2.5 million during the
years ended March 31, 1999 and 1998, respectively. The net proceeds received by
the Company for each share sold were at a significant discount from the
prevailing market price of the Company's common stock.

PRIVATE PLACEMENTS, FISCAL 2000

      In May 1999, the Company sold shares of common stock through a private
placement in Germany which are exempt from registration pursuant to Regulation S
of the Securities Act.. The Company issued 600,000 shares for net consideration
of $0.8 million (net of commissions of $0.5 million). The net proceeds received
by the Company for each share sold were at a significant discount from the
prevailing market price of the Company's common stock.

      In December 1999, the Company sold shares of common stock through a
domestic private placement. The Company issued 2.2 million shares for net
consideration of $9.0 million (net of commissions of $0). The common stock
subscription and purchase agreement requires the Company to issue additional
shares if the average bid price per share is less than $4.00 per share for any
15 consecutive trading days during the four month period commencing on December
31, 2000. The common stock subscription and purchase agreement requires the
Company to file a registration statement with the SEC for the shares sold in the
offering, with such registration statement to be effective no later than
December 31, 2000. The common stock subscription and purchase agreement also
contains certain restrictive financial covenants, which include, among other
things, a restriction on the number of shares of stock the Company may sell
during the two year period ended December 31, 2001.

      In connection with the private placement, the Company granted the
investors warrants to purchase 560,938 shares of common stock at a price of
$9.88 per share (see discussion below).

CONVERTIBLE PREFERRED STOCK, FISCAL 1999

      In December 1998, the Company entered into an agreement with private
investors (the "Investors") whereby the Investors purchased 2,000 shares of the
Company's convertible Preferred Series A Stock (the "Preferred Stock") for a
gross price of $2.0 million, net of commissions of $0.2 million. The Preferred
Stock carries an 8% coupon, payable upon conversion to common stock, and a
liquidation preference of $1,000 per share of Preferred Stock. The Preferred
Stock agreement requires the Company to register the underlying common stock
with the SEC within certain time parameters, as defined. The Company was in
default with said requirement at March 31, 2000 (See further discussion at Note
8 to the consolidated financial statements included elsewhere herein).

      The convertible feature of the Preferred Stock provides for a rate of
conversion that is below market value. Under terms of the Agreement, the
Investors have the right to convert the Preferred Stock into common stock at a
20% discount from the average closing price of the Company's common stock for
the five business days immediately preceding a request for conversion. Such
feature is normally characterized as a "beneficial conversion feature." Pursuant
to Emerging Issues Task Force No. 98-5 ("EITF 98-5"), the Company has determined
the value of the beneficial conversion feature of the Preferred Stock to be $0.4
million.

      In conjunction with the sale of the Preferred Stock, the Company granted
the placement agent warrants to purchase 75,000 shares of common stock at a
price of $2.50 per share (see discussion below). In the calculation of basic and
diluted net loss per share, the value of the beneficial conversion feature and
the value of the placement agent warrants have increased the net loss applicable
to common shareholders.

      No shares had been converted as of March 31, 1999. All of the shares were
converted into 0.9 million shares of common stock during the year ended March
31, 2000. Dividends totaling $0.1 million were incurred by the Company with
respect to the Preferred Stock during the year ended March 31, 2000. All of such
dividends were settled through the issuance of 35,588 shares of common stock
when the shares of Preferred Stock were converted into common shares.

                                       34
<PAGE>

CONVERTIBLE PREFERRED STOCK, FISCAL 2000

      In May 1999, the Company entered into an agreement with the same Investors
whereby the Investors purchased an additional 2,000 shares of Preferred Stock
for a gross price of $2.0 million, net of commissions of $0.2 million. The
Company has determined the value of the beneficial conversion feature of the
Preferred Stock to be $0.4 million. The Preferred Stock agreement requires the
Company to register the underlying common stock with the SEC within certain time
parameters, as defined. The Company was in default with said requirement at
March 31, 2000 (see further discussion at Note 8 to the consolidated financial
statements included elsewhere herein).

      In conjunction with the sale of the Preferred Stock, the Company gave the
Investors warrants to purchase 50,000 shares of common stock at a price of $3.24
per share (see discussion below). In the calculation of basic and diluted net
loss per share, the value of the beneficial conversion feature and the value of
the placement agent warrant have increased the net loss applicable to common
shareholders.

      No shares had been converted as of March 31, 2000. All of the shares were
converted into 364,299 shares of common stock subsequent to March 31, 2000 (See
Note 10 to the consolidated financial statements included elsewhere herein).
Dividends totaling $0.1 million were incurred by the Company with respect to the
Preferred Stock during the year ended March 31, 2000, which have been accrued
and reflected in accounts payable and accrued liabilities at March 31, 2000. All
such dividends were settled subsequent to March 31, 2000 through the issuance of
25,165 shares of common stock when the shares of Preferred Stock were converted
into common shares.

WARRANTS TO PURCHASE COMMON STOCK

      At March 31, 1999, there were no warrants outstanding to purchase shares
of the Company's common stock.

      During the year ended March 31, 2000, in conjunction with the sale of the
Preferred Stock, the Company gave the placement agent warrants to purchase
75,000 shares of common stock at a price of $2.50 per share. Such warrants
expire five years from the date of grant. The warrants retain "Piggy-Back"
Registration Rights. The Company valued the warrants at $0.2 million using the
Black-Scholes Option Pricing Model.

      During the year ended March 31, 2000, in conjunction with the sale of the
Preferred Stock, the Company gave the Investors warrants to purchase 50,000
shares of common stock at a price of $3.24 per share. Such warrants expire five
years from the date of grant. The warrants have an adjustment provision, as
defined, should the Company sell shares of common stock at a price below $3.24
per share. The Company valued the warrants at $0.1 million using the
Black-Scholes Option Pricing Model.

      During the year ended March 31, 2000, in connection with its equipment
financing and line-of-credit arrangement (See additional discussion above), the
Company issued warrants to purchase 492,094 shares of common stock at a price of
$4.97 per share. Such warrants expire five years from the date of grant. The
Company valued the warrants at $1.9 million using the Black-Scholes Option
Pricing Model. The holders of the warrants have both demand and "piggy-back"
registration rights.

      During the year ended March 31, 2000, in conjunction with the sale of
common stock, the Company gave the investors warrants to purchase 560,938 shares
of common stock at a price of $9.88 per share. Such warrants expire five years
from the date of grant. The Company valued the warrants at $4.6 million using
the Black-Scholes Option Pricing Model.

      During the year ended March 31, 2000, the Company issued a warrant to
purchase 100,000 shares of common stock at a price of $1.95 per share. Such
warrant expires two years from the date of grant. The Company was obligated to
provide the warrant in 1997 as a result of assistance provided by the recipient
with certain capital raising activities. The Company valued the warrant at $0.1
million using the Black-Scholes Option Pricing Model.

                                       35
<PAGE>

WORKING CAPITAL DEMANDS

      The Company believes that current cash and cash equivalents and short-term
investments are not sufficient to meet anticipated cash needs for working
capital and capital expenditures.

       The Company expects to experience substantial negative cash flows from
operating activities and negative cash flows before financing activities for at
least the next several years due to continued development, commercial deployment
and expansion of the network. Future cash requirements for developing, deploying
and enhancing our network and operating our business, as well as the Company's
revenues, will depend on a number of factors including:

      o  The number of regions entered, the timing of entry and services
         offered;
      o  The speed of the network development schedules and associated costs;
      o  The rate at which customers and end-users purchase the Company's
         services and the pricing of such services;
      o  The level of marketing required to acquire and retain customers and to
         attain a competitive position in the marketplace;
      o  The rate at which the Company invests in engineering; and
      o  Unanticipated opportunities.

       The Company will be required to raise additional capital, the timing and
amount of which cannot be predicted. The Company expects to raise additional
capital through debt or equity financings, depending on market conditions, to
finance the continued development, commercial deployment and expansion of the
network and for funding operating losses or to take advantage of unanticipated
opportunities. If the Company is unable to obtain required additional capital or
is required to obtain it on terms less satisfactory than it desires, the Company
may be required to delay the expansion of its business or take or forego
actions, any or all of which could harm the business. If the Company fails to
raise sufficient funds, the Company may need to modify, delay or abandon some of
the planned future expansion or expenditures, which could have a material
adverse effect on the business, prospects, financial condition and results of
operations.

COMMITMENTS AND CONTINGENCIES

REGISTRATION RIGHTS

      As disclosed elsewhere herein, the Company is subject to various
requirements to register common stock and the common stock underlying
convertible preferred stock and various warrants. The Company is subject to
various penalties for failure to register such securities, the amount of which
could be material to the Company's consolidated financial condition, results of
operations and cash flows. See Note 8 to the consolidated financial statements
included elsewhere herein regarding the Company's violation of certain
registration requirements.

INFLATION

      The Company's Management does not believe that inflation has had or is
likely to have any significant impact on the Company's operations. Management
believes that the Company will be able to increase subscriber rates after its
systems are launched, if necessary, to keep pace with inflationary increases in
costs.

SUBSEQUENT EVENTS

PREFERRED STOCK CONVERSIONS

      Subsequent to March 31, 2000, all of the issued and outstanding shares of
Preferred Stock were converted into 364,299 shares of common stock. Dividends
totaling $0.1 million, which were accrued at March 31, 2000, and dividends
totaling $8,000 for the period from April 1, 2000 through the date of
conversion, were settled subsequent to March 31, 2000 through the issuance of
26,634 shares of common stock.

                                       36
<PAGE>

BRIDGE LOANS

      On April 17, 2000, the Company entered into a Note and Warrant Purchase
Agreement to borrow $5.0 million. The agreement provides for interest at 6% per
annum, with any unconverted principal and accrued interest due October 17, 2001.
The interest is payable by the Company in cash or common stock, at the election
of the Company, upon conversion of principal or October 17, 2001, whichever is
earlier. The agreement provides for the conversion of the principal balance of
the convertible note into shares of common stock, at the election of the holder,
at a price of $6.06 per share. The conversion price equaled the closing price of
the Company's common stock on April 17, 2000. The agreement provides for an
adjustment of the conversion price to the closing price of the Company's common
stock on April 17, 2001, if the Company's common stock is lower than $6.06 on
such date. However, the conversion price cannot be adjusted to lower than $3.94
per share. The agreement requires the Company to obtain effective registration
of the shares underlying the convertible note and the warrant (see discussion
below) by October 17, 2000. The agreement provides for a 2% per month cash
penalty if such registration is not effective on said date.

      In conjunction with the agreement, the Company issued warrants to the
holder of the convertible note to purchase 412,541 shares of common stock at a
price of $6.06 per share. The warrants expire three years from the date of
grant. The Company valued the warrants at $1.7 million using the Black-Scholes
Option Pricing Model.

      On May 23, 2000, the Company entered into a Note and Warrant Purchase
Agreement to borrow $0.3 million. The agreement provides for interest at 6% per
annum, with any unconverted principal and accrued interest due November 23,
2001. The interest is payable by the Company in cash or common stock, at the
election of the Company, upon conversion of principal or November 23, 2001,
whichever is earlier. The agreement provides for the conversion of the principal
balance of the convertible note into shares of common stock, at the election of
the holder, at a price of $3.91 per share. The conversion price equaled the
closing price of the Company's common stock on May 23, 2000. The agreement
provides for an adjustment of the conversion price to the closing price of the
Company's common stock on May 23, 2001, if the Company's common stock is lower
than $3.91 on such date. However, the conversion price cannot be adjusted to
lower than $2.54 per share. The agreement requires the Company to obtain
effective registration of the shares underlying the convertible note and the
warrant (see discussion below) by November 23, 2000. The agreement provides for
a 2% per month cash penalty if such registration is not effective on said date.

      In conjunction with the agreement, the Company issued warrants to the
holder of the convertible note to purchase 32,000 shares of common stock at a
price of $3.91 per share. The warrants expire three years from the date of
grant. The Company valued the warrants at $84,000 using the Black-Scholes Option
Pricing Model.

      On June 5, 2000 and July 6, 2000, the Company entered into two Note and
Warrant Purchase Agreements to borrow $1.0 million and $0.5 million,
respectively. The agreements provide for interest at 6% per annum, with
principal and accrued interest due in August and September 2000, respectively.
The agreements provide for default interest at a rate of 24% per annum. The
agreements require the Company to obtain effective registration of the shares
underlying the warrants issued in connection with the notes (see discussion
below) by November and December 2000. The agreements provide for a 2% per month
cash penalty if such registration is not effective on said date. The agreements
have been personally guaranteed by the Chairman of the Board of Directors of the
Company.

      In conjunction with the agreements, the Company issued warrants to the
holder of the notes to purchase 200,000 shares and 100,000 shares of common
stock at a price of $2.875 and $3.25 per share, respectively. The warrants
expire three years from the date of grant. The Company valued the warrants at
$934 and $293, respectively, using the Black-Scholes Option Pricing Model.

      On July 7, 2000, the Company entered into a Secured Convertible Promissory
Note Agreement with the same Investors who purchased the Preferred Stock (see
Note 7 of the consolidated financial statements included elsewhere herein). The
agreement provides for a total borrowing of $1.3 million, which represents $0.5
million in cash borrowings and a settlement, in the amount of $0.8 million,
relating to the Preferred Stock "failure to the register" penalties as discussed
in Notes 7 and 8 to the consolidated financial statements included elsewhere
herein. The $0.8 million has been accrued in accounts payable and accrued
liabilities in the accompanying consolidated financial statements as of March
31, 2000. The entire $1.3 million is convertible into shares of the Company's
common stock at a price equal to 75% of the average of the five closing bid
prices of the Company's common stock prior to the date of conversion. The
agreement requires the registration of the underlying shares of common stock.
The agreement provides for interest at 8% per annum, with 133% of the principal
and accrued interest due October 2000. The obligation is secured by shares of
stock of the Company's Chairman.

                                       37
<PAGE>

SHARES ISSUED FOR SERVICES

      Subsequent to March 31, 2000, the Company issued 18,679 shares for
services valued at $0.1 million.

      Subsequent to March 31, 2000, the Company issued 104,165 shares to the
non-employee members of its Board of Directors for services valued at $0.3
million.

      On March 31, 2000, the Company executed a severance and purchase agreement
with an employee. The agreement provided for the issuance of 75,000 shares of
common stock valued at $0.6 million for the purchase of such employee's 5%
ownership interest in UBN. The Company was owed $0.2 million by the employee,
which was offset against the amount ultimately paid. Net shares totaling 45,040
were issued to the employee subsequent to March 31, 2000. The $0.6 million was
recorded by the Company as goodwill, which was subsequently determined to be
impaired as a result of the operating losses of UBN.

WARRANTS GRANTED TO PURCHASE COMMON STOCK

      Subsequent to March 31, 2000, in conjunction with the issuance of various
debt obligations, the Company issued warrants to purchase 744,541 shares of
common stock (see discussion above).

      In connection with execution of a financial advisory services agreement on
May 22, 2000 with an investment banking firm, the Company granted warrants to
purchase 250,000 share of common stock at a price of $6.06 per share. The
warrants expire five years from the date of grant. The Company valued the
warrants at $0.8 million using the Black-Scholes Option Pricing Model. The
warrant agreement requires the Company to obtain effective registration of the
shares underlying the warrants by November 22, 2000.

      The Company is involved in a dispute with a third party consultant
concerning consideration the Company was allegedly expected to pay with respect
to various financial advisory services. The Company has reached a tentative
settlement with the consultant whereby it has agreed to issue a warrant to
purchase 75,000 shares of the Company's common stock with an exercise price of
$5.00.

OPTIONS GRANTED TO PURCHASE COMMON STOCK

      Subsequent to March 31, 2000, the Company granted various employees
options to purchase 1.9 million shares of stock (see discussion below) at prices
ranging from $2.875 to $5.28 per share. The exercise prices equaled the closing
price of the Company's common stock at the date of grant.

      Subsequent to March 31, 2000, the Company granted various service
providers options to purchase 20,500 common shares of stock at a price of $8.031
per share. The exercise price equaled the closing price of the Company's common
stock at the date of grant.

EMPLOYMENT AGREEMENTS

      The Company executed an employment agreement subsequent to March 31, 2000
with its new Chief Executive Officer. The agreement is for a term of two years,
and provides for an annual salary of $350,000, an annual discretionary bonus of
up to $400,000, a signing bonus of $1.0 million, and options to purchase 1.0
million shares of common stock at an exercise price of $5.28 per share (see
discussion above), of which 100,000 vested immediately and 150,000 vest every
six month period. The exercise price equaled the closing price of the Company's
common stock at the date of grant. The agreement provides for severance, as
defined, for termination without cause.

      The Company executed various other employment agreements subsequent to
March 31, 2000. Substantially all of the agreements provide for employment on an
"at-will" basis. One of the agreements provides for severance, as defined, for
termination without cause.

                                       38
<PAGE>

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------

      The Company's exposure to market risk for interest rates relates to debt
obligations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------

      The information required by Item 8 of this Report is set forth in Item
14(a) under the caption "Financial Statements" as a part of this report.

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

      None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
-----------------------------------------

      Information as to the Board of Directors and Executive Officers of the
Company required by this item is incorporated by reference from the portion of
the Company's definitive Proxy Statement under the caption "Proposal Number
1--Election of Directors." Information as to the Company's reporting persons'
compliance with Section 16(a) of the Exchange Act, required by this item, is
incorporated by reference from the portion of the Company's definitive Proxy
Statement under the caption "Section 16(A) Beneficial Ownership Reporting
Compliance" filed with the Commission pursuant to Regulation 14A under the
Exchange Act and mailed to the Company's stockholders prior to the Company's
Annual Meeting of Stockholders, which is scheduled to be held on July 25, 2000.

ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

      Information as to Executive Compensation required by this item is
incorporated by reference from the Company's definitive Proxy Statement, under
the caption "Executive Compensation," filed with the Commission pursuant to
Regulation 14A under the Exchange Act and mailed to the Company's stockholders
prior to the Company's Annual Meeting of Stockholders, which is scheduled to be
held on July 25, 2000.

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

      Information as to Security Ownership of Certain Beneficial Owners and
Management required by this item is incorporated by reference from the Company's
definitive Proxy Statement, under the caption "Security Ownership of Certain
Beneficial Owners and Management," filed with the Commission pursuant to
Regulation 14A under the Exchange Act and mailed to the Company's stockholders
prior to the Company's Annual Meeting of Stockholders, which is scheduled to be
held on July 25, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

      Information as to Certain Relationships and Certain Transactions required
by this item is incorporated by reference from the Company's definitive Proxy
Statement, under the caption "Transactions with Officers, Directors and
Employees," filed with the Commission pursuant to Regulation 14A under the
Exchange Act and mailed to the Company's stockholders prior to the Company's
Annual Meeting of Stockholders, which is scheduled to be held on July 25, 2000.

      See also Note 9 to the consolidated financial statements included
elsewhere herein.

                                       39
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
------------------------------------------------------------------------

      (a) Financial Statements. The following financial statements of the
Company are included herein.

                                                                     Page Number
                                                                     -----------
         (1)  Consolidated Financial Statements.

              Report of Independent Public Accountants, BDO Seidman, LLP     F-2

              Report of Independent Accountants, Smith & Company             F-3

              Consolidated Balance Sheets as of March 31, 2000 and 1999      F-4

              Consolidated Statements of Operations for the three years
                ended March 31, 2000, 1999 and 1998                          F-5

              Consolidated Statements of Shareholders' Equity (Deficit) for
                the three years ended March 31, 2000, 1999 and 1998          F-6

              Consolidated Statements of Cash Flows for three years ended
                March 31, 2000, 1999 and 1998                                F-8

              Notes to Consolidated Financial Statements                    F-10


                                       40
<PAGE>

         (2) The following Exhibits are filed as part of this Report.

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

2.1      Agreement and Plan of Reorganization dated July 31, 1997 between the
         Registrant and Interjet (a)
2.2      Agreement and Plan of Reorganization between the Registrant and Access
         Communications, Inc. dated December 31, 1997 (a)
3.1      Certificate of Incorporation, as amended (b)
3.2      Bylaws of the Company, as amended (b)
3.3      Certificate of Designation for Series A Convertible Preferred Stock (c)
4.1      Specimen Common Stock Certificate (a)
4.2      Specimen Certificate of Series A Convertible Preferred Stock (c)
4.3      Preferred Stock and Private Equity Line of Credit Agreement dated
         December 4, 1998
4.4      Preferred Stock and Private Equity Line of Credit Agreement dated May
         27, 1999
4.5      1992 Stock Option Plan (d)
4.6      2000 Management Equity Incentive Plan (f)
4.7      2000 Equity Incentive Plan (f)
4.8      Form of Stock Option Agreement (Non-qualified)
10.1     Credit Agreement with Nortel Networks, Inc. dated as of July 30, 1999
         (e)
10.2     Amendment Number 1 to Credit Agreement with Nortel Networks, Inc.
10.3     Employment Agreement with Michael A. Sternberg
10.4     Employment Agreement with Jeffery R. Matsen
10.5     Form of Employment Agreement with Nancy J. Hobbs
10.6     Form of Employment Agreement with Steven M. Pierson
10.7     Employment Agreement with Jerral R. Pulley
10.8     Lease Agreement between the Registrant and Koll Tower Four Associates
10.9     Lease Agreement between the Registrant and Downtown Properties III, LLC
10.10    Indefeasible Right of Use Agreement between the Registrant and Star
         Telecommunications, Inc. dated as of December 29, 1999
27.1     Financial Data Schedule

(a)      Incorporated by reference to the exhibit of same number to the
         Registrant's Report on Form 8-K filed with the SEC on September 8,
         1997.
(b)      Incorporated by reference to the exhibit of the same number to the
         Registrant's annual Report on Form 10-KSB/A for the annual period ended
         March 31, 1999 filed with the SEC on October 8, 1999.
(c)      Incorporated by reference to the exhibit of the same number to the
         Registrant's Registration Statement on Form S-3/A, as amended, filed
         with the SEC October 8, 1999.
(d)      Incorporated by reference to the exhibit of the same number to the
         Registrant's annual Report on Form 10-KSB for the annual period ended
         March 31, 1997 filed with the SEC on October 16, 1997.
(e)      Incorporated by reference to the exhibit of the same number to the
         Registrant's quarterly Report on Form 10-Q for the quarterly period
         ended June 30, 1999 filed with the SEC on August 16, 1999
(f)      Incorporated by reference to the exhibit of same number to the
         Registrant's Definitive Proxy Statement filed with the Commission on
         July 5, 2000

     (b) Reports on Form 8-K.

         Current report on Form 8-K filed April 10, 2000 regarding change in
accountants.


                                       41
<PAGE>

                                   SIGNATURES

     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.

IJNT.NET, INC.


 /S/  MICHAEL A. STERNBERG
--------------------------------------
Michael A. Sternberg
Chief Executive Officer
July 7, 2000


 /S/  KIM E. MARCUS
--------------------------------------
Kim E. Marcus
Interim Chief Financial Officer
(Principal Financial and Accounting Officer)
July 7, 2000

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
              SIGNATURE                                      TITLE                             DATE
              ---------                                      -----                             ----
<S>                                           <C>                                           <C>

 /S/  JON H. MARPLE                           Chairman of the Board of Directors            July 7, 2000
--------------------------------------
Jon H. Marple


 /S/  MICHAEL A. STERNBERG                    Chief Executive Officer and Director          July 7, 2000
--------------------------------------
Michael A. Sternberg


 /S/  MARY E. BLAKE                           Vice Chairman of the Board of Directors       July 7, 2000
-------------------------------------
Mary E. Blake


 /S/  RICHARD W. TORNEY                       Director                                      July 7, 2000
-------------------------------------
Richard W. Torney


 /S/  RICHARD F. CHARLES                      Director                                      July 7, 2000
-------------------------------------
Richard F. Charles


 /S/  H. DEAN CUBLEY                          Director                                      July 7, 2000
-------------------------------------
H. Dean Cubley


                                              Director                                      July 7, 2000
-------------------------------------
Steven E. Pazian


                                              Director                                      July 7, 2000
-------------------------------------
Terry D. Kramer
</TABLE>
                                       42

<PAGE>

                                 IJNT.net, INC.

                                    CONTENTS


                                                                    PAGE NUMBER
                                                                    -----------

Report of Independent Certified Public Accountants, BDO Seidman, LLP     F-2

Independent Auditors' Report, Smith & Company                            F-3

Consolidated Financial Statements

     Consolidated Balance Sheets as of March 31, 2000 and 1999           F-4

     Consolidated Statements of Operations for the three years
          ended March 31, 2000, 1999 and 1998                            F-5

     Consolidated Statements of Shareholders' Equity (Deficit) for
          the three years ended March 31, 2000, 1999 and 1998            F-6

     Consolidated Statements of Cash Flows for three years ended
          March 31, 2000, 1999 and 1998                                  F-8

     Notes to Consolidated Financial Statements                          F-10

                                      F-1
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors
IJNT.net, Inc.
Irvine, California

We have audited the accompanying consolidated balance sheet of IJNT.net, Inc.
and subsidiaries (the "Company") as of March 31, 2000, and the related
consolidated statements of operations, shareholders' deficit and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
IJNT.net, Inc. and subsidiaries as of March 31, 2000, and the consolidated
results of their operations and cash flows for the year then ended, in
conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
accompanying consolidated financial statements, the Company has incurred
substantial losses and negative cash flows from operations; the Company also has
substantial working capital and shareholders' deficits as of March 31, 2000.
Lastly, the Company has significant present and future working capital demands
which will require substantial equity and debt financing which have not yet been
secured. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans concerning
these matters are also described in Note 1. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

                                                 /s/ BDO SEIDMAN, LLP

                                                 BDO SEIDMAN, LLP

Costa Mesa, California
June 29, 2000, except
for Note 10, as to which
the date is July 7, 2000

                                      F-2
<PAGE>

                                      Smith
                                        &
                                     Company

           A Professional Corporation of Certified Public Accountants



Board of Directors
IJNT.net, Inc.
Salt Lake City, Utah


INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying consolidated balance sheet of IJNT.net, Inc.
and Subsidiaries as of March 31, 1999, and the related consolidated statements
of operations, changes in shareholders' equity, and cash flows for the years
ended March 31, 1999 and 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 IJNT.net, Inc. and
Subsidiaries as of March 31, 1999 and the results of their operations, changes
in shareholders' equity, and cash flows for the years ended March 31, 1999 and
1998 in conformity with generally accepted accounting principles.

                                                      /S/ Smith & Company
                                                 CERTIFIED PUBLIC ACCOUNTANTS

Salt Lake City, Utah
July 7, 1999, except for Note 12,
as to which the date is May 9, 2000

         10 West 100 South, Suite 700 o Salt Lake City, Utah 84101-1554
               Telephone: (801) 575-8297 Facsimile: (801) 575-8306
        E-mail: smith&co@smithandcocpa.com Members: American Institute of
                          Certified Public Accountants
                Utah Association of Certified Public Accountants


                                      F-3
<PAGE>

<TABLE>
                                                 IJNT.net, Inc.
                                          Consolidated Balance Sheets
                           (amounts in thousands, except share and per share amounts)
<CAPTION>

                                                                                                 March 31,
                                                                                  March 31,        1999
ASSETS (NOTE 4)                                                                     2000       (as restated)
                                                                               -------------   -------------
<S>                                                                            <C>             <C>
Current assets:
     Cash                                                                      $      1,176    $        903
     Accounts receivable, net of allowance for doubtful accounts of
         $330 and $115, respectively                                                     62             176
     Prepaid expenses and other current assets                                          645             387
                                                                               -------------   -------------

Total current assets                                                                  1,883           1,466

Property and equipment, net (Note 2)                                                 15,185           1,564

Other assets, net (Note 3)                                                            3,268           1,769
                                                                               -------------   -------------

Total assets                                                                   $     20,336    $      4,799
                                                                               =============   =============

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
     Accounts payable and accrued liabilities (Note 10)                        $      9,522    $        288
     Accrued payroll, benefits and related costs                                        647             200
     Equipment financing and line of credit arrangement (Note 4)                     14,222              --
     Notes payable to shareholders (Note 9)                                              --             188
     Current portion of obligations under capital leases (Note 5)                       402              --
     Short-term debt and other obligations                                               --             222
                                                                               -------------   -------------

Total current liabilities                                                            24,793             898

Obligations under capital leases, less current portion (Note 5)                         788              --
                                                                               -------------   -------------

Total liabilities                                                                    25,581             898
                                                                               -------------   -------------
Commitments and contingencies (Note 8)

Shareholders' equity (deficit) (Notes 7, 8, 9, 10, 12 and 13)
     Series A  Convertible Preferred Stock, $.01 par value; authorized
         1,000,000 shares; 2,000 issued and outstanding; aggregate
         liquidation preference of $2,000                                                --             --
     Common Stock, $.001 par value; authorized 50,000,000 (2000) and
         20,000,000 (1999) shares; 20,283,508 (2000) and 16,098,129 (1999)
         issued and outstanding                                                          20             16
     Additional paid-in capital                                                      39,347          15,084
     Accumulated deficit                                                            (44,612)        (11,199)
                                                                               -------------   -------------
Total shareholders' equity (deficit)                                                 (5,245)          3,901
                                                                               -------------   -------------
Total liabilities and shareholders' equity (deficit)                           $     20,336    $      4,799
                                                                               =============   =============
</TABLE>

             See report of independent certified public accountants
          and accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

<TABLE>
                                                 IJNT.net, Inc.
                                     Consolidated Statements of Operations
                           (amounts in thousands, except share and per share amounts)
<CAPTION>

                                                                                  Years Ended
                                                                 ---------------------------------------------
                                                                                   March 31,
                                                                   March 31,         1999           March 31,
                                                                      2000       (as restated)        1998
                                                                 -------------   -------------   -------------
<S>                                                              <C>             <C>             <C>
Revenues                                                         $      2,617    $      1,552    $        147
                                                                 -------------   -------------   -------------
Operating expenses:
     Network expenses                                                   3,347             543              66
     Payroll and related expenses (Notes 7, 8 and 9)                   14,318           2,421             774
     Selling, general and administrative expenses
     (Notes 7, 8 and 9)                                                12,107           5,549           1,622
     Depreciation and amortization                                      3,045           1,219              83
                                                                 -------------   -------------   -------------

Total operating expenses                                               32,817           9,732           2,545
                                                                 -------------   -------------   -------------

Operating loss                                                        (30,200)         (8,180)         (2,398)

Interest income                                                           183              65              13
Interest expense, including amortization of deferred
     financing costs                                                   (2,368)           (147)            (10)
                                                                 -------------   -------------   -------------

Net loss                                                         $    (32,385)   $     (8,262)   $     (2,395)
                                                                 =============   =============   =============

Net loss per share, basic and diluted                            $      (1.84)   $      (0.58)   $      (0.21)
                                                                 =============   =============   =============

Weighted-average number of shares, basic and diluted               18,199,114      14,890,130      11,528,021
                                                                 =============   =============   =============
</TABLE>

             See report of independent certified public accountants
          and accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

<TABLE>
                                                    IJNT.net, Inc.
                              Consolidated Statements of Shareholders' Equity (Deficit)
                              (amounts in thousands, except share and per share amounts)
<CAPTION>

                                    Series A
                                   Convertible
                                 Preferred Stock             Common Stock          Additional
                           -------------------------   -------------------------     Paid-In     Accumulated
                              Shares        Amount        Shares        Amount       Capital       Deficit        Total
                           -----------   -----------   -----------   -----------   -----------   -----------   -----------
<S>                             <C>      <C>           <C>           <C>           <C>           <C>           <C>
Balances,
   March 31, 1997                  --    $       --    11,165,563    $       11    $    1,676    $     (178)   $    1,509

See Notes 7, 8, 9 and 12

   Issue shares to
     retire debt                   --            --       155,000            --             1            --             1
   Issue shares to
     acquire subsidiary            --            --       211,000            --           422            --           422
   Issue shares for
     services                      --            --        15,000            --            32            --            32
   Sale of shares in
     private placements            --            --     1,307,582             2         2,484            --         2,486
   Net loss                        --            --            --            --            --        (2,395)       (2,395)
                           -----------   -----------   -----------   -----------   -----------   -----------   -----------

Balances,
   March 31, 1998                  --            --    12,854,145            13         4,615        (2,573)        2,055

See Notes 7, 8, 9 and 12

   Issue shares to
     acquire
     subsidiaries
     and/or operations             --            --       335,621            --           873            --           873
   Issue shares for
     services                      --            --       453,873             1         1,650            --         1,651
   Issue shares to
     retire debt                   --            --        25,456            --            70            --            70
   Issue shares to pay
     interest                      --            --        44,544            --           122            --           122
   Issue shares to
     purchase assets               --            --       507,719            --         1,400            --         1,400
   Issue shares for
     redemption of
     warrants                      --            --       512,821             1           999            --         1,000
   Sale of shares in
     private placements
     (net of issuance
     costs)                        --            --     1,363,950             1         3,191            --         3,192
   Issue convertible
     preferred stock
     (net of issuance
     costs)                     2,000            --            --            --         1,800            --         1,800
   Beneficial
     conversion feature
     of convertible
     preferred stock               --            --            --            --           364          (364)           --
   Net loss                        --            --            --            --            --        (8,262)       (8,262)
                           -----------   -----------   -----------   -----------   -----------   -----------   -----------
Balances,
     March 31, 1999             2,000            --    16,098,129            16        15,084       (11,199)        3,901
</TABLE>

             See report of independent certified public accountants
          and accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

<TABLE>
                                                  IJNT.net, Inc.
                       Consolidated Statements of Shareholders' Equity (Deficit) (Continued)
                            (amounts in thousands, except share and per share amounts)
<CAPTION>

                                    Series A
                                   Convertible
                                 Preferred Stock             Common Stock          Additional
                           -------------------------   -------------------------     Paid-In     Accumulated
                              Shares        Amount        Shares        Amount       Capital       Deficit        Total
                           -----------   -----------   -----------   -----------   -----------   -----------   -----------
<S>                            <C>       <C>           <C>           <C>           <C>           <C>           <C>
See Notes 4, 7, 8, 9
and 10

   Issue shares for
     services                      --            --       438,213            --         2,273            --         2,273
   Sale of shares in
     private placements
     (net of issuance
     costs of $545)                --            --     2,843,750             3         9,772            --         9,775
   Conversion of
     preferred stock           (2,000)           --       867,828             1            --            (1)           --
   Preferred stock
     dividends                     --            --        35,588            --           104          (241)         (137)
   Issue convertible
     preferred stock
     (net of issuance
     costs of $211)             2,000            --            --            --         1,789            --         1,789
   Beneficial
     conversion feature
     of convertible
     preferred stock               --            --            --            --           448          (448)           --
   Warrants issued in
     conjunction with
     issuance of
     convertible
     preferred stock               --            --            --            --           338          (338)           --
   Warrants issued in
     conjunction with
     financing
     arrangement                   --            --            --            --         1,943            --         1,943
   Options granted to
     non-employees                 --            --            --            --           332            --           332
   Options granted to
     employees                     --            --            --            --         7,238            --         7,238
   Other                           --            --            --            --            26            --            26
   Net loss                        --            --            --            --            --       (32,385)      (32,385)
                           -----------   -----------   -----------   -----------   -----------   -----------   -----------
Balances,
     March 31, 2000             2,000    $       --    20,283,508    $       20    $   39,347    $  (44,612)   $   (5,245)
                           ===========   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>

             See report of independent certified public accountants
          and accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

<TABLE>
                                                    IJNT.net, Inc.
                                        Consolidated Statements of Cash Flows
                                                (amounts in thousands)
<CAPTION>

                                                                             Years Ended
                                                             ---------------------------------------------
                                                                               March 31,
                                                                March 31,        1999           March 31,
                                                                  2000       (as restated)        1998
                                                             -------------   -------------   -------------
<S>                                                          <C>             <C>             <C>
Cash flows used in operating activities:
     Net loss                                                $    (32,385)   $     (8,262)   $     (2,395)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
         Bad debt expense                                             666             115              --
         Depreciation and amortization                              3,045           1,219              83
         Amortization of deferred financing costs                   1,399              --              --
         Stock options issued as compensation                       7,570              --              --
         Stock issued for services                                  2,273           1,651              32
         Stock issued for interest                                     --             122              --
         Write-off of assets and goodwill                           1,227             823             352
         Other non-cash                                                 3              --              --
         Changes in current assets and liabilities:
              Accounts receivable                                    (552)           (252)            (40)
              Prepaid expenses and other current assets              (258)           (329)            (58)
              Account payable and accrued liabilities               4,407            (203)            301
              Accrued payroll                                         447             154              46
                                                             -------------   -------------   -------------
Net cash used in operating activities                             (12,158)         (4,962)         (1,679)
                                                             -------------   -------------   -------------
Cash flows used in investing activities:
     Advances to related parties                                     (361)            (80)             --
     Purchases of property and equipment                          (10,626)           (965)             --
     Purchase of licenses and other assets                         (1,000)           (214)             --
     Increase in deposits                                            (257)            (56)            (18)
                                                             -------------   -------------   -------------
Net cash used in investing activities                             (12,244)         (1,315)            (18)
                                                             -------------   -------------   -------------
Cash flows provided by financing activities:
     Borrowings from shareholders                                      --             143              14
     Repayments of borrowings from related parties                   (188)             --              --
     Borrowings of short-term debt and other obligations               --             339              84
     Repayments of short-term debt and other obligations             (222)           (151)            (28)
     Borrowings under equipment financing and line of
         credit arrangement                                        14,222              --              --
     Payments on debt issuance costs                                 (660)             --              --
     Repayments under capital lease obligations                       (41)             --              --
     Proceeds from sale of convertible preferred stock              1,789           1,800              --
     Proceeds from exercise of warrants                                --           1,000              --
     Collection of subscriptions receivable                            --             794              --
     Proceeds from sale of common stock, net                        9,775           3,192           1,690
                                                             -------------   -------------   -------------
Net cash provided by financing activities                          24,675           7,117           1,760
                                                             -------------   -------------   -------------
</TABLE>

             See report of independent certified public accountants
          and accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>

<TABLE>
                                                    IJNT.net, Inc.
                                   Consolidated Statements of Cash Flows (Continued)
                                                (amounts in thousands)
<CAPTION>

                                                                                 Years Ended
                                                                 ---------------------------------------------
                                                                                   March 31,
                                                                    March 31,        1999           March 31,
                                                                      2000       (as restated)        1998
                                                                 -------------   -------------   -------------
<S>                                                              <C>             <C>             <C>
Net increase in cash                                                      273             840              63
Cash at beginning of period                                               903              63              --
                                                                 -------------   -------------   -------------
Cash at end of period                                            $      1,176    $        903    $         63
                                                                 =============   =============   =============
Supplemental schedule of non-cash investing and
  financing activities:
     Issuance of capital leases for asset purchases              $      1,231    $         --    $         --
                                                                 =============   =============   =============
     Increase in accounts payable relating to asset purchases    $      4,361    $         --    $         --
                                                                 =============   =============   =============
     Issuance of common stock for asset purchases                $         --    $      1,400    $         --
                                                                 =============   =============   =============
     Issuance of common stock to acquire subsidiaries and/or
         operations                                              $         --    $        873    $        422
                                                                 =============   =============   =============
     Issuance of warrants in conjunction with financing
         arrangement                                             $      1,943    $         --    $         --
                                                                 =============   =============   =============
     Issuance of warrants in conjunction with preferred stock    $        338    $         --    $         --
                                                                 =============   =============   =============
     Beneficial conversion feature of preferred stock            $        448    $        364    $         --
                                                                 =============   =============   =============
     Preferred stock dividends paid in common stock              $        137    $         --    $         --
                                                                 =============   =============   =============
     Issuance of common stock to retire debt                     $         --    $         70    $          1
                                                                 =============   =============   =============
Cash paid for:
     Interest                                                    $        824    $         24    $         10
                                                                 =============   =============   =============
     Taxes                                                       $          1    $          1    $          1
                                                                 =============   =============   =============
</TABLE>

             See report of independent certified public accountants
          and accompanying notes to consolidated financial statements.

                                      F-9
<PAGE>

                                 IJNT.net, Inc.
                   Notes to Consolidated Financial Statements
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        ORGANIZATION AND BUSINESS

        IJNT.net, Inc. (the "Company") operates through several wholly-owned
        subsidiaries: IJNT, Inc. ("IJNT"), Ubee Network Enterprises, Inc.
        ("UBEE"), Access Communications, Inc. ("Access"), Webit of Utah, Inc.
        ("Webit"), UrJet Backbone Network, Inc. ("UBN"), Man Rabbit House
        Multimedia, Inc. ("MRHM"), GIjargon.com ("GI"), and Global Broadband
        Services, Inc. ("Global"). Certain of the subsidiaries are inactive,
        including Webit, GI and Global. The accompanying consolidated financial
        statements include the accounts of the Company and the aforementioned
        subsidiaries. All significant intercompany balances and transactions
        have been eliminated in consolidation.

        The Company was incorporated on June 11, 1992 in Delaware as Picometrix,
        Inc. On August 8, 1997, the name was changed to Interjet Net
        Corporation. During the year ended March 31, 1999 ("Fiscal 1999"), the
        name was changed to IJNT International, Inc. and then to IJNT.net, Inc.
        The Company acquired the bulk of its assets on July 31, 1997 with the
        acquisition of IJNT, Inc. The acquisition was accounted for as a reverse
        acquisition.

        The Company is in the process of expanding its operations through the
        establishment of telecommunications facilities in pre-designated markets
        with the intent of providing internet access services using DSL
        technology. The Company and its subsidiaries currently are engaged in
        the business of providing wireless internet access through microwave
        technology, dial-up internet access, web site design, web hosting
        services, fiber backbone connectivity, and a variety of
        telecommunications carrier services.

        GOING CONCERN

        The accompanying consolidated financial statements have been prepared
        assuming the Company will continue as a going concern. During the year
        ended March 31, 2000 ("Fiscal 2000"), the Company experienced a net loss
        of $32,385 and had negative cash flows from operations of $12,158. In
        addition, the Company had substantial working capital and shareholders'
        deficits at March 31, 2000. Lastly, the Company has significant present
        and future working capital demands, which will require substantial
        equity and debt financing which have not yet been secured. These
        factors, among others, raise substantial doubt about the Company's
        ability to continue as a going concern. The consolidated financial
        statements do not include any adjustments that might result from the
        outcome of this uncertainty.

        In an effort to reverse the negative financial conditions noted above,
        management of the Company intends to secure a series of debt and equity
        financings during 2000 expected to exceed $200,000. Additionally, the
        Company intends to expand its operations through the establishment of
        switch-based telecommunications facilities in pre-designated markets,
        and develop its management and sales teams, and its corporate
        infrastructure. Management of the Company believes these events will
        provide the working capital required to purchase necessary equipment,
        establish the requisite infrastructure and fund operations until such
        time as the Company becomes profitable.

        There can be no assurances that the Company will be able to successfully
        implement its plans, including generating profitable operations,
        generating positive cash flows from operations and obtaining additional
        debt and equity capital to meet present and future working capital
        demands.

                                      F-10
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        RISKS AND UNCERTAINTIES

        THE COMPANY'S LIMITED OPERATING HISTORY CREATES SUBSTANTIAL UNCERTAINTY
        ABOUT FUTURE RESULTS.

        The Company has never before operated a telecommunications facility and
        its first facility located in Los Angeles, California has just become
        operational. The Company recently organized its principal operating
        subsidiary, UBN. The Company currently provide wireless, dial-up and T-1
        Internet access services in nine markets; however, the Company has never
        before offered Internet access services using DSL technology. As a
        result of the Company's limited operating history, prospective investors
        have limited operating and financial data about the Company on which to
        base an evaluation of its performance and an investment in its capital
        stock. The Company's ability to provide an integrated package of bundled
        telecommunications services on a widespread basis and to generate
        operating profits and positive operating cash flows will depend on the
        Company's ability, among other things, to:

        o  market integrated telecommunications services and generate demand for
           them among targeted client categories;
        o  develop, enhance, promote and carefully manage the Company's brand;
        o  respond appropriately and timely to competitive developments;
        o  develop its operational support and other back office systems;
        o  obtain state authorizations to operate as a competitive local
           exchange carrier and any other required governmental authorizations;
        o  attract and retain an adequate client base;
        o  secure additional financing;
        o  attract and retain qualified personnel; and,
        o  enter into and implement interconnection agreements with established
           telephone companies on satisfactory terms.

        There can be no assurances that the Company will be able to achieve any
        of these objectives, generate sufficient revenue to achieve or sustain
        profitability, meet working capital and debt service requirements or
        compete successfully in the telecommunications industry.

        THE COMPANY'S INABILITY TO COMPETE EFFECTIVELY COULD HARM ITS BUSINESS.

        The telecommunications industry is highly competitive, and one of the
        primary purposes of the Telecommunications Act is to foster further
        competition. In each of the Company's markets, it competes principally
        with the established telephone company serving such market. The Company
        currently does not have a significant market share in any market. The
        established telephone companies have long-standing relationships with
        their clients, and financial, technical and marketing resources
        substantially greater than the Company's and the potential to fund
        competitive services with cash flows from a variety of businesses. These
        competitors also currently benefit from existing regulations that favor
        the established telephone companies over integrated communications
        providers and competitive local exchange carriers in some respects.
        Furthermore, one large group of established telephone companies, the
        regional Bell operating companies, recently have been granted, under
        particular conditions, pricing flexibility from federal regulators with
        regard to some services with which the Company competes. This may
        present established telephone companies with an opportunity to subsidize


                                      F-11
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        services that compete with the Company's services and offer competitive
        services at lower prices. It is likely that the Company will also face
        competition from other integrated communications providers and
        facilities-based competitive local exchange carriers, and many other
        competitors in some of its markets. The Company believes that second and
        third tier markets will support only a limited number of competitors and
        that operations in such markets with multiple competitive providers are
        likely to be unprofitable for one or more of such providers. The Company
        expects to experience declining prices and increasing price competition.
        The Company cannot assure an investor that it will be able to achieve or
        maintain adequate market share or margins, or compete effectively, in
        any of the Company's markets. Moreover, substantially all of the
        Company's current and potential competitors have financial, technical,
        marketing, personnel and other resources, including brand name
        recognition, substantially greater than the Company's as well as other
        competitive advantages over the Company's business, financial condition
        and results of operations. Any of the foregoing factors could materially
        and adversely affect the Company's business, consolidated financial
        condition and operating results.

        THE COMPANY'S INABILITY TO SECURE AND MAINTAIN INTERCONNECTION
        AGREEMENTS ON FAVORABLE TERMS COULD HARM ITS BUSINESS.

        The Company must have in place agreements for the interconnection of the
        Company's network with the networks of the incumbent telephone companies
        and the competitive local exchange carrier covering each market in which
        the Company intends to offer local service. In some cases the Company
        may be able to piggy-back on the terms of existing agreements. At other
        times, however, the Company may be required to negotiate such
        interconnection and co-location agreements with established carriers and
        telephone companies, which can take considerable time, effort and
        expense and are subject to federal, state and local regulation. The
        Company currently has in place interconnection agreements with Pacific
        Bell and GTE in the Company's initial market in Los Angeles and in
        Texas. The Company cannot assure that it will be able to negotiate or
        renew interconnection agreements on a timely basis and on satisfactory
        terms and conditions. The Company's failure to secure and maintain these
        agreements could materially and adversely affect the Company's ability
        to become a single-source provider of broadband data and
        telecommunications services.

        Interconnection agreements are also subject to state telecommunications
        regulatory, FCC and judicial oversight. These governmental bodies may
        modify the terms or prices of its interconnection agreements in ways
        that materially and adversely affect the Company's business, financial
        condition and operating results.

        THE FCC AND STATE REGULATIONS MAY LIMIT THE SERVICES THE COMPANY CAN
        OFFER AND RESTRICT THE OPERATION AND EXPANSION OF THE COMPANY'S
        BUSINESS.

        The Company's networks and the provision of telecommunications services
        are subject to significant regulation at the federal, state and local
        levels. The costs of complying with these regulations and the delays in
        receiving required regulatory approvals or the enactment of new adverse
        regulation or regulatory requirements may have a material adverse effect
        on the Company's business, financial condition and operating results.

                                      F-12
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        The Company's Internet operations are not currently subject to direct
        regulation by the FCC or any other governmental agency, other than
        regulations applicable to businesses generally. However, the FCC
        recently indicated that the regulatory status of some services offered
        over the Internet may have to be reexamined. New laws or regulations
        relating to Internet services, or existing laws found to apply to them,
        may have a material adverse effect on the Company's business,
        consolidated financial condition or results of operations.

        The Telecommunications Act remains subject to judicial review and
        additional FCC rulemaking, and thus it is difficult to predict what
        effect the legislation will have on the Company's operations. There are
        currently many regulatory actions underway and being contemplated by
        federal and state authorities regarding interconnection pricing and
        other issues that could result in significant changes to the business
        conditions in the telecommunications industry.

        CASH

        The Company places its cash with high quality credit institutions. The
        Federal Deposit Insurance Corporation ("FDIC") insures cash accounts at
        each institution for up to $100. From time to time, the Company
        maintains cash balances in excess of the FDIC limit.

        CONCENTRATION OF CREDIT RISK

        Financial instruments, which potentially expose the Company to
        concentrations of credit risk, consist primarily of cash and accounts
        receivable. Credit is extended for all customers based upon an
        evaluation of the customer's financial condition and credit history and
        generally the Company does not require collateral. Credit losses are
        provided for in the consolidated financial statements by management
        based upon a detailed evaluation of the collectibility of accounts
        receivable.

        PROPERTY AND EQUIPMENT

        Property and equipment are stated at cost and are depreciated or
        amortized (as applicable) using the straight-line method over the
        estimated useful lives of the related assets, ranging from three to
        seven years (or lease term, if shorter). Maintenance and repairs are
        charged to expense as incurred. At the time of retirement or other
        disposition of property and equipment, the cost and accumulated
        depreciation and amortization are removed from the accounts and any
        resulting gain or loss is reflected in operations.

        OTHER ASSETS

        Other assets primarily consist of frequency licenses, an Indefeasible
        Right of Use License, deferred financing costs and lease security
        deposits (see Note 3). Frequency licenses represent certain channel
        rights in various regional markets. The Indefeasible Right of Use
        License represents a 20-year license of a digital transmission network
        connecting the Los Angeles and San Francisco market areas. Frequency
        licenses are being amortized over the license period, which generally
        ranges from two to three years. Amortization related to frequency
        licenses totaled $448, $0 and $0 for the years ended March 31, 2000,
        1999 and 1998, respectively.

        Deferred financing costs represent certain costs associated with the
        issuance of debt obligations, including legal costs, loan fees,
        commitment fees and the fair value of warrants issued in conjunction
        with such debt obligations. Deferred financing costs are capitalized and
        amortized over the term of the related debt obligations using the
        effective yield method. Amortization related to deferred financing costs
        totaled $1,399, $0 and $0 for the years ended March 31, 2000, 1999 and
        1998, respectively.

                                      F-13
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        LONG-LIVED ASSETS

        The Company reviews the carrying amount of its long-lived assets and
        identifiable intangible assets for possible impairment whenever events
        or changes in circumstances indicate that the carrying amount of the
        assets may not be recoverable. Recoverability of assets to be held and
        used is measured by a comparison of the carrying amount of an asset to
        future undiscounted net cash flows expected to be generated by the
        asset. If such assets are considered to be impaired, the impairment to
        be recognized is measured by the amount by which the carrying amount of
        the assets exceeds the fair value of the assets. Assets to be disposed
        of are reported at the lower of the carrying amount or fair value less
        costs to sell.

        Management determined that fixed and other assets totaling $80 and $433,
        respectively, were impaired during the years ended March 31, 2000 and
        1999. Management determined that goodwill totaling $1,147, $823 and
        $352, respectively, was impaired during the years ended March 31, 2000,
        1999 and 1998. Management determined that frequency licenses totaling
        $699, which were contributed for 1,000 shares of common stock by Jon
        Marple, Chairman of the Board of Directors of the Company, were impaired
        during the year ended March 31, 1999.

        The Company has wireless and dial-up internet service operations in five
        satellite offices located in Concord and Petaluma, California, Beaumont
        and Houston, Texas and Salt Lake City, Utah. The satellite offices have
        incurred substantial losses from operations. The Board of Directors has
        instructed management to evaluate such offices to determine whether they
        should be retained and restructured, or sold. The net book value of the
        fixed assets of the satellite offices approximated $1,152 at March 31,
        2000. The satellite offices have various office leases, which require
        minimum lease payments aggregating $1,536 over the next five years.
        Management has not completed its assessment of the satellite offices,
        which is required in order to make a recommendation as to whether the
        satellite offices should be retained and restructured, or sold. As a
        result, management has not made a determination as to whether the assets
        of the satellite offices have been impaired. There is an uncertainty as
        to the actual amount the Company will ultimately receive in its
        realization of the assets of the satellite offices, if they are sold. As
        a result, such assets may ultimately be determined to be impaired. The
        accompanying consolidated financial statements do not include any
        adjustments that might result from the outcome of this uncertainty.

        USE OF ESTIMATES

        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosure of contingent assets and liabilities at the date of the
        financial statements, and the reported amounts of revenues and expenses
        during the reported periods. Actual results could materially differ from
        those estimates. Significant financial statement categories requiring
        estimates include, but are not limited to the allowance for doubtful
        accounts, the recoverability of property and equipment and frequency
        licenses through future operations.

                                      F-14
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        REVENUE RECOGNITION

        Wireless internet service requires certain hardware items which must be
        installed at the customer's location. The sales of the equipment and
        installation labor are recognized as revenue in the period in which the
        equipment is installed. Internet access revenue is recognized monthly as
        it is earned. Web site development services revenue is recognized based
        on stages of development, typically over a period of one to three
        months, as the customer authenticates the stages.

        ADVERTISING

        Advertising costs are expensed as incurred. During the years ended March
        31, 2000, 1999 and 1998, advertising expenses totaled $788, $567 and
        $61, respectively.

        INCOME TAXES

        The Company accounts for income taxes under Statement of Financial
        Accounting Standards No. 109 "ACCOUNTING FOR INCOME TAXES", ("SFAS
        109"). Under SFAS 109, 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. 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. A valuation allowance is provided
        for significant deferred tax assets when it is more likely than not that
        such assets will not be recovered.

        STOCK-BASED COMPENSATION

        The Financial Accounting Standards Board issued Statement of Financial
        Accounting Standards No. 123 ("SFAS 123"), "ACCOUNTING FOR STOCK-BASED
        COMPENSATION," which defines a fair value based method of accounting for
        stock-based compensation. However, SFAS 123 allows an entity to continue
        to measure compensation cost related to stock and stock options issued
        to employees using the intrinsic method of accounting prescribed by
        Accounting Principles Board Opinion No. 25 ("APB 25"), "ACCOUNTING FOR
        STOCK ISSUED TO EMPLOYEES." Entities electing to remain with the
        accounting method of APB 25 must make pro forma disclosures of net loss,
        as if the fair value method of accounting defined in SFAS 123 had been
        applied. The Company has elected to account for stock-based compensation
        to employees under APB 25 (see Note 7).

        EARNINGS PER SHARE

        Basic EPS is computed as net loss divided by the weighted average number
        of common shares outstanding for the period. Diluted EPS reflects the
        potential dilution that could occur from common shares issuable through
        stock options, warrants and other convertible securities. Basic and
        diluted EPS are the same, as the effect of common stock equivalents on
        EPS is anti-dilutive for all periods presented.

                                      F-15
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        The following table illustrates the required disclosure of the
        reconciliation of the numerators and denominators of the basic and
        diluted EPS computations for the years ended March 31:

<TABLE>
<CAPTION>
        YEARS ENDED                                                2000            1999            1998
                                                              -------------   -------------   -------------
        <S>                                                   <C>             <C>             <C>
        Basic and diluted:
            Net loss                                          $    (32,385)   $     (8,262)   $     (2,395)
            Adjustments to net loss:
            Warrants issued in connection with sale of
                 convertible preferred stock (see Note 7)             (338)             --              --
            Preferred stock dividends                                 (241)             --              --
            Preferred stock beneficial conversion
                 feature (see Note 7)                                 (448)           (364)             --
                                                              -------------   -------------   -------------
        Basic and diluted net loss                            $    (33,412)   $     (8,626)   $     (2,395)
                                                              =============   =============   =============
        Weighted average number of common shares                18,199,114      14,890,130      11,528,021
                                                              =============   =============   =============
        Basic and diluted net loss per common share           $      (1.84)   $      (0.58)   $      (0.21)
                                                              =============   =============   =============
</TABLE>

        The total potential common shares that have not been included in the
        calculation of diluted net loss per share totaled 4,302,358, 1,162,899
        and 0 for the years ended March 31, 2000, 1999 and 1998, respectively.

        SEGMENT REPORTING

        The Company adopted SFAS No. 131 ("SFAS 131"), "DISCLOSURES ABOUT
        SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION," during Fiscal 1999.
        SFAS 131 establishes standards for the way that public companies report
        information about operating segments and related disclosures about
        products and services, geographic areas and major customers in annual
        consolidated financial statements. The Company operates primarily in one
        business segment.

        COMPREHENSIVE INCOME

        The Company adopted Statement of Financial Accounting Standards No. 130,
        "Reporting Comprehensive Income" ("SFAS 130") during Fiscal 1999. SFAS
        130 established new rules for the reporting and display of comprehensive
        income and its components in a full set of general-purpose financial
        statements. The adoption of SFAS 130 had no effect on the accompanying
        consolidated financial statements, because the Company had no other
        components of comprehensive income for all periods presented.

        FAIR VALUE OF FINANCIAL INSTRUMENTS

        Statement of Financial Accounting Standards No. 107, "DISCLOSURES ABOUT
        FAIR VALUE OF FINANCIAL INSTRUMENTS", requires the disclosure of the
        fair value, if reasonably obtainable, of the Company's financial
        instruments. The Company's financial instruments consist of its cash,
        accounts receivable, equipment financing and line-of-credit arrangement,
        accounts payable, and notes receivable and payable to/from shareholders.
        Management has determined that, except for notes receivable and payable
        to/from shareholders, the fair values of the Company's financial
        instruments approximate their carrying values at March 31, 2000 and
        1999. Management was unable to determine the fair value of the notes
        receivable and payable to/from shareholders, as an active market for
        such instruments does not exist.

                                      F-16
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

        RECLASSIFICATIONS

        Certain reclassifications have been made to the 1999 consolidated
        financial statements to conform with the 2000 consolidated financial
        statement presentation.

2.      PROPERTY AND EQUIPMENT

        Property and equipment consists of the following:

        MARCH 31,                                       2000            1999
                                                   -------------   -------------

        Furniture, fixtures and equipment          $        890    $        180
        Capitalized software                              2,921              --
        Leasehold improvements                            1,372              --
        Transmission equipment                           12,628           1,986
        Leased vehicles                                     220              13
                                                   -------------   -------------
                                                         18,031           2,179

        Accumulated depreciation                         (2,846)           (615)
                                                   -------------   -------------
                                                   $     15,185    $      1,564
                                                   =============   =============

        At March 31, 2000, the Company was in receipt of $3,700 in transmission
        equipment from Nortel which the Company has not reflected in property
        and equipment and accounts payable in the accompanying consolidated
        financial statements as effective delivery to the Company had not been
        made. Subsequent to March 31, 2000, effective delivery was made and such
        amounts were reflected in the Company's books and records.

        The net book value of transmission equipment held under capital leases
        (see Note 5) totaled $1,159 and $0 at March 31, 2000 and 1999,
        respectively. Depreciation expense totaled $2,597, $1,219 and $83 for
        the years ended March 31, 2000, 1999 and 1998, respectively.

3.      OTHER ASSETS

        Other assets consist of the following:

        MARCH 31,                                            2000        1999
                                                          ----------  ----------

        Frequency licenses, net (see Notes 7 and 9)       $     640   $   1,084
        Indefeasible Right of Use License, net                1,000          --
        Deferred financing costs, net (see Notes 4 and 7)     1,204          --
        Other intangibles                                        --         509
        Deposits                                                322          65
        Receivables from related parties (see Note 9)           102         111
                                                          ----------  ----------

                                                          $   3,268   $   1,769
                                                          ==========  ==========

                                      F-17
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


4.      EQUIPMENT FINANCING AND LINE-OF-CREDIT ARRANGEMENT

        In July 1999, UBN, a subsidiary of UBEE, entered into a credit agreement
        (the "Agreement") with Nortel Networks, Inc. ("Nortel") which provides
        for a line-of-credit of up to $7,000 ("Tranche A") as well as a term
        loan of up to $37,000 ("Tranche B"). However, the maximum combined
        borrowing under the Agreement cannot exceed $37,000. Furthermore, the
        Company is not able to borrow under Tranche B until a $30,000 equity
        infusion to UBN has been completed. If such infusion is not completed by
        October 30, 2000, the Tranche B commitment will terminate. The Agreement
        is collateralized by all of the assets and the common stock of UBN. A
        substantial portion of the Company's assets are located in its UBN
        subsidiary. The Agreement further restricts UBN from dividending or
        loaning funds to IJNT or its other subsidiaries (see parent only
        financial statements at Note 11).

        Borrowings under Tranche A can be used for working capital and general
        corporate purposes, bear interest at 13% and mature on July 31, 2000. As
        of March 31, 2000, $7,646 (including interest) was outstanding under
        Tranche A and no additional borrowings were available.

        Borrowings under Tranche B can only be used to finance purchases of
        Nortel goods and services and bear interest at the prime rate (9% at
        March 31, 2000) plus 3.75%. Tranche B is payable in twelve equal
        quarterly payments beginning in October 2000. As of March 31, 2000, no
        borrowings were outstanding under Tranche B as the Company had not
        completed the required equity infusion. However, as of March 31, 2000,
        the Company owes Nortel $6,576 for purchases of equipment and services.
        Additionally, as of March 31, 2000, Nortel had delivered approximately
        $3,700 of transmission equipment that was not completely installed until
        subsequent to March 31, 2000. The Company has not recorded this
        liability or the related fixed assets (see Note 2) as of March 31, 2000
        as the Company believes that its obligation should not be recognized
        until such time as the equipment is completely installed. Had the
        Company recorded the $3,700 in transmission equipment as of March 31,
        2000, the unfinanced Nortel purchases would have totaled $10,276 at
        March 31, 2000. If the Company is able to complete the required equity
        infusion, these borrowings will be classified as Tranche B borrowings.
        If the required equity infusion is not completed, the Company will be
        required to pay for these purchases pursuant to normal vendor terms.

        A summary of the borrowings under the Agreement follows:

                                                             2000        1999
                                                          ----------  ----------

                 Tranche A                                $   7,646   $      --
                 Tranche B                                       --          --
                 Unfinanced purchases                         6,576          --
                                                          ----------  ----------

                 Total                                    $  14,222   $      --
                                                          ==========  ==========

        In connection with the Agreement, the Company issued a warrant to
        purchase 492,094 shares of the Company's common stock (see Note 7). The
        fair value of the warrants of approximately $1,943, as well as certain
        other costs related to the Agreement, were capitalized as deferred
        financing costs (see Note 3) and are being amortized over the life of
        the Tranche A loan.

                                      F-18
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


4.      EQUIPMENT FINANCING AND LINE-OF-CREDIT ARRANGEMENT (CONTINUED)

        The Agreement has certain restrictive financial covenants. Such
        covenants include minimum tangible net worth requirements, maximum asset
        to net worth ratios, minimum net income requirements and other
        restrictions with respect to financial ratios. At March 31, 2000, the
        Company was substantially not in compliance with all such covenants, but
        has subsequently entered into an amendment to the Agreement which
        revised all such covenants effective March 31, 2000 and for all future
        periods.

        Furthermore, the Agreement has restrictions related to specific
        activities, including, but not limited to, limitations on leases, timely
        payment of accounts payable and timely submission of certain reports to
        Nortel. At March 31, 2000, the Company was in not in compliance with
        several of such covenants, but has subsequently entered into an
        amendment to the Agreement which revised all such covenants effective
        March 31, 2000 and for all future periods.

5.      OBLIGATIONS UNDER CAPITAL LEASES

        The Company leases certain equipment under non-cancelable capital leases
        (see Note 10). Future principal 5. payments under these non-cancelable
        capital leases are as follows:

        YEARS ENDING MARCH 31,

           2001                                                    $        541
           2002                                                             759
           2003                                                              31
                                                                   -------------
                                                                          1,331

        Less: interest at 6% and 11%                                       (141)
                                                                   -------------
                                                                          1,190

        Less: current portion                                              (402)
                                                                   -------------
                                                                   $        788
                                                                   =============

6.      INCOME TAXES

        The provision for income taxes consists of the following components:

        YEARS ENDING MARCH 31,          2000            1999           1998
                                   -------------   -------------   -------------
        Current:
            Federal                $         --    $         --    $         --
            State                             1               1               1
                                   -------------   -------------   -------------
                                              1               1               1
                                   -------------   -------------   -------------
        Deferred:
            Federal                          --              --              --
            State                            --              --              --
                                   -------------   -------------   -------------
                                             --              --              --
                                   -------------   -------------   -------------
                                   $          1    $          1    $          1
                                   =============   =============   =============

                                      F-19
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


6.      INCOME TAXES (CONTINUED)

        Income tax effects of significant items comprising the Company's net
        deferred income tax assets and liabilities are as follows:

        MARCH 31,                                       2000            1999
                                                   -------------   -------------
        Deferred tax assets:
            Net operating loss carryforwards       $     11,600    $      3,000
            Intangible assets                               780             328
            Bad debt reserve                                130              46
            Other                                           258              20
                                                   -------------   -------------
        Gross deferred tax assets                        12,768           3,394

        Valuation allowance                             (12,768)         (3,394)
                                                   -------------   -------------
        Deferred tax assets, net of reserve        $         --    $         --
                                                   =============   =============

        The income tax benefit differs from the amount of income tax determined
        by applying the expected U.S. Federal income tax rate of 34% to pretax
        loss as a result of:

<TABLE>
<CAPTION>
        YEARS ENDING MARCH 31,                                2000            1999           1998
                                                         -------------   -------------   -------------
        <S>                                              <C>             <C>             <C>
        Computed "expected" tax (benefit)                $    (11,011)   $     (2,809)   $       (814)
        Decrease in income tax benefit resulting from:
            Stock option compensation                           2,461              --              --
            Other nondeductible expenses                           34             255             100
            State income tax expense                                1               1               1
            Losses with no current benefit                      8,516           2,554             714
                                                         -------------   -------------   -------------

                                                         $          1    $          1    $          1
                                                         =============   =============   =============
</TABLE>

        At March 31, 2000, the Company has estimated Federal tax net operating
        loss carryforwards of approximately $31,000, which expire through 2020,
        and state net operating loss carryforwards of approximately $14,000,
        which expire through 2005.

        As a result of the Company's significant equity transactions, the
        Company may have experienced a more than 50% ownership change for
        federal income tax purposes. As a result, an annual limitation may be
        placed upon the Company's ability to realize the benefit of its net
        operating loss and credit carryforwards. The amount of this annual
        limitation, as well as the impact of the application of other possible
        limitations under the consolidated return regulations, has not been
        definitively determined at this time. Management believes sufficient
        uncertainty exists regarding the realizability of the deferred tax asset
        items and that a valuation allowance, equal to the net deferred tax
        asset amount, is required.

7.      EQUITY

        RESTRICTIONS ON DIVIDENDS

        Pursuant to state law, the Company may be restricted from paying
        dividends to its shareholders for the foreseeable future as a result of
        its accumulated deficit as of March 31, 2000.

                                      F-20
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


7.      EQUITY (CONTINUED)

        PRIVATE PLACEMENTS, FISCAL 1999 AND 1998

        During the years ended March 31, 1999 and 1998, the Company sold shares
        of common stock through various private placements in Germany which are
        exempt from registration pursuant to Regulation S of the Securities Act.
        The Company also sold shares of common stock through a domestic private
        placement. The Company issued an aggregate of 1,363,950 and 1,307,582
        shares for net consideration of $3,192 (net of commissions of $3,068)
        and $2,486 during the years ended March 31, 1999 and 1998, respectively.
        The net proceeds received by the Company for each share sold were at a
        significant discount from the prevailing market price of the Company's
        common stock.

        PRIVATE PLACEMENTS, FISCAL 2000

        In May 1999, the Company sold shares of common stock through a private
        placement in Germany which are exempt from registration pursuant to
        Regulation S of the Securities Act. The Company issued 600,000 shares
        for net consideration of $800 (net of commissions of $545). The net
        proceeds received by the Company for each share sold were at a
        significant discount from the prevailing market price of the Company's
        common stock.

        In December 1999, the Company sold shares of common stock through a
        domestic private placement. The Company issued 2,243,750 shares for net
        consideration of $8,975 (net of commissions of $0). The common stock
        subscription and purchase agreement requires the Company to issue
        additional shares if the average bid price per share is less than $4.00
        per share for any 15 consecutive trading days during the four month
        period commencing on December 31, 2000. The common stock subscription
        and purchase agreement requires the Company to file a registration
        statement with the SEC for the shares sold in the offering, with such
        registration statement to be effective no later than December 31, 2000.
        The common stock subscription and purchase agreement also contains
        certain restrictive financial covenants, which include, among other
        things, a restriction on the number of shares of stock the Company may
        sell during the two year period ended December 31, 2001.

        In connection with the private placement, the Company granted the
        investors warrants to purchase 560,938 shares of common stock at a price
        of $9.88 per share (see discussion below).

        CONVERTIBLE PREFERRED STOCK, FISCAL 1999

        In December 1998, the Company entered into an agreement with private
        investors (the "Investors") whereby the Investors purchased 2,000 shares
        of the Company's convertible Preferred Series A Stock (the "Preferred
        Stock") for a gross price of $2,000, net of commissions of $200. The
        Preferred Stock carries an 8% coupon, payable upon conversion in common
        stock. The Preferred Stock carries a liquidation preference of $1,000
        per share of Preferred Stock. The Preferred Stock agreement requires the
        Company to register the underlying common stock with the SEC within
        certain time parameters, as defined. The Company was in default with
        said requirement at March 31, 2000 (see further discussion at Note 8).

                                      F-21
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


7.      EQUITY (CONTINUED)

        The convertible feature of the Preferred Stock provides for a rate of
        conversion that is below market value. Under terms of the Agreement, the
        Investors have the right to convert the Preferred Stock into common
        stock at a 20% discount from the average closing price of the Company's
        common stock for the five business days immediately preceding a request
        for conversion. Such feature is normally characterized as a "beneficial
        conversion feature". Pursuant to Emerging Issues Task Force No. 98-5
        ("EITF 98-5"), the Company has determined the value of the beneficial
        conversion feature of the Preferred Stock to be $364.

        In conjunction with the sale of the Preferred Stock, the Company granted
        the placement agent warrants to purchase 75,000 shares of common stock
        at a price of $2.50 per share (see discussion below). In the calculation
        of basic and diluted net loss per share, the value of the beneficial
        conversion feature and the value of the placement agent warrants have
        increased the net loss applicable to common shareholders.

        No shares had been converted as of March 31, 1999. All of the shares
        were converted into 867,828 shares of common stock during the year ended
        March 31, 2000. Dividends totaling $104 were incurred by the Company
        with respect to the Preferred Stock during the year ended March 31,
        2000. All of such dividends were settled through the issuance of 35,588
        shares of common stock when the shares of Preferred Stock were converted
        into common shares.

        CONVERTIBLE PREFERRED STOCK, FISCAL 2000

        In May 1999, the Company entered into an agreement with the same
        Investors whereby the Investors purchased an additional 2,000 shares of
        Preferred Stock for a gross price of $2,000, net of commissions of $211.
        The Company has determined the value of the beneficial conversion
        feature of the Preferred Stock to be $448. The Preferred Stock agreement
        requires the Company to register the underlying common stock with the
        SEC within certain time parameters, as defined. The Company was in
        default with said requirement at March 31, 2000 (see further discussion
        at Note 8).

        In conjunction with the sale of the Preferred Stock, the Company gave
        the Investors warrants to purchase 50,000 shares of common stock at a
        price of $3.24 per share (see discussion below). In the calculation of
        basic and diluted net loss per share, the value of the beneficial
        conversion feature and the value of the placement agent warrants have
        increased the net loss applicable to common shareholders.

        No shares had been converted as of March 31, 2000. All of the shares
        were converted into 364,299 shares of common stock subsequent to March
        31, 2000 (see Note 10). Dividends totaling $137 were incurred by the
        Company with respect to the Preferred Stock during the year ended March
        31, 2000, which have been accrued and reflected in accounts payable and
        accrued liabilities at March 31, 2000. All such dividends were settled
        subsequent to March 31, 2000 through the issuance of 25,165 shares of
        common stock when the shares of Preferred Stock were converted into
        common shares (see Note 10).

                                      F-22
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


7.      EQUITY (CONTINUED)

        RELIANCE ON REGISTRATION EXEMPTIONS

        With respect to the aforementioned private placements and preferred
        stock offerings, the Company has relied on registration exemptions
        provided under Regulations D and S and in section 4(2) of the Securities
        Act of 1933, as amended, and various exemptions provided under state
        securities laws. The Company may have violated certain of these Federal
        and/or state securities laws in connection with certain of the
        aforementioned offerings of common and preferred stock (see further
        discussion in Note 8).

        SHARES ISSUED FOR SERVICES, FISCAL 1999 AND 1998

        During the years ended March 31, 1999 and 1998, the Board of Directors
        authorized the issuance of 453,873 and 15,000, respectively, shares of
        common stock to various individuals and employees as compensation for
        services provided to the Company. The shares were valued at market
        prices ranging from $2.13 to $12.00 as of the day of Board approval. The
        Company recorded expense totaling $1,651 and $32, respectively, for the
        years ended March 31, 1999 and 1998. Certain of these shares were issued
        to related parties (see Note 9).

        SHARES ISSUED FOR SERVICES, FISCAL 2000

        During the year ended March 31, 2000, the Board of Directors authorized
        the issuance of 438,213 shares of common stock to various individuals
        and employees as compensation for services provided to the Company. The
        shares were valued at market prices ranging from $2.00 to $10.81 as of
        the day of Board approval. The Company recorded expense totaling $2,273
        for the year ended March 31, 2000. Certain of these shares were issued
        to related parties (see Note 9).

        SHARES ISSUED FOR ACQUISITION OF SUBSIDIARIES

        The Company has issued 546,621 shares to acquire subsidiaries (treated
        as purchase transactions) as follows (see Note 10):

        January 1, 1998         Access Communications, Inc. (1)         241,333
        April 17, 1998          Webit of Utah, Inc.                      20,000
        August 4, 1998          Man Rabbit House Multimedia, Inc.        35,288
        February 22, 1999       Global Broadband Services, Inc.         250,000
                                                                     -----------

                                                                        546,621
                                                                     ===========

        (1) Includes an additional 30,333 shares issued in January 1999

        All of the acquisitions have been accounted for as purchases in
        accordance with Accounting Principles Board Opinion No. 16, "Business
        Combinations". The shares issued were valued at market prices ranging
        from $2.12 to $9.72 per share. The aggregate consideration tendered
        totaled $873 and $422 during the years ended March 31, 1999 and 1998,
        respectively. The purchase consideration paid in the aggregate for all
        transactions, exceeded the fair values of the net assets acquired by
        $1,175. The Company determined that such goodwill was impaired, and
        accordingly, expensed $823 and $352 during the years ended March 31,
        1999 and 1998, respectively. In addition, the Company determined that

                                      F-23
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


7.      EQUITY (CONTINUED)

        various fixed assets and one note receivable acquired from a subsidiary
        were impaired, and accordingly, expensed $225 and $208, respectively,
        for the year ended March 31, 1999. The Company has determined that the
        historical operations of the subsidiaries acquired were minimal, and
        accordingly, proforma presentation for Fiscal 1999 and 1998 has been
        omitted.

        SHARES ISSUED FOR PURCHASES OF ASSETS AND INTANGIBLES, FISCAL 1999

        During the year ended March 31, 1999, the Board of Directors authorized
        the issuance of 507,719 shares of common stock to various individuals to
        purchase assets and intangibles. The shares were valued at market prices
        ranging from $2.13 to $3.31 as of the day of Board approval. The Company
        recorded frequency licenses and other assets in the amount of $1,400
        (see Note 3). Certain of these shares were issued to related parties
        (see Note 9).

        WARRANTS TO PURCHASE COMMON STOCK

        At March 31, 1999, there were no warrants outstanding to purchase shares
        of the Company's common stock.

        During the year ended March 31, 2000, in conjunction with the sale of
        the Preferred Stock, the Company gave the placement agent warrants to
        purchase 75,000 shares of common stock at a price of $2.50 per share.
        Such warrants expire five years from the date of grant. The warrants
        retain "Piggy-Back" Registration Rights. The Company valued the warrants
        at $245 using the Black-Scholes Option Pricing Model.

        During the year ended March 31, 2000, in conjunction with the sale of
        the Preferred Stock, the Company gave the Investors warrants to purchase
        50,000 shares of common stock at a price of $3.24 per share. Such
        warrants expire five years from the date of grant. The warrants have an
        adjustment provision, as defined, should the Company sell shares of
        common stock at a price below $3.24 per share. The Company valued the
        warrants at $93 using the Black-Scholes Option Pricing Model.

        During the year ended March 31, 2000, in connection with its equipment
        financing and line-of-credit arrangement (see Note 4), the Company
        issued warrants to purchase 492,094 shares of common stock at a price of
        $4.97 per share. Such warrants expire five years from the date of grant.
        The Company valued the warrants at $1,943 using the Black-Scholes Option
        Pricing Model. The holders of the warrants have both demand and
        "piggy-back" registration rights.

        During the year ended March 31, 2000, in conjunction with the sale of
        common stock, the Company gave the investors warrants to purchase
        560,938 shares of common stock at a price of $9.88 per share. Such
        warrants expire five years from the date of grant. The Company valued
        the warrants at $4,609 using the Black-Scholes Option Pricing Model.

        During the year ended March 31, 2000, the Company issued a warrant to
        purchase 100,000 shares of common stock at a price of $1.95 per share.
        Such warrant expires two years from the date of grant. The Company was
        obligated to provide the warrant in 1997 as a result of assistance
        provided by the recipient with certain capital raising activities. The
        Company valued the warrant at $149 using the Black-Scholes Option
        Pricing Model.

        The Company issued additional warrants subsequent to March 31, 2000 (see
        Note 10).

                                      F-24
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


7.      EQUITY (CONTINUED)

        OPTIONS TO PURCHASE COMMON STOCK

        The Company's Board of Directors has adopted the 2000 Management Equity
        Incentive Plan (the "Management Plan") and the 2000 Equity Incentive
        Plan (the "Equity Plan"). Both of the Plans require shareholder
        approval, which the Company will request at its annual meeting of
        shareholders in July 2000. Management of the Company believes that such
        approval is a mere formality in that the Members of the Board of
        Directors had sufficient share votes, through shares owned or controlled
        by them (including shares for which they had received irrevocable voting
        proxies), to ensure that a majority of the shareholders will vote to
        approve both plans.

        The Management Plan provides for the issuance of up to 2,417,500 options
        to purchase shares of common stock. The options granted pursuant to the
        Management Plan can either be incentive options or non-qualified
        options, and may be granted to employees, directors and consultants. The
        Management Plan has limits as to the number of options that may be
        granted to any one recipient in a given year, as defined. The options
        granted pursuant to the Management Plan may have a term of up to 10
        years, vesting provisions of no less than 20% per year, and exercise
        prices of no less than the par value of the Company's common stock
        (non-qualified options) and 100% of fair market value at the date of
        grant (incentive options).

        The Equity Plan provides for the issuance of up to 3,000,000 options to
        purchase shares of common stock. The terms of the Equity Plan are
        substantially the same as the Management Plan, except that the
        restriction on the number of options that may be granted to any one
        recipient in a given year is different and the exercise price of grants
        for non-qualified options may not be less than 85% of fair market value
        of the Company's common stock at the date of grant.

        On March 30, 2000, the Company granted 2,803,000 options pursuant to the
        Management and Equity Plans to purchase shares of common stock to
        various officers and employees. Of the options granted, 60% generally
        vest over a four year period, with options granted to certain members of
        senior management vesting over two and three year periods. The remaining
        40% vested immediately. The 60% of the options were granted at prices
        ranging from $10.812 to $12.75 per share, which equaled or exceeded the
        market price of the Company's common stock at the date of grant. The
        remaining 40% of the options were granted at prices ranging from $3.00
        to $12.75 per share, with 906,000 options at exercise prices that were
        substantially below the market price of the Company's common stock at
        the date of grant. The Company recorded compensation expense relating to
        such options in the fourth quarter of Fiscal 2000 totaling $7,238.

        On March 30, 2000, the Company granted 37,500 options pursuant to the
        Equity Plan to purchase shares of common stock to a consultant. Of the
        options granted, 60% vest over a four year period. The remaining 40%
        vested immediately. The options were granted at a price of $12.75 per
        share, which exceeded the market price of the Company's common stock at
        the date of grant. Management of the Company valued the options granted
        to this non-employee at fair value using the Black-Scholes Option
        Pricing Model. Management of the Company recorded consulting expense
        relating to such options in the fourth quarter of Fiscal 2000 totaling
        $332.

                                      F-25
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


7.      EQUITY (CONTINUED)

        The following table summarizes information about stock option
        transactions:

                                                                   Weighted
                                                   Option          Average
                                                   Shares       Exercise Price
        ------------------------------------------------------------------------

        Outstanding at March 31, 1999                   --      $            --
        Options granted                          2,840,500                 8.55
        Options canceled                                --                   --
        Options exercised                               --                   --
        ------------------------------------------------------------------------

        Outstanding at March 31, 2000            2,840,500      $          8.55
        ========================================================================

        Exercisable at March 31, 2000            1,134,600      $          4.40
        ========================================================================

        The weighted average fair value of options granted during the year ended
        March 31, 2000 approximated $6.99 per share.

        The following table summarizes information about stock warrant
        transactions:

                                                                  Weighted
                                                  Warrant          Average
                                                  Shares        Exercise Price
        ------------------------------------------------------------------------

        Outstanding at March 31, 1999                   --      $            --
        Warrants granted                         1,278,032                 6.69
        Warrants canceled                               --                   --
        Warrants exercised                              --                   --
        ------------------------------------------------------------------------

        Outstanding at March 31, 2000            1,278,032      $          6.69
        ========================================================================

        Exercisable at March 31, 2000            1,278,032      $          6.69
        ========================================================================

        The weighted average fair value of warrants granted during the year
        ended March 31, 2000 approximated $5.51 per share.

        If the Company had elected the fair value method of accounting for
        stock-based employee compensation, compensation cost would be accrued at
        the estimated fair value of all stock grants over the service period,
        regardless of later changes in stock prices and volatility. The fair
        value at the date of grant for options granted during the year ended
        March 31, 2000, has been estimated using the Black-Scholes Option
        Pricing Model with the following assumptions: no dividend yield,
        expected volatility of 116% based on historical results, risk-free
        interest rate of 6.0% per annum, and average expected option lives of
        five years.

                                      F-26
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


7.      EQUITY (CONTINUED)

        The following table sets forth the net loss, net loss available for
        common shareholders and the net loss per weighted average common share
        amounts for the year ended March 31, 2000, as if the Company had elected
        the fair value method of accounting for stock options:

                                                                       2000
        Net Loss                                                  --------------
            As reported                                           $     (32,385)
            Pro forma                                             $     (36,076)

        Net Loss Available for Common Shareholders
            As reported                                           $     (33,412)
            Pro forma                                             $     (37,103)

        Basic and Diluted Loss Per Share
            As reported                                           $       (1.84)
            Pro forma                                             $       (2.04)

8.      COMMITMENTS AND CONTINGENCIES

        POTENTIAL SECURITY LAW VIOLATIONS

        The Company may have violated certain Federal and state securities laws
        in connection with certain offerings of its common and preferred stock
        and in connection with complying with quarterly and annual reporting
        requirements during the years ended March 31, 2000 and 1999 (see Note
        7). The Company may be subject to various claims for damages in future
        lawsuits (including demands for rescission), if any, from third parties
        as a result of such potential securities law violations. Although no
        claims have been made to date, the Company's inability to avoid future
        claims, if any, could cause it to sustain substantial losses and such
        losses could have a material adverse effect on the Company's
        consolidated financial conditions and results of operations.

        PENDING AND THREATENED LITIGATION

        In connection with the Company's two issuances of Preferred Stock (see
        Note 7), the Company was required to file a registration statement to
        register the shares of common stock underlying the convertible preferred
        stock within 30 days of the date of issuance. Furthermore, the
        registration statement for each issuance of convertible preferred stock
        was to be effective within 90 days of the date of issuance. The Company
        filed a registration statement with respect to both issuances of
        convertible preferred stock, which has not yet become effective. The
        Company is in violation of these registration requirements and, pursuant
        to the related agreements, is subject to a 2% per month cash penalty as
        a result thereof. The Rule 144 restriction period has lapsed for both
        issuances, and the underlying stock can be transferred. The holders of
        the shares of convertible preferred stock have given notice to the
        Company as to the violation and requested $1,300 in related damages.
        Subsequent to March 31, 2000, management of the Company agreed to settle
        this matter for $795 (see Note 10). The accompanying consolidated
        financial statements reflect an accrual for the settlement as of March
        31, 2000.

                                      F-27
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


8.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

        The Company is involved in a dispute with a third party consultant
        concerning consideration the Company was allegedly expected to pay with
        respect to various public relations communications services. The
        consultant has stated that the Company is required to issue a warrant to
        purchase 100,000 shares of the Company's common stock with an exercise
        price of $4.00. Management of the Company believes that the consultant
        breached its contract for services and that no additional consideration
        is due to the consultant. The Company has not provided a reserve as of
        March 31, 2000 with respect to this matter. There is an uncertainty as
        to the actual amount the Company will ultimately pay upon resolution of
        this matter.

        The Company is involved in a dispute with a third party vendor
        concerning consideration the Company was allegedly expected to pay with
        respect to circuit charges. The vendor has stated that the Company is
        required to pay $726. Management of the Company believes it is not
        responsible for all of the charges claimed by the vendor and has
        estimated a range for the claim, which is less than the amount claimed.
        Management has accrued $183 for this claim as of March 31, 2000. There
        is an uncertainty as to the actual amount the Company will ultimately
        pay upon resolution of this matter.

        The Company and its subsidiaries are, from time to time, involved in
        legal proceedings, claims and litigation arising in the ordinary course
        of business. Based on the facts currently available, management believes
        that such matters will not have a material adverse affect on the
        Company's consolidated financial condition, results of operations or
        cash flows. The amounts claimed may be substantial, and the ultimate
        liability cannot presently be determined because of uncertainties that
        exist. Therefore, it is possible the outcome of such legal proceedings,
        claims and litigation, could have a material adverse effect on quarterly
        or annual consolidated operating results, cash flows or financial
        condition of the Company when resolved in a future period.

        STATE TAX RETURNS

        The Company has not filed tax returns for certain states in which it
        operates. The Company may be subject to certain penalties for late
        filing, but believes that any obligations related thereto would be
        deminimus.

        EMPLOYMENT AGREEMENTS

        The Company had executed various employment agreements. Substantially
        all of the agreements provide for employment on an "at-will" basis.

        REGISTRATION RIGHTS

        As disclosed elsewhere herein, the Company is subject to various
        requirements to register common stock and the common stock underlying
        convertible preferred stock and various warrants. The Company is subject
        to various penalties for failure to register such securities, the amount
        of which could be material to the Company's consolidated financial
        condition, results of operations and cash flows. As discussed above, the
        Company is currently in violation of certain registration requirements.

                                      F-28
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


8.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

        LEASES

        The Company leases its offices under non-cancelable lease agreements
        expiring at various dates through 2010. Future minimum rental payments
        required under the above leases as of March 31, 2000 are as follows:

                                                                       Amount
        YEARS ENDING MARCH 31,                                     -------------

           2001                                                    $      2,767
           2002                                                           2,794
           2003                                                           2,769
           2004                                                           2,362
           2005                                                           1,234
           Thereafter                                                     1,049
                                                                   -------------
                                                                   $     12,975
                                                                   =============

        The Company has entered into a $103,000 letter of credit related to one
        of the lease agreements. Lease expense for the years ended March 31,
        2000, 1999 and 1998 was $1,178, $338 and $328, respectively.

9.      RELATED PARTY TRANSACTIONS

        In April and August of 1998, 12,903 and 25,000 shares, respectively, of
        common stock were issued to J.R. Marple, in exchange for accounting
        services (see Note 7). The values of these shares at the dates of the
        grants were $48 and $152 respectively. Mr. Marple is the son of Jon
        Marple, the Chairman of the Board of Directors of the Company.

        In July 1998, the Company issued 10,000 common shares valued at $98 to
        Robert Santore in exchange for web development services. In August 1998,
        the Company issued 25,000 common shares valued at $100 to Mr. Santore as
        part of the acquisition costs to acquire MRHM (additional shares were
        issued to an unrelated third party, see further discussion in Note 7).
        Mr. Santore is the nephew of Mary Blake, Vice Chairman of the Board of
        Directors of the Company.

        In February 1999, the Company issued 200,000 shares valued at $500 to
        JustWebit, an entity in which J.R. Marple has a substantial ownership
        interest, to acquire various license rights (see Note 3). The Company
        obtained an independent appraisal supporting the valuation of the
        acquired assets.

        In March 1999, the Company issued 208,000 shares valued at $687 to
        purchase assets and assume certain liabilities of a company owned by
        independent third parties. A portion of the purchased assets were
        originally acquired by such company from JustWebit. As a result, the
        Company assumed a $183 liability the company owed to JustWebit as part
        of this transaction.

        In April 1999, the Company issued to JustWebit 50,000 shares valued at
        $102 for services. In December of 1999, the Company issued to JustWebit,
        25,000 shares valued at $247 for services.

                                      F-29
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


9.      RELATED PARTY TRANSACTIONS (CONTINUED)

        At March 31, 1999, the Company owed J. R. Marple and another shareholder
        $188, payable within the next twelve months without interest. These
        amounts were fully repaid prior to June 30, 1999. In addition, the
        Company was owed $80 by Jon Marple and Mary Blake, payable within the
        next twelve months without interest. During the year ended March 31,
        2000, these receivables were expensed as the records supporting the
        consideration transferred to the Company were inadvertently destroyed.

        At March 31, 2000 and 1999, the Company was owed $98 and $31,
        respectively, from J.R. Marple. Of the March 31, 2000 amount, $50
        represents the amount J.R. Marple has agreed to pay to purchase the
        JustWebit domain name from the Company. Such domain name was acquired in
        the Webit of Utah purchase (see Note 7). Such amount is to be repaid to
        the Company through the issuance of 84,700 shares of stock of JustWebit,
        which are traded over-the-counter, having a fair value approximating
        $50. The remainder represents $31 due to the Company in connection with
        an acquisition in Fiscal 1999 and $17 cash funds advanced during Fiscal
        2000. Such amounts are to be repaid to the Company through the issuance
        of 68,600 shares of stock of JustWebit, having a fair value
        approximating $60. The shares issued to the Company are restricted
        pursuant to Rule 144.

        The Company incurred $163 and $63 to an affiliate of Robert Santore for
        services and products during the years ended March 31, 2000 and 1999,
        respectively.

        The aforementioned transactions were not conducted on an "arms-length"
        basis. Accordingly, the amounts tendered by the Company may be in excess
        of that which would have been negotiated with independent third parties
        in the ordinary course of business.

10.     SUBSEQUENT EVENTS

        PREFERRED STOCK CONVERSIONS

        Subsequent to March 31, 2000, all of the issued and outstanding shares
        of Preferred Stock were converted into 364,299 shares of common stock.
        Dividends totaling $137, which were accrued at March 31, 2000, and
        dividends totaling $8 for the period from April 1, 2000 through the date
        of conversion, were settled subsequent to March 31, 2000 through the
        issuance of 26,634 shares of common stock.

        BRIDGE LOANS

        On April 17, 2000, the Company entered into a Note and Warrant Purchase
        Agreement to borrow $5,000. The agreement provides for interest at 6%
        per annum, with any unconverted principal and accrued interest due
        October 17, 2001. The interest is payable by the Company in cash or
        common stock, at the election of the Company, upon conversion of
        principal or October 17, 2001, whichever is earlier. The agreement
        provides for the conversion of the principal balance of the convertible
        note into shares of common stock, at the election of the holder, at a
        price of $6.06 per share. The conversion price equaled the closing price
        of the Company's common stock on April 17, 2000. The agreement provides
        for an adjustment of the conversion price to the closing price of the
        Company's common stock on April 17, 2001, if the Company's common stock
        is lower than $6.06 on such date. However, the conversion price cannot
        be adjusted to lower than $3.94 per share. The agreement requires the
        Company to obtain effective registration of the shares underlying the
        convertible note and the warrant (see discussion below) by October 17,
        2000. The agreement provides for a 2% per month cash penalty if such
        registration is not effective on said date.

                                      F-30
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


10.     SUBSEQUENT EVENTS (CONTINUED)

        In conjunction with the agreement, the Company issued warrants to the
        holder of the convertible note to purchase 412,541 shares of common
        stock at a price of $6.06 per share. The warrants expire three years
        from the date of grant. The Company valued the warrants at $1,689 using
        the Black-Scholes Option Pricing Model.

        On May 23, 2000, the Company entered into a Note and Warrant Purchase
        Agreement to borrow $250. The agreement provides for interest at 6% per
        annum, with any unconverted principal and accrued interest due November
        23, 2001. The interest is payable by the Company in cash or common
        stock, at the election of the Company, upon conversion of principal or
        November 23, 2001, whichever is earlier. The agreement provides for the
        conversion of the principal balance of the convertible note into shares
        of common stock, at the election of the holder, at a price of $3.91 per
        share. The conversion price equaled the closing price of the Company's
        common stock on May 23, 2000. The agreement provides for an adjustment
        of the conversion price to the closing price of the Company's common
        stock on May 23, 2001, if the Company's common stock is lower than $3.91
        on such date. However, the conversion price cannot be adjusted to lower
        than $2.54 per share. The agreement requires the Company to obtain
        effective registration of the shares underlying the convertible note and
        the warrant (see discussion below) by November 23, 2000. The agreement
        provides for a 2% per month cash penalty if such registration is not
        effective on said date.

        In conjunction with the agreement, the Company issued warrants to the
        holder of the convertible note to purchase 32,000 shares of common stock
        at a price of $3.91 per share. The warrants expire three years from the
        date of grant. The Company valued the warrants at $84 using the
        Black-Scholes Option Pricing Model.

        On June 5, 2000 and July 6, 2000, the Company entered into two Note and
        Warrant Purchase Agreements to borrow $1,000 and $500, respectively. The
        agreements provide for interest at 6% per annum, with principal and
        accrued interest due in August and September 2000, respectively. The
        agreements provide for default interest at a rate of 24% per annum. The
        agreements require the Company to obtain effective registration of the
        shares underlying the warrants issued in connection with the notes (see
        discussion below) by November and December 2000. The agreements provide
        for a 2% per month cash penalty if such registration is not effective on
        said date. The agreements have been personally guaranteed by the
        Chairman of the Board of Directors of the Company.

        In conjunction with the agreements, the Company issued warrants to the
        holder of the notes to purchase 200,000 shares and 100,000 shares of
        common stock at a price of $2.875 and $3.25 per share, respectively. The
        warrants expire three years from the date of grant. The Company valued
        the warrants at $934 and $293, respectively, using the Black-Scholes
        Option Pricing Model.

        On July 7, 2000, the Company entered into a Secured Convertible
        Promissory Note Agreement with the same Investors who purchased the
        Preferred Stock (see Note 7). The agreement provides for a total
        borrowing of $1,295, which represents $500 in cash borrowings and a
        settlement, in the amount of $795, relating to the Preferred Stock
        "failure to the register" penalties as discussed in Notes 7 and 8. The
        $795 has been accrued in accounts payable and accrued liabilities in the
        accompanying consolidated financial statements as of March 31, 2000. The
        entire $1,295 is convertible into shares of the Company's common stock
        at a price equal to 75% of the average of the five closing bid prices of
        the Company's common stock prior to the date of conversion.

                                      F-31
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


10.     SUBSEQUENT EVENTS (CONTINUED)

        The agreement requires the registration of the underlying shares of
        common stock. The agreement provides for interest at 8% per annum, with
        133% of the principal and accrued interest due October 2000. The
        obligation is secured by shares of stock of the Company's Chairman.

        SHARES ISSUED FOR SERVICES

        Subsequent to March 31, 2000, the Company issued 18,679 shares for
        services valued at $107.

        Subsequent to March 31, 2000, the Company issued 104,165 shares to the
        non-employee members of its Board of Directors for services valued at
        $300.

        On March 31, 2000, the Company executed a severance and purchase
        agreement with an employee. The agreement provided for the issuance of
        75,000 shares of common stock valued at $602 for the purchase of such
        employee's 5% ownership interest in UBN. The Company was owed $241 by
        the employee, which was offset against the amount ultimately paid. Net
        shares totaling 45,040 were issued to the employee subsequent to March
        31, 2000. The $602 was recorded by the Company as goodwill, which was
        subsequently determined to be impaired as a result of the operating
        losses of UBN.

        WARRANTS GRANTED TO PURCHASE COMMON STOCK

        Subsequent to March 31, 2000, in conjunction with the issuance of
        various debt obligations, the Company issued warrants to purchase
        744,541 shares of common stock (see discussion above).

        In connection with execution of a financial advisory services agreement
        on May 22, 2000 with a national investment banking firm, the Company
        granted warrants to purchase 250,000 share of common stock at a price of
        $6.06 per share. The warrants expire five years from the date of grant.
        The Company valued the warrants at $801 using the Black-Scholes Option
        Pricing Model. The warrant agreement requires the Company to obtain
        effective registration of the shares underlying the warrants by November
        22, 2000.

        The Company is involved in a dispute with a third party consultant
        concerning consideration the Company was allegedly expected to pay with
        respect to various financial advisory services. The Company has reached
        a tentative settlement with the consultant whereby it has agreed to
        issue a warrant to purchase 75,000 shares of the Company's common stock
        with an exercise price of $5.00.

        OPTIONS GRANTED TO PURCHASE COMMON STOCK

        Subsequent to March 31, 2000, the Company granted various employees
        options to purchase 1,861,750 shares of stock (see discussion below) at
        prices ranging from $2.875 to $5.28 per share. The exercise prices
        equaled the closing price of the Company's common stock at the date of
        grant.

        Subsequent to March 31, 2000, the Company granted various service
        providers options to purchase 20,500 common shares of stock at a price
        of $8.031 per share. The exercise price equaled the closing price of the
        Company's common stock at the date of grant.

                                      F-32
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


10.     SUBSEQUENT EVENTS (CONTINUED)

        EMPLOYMENT AGREEMENTS

        The Company executed an employment agreement subsequent to March 31,
        2000 with its new Chief Executive Officer. The agreement is for a term
        of two years, and provides for an annual salary of $350, an annual
        discretionary bonus of up to $400, a signing bonus of $1,000, and
        options to purchase 1,000,000 shares of common stock at an exercise
        price of $5.28 per share (see discussion above), of which 100,000 vested
        immediately and 150,000 vest every six month period. The exercise price
        equaled the closing price of the Company's common stock at the date of
        grant. The agreement provides for severance, as defined, for termination
        without cause.

        The Company executed various other employment agreements subsequent to
        March 31, 2000. Substantially all of the agreements provide for
        employment on an "at-will" basis. One of the agreements provides for
        severance, as defined, for termination without cause.

        DISPOSITION OF MRHM

        Subsequent to March 31, 2000, the Company's Board of Directors has
        directed management to effect the disposition of MRHM. MRHM had total
        assets and net assets approximating $623 and $320, respectively, as of
        March 31, 2000, and a net loss from operations approximating $1,705 for
        the year ended March 31, 2000. MRHM provides a variety of web design and
        web hosting services. Management of the Company expects to continue,
        although to a lesser extent, to provide such services after the
        successful disposition of MRHM. Management of the Company has not
        identified MRHM as a separate business line which requires discontinued
        operations accounting. MRHM has two office leases, which require minimum
        lease payments aggregating $1,618 over the next five years. Management
        of the Company has obtained an independent valuation of MRHM from a
        nationally recognized valuation firm totaling $850. Such valuation does
        not take into consideration one of the office leases, which requires
        minimum lease payments aggregating $1,167 over the next five years. To
        date, management of the Company has not identified any impairment with
        respect to its anticipated disposition of MHRM.

        CAPITAL LEASES

        Subsequent to March 31, 2000, the Company converted $1,523 of vendor
        accounts payable to capital leases. Of this amount, $1,319 was reflected
        in accounts payable and accrued liabilities at March 31, 2000. The
        leases provide for payments of $44 over a period of 36 months. The
        leases were executed with effective interest rates approximating 16% per
        annum.

11.     PARENT COMPANY FINANCIAL STATEMENTS

        The Company has a significant subsidiary, UBN, which accounts for more
        than 25% of the Company's consolidated net assets on an absolute basis.
        Pursuant to UBN's equipment financing and line-of-credit arrangement
        (see Note 4), UBN is restricted from dividending or loaning funds to
        IJNT or any of IJNT's other subsidiaries. Presented below is the
        unconsolidated condensed balance sheet as of March 31, 2000, and the
        unconsolidated condensed statements of operations and cash flows for the
        year ended March 31, 2000, as if the Company had accounted for UBN under
        the equity method of accounting. Previous periods are not presented as
        UBN did not have assets or operations prior to March 31, 1999.

                                      F-33
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


11.     PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)


                       Condensed Unconsolidated Balance Sheet

                                                                      March 31,
        ASSETS                                                          2000
                                                                   -------------
        Current assets:
             Cash                                                  $      1,205
             Accounts receivable, net                                        62
             Prepaid expenses and other current assets                      138
                                                                   -------------

        Total current assets                                              1,405

        Property and equipment, net                                       2,132
        Other assets, net                                                   813
                                                                   -------------

        Total assets                                               $      4,350
                                                                   =============

        LIABILITIES AND SHAREHOLDERS' DEFICIT

        Current liabilities:
             Accounts payable and accrued liabilities              $      2,482
             Accrued payroll, benefits and related costs                    370
                                                                   -------------

        Total current liabilities                                         2,852

        Investment in UBN, net of $11,455 in advances                     6,743
                                                                   -------------

        Total liabilities                                                 9,595
                                                                   -------------
        Shareholders' deficit
             Series A Convertible Preferred Stock                            --
             Common Stock                                                    20
             Additional paid-in capital                                  39,347
             Accumulated deficit                                        (44,612)
                                                                   -------------

        Total shareholders' deficit                                      (5,245)
                                                                   -------------

        Total liabilities and shareholders' deficit                $      4,350
                                                                   =============

                                      F-34
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


11.     PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)


                   Condensed Unconsolidated Statement of Operations

                                                                    Year Ended
                                                                     March 31,
                                                                       2000
                                                                   -------------

        Revenues                                                   $      2,617
                                                                   -------------
        Operating expenses:
             Network expenses                                             1,427
             Payroll and related expenses                                 6,930
             Selling, general and administrative expenses                 6,864
             Depreciation and amortization                                1,675
                                                                   -------------

        Total operating expenses                                         16,896
                                                                   -------------

        Operating loss                                                  (14,279)

        Loss from investment in UBN                                     (18,198)
        Other income                                                         50
        Interest income                                                      44
        Interest expense                                                     (2)
                                                                   -------------

        Net loss                                                        (32,385)

        Preferred stock beneficial conversion feature,
          related warrants and dividends                                 (1,027)
                                                                   -------------

        Net loss applicable to common shareholders                 $    (33,412)
                                                                   =============

                                      F-35
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


11.     PARENT COMPANY FINANCIAL STATEMENTS (CONTINUED)

                Condensed Unconsolidated Statement of Cash Flows

                                                                    Year Ended
                                                                     March 31,
                                                                       2000
                                                                   -------------

        Cash flows used in operating activities:
             Net loss                                              $    (32,385)
             Adjustments to reconcile net loss to net cash
               used in operating activities:
                 Bad debt expense                                           666
                 Depreciation and amortization                            1,311
                 Loss of UBN                                             18,198
                 Stock issued for services                                2,273
                 Stock options issued for compensation                    3,565
                 Write-off of assets and goodwill                         1,227
                 Other non-cash                                              39
                 Changes in current assets and liabilities:
                      Accounts receivable                                  (552)
                      Prepaid expenses and other current assets             249
                      Account payable and accrued liabilities             1,563
                      Accrued payroll                                       170
                                                                   -------------

        Net cash used in operating activities                            (3,676)
                                                                   -------------

        Cash flows used in investing activities:
             Advances to related parties                                   (401)
             Advances to UBN                                             (5,507)
             Purchases of property and equipment                         (1,267)
             Increase in deposits                                            (1)
                                                                   -------------

        Net cash used in investing activities                            (7,176)
                                                                   -------------

        Cash flows provided by financing activities:
             Repayment of borrowings from related parties                  (188)
             Repayments of short-term debt and other obligations           (222)
             Proceeds from sale of convertible preferred stock            1,789
             Proceeds from sale of common stock                           9,775
                                                                   -------------

        Net cash provided by financing activities                        11,154
                                                                   -------------

        Net increase in cash                                                302
        Cash at beginning of period                                         903
                                                                   -------------

        Cash at end of period                                      $      1,205
                                                                   =============

                                      F-36
<PAGE>

                                 IJNT.net, Inc.
             Notes to Consolidated Financial Statements (Continued)
           (amounts in thousands, except share and per share amounts)


12.     CHANGES TO 1999 CONSOLIDATED FINANCIAL STATEMENTS

        The consolidated financial statements as of and for the year ended March
        31, 1999 have been restated to correct the following errors:

        During the year ended March 31, 1999, shares of common stock were issued
        for services, to acquire assets and to settle debts. These shares were
        originally recorded at a discounted value from the free-trading price of
        similar shares. The Company has restated the value of the shares
        tendered using the free-trading market price as the basis for all such
        issuances. Such restatement resulted in additional expense of $1,367 for
        the year ended March 31, 1999.

        During April 1999, 123,000 shares of common stock were issued pursuant
        to a binding agreement dated March 30, 1999. This transaction had not
        previously been reflected in the financial statements of the Company.
        This transaction has now been reflected in the consolidated financial
        statements of the Company, resulting in additional expense totaling $49
        and recordation of other assets totaling $213.

        An error was made in the calculation of the preferred stock beneficial
        conversion feature. The beneficial conversion feature was overstated by
        $200. The correct impact of the conversion feature has been reflected in
        the 1999 financial statements.

        The net realizability of LPTV frequency licenses has been reevaluated as
        of March 31, 1999. Upon such reevaluation, it was determined that these
        licenses were impaired. As a result, the Company charged the cost of
        these licenses, in the amount of $699, to operations, resulting in
        additional expense and a reduction in net assets of $699.

        Certain components of property, plant and equipment were written down to
        their net realizable value as of March 31, 1999, and the depreciable
        lives of certain asset classifications were shortened, resulting in a
        charge to operations and a reduction to net property, plant and
        equipment of $750.

        A reserve for uncollectible accounts receivable was not previously
        recorded in the financial statements. Such reserve has now been
        recorded, resulting in a charge to operations of $115.

        A note receivable recorded in conjunction with an acquisition was deemed
        uncollectible and was written off, resulting in a charge to operations
        and a reduction of assets of $208.

13.     FOURTH QUARTER ADJUSTMENTS

        During the fourth quarter of Fiscal 2000, the Company recorded adjusting
        journal entries primarily related to accruing for certain expenses,
        writing-off certain assets, recording additional fixed asset
        depreciation and accruing for a loss contingency. These entries
        increased the consolidated net loss by approximately $3,200 and
        increased the net loss per share by $0.18.

                                      F-37