<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                            ______________________

                                    FORM 10-K

(Mark One)

|X|    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

For the fiscal year ended                   December 31, 1999
                          ----------------------------------------------------

                                      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 025582

                            GRACE DEVELOPMENT, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
            <S>                                                                <C>
                       Colorado                                                    84-1110469
            (State or other Jurisdiction of                                     (I.R.S. employer
            incorporation or organization)                                     identification no.)

                 1690 Chantilly Drive                                            (678) 222-3030
                Atlanta, Georgia  30324                                  (Registrant's telephone number
       (Address of principal executive offices)                               including area code)
                      (zip code)
</TABLE>

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                  Title to each class                               Name of each exchange on which registered
                  -------------------                               -----------------------------------------
                 <S>                                                <C>
                         None                                                         None
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, no par value
                               (Title of class)

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

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

       The aggregate market value on February 29, 2000, of the voting stock held
by non-affiliates of the registrant was $213,896,260 (based on the closing bid
price for shares of the registrant's Common Stock as reported on the Nasdaq
Over-the-Counter Bulletin Board on that date). In determining this figure, the
registrant has assumed that all of its directors, officers and persons owning
10% or more of the outstanding Common Stock are affiliates. This assumption
shall not be deemed conclusive for any other purpose.

       As of February 29, 2000, there were 75,895,903 shares of the registrant's
common stock, no par value, outstanding.

       Portions of the registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission no later than 120 days after the
registrant's fiscal year ended December 31, 1999, and to be delivered to
stockholders in connection with the 2000 Annual Meeting of Stockholders are
incorporated in Part III by reference.
<PAGE>

                            GRACE DEVELOPMENT, INC.

                                     INDEX

<TABLE>
<CAPTION>
REPORT:  FORM 10-K                                                                                                  Page
                                                                                                                    ----
<S>                                                                                                                 <C>

PART I...........................................................................................................     3
         ITEM 1. BUSINESS........................................................................................     3
         ITEM 2. PROPERTIES......................................................................................    34
         ITEM 3. LEGAL PROCEEDINGS...............................................................................    34
         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................    35

PART II..........................................................................................................    36
         ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...........................    36
         ITEM 6. SELECTED FINANCIAL DATA.........................................................................    36
         ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                      OPERATIONS.................................................................................    37
         ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.....................................    45
         ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................................................    45
         ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                      DISCLOSURE.................................................................................    45

PART III.........................................................................................................    46
         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............................................    46
         ITEM 11. EXECUTIVE COMPENSATION.........................................................................    46
         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................    46
         ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................    46

PART IV..........................................................................................................    47
         ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K...............................    47

SIGNATURES.......................................................................................................    49

CONSOLIDATED FINANCIAL STATEMENTS................................................................................   F-1

EXHIBIT INDEX....................................................................................................   E-1
</TABLE>

                                       2
<PAGE>

                                    PART I

ITEM 1.  BUSINESS

GENERAL

     Grace Development, Inc., a Colorado corporation doing business as Avana
Communications ("Grace" or the "Company"), is a start-up company whose
predecessor was formed in 1998.  The Company plans to become a full-service
integrated communications provider, offering a suite of "bundled" data and
communications services and products to small businesses and individuals in mid-
sized and smaller markets located primarily in the Southeastern United States,
and internet-related and long-distance services to customers nationally.

     The Company believes that technological developments and economic factors
are driving a rapid convergence of products and services in the information
technology and telecommunications industries.  However, management believes that
consumers find the rapidly growing and changing array of data and communications
technologies to be confusing, and that consumers are frustrated by the cost and
inconvenience of having to rely on multiple providers to obtain the services and
products they need.  The Company intends to pursue profitable growth by offering
its customers simplified, affordable solutions to managing their information
technology and telecommunications needs in this converging environment.

     The Company's strategy is to develop the capability to deliver to its
customers -- through facilities-based and resale networks -- an affordable
bundle of data, voice, internet-related, and eventually video, services and
products that are tailored to meet each customer's individual needs in one
account with one source of support and customer service.  The Company intends to
offer, and assist its customers in selecting a customized "bundle" of, primary
functional services, which may include one or more of the following:

     .  internet access service
     .  local and long distance telephone
     .  enhanced telephone services (such as voice mail, call waiting,
        conference calling and caller-ID)
     .  web page design, development and hosting
     .  dedicated circuits for voice, data and video
     .  frame relay transport services
     .  ATM (Asynchronous Transfer Mode)
     .  integrated wireless PCS (Personal Communication System)
     .  calling card services
     .  ISDN (Integrated Service Digital Network)
     .  SDSL (Symetrical Digital Subscriber Line), VoDSL (Voice Over Digital
        Subscriber Line) and
        ADSL (Asymetrical Digital Subscriber Line)
     .  OC-1 (Optical Carrier one) and OC-3 (Optical Carrier three)
     .  RAS ports (Random Access Server)


                                       3
<PAGE>

     Additionally, the Company may sell, install and maintain the following
products for customers and their end users:

     .  phone equipment; PBX equipment; voice-over equipment
     .  mini-computer, personal computers and servers
     .  internet appliances and convergence devices
     .  wireless communications devices

     The array of services and products offered will be determined on a market-
by-market basis, depending on the population density and demographics of each
market, either through direct sales, resale agency arrangements or some
combination of the two.  The Company plans to offer facilities-based services in
markets that can support the cost of the facilities infrastructure build-out,
and to offer services through resale or interconnection arrangements in markets
where build-out of facilities-based infrastructure would not be cost-effective.

Execution of Business Plan

     The Company has developed a three-pronged strategy for implementing its
business plan:  (a) acquisition of existing service providers and developing
technology-based service companies; (b) build-out of the Company's delivery
network, primarily in mid-sized and smaller (1.5 million persons or less)
markets located in the Southeastern United States; and (c) integration of the
products and services acquired or developed by the Company into a suite of
offerings, from which the Company will assist its customers in selecting a
"bundle" of products and services that will meet their needs on a simple and
affordable basis.

     Acquisitions.  The Company intends to be opportunistic and aggressive in
acquiring and consolidating independent technology providers that enhance the
array of products and services that the Company plans to offer to its customers,
that provide the Company with new or increased access to desirable markets or
that enhance its human resources.

     Building Infrastructure.  The Company intends to build-out its existing
network infrastructure where acceptable acquisition candidates or existing
network infrastructure do not exist and where the market size is such that the
cost of the build-out can be justified or where it is necessary in order to
reduce dependency on third parties.  For instance, the Company may expand and
build infrastructure in smaller markets where current advanced network
infrastructure is unavailable, unplanned and the cost of entry and level of
competition are relatively low.  In larger markets, the Company may develop and
deploy advanced fixed networks where such networks do not exist or where cost
effective access to existing networks is not available.  In addition, the
Company may enter new markets by leasing or reselling existing services or
infrastructure to develop a large enough market share to support the cost of
building out the Company's own facilities.

     Integration of Products and Services.  As its product and service
capabilities expand, through acquisitions and internal development, the
Company's goal is to integrate those products and services into a suite of
offerings from which its customers may choose a bundle of products and services
which best suit their individual needs.  The Company intends to differentiate
itself from its competitors, in part, by actively assisting its customers in
selecting the appropriate

                                       4
<PAGE>

products and services to meet their needs on a simple and cost effective basis.
Management believes that such customer assistance will help build customer
loyalty and reduce customer attrition, while offering an opportunity for the
Company to "cross-sell" its more profitable products and services. In addition,
the Company believes that the integration of acquired or developed products and
services will permit it to establish a local presence in its targeted markets
while centralizing technological and administrative support services, whenever
possible, to capture operational efficiencies and economies of scale.

     Additionally, to more quickly expand its customer base, geographic reach
and brand awareness, the Company may also act as a reseller of local, long
distance and other telecommunications services where it does not have facilities
in place.

     Implementation of the Company's business plan has already begun.  Since
November 1, 1999, the Company acquired (i) an Atlanta, Georgia-based ISP, (ii) a
Florida-based ASP that provides Web page design and hosting services, (iii) a
South Carolina-based CLEC, and (iv) a Florida-based computer services firm that
provides network maintenance management and installation services.  As a result
of these acquisitions, the Company presently offers data and communications
services, including Internet connections, Web page design and hosting, and
"bundled" local, long distance and some enhanced telephone services, to
individuals and businesses in a limited number of markets in the Southeastern
United States.

Current Operations

     Through its operating subsidiaries, the Company currently provides Internet
connections; Web page design and hosting services; local, long distance and
certain enhanced telephone services; and data network systems design,
installation and maintenance.

Internet Service Provider ("ISP")

     The Company operates as an ISP primarily through its indirect wholly-owned
subsidiary Avana Communications Corporation, a Georgia corporation ("Avana").
Avana was acquired in May 1999.  The Company currently provides Internet
connections to approximately 4,500 individuals and small and medium size
companies in the Atlanta, Georgia, market for a monthly service fee.
Additionally, the Company offers domain name registration and Web server co-
location services.  The Company's ISP operations and systems are located in the
Company's primary operating facility in Atlanta, Georgia.  The Company's ISP and
ASP operations make up its Internet segment.  The information in Note 10 -
"Segment Reporting" of the Company's Consolidated Financial Statements is
incorporated herein by reference.

Application Service Provider ("ASP")

     The Company operates as an ASP primarily through its indirect wholly-owned
subsidiary WebWizard, Inc., a Delaware corporation formerly based in Altamonte
Springs, Florida ("WebWizard").  The Company acquired WebWizard in January 2000.
The Company offers four primary products and services as an ASP:  (i) licensing
of Internet and intranet Web page design software; (ii) Web page design and
implementation consulting services; (iii) Web hosting services; and (iv) online
database application services.  The WebWizard design tool enables persons with
limited computer skills to build and maintain Web pages.  It includes a fully

                                       5
<PAGE>

integrated, seamless Web page design and maintenance tool that can be integrated
with many existing computer based database packages and includes a shopping cart
facility, catalog tools, forms tools, and content and contact management tools.
The Web page design tool is provided to end users who design and maintain their
own Web pages, and licensed to intermediary Web page designers and consultants
who design and maintain Web pages for end users.  The Company also offers its
own Web page consulting services to design, build and maintain Web pages for
customers, including licensees.  The Company will also host customers' Web pages
on its computer servers for a monthly service fee.  The Company currently has
approximately 12 license holders of the WebWizard software -- through which the
Company reaches approximately 6,000 end users -- and over 300 customers for whom
it hosts Web sites.  The Company's ASP customers are not concentrated in any
particular geographic region.  WebWizard's operations and computer systems are
located in Altamonte Springs, Florida and redundantly supported in Atlanta,
Georgia.

Competitive Local Exchange Carrier ("CLEC") and Inter-Exchange Carrier ("IXC")

     The Company, through its operating subsidiaries, operates as a CLEC and
IXC, offering local, long distance and certain enhanced telephone services.  The
Company offers traditional local telephone products, long distance voice and
data services, operator services, prepaid calling cards and certain enhanced
services, including voice mail, call waiting, conference calling and caller-ID.
The Company currently provides such services to approximately 1,200 customers
and over 6,500 lines located primarily in the Southeastern United States.

     The Company has negotiated interconnect agreements with BellSouth Corp.,
GTE Telecommunications Inc., Sprint Corp., and SBC Communications, as successor-
by-merger to Ameritech, all of which are ILECs.  The Company has contracts to
resell long distance services with Qwest Communications International Inc. and
Global Crossing Ltd.  The Company also has a contract to resell advanced network
services with ICG Communications involving a lease of high speed data
transmission facilities.  Under those agreements, the Company purchases local
exchange, long distance and high speed data services at wholesale prices and
resells those services to its customers.  As of March 31, 2000, the Company had
switching equipment and related computer hardware and software installed at a
facility in Johnson City, Tennessee, and to be installed in co-location
facilities in Atlanta, Georgia.

     The Company's CLEC service is transparent to the customer, whose telephone
operates in precisely the same manner as it did prior to selecting the Company
as its local carrier.  The customer receives its bill from the Company, rather
than from the ILEC.  The Company is certified and operating as a CLEC in
Alabama, Florida, Illinois, Kentucky, Mississippi, North Carolina, South
Carolina, Tennessee and Virginia.  The Company has filed for CLEC certification
in Louisiana and Ohio.

     The Company is certified by the Federal Communications Commission ("FCC")
and the applicable state regulatory agencies to provide intrastate, interstate
and international long distance telephone services to customers in Alabama,
Florida, Georgia, Illinois, Kentucky, Louisiana, Mississippi, North Carolina,
Ohio, South Carolina, Tennessee, and Virginia.  The Company's other long
distance telephone products are 800 Numbers and debit calling card services.

                                       6
<PAGE>

     In order to provide these products, the Company purchases long distance
telephone time from national carriers at wholesale rates based upon high volume
usage and its certifications as an IXC.  The Company then resells this time to
its customers at its own retail rates which are generally priced below IXCs'
published, tariffed, basic retail rates.  The Company's calling card products
operate similarly to the calling card products offered by the major carriers.
The Company's customers pay for their long distance calling usage through direct
billing.

     The Company also has state tariffs to provide pre-paid local telephone
service in Alabama, Florida, Kentucky, North Carolina, Mississippi, South
Carolina, Tennessee and Virginia.  This service is provided under the P.V. Tel.
brand.  The Company has approximately 1,200 pre-paid local telephone service
customers.

     The Company has an arrangement with Lucent Technologies, Inc. whereby
Lucent is to supply the Company with certain network infrastructure equipment
necessary for network expansion. As of December 31, 1999, Lucent held 4.4% of
the Company's Common Stock that was acquired by exercising warrants that were
awarded in connection with this agreement. Under the Lucent arrangement, Lucent
has made a non-binding commitment to lease to the Company up to $25 million in
equipment and services during 2000 and to provide the Company with a secured
non-revolving working capital line of credit of up to $3,125,000 at a rate of
$1.00 for every $8.00 in new equipment purchased or leased by the Company from
Lucent. The line of credit will be made available in tranches, as needed,
subject to credit review as the tranches are utilized. Any advance under the
line of credit would bear interest at a rate of 12.5%, payable as interest only
for the first three months, followed by 21 months of principal and interest.

Bundled Products and Services

     As of March 31, 2000, the Company was offering "bundled" telecommunications
services in the Atlanta, Georgia, market consisting of long distance services,
800 toll free numbers, calling cards, Internet access, high speed data services
and Web page design and hosting.  The Company's business plan calls for
additional services to be added in the future, including local telephone, local
area networks, wide area networks and installation, maintenance and servicing of
networks.  The Company markets its bundled products and services through its own
direct sales force and through a variety of value added resellers ("VARs") and
other agents.  In Alabama, Florida, Georgia, Kentucky, Mississippi, North
Carolina, South Carolina, Tennessee and Virginia, the Company offers bundled
local and long distance telephone service.

PREDECESSOR

     The predecessor to the Company, New Millennium Multimedia, Inc., a Georgia
corporation ("New Millennium"), which resold local and long distance services in
the north Atlanta, Georgia, market was formed on October 7, 1998. On May 5,
1999, New Millennium acquired Avana Communications Corporation, a Georgia
corporation ("Avana"), an internet service provider which then had approximately
4,000 customers located primarily in the Atlanta, Georgia market.

     On September 28, 1999, a wholly owned subsidiary of Grace Development, Inc.
merged with and into New Millennium (the "Grace Merger").  The defined term "Old
Grace" will be

                                       7
<PAGE>

used to refer to Grace Development, Inc. prior to the Grace Merger. Each share
of New Millennium common stock was exchanged for 66.3013 shares of the Company's
Common Stock and a total of 66,246,933 shares of the Company's Common Stock were
issued to New Millennium stockholders. Although, as a result of the Grace
Merger, New Millennium became a wholly owned subsidiary of the Company, the
Grace Merger was accounted for as an acquisition of Old Grace by New Millennium
because, following the transaction, the former shareholders of New Millennium
owned a substantial majority of the Company's outstanding Common Stock.
Accordingly, the Consolidated Financial Statements of the Company are the
financial statements of New Millennium adjusted for the assumed acquisition of
the net assets of Old Grace in exchange for the issuance of the Company's Common
Stock. In accordance with purchase accounting principles, the net assets of New
Millennium were accounted for at their historical cost, and the net assets of
Old Grace were accounted for at their fair value as of September 28, 1999. No
goodwill was recorded as a result of the Grace Merger.

     On November 8, 1999, Avana acquired substantially all of the business
assets of Rob Ballard and Sabrina Ballard d/b/a Northwest Georgia Internet.
Northwest Georgia Internet provides Internet access, Web hosting and Web design
to businesses and individuals located in areas northwest of Atlanta, Georgia.

     The corporate headquarters of the Company, as well as its central operating
facility, are located at 1690 Chantilly Drive, Atlanta, Georgia 30324 (telephone
number 678-222-3030).

RECENT COMPANY HISTORY

WebWizard Acquisition

     On January 31, 2000, a wholly owned subsidiary of the Company was merged
with and into WebWizard, Inc. ("WebWizard") (the "WebWizard Acquisition").
WebWizard's primary product is its Internet-accessible software platform for the
creation and management of Websites and Web-based applications which enable a
person, with little or no computer programming knowledge or special training, to
create Websites. WebWizard's Website development tools also include modules to
add e-commerce, forms-wizard, shopping cart, catalogue and contact manager
capabilities to a Website. A key feature of the product is its embedded content
management capability, which permits a Website administrator to monitor and
filter the content of distributed sites. WebWizard licenses its products to
Website developers, small merchants and other retail customers. It has more than
6,000 users and at least 12 licensing agreements in place with value-added
resellers in the consulting, e-commerce and communications industries.
WebWizard's assets include approximately $100,000 in computer hardware and
software which are used to support its product offerings. The Company intends to
continue to use such hardware and software to support WebWizard's activities.

     The WebWizard Acquisition was consummated in accordance with the terms and
conditions of an Agreement and Plan of Merger, dated January 20, 2000.  As a
result of the WebWizard Acquisition, WebWizard is an indirect wholly owned
subsidiary of the Company.  The aggregate consideration paid to acquire
WebWizard was 1,762,554 shares of the Company's Common Stock (the "WebWizard
Consideration"), with 257,500 shares being held in escrow in connection with
certain indemnification obligations of the Seller until June 30, 2001.  Of the
1,762,554 shares of the Company's Common Stock constituting the aggregate merger
consideration, 96,567 shares are to be issued by the Company directly to certain
persons on behalf of the former majority webwizard shareholder as a fee for
rendering financial advisory and broker services.  The Company has also agreed
to issue an additional 10,343 shares of Common Stock as a finder's fee to one
individual.  The

                                       8
<PAGE>

WebWizard Acquisition was structured to qualify as a tax exempt reorganization
under Section 368(a) of the Internal Revenue Code.

     The fair market value of the Common Stock comprising the WebWizard
Consideration was estimated to be $0.40 per share on January 31, 2000, making
the aggregate consideration $705,022.  WebWizard's liabilities exceeded its
assets by approximately $290,000 at the time of the acquisition.  As a result of
the WebWizard Acquisition, the Company estimates that it will record
approximately $1,000,000 of goodwill.

     All of the 1,762,554 shares of the Company's Common Stock issued in the
WebWizard Acquisition are "restricted securities" under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act").  Such
securities may not be sold in the absence of registration under the Securities
Act unless an exemption from registration is available, including the exemptions
contained in Rule 144.  See "Item 1. Business--Restricted Securities and
Registration Rights" below for a summary of the exemptions available under Rule
144.

     On January 31, 2000, in connection with the WebWizard Acquisition, a wholly
owned subsidiary of the Company entered into an employment agreement with O.E.
"Randy" Ray, a former stockholder of WebWizard, which provides for Mr. Ray to
serve as Executive Vice President - Business Development of the subsidiary for a
term ending January 31, 2001.  As compensation, Mr. Ray is entitled to (i)
receive a base salary of $90,000 per year, and (ii) participate in the Company's
incentive and bonus programs to the same extent as other senior executive
officers of the Company.  In addition Mr. Ray was given the right to receive an
option to purchase 50,000 shares of the Company's Common Stock at an exercise
price of $3.25 per share to be granted pursuant to a stock option plan adopted
by the Board of Directors of the Company when a plan is adopted.  Effective
April 3, 2000, in connection with the Alpha Computer Acquisition (as defined
below), Mr. Ray's base salary was increased from $90,000 per year to $140,000
per year.

     On January 31, 2000, in connection with the WebWizard Acquisition, a wholly
owned subsidiary of the Company entered into an employment agreement with Wendy
Lewis, which provides for Ms. Lewis to serve as Vice President of Operations -
Applications Services Group of the subsidiary for a term ending January 31,
2001.  As compensation, Ms. Lewis is entitled to receive (i) a base salary of
$75,000 per year, and (ii) participate in the Company's incentive and bonus
programs to the same extent as other senior executive officers of the Company.
In addition Ms. Lewis was given the right to receive an option to purchase
50,000 shares of the Company's Common Stock at an exercise price of $3.25 per
share pursuant to a stock option plan adopted by the Board of Directors of the
Company when a plan is adopted.  Effective April 3, 2000, in connection with the
Alpha Computer Acquisition, Ms. Lewis' base salary was increased from $75,000
per year to $125,000 per year.

     In connection with the WebWizard Acquisition, the Company also entered into
a six month consulting agreement with John Cavanaugh, a former stockholder of
WebWizard.  Pursuant to the consulting agreement, Mr. Cavenaugh received 17,500
shares of Common Stock upon execution of the consulting agreement and is
entitled to $10,000 per month for the term of the agreement.

                                       9
<PAGE>

P.V. Tel. Acquisition

     On February 24, 2000, a wholly-owned subsidiary of the Company was merged
with and into P.V. Tel., Inc. ("P.V. Tel."), a South Carolina corporation (the
"P.V. Tel. Acquisition"). P.V. Tel. is a CLEC currently serving approximately
1,200 customers in small markets in South Carolina and Tennessee. P.V. Tel.'s
customer base is composed primarily of small and medium-sized businesses and
residential customers. Its service offerings include traditional local telephone
products, long distance voice and data services, operator services and prepaid
calling cards.

     The P.V. Tel. Acquisition was consummated in accordance with the terms and
conditions of a Stock Exchange Agreement, dated February 15, 2000. Pursuant
thereto, a wholly-owned subsidiary of the Company acquired all of the capital
stock of P.V. Tel., and P.V. Tel. became an indirect wholly owned subsidiary of
the Company. The aggregate consideration was 2,150,000 shares of the Company's
Common Stock, with 750,000 shares being held in escrow until July 31, 2001. The
P.V. Tel. Acquisition was structured to qualify as a tax exempt reorganization
under Section 368(a) of the Internal Revenue Code.

     The Company is currently in the process of obtaining an independent
appraisal of the valuation of the Common Stock issued in the P.V. Tel
Acquisition, and therefore has not determined the amount of goodwill to be
recognized.

     All of the 2,150,000 shares of the Company's Common Stock issued in the
P.V. Tel Acquisition are "restricted securities" under Rule 144 promulgated
under the Securities Act.  Such securities may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule 144.  See "Item 1.
Business--Restricted Securities and Registration Rights" below for a summary of
the exemptions available under Rule 144.

     Pursuant to a registration rights agreement (the "P.V. Tel. Registration
Rights Agreement") executed at the closing of the P.V. Tel. Acquisition, the
Company granted "piggyback" registration rights with respect to 1,400,000 of the
2,150,000 shares of Common Stock issued in the P.V. Tel. Acquisition.  Subject
to the terms and conditions set forth in the registration rights agreement, the
piggyback registration rights permit, at any time prior to the one-year
anniversary of the closing, the holders of the covered shares to include these
shares in any registration by the Company of its Common Stock under the
Securities Act for sale to the public, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
subject to Rule 145 under the Securities Act, or a registration on any
registration form that does not permit secondary sales.

     Prior to consummating the P.V. Tel. Acquisition, the Company advanced to
P.V. Tel. approximately $450,000 for working capital purposes (the "Working
Capital Advances"), which advances were evidenced by two promissory notes made
by P.V. Tel. to the Company and guaranteed by the former stockholders of P.V.
Tel. At the closing of the Acquisition, the promissory notes evidencing the
Working Capital Advances were canceled and Peter Noce and Coastal Growth
Partners, L.P. ("Coastal") delivered to the Company promissory notes in
substitution for the two P.V. Tel. promissory notes.  The indebtedness
represented by these substituted promissory notes is secured by the pledge of
85,800 shares of Common Stock by

                                       10
<PAGE>

Peter Noce and 64,200 shares of Common Stock by Coastal. Pursuant to the
substituted promissory notes, if the Company has not afforded Mr. Noce or
Coastal the opportunity to register all of their respective shares that are
registrable pursuant to the P.V. Tel. Registration Rights Agreement by February
24, 2001, then the substituted note will be cancelled in full and the makers of
the notes will have no further liabilities or obligations thereunder to the
Company.

     In connection with the P.V. Tel. Acquisition, the Company entered into an
employment agreement with Joseph Buck, a former stockholder of P.V. Tel., which
provides that that Mr. Buck will serve as Vice President of Engineering and
Infrastructure of the Company for a term ending February 7, 2001.  Mr. Buck is
entitled to (i) a base salary of $92,000 per year, and (ii) an annual bonus
ranging from 43% to 75% of his annual salary if the Company achieves certain
annual objectives.  In addition, Mr. Buck was granted the right to receive an
option to purchase 350,000 shares of Common Stock at an exercise price of $1.00
per share pursuant to a stock option plan approved by the Board of Directors
when a plan is adopted.  The option is to vest at a rate of 175,000 shares on
March 1, 2001 and 175,000 shares on March 1, 2002.

     Pursuant to the P.V. Tel. Acquisition, the Company also entered into an
employment agreement with Paul Reynolds, which provides that Mr. Reynolds will
serve as Vice President of Sales Engineering and Support of the Company for a
term ending February 7, 2002.  Mr. Reynolds is entitled to (i) a base salary of
$82,000 per year, (ii) a signing bonus of $10,000, and (iii) an annual bonus
ranging from 43% to 75% of his annual salary if the Company attains certain
annual objectives.  In addition, Mr. Reynolds was granted the right to receive
an option to purchase 350,000 shares of Common Stock at an exercise price of
$1.00 per share pursuant to a stock option plan approved by the Board of
Directors when a plan is adopted.  The option shall vest at a rate of 175,000
shares on March 1, 2001 and 175,000 shares on March 1, 2002.

Alpha Computer Acquisition

     On March 30, 2000, the Company acquired Alpha Computer Services, Inc.
("Alpha Computer"), a Florida corporation, pursuant to an Agreement and Plan of
Merger providing for the merger of Alpha Computer with and into an indirect
wholly-owned subsidiary of the Company (the "Alpha Computer Acquisition").
Alpha Computer is a Florida-based computer services firm that provides network
management and installation services.

     The Company paid aggregate consideration in The Alpha Computer Acquisition
of 3,100,000 shares of the Company's Common Stock, with 620,000 being held in
escrow in connection with certain indemnification obligations of the Seller for
12 months following the closing. The Alpha Computer Acquisition was structured
to qualify as a tax exempt reorganization under Section 368(a) of the Internal
Revenue Code.

     The Company is currently in the process of obtaining an independent
appraisal of the valuation of the Common Stock issued in the Alpha Computer
Acquisition, and therefore has not determined the amount of goodwill to be
recognized.

     All of the 3,100,000 shares of the Company's Common Stock issued in the
Alpha Computer Acquisition are "restricted securities" under Rule 144
promulgated under the Securities Act.  These securities may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions

                                       11
<PAGE>

contained in Rule 144. See "Item 1. Business--Restricted Securities and
Registration Rights" below for a summary of the exemptions available under Rule
144.

     Pursuant to a registration rights agreement executed at the closing of the
Alpha Computer Acquisition, the Company granted certain "piggyback" registration
rights with respect to 500,000 of the 3,100,000 shares of the Company's Common
Stock issued in the Alpha Computer Acquisition.  Subject to certain conditions
set forth in the registration rights agreement, the piggyback registration
rights permit, at any time prior to the one year anniversary of the closing, the
holders of such shares to include such shares in any registration by the Company
of its Common Stock under the Securities Act for sale to the public, other than
a registration relating solely to employee benefit plans, or a registration
relating solely to a transaction subject to Rule 145 under the Securities Act,
or a registration on any registration form that does not permit secondary sales.

INTELLECTUAL PROPERTY

     The Company has registered two trademarks with the United States Patent and
Trademark Office: "Avana" and "WebWizard."  Management believes that each of
these trademarks may be important parts of the Company's future branding and
name recognition programs.  An unrelated third party owns the Internet domain
name "Avana.com."  The Company has reached an agreement in principal to purchase
the "Avana.com" Internet domain name and expects to consummate this transaction
in the near future.  Unrelated third parties own the Internet domain names
"Webwizard.com," "Webwizard.net" and "Webwizard.org."  One of these third
party's has alleged that it has a superior right to the use of the WebWizard
mark and has requested that the Company either cease using the WebWizard mark or
license the right to use such mark.  The Company is currently investigating this
allegation.  No formal claim or action has been filed opposing the Company's use
of either the Avana or WebWizard marks.

     The Company intends to take appropriate action to solidify its claim to the
Avana and WebWizard marks and to challenge any adverse claims to such marks.
Intellectual property litigation is expensive and time consuming and could
divert management's attention away from running the business.  If the Company
fails to protect its right to use these marks, it could be required either to
cease using such marks or to enter into license agreements for the use of such
marks.  Such license agreements may not be available on terms acceptable to the
Company.  Even if the Company secures the right to continue using the Avana and
WebWizard marks, its ability to prevent others from using the same or similar
marks may be limited, which could result in market confusion and detract from
the Company's brand recognition efforts.  The Company's business, operating
results and financial condition could be materially adversely affected if it is
required either to cease using such marks or license the right to use such marks
or if it cannot prevent others from using the same or similar marks.

COMPETITION

     The Company faces competition from many competitors with significantly
greater financial resources, well-established brand names and large, existing
installed customer bases. Moreover, the Company expects the level of competition
to intensify in the future.  The

                                       12
<PAGE>

Company faces significant competition in each of its three targeted service
categories: data, Internet and Web hosting; local access and voice services; and
integration services.

     The Company believes that various legislative initiatives, including the
Telecommunications Act of 1996, have removed many of the remaining legislative
barriers to local exchange competition.  Rules adopted to carry out the
provisions of the Telecommunications Act of 1996, however, remain subject to
pending administrative and judicial proceedings which could materially affect
local exchange competition.  Moreover, in light of the passage of the
Telecommunications Act of 1996, regulators are providing ILECs with increased
pricing flexibility as competition increases.  If ILECs are permitted to lower
their rates substantially or engage in excessive volume or term discount pricing
practices for their customers, the net income or cash flow of integrated
communication providers and CLECs, including the Company, could be materially
adversely affected.  In addition, while the Company currently intends to compete
with AT&T, MCI WorldCom, Sprint and other IXCs in the long distance market, the
Telecommunications Act of 1996 permits the Regional Bell Operating Companies
("RBOCs") to provide long distance service in the same areas they are now
providing local service once certain criteria are met. Once the RBOCs begin to
provide such services, they will be in a position to offer single source local
and long distance service similar to that which the Company offers. Furthermore,
through acquisitions, AT&T and MCI Worldcom have entered the local exchange
services market, and other IXCs have announced their intent to enter the local
exchange services market which is facilitated by the Telecommunications Act's
requirement that ILECs permit others to use their local exchange facilities to
provide service to customers. The Company cannot predict the number of
competitors that will emerge as a result of existing or new federal and state
regulatory or legislative actions but increased competition with respect to
interexchange services and local exchange services from existing and new
entities could have a material adverse effect on the Company's business,
financial condition, results of operations and prospects.

     Competition in each of the service categories targeted by the Company is
discussed below.

Data, Internet and Web Hosting Services.

     The Company faces competition in the high-speed data services arena from
IXCs, ILECs, cable operators and other telecommunications companies.  Many of
the Company's existing and potential competitors have financial and other
resources significantly greater than those of the Company.

     The Company intends to compete with the larger IXCs on the basis of
superior service, a rapid response to technology and service trends, and a
regional focus.  All of the major IXCs, including AT&T, MCI WorldCom and Sprint,
offer frame relay, ATM and IP based transport services, and several of the major
IXCs have announced plans to provide Internet services.  The Company believes it
can compete favorably with these providers in its markets based on the features
and functions of its planned services, the high density of its planned networks,
and its in-house expertise.  Aggressive pricing is expected to support continued
rapid growth, but will place pressure on operating margins.

                                       13
<PAGE>

     Many of the ILECs now offer services similar to the Company's planned data,
Internet, and Web hosting service. Because the RBOCs have not yet been
authorized to provide interexchange service inside the regions where they
provide local exchange service, they may offer these services only on an
intraLATA basis within their operating regions. The FCC, however, as a condition
of the merger between SBC and Ameritech, permitted the merged entity to provide
advanced data services using a separate subsidiary. The merged RBOC is forbidden
to favor its subsidiary over competing CLECs and is required to provide data
CLECs with discounted loops and other measures to enhance competition. Other
RBOCs presumably would be able to do the same. Out-of-region RBOCs may also
offer these data services on an interLATA basis. While the RBOCs generally
cannot interconnect their frame relay networks with each other, the Company may
interconnect its frame relay network with those of various RBOCs. As a result,
the Company could use certain RBOC services to keep its own costs down when
distributing into areas that cannot be more economically serviced on its own
network. The Company expects the RBOCs to aggressively expand their data,
Internet, and Web hosting services as regulatory developments permit them to
deploy in-region interLATA long distance networks. When the RBOCs are permitted
to provide such services, they will be in a position to offer single source
service similar to that being proposed by the Company. As part of its various
interconnection agreements, the Company has negotiated favorable rates for
unbundled ILEC network elements, including frame relay service elements. The
Company expects use of such network elements to decrease its costs, thereby
improving margins for this service.

     The Company faces competition in the Internet services arena from various
technology and Internet related companies, including cable-based services
companies.  Some of these companies have financial and other resources
significantly greater than those of the Company.  The Company intends to compete
in this highly competitive market by offering high service levels, broad
technical expertise, strong customer service and value-added applications.

     The market for managed Web site and application hosting conducted by the
Company is highly competitive.  There are few substantial barriers to entry and
many of the Company's current competitors have substantially greater financial,
technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships in the
industry than it possesses.  Current and potential competitors in the market
include Web hosting service providers, ISPs, telecommunications companies and
large information technology outsourcing firms.  Competitors may operate in one
or more of these areas and include companies such as AT&T, Cable & Wireless,
Concentric Network, Data Return, EDS, Exodus Communications,
Frontier/GlobalCenter, Globix, GTE, IBM, Intel, Level 3 Communications, MCI
WorldCom, Navisite, PSINet, Qwest Communications International, and US
Internetworking.  The Company may be unable to achieve its operating and
financial objectives due to the significant competition in the Web hosting
industry.

Local Access and Voice Services.

     In the Company's target market, the Southeastern United States, the Company
faces significant competition for the local services it intends to offer from
RBOCs and other ILECs, which currently maintain dominant market shares in their
local telecommunications markets.  These companies all have long-standing
relationships with their customers and have financial, personnel and technical
resources substantially greater than those of the Company.  Some of

                                       14
<PAGE>

these companies also have indicated their intent to offer services as CLECs in
markets outside of their current territory.

     The Company also faces competition in most markets in which it intends to
operate from one or more CLECs or integrated communication providers operating
fiber optic networks.  Other local service providers without their own fiber
networks have operations or are initiating operations within one or more of the
Company's target service areas.  MCI WorldCom, AT&T and certain cable television
providers, either alone or jointly with AT&T or another carrier, have entered
some or all of the Company's target markets.  The Company also believes that
other telecommunications companies may enter the local exchange services market
within specific metropolitan areas served or targeted by the Company.  Other
potential competitors of the Company include utility companies, other long
distance carriers, wireless carriers and private networks built by individual
business customers.  Many of these entities are substantially larger and have
substantially greater financial resources than the Company.  The Company cannot
predict the number of competitors that will emerge as a result of existing or
any new federal and state regulatory or legislative actions.

     Competition in all of the Company's targeted geographic market areas is
based on quality, reliability, customer service and responsiveness, service
features and price.  The Company intends to keep its prices at levels
competitive with those of the ILECs while providing a higher level of service
and responsiveness to its customers.

     Although the ILECs are generally subject to greater pricing and regulatory
constraints than other local network service providers, ILECs, as noted above,
are achieving increased pricing flexibility for their local services as a result
of recent legislative and regulatory action designed to increase competition in
the local exchange market.  The ILECs have continued to lower rates, resulting
in downward pressure on the price of certain dedicated and switched access
transport services to be offered by the Company and other CLECs.  This price
erosion has decreased operating margins for these services.  However, the
Company believes this effect will be more than offset by the increased revenues
available as a result of access to customers provided through the Company's
interconnection co-carrier agreements and the opening of local exchange service
to competition.  In addition, the Company believes that lower rates for
dedicated access may benefit other services offered by the Company.

     The Company will compete with AT&T, MCI WorldCom, Sprint and others in the
long distance services market.  Many of these competitors have longstanding
relationships with their customers and have financial, personnel and technical
resources substantially greater than those of the Company.  When, as expected,
the RBOCs are permitted to provide long distance services within their operating
regions they may provide substantial new competition to long distance providers.
In providing long distance services, the Company intends to focus on quality,
service and price to distinguish itself in a very competitive marketplace and
intends to build a loyal customer base by emphasizing its customer service and
bundled product portfolio.

Integration Services.

     The Company faces competition in its planned systems integration business
from equipment manufacturers, RBOCs and other ILECs, long distance carriers and
systems

                                       15
<PAGE>

integrators, many of which have financial and other resources significantly
greater than those of the Company. The Company intends to compete in this market
on the basis of its technical expertise and customer service.

GOVERNMENT REGULATION

     Overview.  The Company's telecommunications services are subject to varying
degrees of federal, state and local regulation.  The FCC and state utility
commissions regulate telecommunications common carriers.  A telecommunications
common carrier is a company which generally offers telecommunications services
to the public or to all prospective users on standardized rates and terms.  The
Company's local exchange, interexchange and international services are all
common carrier services.  The Company's systems integration business and
Internet services are not considered to be common carrier services, although
regulatory treatment of Internet services is evolving and it may become subject,
at least in part, to some form of common carrier regulation.

     The FCC exercises jurisdiction over telecommunications common carriers, and
their facilities and services, to the extent they are providing interstate or
international communications.  International authorities also may seek to
regulate international telecommunications services originating in the United
States.  The various state regulatory commissions retain jurisdiction over
telecommunications carriers, and their facilities and services, to the extent
they are used to provide communications that originate and terminate within the
same state.  The degree of regulation varies from state to state.

     In recent years, the regulation of the telecommunications industry has been
in a state of transition as the United States Congress and various state
legislatures have passed laws seeking to foster greater competition in
telecommunications markets.  The FCC and state utility commissions have adopted
many new rules to implement this legislation and encourage competition.  These
changes, which have not been fully implemented, have created new opportunities
and challenges for the Company and its competitors.  The following summary of
regulatory developments and legislation does not purport to describe all present
and proposed federal, state and local regulations and legislation affecting the
telecommunications industry.  Certain of these and other existing federal and
state regulations are currently the subject of judicial proceedings, legislative
hearings and administrative proposals which could change, in varying degrees,
the manner in which this industry operates.  Neither the outcome of these
proceedings, nor their impact upon the telecommunications industry or the
Company can be predicted at this time.

     The regulatory status of telephone service over the Internet is presently
uncertain.  The Company is unable to predict what regulations may be adopted in
the future or to what extent existing laws and regulations may be found by state
and federal authorities to be applicable to these services or the impact new or
existing laws and regulations may have on the Company's business.  Specific
statutes and regulations addressing this service have not been adopted at this
time and the extent to which current laws and regulations at the state and
federal levels will be interpreted to include Internet telephone services has
not been determined.  There can be no assurance that new laws or regulations
relating to these services or a determination that existing laws are applicable
to them will not have a material adverse effect on the Company's business.

                                       16
<PAGE>

     Federal Regulation.   Although the Company is currently not subject to
price cap or rate of return regulation at the federal level and is not currently
required to obtain FCC authorization for the installation, acquisition or
operation of its domestic interexchange network facilities, it nevertheless must
comply with the requirements of common carriage under the Communications Act of
1934 (the "Communications Act"), as amended.  Pursuant to the Communications
Act, the Company is subject to the general requirement that its charges and
regulations for communications services must be "just and reasonable" and that
it may not make any "unjust or unreasonable discrimination" in its charges or
regulations.  The FCC also has jurisdiction to act upon complaints against any
common carrier for failure to comply with its statutory obligations.  The
Communications Act also requires prior approval for the assignment of an
authorization to provide international service (but not domestic interexchange
service) or the transfer of control (for example, through the sale of stock) of
a company holding an international authorization.  The FCC generally has the
authority to modify or terminate a common carrier's authority to provide
domestic interexchange or international service for failure to comply with
federal laws or the rules of the FCC.  Fines or other penalties also may be
imposed for such violations.  Carriers such as the Company also are subject to a
variety of miscellaneous regulations that, for instance, govern the
documentation and verifications necessary to change a consumer's long distance
carrier, require the filing of periodic reports, and restrict interlocking
directors and management.  Certain other specific regulations applicable to the
Company are discussed below.

     Comprehensive amendments to the Communications Act were made by the
Telecommunications Act of 1996 (the "Telecommunications Act"), which was signed
into law on February 8, 1996.  The Telecommunications Act effected plenary
changes in regulation at both the federal and state levels that affect virtually
every segment of the telecommunications industry.  The stated purpose of the
Telecommunications Act is to promote competition in all areas of
telecommunications.  While it will take years for the industry to feel the full
impact of the Telecommunications Act, it is already clear that the legislation
provides the Company with both new opportunities and new challenges.

     The Telecommunications Act requires ILECs to provide access to their
networks to competing carriers.  Among other things, the Telecommunications Act
requires the ILECs to: (i) provide physical co-location, which allows CLECs such
as the Company and other interconnectors to install and maintain their own
network equipment in ILEC central offices, and virtual co-location if requested
or if physical co-location is demonstrated to be technically infeasible; (ii)
unbundle components of their local service networks so that other providers of
local service can compete for a wider range of local services; (iii) establish
"wholesale" rates for their services to promote resale by CLECs and other
competitors; (iv) establish number portability, which will allow a customer to
retain its existing phone number if it switches from the ILEC to a CLEC; (v)
establish dialing parity, which ensures that customers will not detect a quality
difference in dialing telephone numbers or accessing operators or emergency
services; and (vi) provide telecommunication carriers nondiscriminatory access
to telephone poles, ducts, conduits and rights-of-way.  In addition, the
Telecommunications Act requires ILECs to compensate competitive carriers for
traffic originated by the ILECs and terminated on the competitive carriers'
networks.

     The FCC is charged with establishing national guidelines to implement
certain portions of the Telecommunications Act. The FCC did so in its
Interconnection Order on August 8, 1996.

                                       17
<PAGE>

On July 18, 1997, however, the United States Court of Appeals for the Eighth
Circuit issued a decision vacating the FCC's pricing rules, as well as certain
other portions of the FCC's interconnection rules, on the grounds that the FCC
had improperly intruded into matters reserved for state jurisdiction. On January
25, 1999, the Supreme Court largely reversed the Eighth Circuit's order, holding
that the FCC has general jurisdiction to implement the local competition
provisions of the Telecommunications Act. This action reestablishes the validity
of many of the FCC rules vacated by the Eighth Circuit. Although the Supreme
Court affirmed the FCC's authority to develop pricing guidelines, the Supreme
Court did not evaluate the specific pricing methodology adopted by the FCC and
has remanded the case to the Eighth Circuit for further consideration. In its
decision, the Supreme Court also vacated the FCC's rule that identifies the
unbundled network elements that ILECs must provide to CLECs. The Supreme Court
found that the FCC had not adequately considered certain statutory criteria for
requiring ILECs to make those network elements available to CLECs and must
reexamine the matter. On November 5, 1999, the FCC released an order reaffirming
and clarifying the obligation of ILECs to provide most of the unbundled network
elements it had previously identified, including local loops, network interface
devices and operations support systems. The FCC also required ILECs to provide
additional elements, not previously widely available. These elements include but
are not limited to new types of loops (including xDSL capable loops, sub loop
elements and dark fiber loops), interoffice dark fiber and high capacity
transport and inside wire. These rules are subject to appeal and many require
implementing action by state regulatory agencies.

     In order to obtain access to an ILEC's network, a competitive carrier is
required to negotiate an interconnection agreement with the ILEC covering the
network elements it desires to use.  In the event the parties can not agree, the
matter is submitted to the state public utility commission for binding
arbitration.  To date, the Company has successfully negotiated interconnection
agreements with many of the ILECs in the areas the Company serves.  These
interconnection agreements are of fixed duration, however, and several will
expire in the near future.  These agreements must be renegotiated or re-
arbitrated.  Expired agreements continue in effect as interim agreements until
replaced by new agreements.  When the new agreements take effect they will
supercede the expired agreements and may be applied retroactively.

     In addition, on November 18, 1999, the FCC ordered ILECs to share their
telephone lines with providers of high speed Internet access and other data
services.  This action permits CLECs to obtain access to the high-frequency
portion of the local loop from the ILECs over which the ILEC provides voice
services.  As a result, CLECs will be able to provide DSL-based services over
the same telephone lines simultaneously used by the ILEC for its voice services,
and will no longer need to purchase a separate local loop from the ILEC in order
to provide DSL services.  This ruling may make it easier for CLECs, including
the Company and its competitors, to provide DSL services.

     As a result of the pro-competitive provisions of the Telecommunications
Act, the Company has taken the steps necessary to be a provider of local
exchange services and has positioned itself to be a full service, integrated
telecommunications services provider.  The Company has obtained local
certification in 10 states.  The Company is also taking the steps necessary to
exercise its rights to interconnection, co-location and unbundled network
elements under the Telecommunications Act.

                                       18
<PAGE>

     The Telecommunications Act's interconnection requirements also apply to
interexchange carriers and to all other providers of telecommunications
services, although the terms and conditions for interconnection provided by
these carriers are not regulated as strictly as interconnection provided by the
ILECs.  This may provide the Company with the ability to reduce its access costs
by interconnecting directly with non-ILECs, but may also cause the Company to
incur additional administrative and regulatory expenses in replying to
interconnection requests from other carriers.

     As another part of its pro-competitive policies, the Telecommunications Act
frees the RBOCs from the judicial orders that prohibited their provision of
interLATA services.  Specifically, the Telecommunications Act permits RBOCs to
provide long distance services outside their local service regions immediately,
and will permit them to provide in-region interLATA service upon demonstrating
to the FCC and state regulatory agencies that they have adhered to the FCC's
local exchange service interconnection regulations.  Some RBOCs have filed
applications with various state public utility commissions and the FCC seeking
approval to offer in-region interLATA service.  Some states have denied these
applications while others have approved them, but until recently, the FCC has
denied each of the RBOCs' applications brought before it because it found that
the RBOC had not sufficiently made its local network available to competitors.
In December 1999, however, the FCC approved a Bell Atlantic application for in
region interLATA service in New York, and SBC has recently filed an application
for in region interLATA service in Texas.  The FCC is also considering a
proposal to permit RBOCs to offer immediately high speed, interLATA data
services within their operating regions if they do so through a separate
subsidiary, without first having to demonstrate that they have adhered to the
FCC interconnection regulations discussed above.  In the interim, the FCC, as a
condition of the merger between SBC and Ameritech, permitted the merged entity
to provide advanced data services using a separate subsidiary.  A similar
condition was accepted by Bell Atlantic as part of the process of obtaining in-
region interLATA service authority in New York.  In both of these cases, the
RBOC is forbidden to favor its subsidiary over competing CLECs and is required
to provide data CLECs with discounted loops and other measures to enhance
competition.  Other RBOCs presumably would be able to do the same.

     The Telecommunications Act provides the FCC with the authority to forebear
from imposing any regulations it deems unnecessary, including requiring non-
dominant carriers to file tariffs.  On November 1, 1996, in its first major
exercise of regulatory forbearance authority granted by the Telecommunications
Act, the FCC issued an order detariffing domestic interexchange services.  The
order required mandatory detariffing and gave carriers nine months to withdraw
federal tariffs and move to contractual relationships with their customers.
This order subsequently was stayed by a federal appeals court, and it is unclear
at this time whether the detariffing order will be implemented.  Until further
action is taken by the FCC or the courts, facilities based CLECs will continue
to maintain tariffs for these services.  In June 1997, the FCC issued another
order stating that non-dominant carriers could withdraw their tariffs for
interstate access services.  As a reseller, these tariffs do not apply to the
Company, the underlying service provider is responsible for these tariffs.  If
the Company becomes a facilities based CLEC, the Company's facilities based CLEC
operations will be subject to these tariffs.  The FCC does require facilities
based CLECs to obtain authority to provide service between the United States and
foreign points and to file tariffs on an ongoing basis for international
service.

                                       19
<PAGE>

     The Telecommunications Act also directs the FCC, in cooperation with state
regulators, to establish a Universal Service Fund that will subsidize carriers
that provide service to under-served individuals and in high cost areas.  A
portion of carriers' contributions to the Universal Service Fund also will be
used to provide telecommunications related facilities for schools, libraries and
certain rural health care providers.  The FCC released its order in June 1997.
This order requires the Company to contribute to the Universal Service Fund, but
may also allow the Company to receive payments from the Fund if it is deemed
eligible.  Management does not expect the Company will receive any such funds.
For the last quarter of 1999, the FCC established payment rates for all
interexchange carriers, including the Company, that amount to 5.8% of eligible
interstate and international long distance end user service revenues for the
corresponding period of the previous year.  The FCC allows all interexchange
carriers, including the Company, to recover the international and interstate
portions of these payments by passing the charges through to their customers.
In November 1999, the FCC revised its proposed methodology for subsidizing
service in certain high cost areas which may result in increases in the subsidy
program.  The FCC's implementation of universal service requirements remains
subject to judicial and additional FCC review.

     The FCC has fundamentally restructured the "access charges" that ILECs
charge to interexchange carriers and end user customers to connect to the ILEC's
network to permit ILECs subject to the FCC's price cap rules increased pricing
flexibility as competition becomes established in their markets.  In August
1999, the FCC adopted an order providing additional pricing flexibility to ILECs
subject to price cap regulation in their provision of interstate access
services, particularly special access and dedicated transport.  Some of the
actions taken by the FCC would immediately eliminate rate scrutiny for "new
services" and permit the establishment of additional geographic zones within a
market that would have separate rates.  Additional and more substantial pricing
flexibility will be given to ILECs as specified levels of competition in a
market are reached through the co-location of competitive carriers and their use
of competitive transport.  This flexibility will include, among other items,
customer specific pricing, volume and term discounts for some services and
streamlined tariffing.

     As part of the same August order, the FCC initiated another proceeding to
consider increased pricing flexibility proposals for ILECs access charges.  This
proceeding also will consider the reasonableness of CLEC access rates and seeks
comment on whether the FCC should adopt rules to regulate CLEC access charges.
In addition, the FCC's rulemaking is examining whether any statutory or
regulatory constraints prevent an IXC from declining to accept a CLEC's access
services, and if so under what circumstances.  The outcome of this rulemaking
cannot be predicted.  Other CLEC's have experienced similar problems and the FCC
has ruled on a complaint against AT&T that it must pay such access charges at
the CLEC's tariffed rate.

     On May 21, 1999, a United States court of appeals reversed an FCC order
that had established the factors that are currently used to set the annual price
cap for ILEC access charges.  The court ordered the FCC to further explain the
methodology it used in establishing those factors.  This proceeding also is
ongoing.

     On November 9, 1999, the FCC released a decision which concluded that
advanced services, such as Digital Subscriber Line Service, sold by ILECs to
Internet service providers and

                                       20
<PAGE>

bundled by the Internet service provider with its other services are not subject
to the resale obligations of the Act. This decision will allow ILECs to provide
ISPs with special rate packages for DSL on terms and conditions not available to
the Company in its activity as a CLEC. The Company's Internet subsidiaries may
obtain such special pricing, however.

     A dispute has arisen over the provision of the Telecommunications Act
requiring ILECs to compensate facilities-based CLECs for local calls originating
on the ILEC's network but terminating on the CLEC's network.  Most ILECs argue
that they are not obligated to pay CLECs for local calls made to Internet
service providers.  The CLEC industry has asked state regulatory commissions to
resolve this dispute.  Although this does not impact the Company at present,
because it is not a facilities based CLEC, the Company may become eligible to
claim revenues for terminating such calls in the future if it becomes a
facilities based CLEC.

     On February 25, 1999, the FCC ruled that Internet service provider traffic
is interstate traffic within the FCC's jurisdiction but that its current rules
neither require nor prohibit the payment of reciprocal compensation for these
calls ("ISP Rules").  The FCC determined that state commissions have authority
to interpret and enforce the reciprocal compensation provisions of existing
interconnection agreements and to determine the appropriate treatment of
Internet service provider traffic in arbitrating new agreements.  The FCC also
requested comment on federal rules to govern compensation for these calls in the
future.

     Prior to the FCC's adoption of the ISP Rules, 30 state commissions and
several federal and state courts ruled that reciprocal compensation arrangements
under existing interconnection agreements apply to calls to Internet service
providers.  Four states, however, have ruled that in certain situations
reciprocal compensation arrangements are not applicable to calls to Internet
service providers under at least some agreements entered before the FCC
decision.  Some regional Bell operating companies have asked state commissions
to reopen decisions requiring the payment of reciprocal compensation on Internet
service provider calls.  Subsequent to the FCC decision, at least 19 state
commissions have reaffirmed their prior determinations or ruled for the first
time that reciprocal compensation was due under interconnection agreements
existing prior to the FCC decision.  In some states where state commissions have
ruled that reciprocal compensation should be paid, the amount of such payment is
being disputed by the ILEC.  In addition, there are ongoing disputes concerning
the appropriate treatment of Internet service provider traffic under new
interconnection agreements.  These likely will be resolved in arbitration
proceedings or by new FCC rules.  The United States Court of Appeals for the
District of Columbia Circuit on March 24, 2000, vacated and remanded the FCC's
ISP Rules and required the FCC to explain the rationale for its decision.
Specifically, the Court of Appeals requested the FCC to explain the
applicability of its end-to-end jurisdictional analysis to reciprocal
compensation requirement.

     In 1994 Congress adopted the Communications Assistance for Law Enforcement
Act to insure the law enforcement agencies would be able to conduct properly
authorized electronic surveillance over the new digital and wireless media as
well as traditional wireline carriers.  An interim technical standard was
released in 1997 and the FCC recently required carriers to have additional
capabilities requested by law enforcement authorities and directed that the
interim standard be revised.  Some in the industry believe that the cost of
providing these additional capabilities are unreasonably high and the FCC's
decision has been appealed.  The Company is

                                       21
<PAGE>

not able to predict the outcome of this litigation or the cost of compliance
with whatever standards are ultimately developed.

     State Regulation.  To the extent that the Company provides
telecommunications services which originate and terminate within the same state,
it is subject to the jurisdiction of that state's public service commissions.
The Company currently provides some intrastate telecommunication services in 10
states and is subject to varying degrees of regulation by the public service
commissions of those states.  The Company is currently certified in 12 states to
provide intrastate long distance services.  The Company is certified as a CLEC
in 10 states and has CLEC certifications pending in two additional states.  The
Company is constantly evaluating the competitive environment and may seek to
further expand its intrastate certifications into additional jurisdictions.  The
Company is not subject to price cap or rate of return regulation in any state in
which it is currently certified to provide local exchange service.

     The Telecommunications Act preempts state statutes and regulations that
restrict the provision of competitive local services.  As a result of this
sweeping legislation, the Company will be free to provide the full range of
intrastate local and long distance services in all states in which it currently
operates, and in any states into which it may wish to expand.  While this action
greatly increases the Company's addressable customer base, it also increases the
amount of competition to which the Company may be subject.

     Although the Telecommunications Act's prohibition of state barriers to
competitive entry took effect on February 8, 1996, various legal and policy
matters still must be resolved before the Telecommunications Act's policies
promoting local competition are fully implemented.  The Company continues to
support efforts at the state government level to encourage competition in its
markets under the federal law and to permit integrated communication providers
and CLECs to operate on the same basis and with the same rights as the ILECs.
Despite the still uncertain regulatory environment, the Company so far has been
successful in its pursuit of local certificates from state commissions and in
negotiating interconnection agreements with the ILECs which permit the Company
to meet its business objectives.  However, the Company is now engaged in
negotiations for new interconnection agreements and the outcome of these
negotiations cannot now be predicted.

     In most states, the Company is required to file tariffs setting forth the
terms, conditions and prices for services classified as intrastate (local and
intrastate long distance).  Most states require the Company to list the services
provided and the specific rate for each service.  Under different forms of
regulatory flexibility, the Company may be allowed to set price ranges for
specific services, and in some cases, prices may be set on an individual
customer basis.  Some states also require the Company to seek the approval of
the local public service commission for the issuance of debt or equity
securities or other transactions which would result in a lien on the Company's
property used to provide intrastate service within those states.  Many states
also require approval for the sale or acquisition of a telecommunications
company and require the filing of reports and payments of various fees.  Like
the FCC, most states also consider complaints relating to a carrier's services
or rates within their jurisdictions.

     Local Government Authorizations.  The Company may be required to obtain
from municipal authorities street opening and construction permits to install
and expand its facilities in

                                       22
<PAGE>

certain cities. In some cities, local partners or subcontractors may already
possess the requisite authorizations to construct or expand the Company's
network.

     In some of the areas where the Company intends to provide service, it may
be subject to municipal franchise requirements and may be required to pay
license or franchise fees based on a percentage of gross revenue or other
formula.  There are no assurances that certain municipalities that do not
currently impose fees will not seek to impose fees in the future, nor is there
any assurance that, following the expiration of existing franchises, fees will
remain at their current levels.  The Telecommunications Act requires
municipalities to charge nondiscriminatory fees to all telecommunications
providers, but it is uncertain how quickly this requirement will be implemented
by particular municipalities in which the Company operates or plans to operate
or whether it will be implemented without a legal challenge initiated by the
Company or another integrated communications provider or CLEC.   In some
municipalities the ILECs pay fees that have not been changed in many years.  In
some situations rates for new CLECs have been set higher than the ILEC rates,
however, this practice appears to be diminishing.  CLECs have been able to
successfully challenge these disproportionate rates, however, the municipalities
can effectively delay a CLEC's entry into a new market while the rate is
challenged.  As a reseller of services, the Company is not required to obtain
municipal franchises, but it will have to do so in municipalities where it
becomes a facilities based CLEC in the future.

     The Company also must obtain licenses to attach facilities to utility poles
to build and expand facilities.  Because utilities that are owned by
cooperatives or municipalities are not subject to federal pole attachment
regulation, there is no assurance that the Company will be able to obtain pole
attachment from these utilities at reasonable rates, terms and conditions.

RESTRICTED SECURITIES AND REGISTRATION RIGHTS

     General.  As of the date of this Form 10-K, the public market for the
Common Stock is limited.  The Common Stock is listed on the Nasdaq Over-the-
Counter Bulletin Board System. No prediction can be made as to the effect, if
any, that future sales of shares of the Common Stock (including sales pursuant
to Rule 144) or the availability of shares of Common Stock for future sale will
have on the market price prevailing from time to time. Sales of substantial
amounts of Common Stock (including Common Stock issued upon the exercise of
options or warrants or the conversion of convertible securities), or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock and impair the Company's ability to obtain additional
capital through the sale of equity securities.  See "The market price of the
Company's Common Stock may drop significantly when the restrictions and resale
of many of the Company's existing stockholders lapse" under the caption "Factors
That May Affect the Company's Business, Operating Results and Financial
Condition, and the Price of the Common Stock."

     Restricted Securities.  The Common Stock owned by "Affiliates" of the
Company and the Common Stock that was issued in various private placements
exempt from registration under the Securities Act are "restricted securities"
under Rule 144 promulgated under the Securities Act and may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including exemptions contained in Rule 144.  In
general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated with them in

                                       23
<PAGE>

accordance with Rule 144) who has beneficially owned "restricted securities"
(defined generally as securities acquired from the issuer or an Affiliate of the
issuer in a transaction not involving a public offering) for at least one year,
and including the holding period of any seller of securities unless such seller
is an Affiliate, would be entitled to sell within any three-month period a
number of shares of Common Stock that does not exceed the greater of 1% of the
then-outstanding shares of Common Stock or 1% of the average weekly trading
volume of shares of Common Stock on the Over-the-Counter Bulletin Board System
during the four calendar weeks preceding each such sale. Sales under Rule 144
are also subject to certain manner of sale provisions, notice requirements and
the availability of current public information about the Company. Pursuant to
Rule 144(c), because the Company filed its Form 10-QSB for the quarter ended
September 30, 1999 late, adequate public information will be deemed not to be
available for Rule 144 purposes until the Company has timely filed all of the
reports it is required to file under Sections 13 and 15(d) of the Exchange Act
for one year. Thus, stockholders who have held their shares of Common Stock for
more than one year, but less than two years, and who would otherwise be
permitted to sell their shares of Common Stock pursuant to Rule 144, will not be
permitted to sell their shares pursuant to the exemption provided by Rule 144
until at least November 24, 2000. Therefore, such stockholders will be free to
sell their shares of Common Stock, subject to the volume and other resale
restrictions of Rule 144, provided the Company has timely filed all of its
required reports.

     Any person (or persons whose shares are aggregated with them in accordance
with Rule 144) who is not deemed to have been an Affiliate of the Company at any
time during the three months preceding a sale, and who has beneficially owned
shares for at least two years (including any period of ownership of preceding
non-affiliated holders), would be entitled to sell the shares under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, notice
requirements or public information requirements.  An "Affiliate" of the Company
is a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or under common control with, the Company.

     As of March 31, 2000, 3,032,975 shares of the Company's Common Stock were
sold in registered offerings and, if held by non-affiliates, trade without
restrictions.  An additional 4,566,987 shares of unregistered common stock have
been outstanding in excess of two years and, if held by non-affiliates, trade
without restrictions.  To the knowledge of the Company, the following table sets
forth when certain substantial blocks of the Company's stock will meet the one
and two year holding requirements of Rule 144 and become eligible for trading
assuming the other requirements of Rule 144 can be met at that time.

<TABLE>
<CAPTION>
                                                      Non-Affiliates May
                                                      ------------------
                                                      Trade Subject To
                                                      ----------------
                                                      Manner Of Sale, Notice   Non-Affiliates May
                                                      ----------------------   ------------------
                                                      And Public Information   Trade Without
                                                      ----------------------   -------------
      Block                                           Conditions (1)           Restrictions
      -----                                           --------------           ------------
<S>                                                   <C>                      <C>
1.    1,326,026 shares of Common Stock held by        November 24, 2000        October 6, 2001
      former stockholders of New Millennium (2)
</TABLE>

                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                      Non-Affiliates May
                                                      ------------------
                                                      Trade Subject To
                                                      ----------------
                                                      Manner Of Sale, Notice   Non-Affiliates May
                                                      ----------------------   ------------------
                                                      And Public Information   Trade Without
                                                      ----------------------   -------------
      Block                                           Conditions (1)           Restrictions
      -----                                           --------------           ------------
<S>                                                   <C>                      <C>
 2.   27,581,359 shares of Common Stock held by       November 24, 2000        April 27, 2001
      former stockholders of New Millennium (2)

 3.   6,485,859 shares of Common Stock held by        November 24, 2000        May 5, 2001
      former stockholders of New Millennium (2)

 4.   493,507 shares of Common Stock held by former   November 24, 2000        July 29, 2001
      stockholders of New Millennium (2)

 5.   3,248,764 shares of Common Stock owned by       November 24, 2000        August 29, 2001
      Lucent

 6.   16,641,628 shares of Common Stock exchanged     November 24, 2000        July 29, 2001
      for shares of New Millennium common stock
      issued in the First Private Placement

 7.   9,968,798 shares of Common Stock exchanged      November 24, 2000        September 26, 2001
      for shares of New Millennium common stock
      issued in the Second Private Placement

 8.   1,762,554 shares issued in the WebWizard        January 31, 2001         January 31, 2002
      Acquisition

 9.   2,150,000 shares issued in the P.V. Tel.        February 24, 2001        February 24, 2002
      Acquisition

10.   2,100,000 shares issued in the Third Private    March 1, 2001            March 1, 2002
      Placement

11.   1,000,000 shares of Common Stock issued to      March 17, 2001           March 17, 2002
      Jim Blanchard

12.   650,000 shares of Common Stock issued to        March 17, 2001           March 17, 2002
      Louis Friedman

13.   3,100,000 shares of Common Stock issued in      March 31, 2001           March 31, 2002
      the Alpha Computer Acquisition
</TABLE>

                                       25
<PAGE>

<TABLE>
<CAPTION>
                                                      Non-Affiliates May
                                                      ------------------
                                                      Trade Subject To
                                                      ----------------
                                                      Manner Of Sale, Notice   Non-Affiliates May
                                                      ----------------------   ------------------
                                                      And Public Information   Trade Without
                                                      ----------------------   -------------
      Block                                           Conditions (1)           Restrictions
      -----                                           --------------           ------------
<S>                                                   <C>                      <C>
14.   3,000,000 shares of Common Stock issued in      April 14, 2001           April 14, 2002
      the Fourth Private Placement
</TABLE>

(1) Because the Company's Form 10-QSB for the quarter ended September 30, 1999,
    was filed late on November 24, 1999, shares that would otherwise be
    eligible to trade with restrictions prior to November 24, 2000 may not.

(2) The time such stockholders are deemed to have owned such shares of Common
    Stock is determined by tacking the time they held their shares of New
    Millennium common stock to the time they have held their shares of the
    Company's Common Stock for which their shares of New Millennium common
    stock were exchanged.

     On March 30, 2000, the Company entered into an agency agreement with
DotPlanet.com pursuant to which DotPlanet.com will the Company's
telecommunications, Internet and Web Hosting services in exchange for
commissions payable in the form of warrants to purchase shares of the Common
Stock. The agreement provides for payment to DotPlanet.com of warrants to
purchase up to 1,000,000 shares of the Company's Common Stock at an exercise
price of $4.50 per share, based on producing new customers for the Company that
generate certain monthly revenue targets.

     On April 14, 2000, the Company's board of directors approved a Finders Fee
Agreement with One Up Ventures, LLC, an entity controlled by Louis Friedman,
former Chairman of the Board of the Company, providing for the payment to One Up
Ventures of 500,500 shares of Common Stock in consideration of One Up Ventures'
services in connection with the first closing under the Fourth Private Placement
and up to 924,000 additional shares of Common Stock in connection with
subsequent closings under the Fourth Private Placement.

     On April 14, 2000, the Company's board of directors also approved a form of
consulting agreement between the Company and Louis Friedman, doing business as
One Up Ventures or One Up Ventures Partners LP. Pursuant to the consulting
agreement, One Up Ventures will provide various strategic consulting services
for the Company, including arranging acquisitions, future financings and hiring
of key employees, in exchange for fees to be agreed upon between the Company and
Mr. Friedman on a case-by-case basis, payable in the form of Common Stock. The
form of consulting agreement approved by the Company's board has a term of one
year, subject to extension upon mutual agreement of the parties or early
termination at the election of either party. The Company anticipates executing
the consulting agreement in the near future.

     In addition, on April 14, 2000, the Company's board of directors approved
the issuance to One Up Ventures of shares of Common Stock as follows: (i)
336,000 shares of Common Stock in consideration of One Up Ventures' services in
connection

                                      26
<PAGE>

with the Third Private Placement, and (ii) 264,000 shares of the Company's
Common Stock in consideration of One Up Ventures' services in connection with
the recruiting and hiring of Benjamin J. Holcomb as the Company's Chairman and
Chief Executive Officer.

     Registration Rights. The Company has granted "demand" and "piggyback"
registration rights to various stockholders in connection with the issuance of
shares of Common Stock in private equity financings and acquisitions.  Subject
to the conditions provided in the registration rights agreements governing each
grant of registration rights (i) the demand registration rights permit holders
of the applicable shares to request one demand registration within a specified
time period, and (ii) the piggyback registration rights permit the holders of
the applicable shares to include their Common Stock in the registration by the
Company of Common Stock, except registrations on certain registration forms.

     The following table sets forth the significant blocks of the Company's
Common Stock that are subject to various types of registration rights.  For a
more detailed description of these rights, see the description of such issuance
set forth under the caption "Item 1. Business - Recent Company History" or "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

<TABLE>
<CAPTION>
      Block                                                               Registration
      -----                                                               ------------
                                                                          Rights
                                                                          ------
<S>                                                                       <C>
1.    16,808,918 shares of Common Stock exchanged for shares of New       Piggyback
      Millennium common stock issued in the First Private Placement

2.    9,968,798 shares of Common Stock exchanged for shares of New        Piggyback
      Millennium common stock issued in the Second Private Placement

3.    3,248,764 shares of Common Stock owned by Lucent                    Piggyback

4.    1,400,000 shares issued in the P.V. Tel. Acquisition                Piggyback

5.    1,400,000 shares issuable pursuant to conversion of the note        Demand
      issued in the Third Private Placement

6.    500,000 shares of Common Stock issued in the Alpha Computer         Piggyback
      Acquisition

7.    3,000,000 shares of Common Stock issued in the Fourth Private       Demand and
      Placement                                                           Piggyback
</TABLE>

FACTORS THAT MAY AFFECT THE COMPANY'S BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION, AND THE PRICE OF THE COMMON STOCK

     An investment in the Company's Common Stock involves a high degree of risk.
Investors should carefully consider the risks described below and the other
information in this

                                       27
<PAGE>

Form 10-K when evaluating an investment in the Company's Common Stock. If any of
the following risks actually occurs, the Company's business, financial condition
or results of operations would likely suffer materially. As a result, the
trading price of the Company's Common Stock may decline substantially.

The Company's limited operating history makes it difficult to evaluate the
Company's business and prospects.

     The Company, having commenced operations in its present form with the Avana
Acquisition in May 1999 and the Grace Merger in September 1999, operates
primarily as an ISP serving the Atlanta, Georgia Market.  During the first
quarter of 2000, the Company expanded its operations as an ASP, CLEC and
provider of additional enhanced telecommunications products and services by
completing several significant acquisitions.  Accordingly, there is a limited
operating history with which to evaluate the Company's business, strategies and
performance and the value of the Common Stock.

The Company has incurred losses and has experienced negative operating cash flow
to date and expects that the losses and negative operating cash flow will
continue and increase.

     The Company has incurred significant losses and experienced negative
operating cash flow for each month since the Grace Merger.  The Company expects
to continue to incur significant losses and negative operating cash flow for the
foreseeable future. If the Company's revenues do not grow as expected or capital
and operating expenditures exceed the Company's plans, the business, prospects,
financial condition and results of operations of the Company will be materially
adversely affected.  As of December 31, 1999, the Company had an accumulated
deficit of approximately $3,115,833.  The Company cannot be certain if or when
it will be profitable or if or when it will generate positive operating cash
flow.  The Company expects its operating expenses to increase significantly as
it expands its business. In addition, the Company expects to make significant
additional capital expenditures in 2000 and in subsequent years.  The Company
also expects to substantially increase its operating expenditures, particularly
network and operations and sales and marketing expenditures, as it implements
its business plan. However, there can be no assurance that the Company's
revenues will increase as a result of this increased spending.

The Company's business model is unproven, and may not be successful.

     The Company does not know whether its business model and strategy will be
successful. If the assumptions underlying its business model are not valid or it
is unable to implement its business plan, achieve the predicted level of market
penetration or obtain the desired level of pricing for its services for
sustained periods, the Company's business, prospects, financial condition and
results of operations could be materially adversely affected.  The Company has
adopted a strategy that is different from that of certain other Internet and
telecommunications companies.  The Company intends to focus on marketing
"bundled" Internet, data and telecommunications products and services directly
to individuals and small and medium sized businesses in small and mid-sized
markets.  In contrast, many of the Company's competitors focus on one or a small
subset of the products and services that the Company plans to offer and they
offer such products and services to intermediaries who, in turn, resell such
products and

                                       28
<PAGE>

services to end users through their sales forces. In addition, many of these
competitors are currently focused primarily on offering their products and
services in large metropolitan areas. Certain of the Company's target markets
are within the larger metropolitan areas where its competitors are focused on
providing products and services. The Company's unproven business model makes it
difficult to predict the extent to which its services will achieve market
acceptance. To be successful, the Company must deploy its network in a
significant number of its selected markets and convince its target customers to
utilize its services. It is possible that the Company may never be able to
deploy its network as planned or achieve significant market acceptance,
favorable operating results or profitability.

If the Company fails to recruit qualified personnel in a timely manner and
retain its employees, it will not be able to execute its business plan and its
business will be harmed.

     To meet its business plan, the Company needs to hire a substantial number
of qualified personnel, particularly sales and marketing, engineering and other
technical personnel.  If the Company is unable to recruit qualified personnel in
a timely manner or to retain its employees, it will not be able to execute its
business plan.  In particular, if the Company is unable to recruit and retain a
sufficient number of qualified personnel, including many who must be recruited
to work locally in the new markets where it provides or intends to provide
services, the Company may not be able to commence service as quickly as it
expects in those new markets and, as a result, its revenue growth may be lower
than it expects and its business may be harmed.  The Company's industries are
characterized by intense competition for, and aggressive recruiting of, skilled
personnel, as well as a high level of employee mobility.  Many of the Company's
future employees must be recruited to work locally in the new markets where the
Company intends to establish a presence.  The combination of the Company's local
sales and marketing strategy and the competitive nature of its industries may
make it difficult to hire qualified personnel on a timely basis and to retain
its employees.

The Company's senior management team has little experience working together, and
the loss of key personnel could adversely affect the Company's business.

     The Company depends on a small number of executive officers and other
members of its senior management to work effectively as a team, to execute its
business strategy and business plan, and to manage employees located throughout
the Southeastern United States.  The loss of key managers or their failure to
work effectively as a team could have a material adverse effect on the Company's
business and prospects.

Failure to obtain space for the Company's equipment in the local telephone
companies' central offices in its target markets could adversely affect its
business.

     The Company's strategy requires it to obtain space for its equipment in
those central offices of the traditional local telephone companies that already
serve a large number of its target customers.  Failure to obtain required space
to locate its equipment in those central offices, known as collocation space, on
a timely basis could have a material adverse effect on the Company's business.
In addition to negotiating and entering into interconnection agreements with
traditional telephone companies, the Company must obtain collocation space in
each central office in which it intends to locate equipment.  The Company may
not be able to secure

                                       29
<PAGE>

collocation space in the central offices of its choice on a timely basis. The
Company expects that central office space will become increasingly scarce as
demand increases. In addition, the terms of the Company's co-location agreements
are generally one to two years and are subject to certain renegotiation, renewal
and termination provisions. Failure to obtain collocation space, or failure to
renew collocation agreements on reasonable terms, could have a material adverse
affect on the Company's business, operating results and financial condition.

The Company depends on two long distance carriers to connect its network.

     Data is transmitted across the Company's network via transmission
facilities that it leases from Qwest Communications and Global Crossing Ltd.
Failure of these carriers to provide service or to provide quality service may
interrupt the use of the Company's services by its customers which may have a
material adverse affect on the Company's business, operating results and
financial condition.

The Company may not be able to continue to grow its business if it does not
obtain significant additional funds on acceptable terms during 2000.

     The actual amount and timing of the Company's future capital requirements
will depend on the demand for its services and regulatory, technological and
competitive developments which could differ materially from the Company's
estimates.  The Company may not be able to raise sufficient debt or equity
capital on terms that it considers acceptable, if at all.  If the Company is
unable to obtain adequate funds on acceptable terms, its ability to deploy and
operate its network, fund its expansion or respond to competitive pressures
would be significantly impaired.

The Company may be subject to risks associated with acquisitions.

     The Company made several significant acquisitions in 1999 and the first
quarter of 2000 and may acquire additional businesses in the future, although
the Company has no definitive agreements to do so at this time. Any acquisition,
including the recently-completed acquisitions, may not produce the revenue,
earnings or business synergies that the Company anticipates, and an acquired
business might not perform as the Company expects.  If the Company pursues any
future acquisition, its management could spend a significant amount of time and
effort in identifying and completing the acquisition and may be distracted from
the operation of the Company's business.  The Company will probably have to
devote a significant amount of management resources to integrating any acquired
business, including the businesses acquired in the past year, with its existing
operations, and such integration may not be successful.

                                       30
<PAGE>

The market price of the Company's Common Stock may drop significantly when the
restrictions on resale by many of the Company's existing stockholders lapse.

     As of March 31, 2000, the Company will have approximately 85,133,457 shares
of Common Stock outstanding.  At such time approximately 82,100,482 shares, or
96.4%, of the Company's outstanding Common Stock was subject to restrictions on
resale under U.S. securities laws. As these restrictions on resale end,
beginning in November 2000, the market price of Common Stock could drop
significantly if holders of these shares sell them or are perceived by the
market as intending to sell them.  These potential sales also may make it
difficult for the Company to sell equity securities in the future at a time and
price that the Company deems appropriate.  See "Item 1.  Business -- Restricted
Securities and Registration Rights."

FORWARD LOOKING STATEMENTS

     Certain statements set forth in this Form 10-K of the Company constitute
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and are subject to the safe harbor created by such
section. Such statements are identified by phrases such as "will likely
result," "are expected to," "will continue," "is anticipated," "estimated,"
"project," "believe," or similar expressions. Certain factors that could cause
results to differ materially from those described in the forward looking
statements are enumerated in Item 1. "Business--Factors that May Affect the
Company's Business, Operating Results and Financial Condition, and the Price of
the Common Stock" and elsewhere in this Form 10-K. This Annual Report on Form
10-K (including those items incorporated by reference), including the
Consolidated Financial Statements and the notes thereto, should be read in its
entirety for a complete understanding the Company's business, operating results
and financial condition.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The name and age of each director and executive officer of the Company as
of March 1, 2000, together with a brief description of the principal occupation
or employment of each such person during the past five years, is set forth
below.  Executive officers serve at the pleasure of the board of directors and
are generally elected at each annual organizational meeting of the board of
directors.  Directors are elected by the Company's stockholders each year at the

                                       31
<PAGE>

Company's annual meeting of stockholders or, when the need arises, by a majority
of the remaining directors in order to fill vacancies on the board in between
annual meetings of stockholders.

      Name                                   Title                         Age

Benjamin F. Holcomb          Chairman and Chief Executive Officer           48
James M. Blanchard           Director, President                            38
Dr. Lee H. Silverstein       Director                                       40
Peter A. Tierney             Director                                       40
Scott H. Barber              Vice President, Chief Technology Officer       40
Joseph T. Buck               Vice President, Engineering / Facilities       44
Nicholas E. Farsi            Vice President, Chief Information Officer      47
James C. Foregger            Director of Finance                            53
Sharon S. Quaintance         Vice President, Customer Operations            44
Paul A. Reynolds             Vice President, Engineering / Support          36
Wendy L. Squires             Controller and Corporate Secretary             31
Dennis P. Werner             Vice President, Chief Operating Officer        50

     Benjamin F. Holcomb.  Mr. Holcomb was elected a director by the board of
directors on February 18, 2000, to fill the vacancy created upon the resignation
of Richard Granville.  Mr. Holcomb became Chief Executive Officer of the Company
on February 18, 2000.  Mr. Holcomb formerly was president of Europe and
Asia/Pacific for BellSouth International (1997 to 1999). Prior to that he was
president of BellSouth's American Cellular Communications unit (1987 to 1997).
He is a graduate of the University of Tennessee.

     James M. Blanchard.  Mr. Blanchard was elected a director by the board of
directors on September 30, 1999.  Mr. Blanchard became President and Chief
Operating Officer of the Company on September 30, 1999.  Mr. Blanchard
relinquished the title of Chief Operating Officer on March 1, 2000.  Mr.
Blanchard joined Avana as a consultant in June 1999.  From January 1999 to
September 1999, Mr. Blanchard was a consultant for Lifetech Corporation, The
Personal Solutions Group, Inc. and The International Communications & Media
Management Group, Inc. in addition to the Company.  From April 1998 to January
1999 Mr. Blanchard served as senior officer of The Personal Solutions Group,
Inc.  From April 1997 through March 1998 Mr. Blanchard served as the Senior Vice
President, Business Development of Entergy Corporation.  From November 1992 to
March 1997 Mr. Blanchard served in a senior management capacity at Rollins, Inc.

     Dr. Lee H. Silverstein. Dr. Silverstein was elected a director by the board
of directors on September 28, 1999, in connection with the Grace Merger.  Dr.
Silverstein is a practicing periodontic surgeon and has been President and Chief
Operating Officer of Kennestone Peridontics, P.C., a periodontic surgical
practice, and its related entities, Kennestone Periodontics of Windy Hill, P.C.,
Kennestone Periodontics of Vinnings, P.C. and Kennestone Periodontics of
Marietta, P.C., since 1991.  Dr. Silverstein is also President of Kennestone
Interactive, Inc., an educational center and recording studio engaged in
commercial ventures; Kennestone, LLC, a real estate holding company; and
Kennestone Periodontics, L.P., a holding company that purchases bulk supplies
for Kennestone Periodontics, P.C. and Kennestone, LLC.  Dr. Silverstein

                                       32
<PAGE>

is also a member of the Board of Directors of Partners at Park Place LLC, a real
estate holding company and the Ben Massel Dental Clinic.

     Peter A. Tierney.  Mr. Tierney was elected a director by the board of
directors on September 28, 1999, in connection with the Grace Merger.  Mr.
Tierney has been President and Chief Operating Officer of Millennium Optical
Networks, Inc., a facilities based competitive local exchange carrier, since
January 1999.  Prior to joining Millennium Optical, he was senior manager for
telecommunications services for MCI Telecommunications Corporation (1990 to
1995). Prior to that he held telecommunications sales positions with Time Warner
Communications (1995 to 1998).

     Scott H. Barber.  Mr. Barber became Vice President, Chief Technology
Officer of the Company on May 17, 1999.  Prior to that he was Technology
Consultant at ICG Communications (1997 to 1999).  Prior to that he was Network
Technical Consultant for IBM Value Added Resellers (1995 to 1997).  Prior to
that he was an advisory Network Consultant and Account Sales Executive with IBM
(1984 to 1995).  He earned his Bachelor and MBA degrees from Eastern Kentucky
University.

     Joseph T. Buck.  Mr. Buck became Vice President, Engineering/Facilities of
the Company on February 7, 2000.  Prior to joining the Company, Mr. Buck was
President and COO of P.V. Tel.ecom Enterprises, Inc. a facilities based CLEC in
7 states (May 1997 to February 2000).  Prior to that he served as Vice
President, Operations and Engineering at ICG Access Services (June 1994 to
November 1996).

     Nicholas E. Farsi.  Mr. Farsi became Vice President, Chief Information
Officer of the Company on March 2, 2000.  Prior to joining the Company, Mr.
Farsi was an information technology senior director at BellSouth Cellular
Corporation (January 1994 to February 2000).  He is a graduate of The Citadel
and completed technical courses at the Massachusetts Institute of Technology
(MIT).

     James C. Foregger.  Mr. Foregger joined the Company as Corporate Controller
in September 1999, and became Director of Finance in January 2000.  Prior to
joining the Company Mr. Foregger was a financial consultant for FT Mortgage Co.,
Inc. (November 1997 to August 1999).  In addition to his consulting endeavors,
Mr. Foregger was Vice President - Operations (Principal) at Dow Guarantee
Mortgage Corp. in Atlanta (August 1996 to October 1997).  Prior to his
experience with Dow Guarantee, Mr. Foregger was Vice President - Operations for
Community Development at Woodside Development, LP.  He holds a Bachelor of
Business Administration degree, in Accounting, from Florida Atlantic University.

     Sharon S. Quaintance.  Ms. Quaintance became Vice President, Customer
Operations of the Company on January 28, 2000.  Ms. Quaintance joined the
Company after working as Director - Contract Management for CHR Solutions
(January 1997 to February 2000).  Prior to that, she worked at GTE Corp. for 16
years in various regulatory, marketing, legislative, and public affairs
positions.  She graduated from the University of Southern California and earned
an MBA, magna cum laude, from Loyola University.

                                       33
<PAGE>

     Paul A. Reynolds.  Mr. Reynolds became Vice President, Engineering/Support
of the Company on February 7, 2000.  Mr. Reynolds was a Vice President of
technology development for P.V. Tel. prior to its acquisition by the Company
(1997 to 2000).  He previously served as a director of operations and facilities
for HomePlace of America, Inc. (1988 to 1996).  He is a graduate of the
University of South Carolina.

     Wendy L. Squires.  Ms. Squires became Controller of the Company on January
10, 2000.  She previously served as a Manager with Deloitte Consulting (1994 to
1999).  She is a graduate of Georgia State University.

     Dennis P. Werner.  Mr. Werner became Vice President, Chief Operating
Officer of the Company on March 1, 2000.  Prior to joining the Company, Mr.
Werner was Vice President of Sales at ChoicePoint, Inc. (1998 to 1999).  Prior
to that he was a 25 year senior management employee with American Express
Company, Travel Related Services (1973 to 1998).  He is a graduate of the
University of Kentucky and did post graduate work at the Colgate Darden Graduate
School, University of Virginia.

Employees

     As of December 31, 1999, the Company had 55 employees.  As of March 1,
2000, the Company had 94 employees.  The Company believes that its relations
with its employees are good.

ITEM 2.  PROPERTIES

     The Company leases all of its offices and facilities and does not own any
real estate.

     The Company's corporate headquarters and principal operations are located
in a 17,340 square foot facility located at 1690 Chantilly Drive, Atlanta
Georgia, 30324.  This facility houses the Company's senior management and
corporate support staff, the Atlanta sales and marketing staff, the Atlanta
operations staff, the Company's principal Internet data and telecom facilities,
and the Company's centralized operations and customer support team.

     The data center facilities are fully operational with state-of-the-art
fiber optic network access and filtered power and environmental controls
systems.  Internal and co-location customer automation services include storage
management and content filtering options as well as an automated tape library
that backs up all servers once every 24 hours.

     During the first quarter of 2000 the Company, through the acquisition of
WebWizard, acquired 4,300 square feet of leased premises at 650 Douglas Avenue,
Altamonte Springs, Florida 32714, which houses the WebWizard facilities.  The
Company also acquired in the first quarter of 2000, 8,100 square feet of leased
premises at 250 Commerce Boulevard, Altamonte Springs, Florida 32714, pursuant
to the Alpha Acquisition.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is party to various legal actions that are incidental to its
business. While the outcome of legal actions cannot be predicted with certainty,
the Company believes that the outcome of any of these proceedings, or all of
them combined, will not have a material adverse effect on its consolidated
financial position, results of operations or cash flows.

                                       34
<PAGE>

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

     There were no matters submitted to a vote of the Company's stockholders
during the quarter ended December 31, 1999.

                                       35
<PAGE>

                                    PART II

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

     The Common Stock of the Company is listed on the Nasdaq Over-the-Counter
Bulletin Board and trades under the symbol "GCDV."  As of December 31, 1999,
there were 574 shareholders of record of the Company's Common Stock.  To date,
the Company has not paid any dividends on its Common Stock and does not expect
to pay any dividends in the foreseeable future.  Instead, the Company intends to
retain any earnings to finance the growth and development of the Company's
businesses.

     The following tables set forth the high and low bid prices of the Company's
Common Stock for each full quarterly period since the Company began doing
business in its present form on September 28, 1999 (the effective date of the
Grace Merger).  Although, as a result of the Grace Merger, New Millennium became
a wholly owned subsidiary of the Company, the Grace Merger was accounted for as
an acquisition of Old Grace by New Millennium because, following the
transaction, the former shareholders of New Millennium owned a substantial
majority of the Company's outstanding Common Stock.  Accordingly, the stock
prices of Old Grace prior to September 28, 1999 are not presented.  The
quotations reflect inter-dealer prices, without retail mark-ups, markdowns or
commissions and may not represent actual transactions.

                                 Year 1999
                                 ---------

                                                High         Low
                                                -----        ---
Fourth Quarter (Oct.-Dec.)                      $7.25        $4.00

                                 Year 2000
                                 ---------

                                                High         Low
                                                ----         ---
First Quarter (Jan.-March)                      $7.25        $4.63


     As of March 31, 2000, of the Company's 82,033,457 shares of Common Stock,
only 4,359,001 or 5.31%, was registered or could trade without restrictions
pursuant to Rule 144 promulgated under the Securities Act.  See "Restricted
Securities and Registration Rights" for a description of when the Company
believes certain significant unregistered blocks of Common Stock will be
eligible to trade pursuant to Rule 144, assuming certain other conditions are
met.  In addition, see "The market price of the Company's Common Stock may drop
significantly when restrictions on resale by many of the Company's existing
stockholders lapses" under the caption "Factors That May Affect The Company's
Business, Operating Results and Financial Condition, and the Price of the Common
Stock."

ITEM 6.  SELECTED FINANCIAL DATA

                                       36
<PAGE>

<TABLE>
<CAPTION>

                                                                       For the Year Ended
                                                                          December 31,
                                                    -----------------------------------------------------
                                                             1999                            1998
                                                    --------------------           ----------------------
<S>                                                 <C>                            <C>
Statement of Operations Data:
Revenues                                                     $   679,415             $    -
 Loss from Operations                                         (2,967,921)                         (20,855)
 Total other income (expense)                                   (127,171)                             114
 Net loss                                                    $(3,095,092)                        $(20,741)
 Basic and diluted loss per common share                           (0.07)                              --
 Cash dividends declared per common share                             --                               --
Weighted average basic and diluted common shares(1)           44,367,250                               --

                                                                      As of December 31,
                                                    -----------------------------------------------------

                                                          1999                             1998
                                                    --------------------           ----------------------
<S>                                                 <C>                            <C>
Selected Balance Sheet Data:
Cash and cash equivalents                                    $   102,481                            3,719
Investments in certificates of deposit                         3,700,000                               --
Equipment and software                                         2,397,889                           12,611
Total assets                                                   7,598,815                           17,150
Total liabilities                                              6,444,453                            5,391
                                                                                                   ------
Stockholders' equity                                           1,154,362                           11,759
                                                                                                   ------
Book value per share                                                 .02                               --
Common shares issued and outstanding(1)                       73,871,895                               --
</TABLE>

(1) On September 28, 1999, a wholly-owned subsidiary of Old Grace was merged
    with and into New Millennium in the Grace Merger. All of the shares of New
    Millennium outstanding at the time of the Grace Merger were exchanged for a
    total of 66,246,933 shares of the Company's common stock at a ratio of
    66.3013 to 1.
(2) The Company believes that 410,000 shares of its Common Stock that are deemed
    to be outstanding were not validly issued (the "Disputed Shares"). In
    January 1995, Old Grace issued 80,000 of the Disputed Shares to an
    unaffiliated third party in exchange for the recipient's contractual
    obligation to identify an acquisition candidate and consummate a merger
    between Old Grace and such candidate. No such merger was consummated. In
    April, 1995, Old Grace issued 330,000 of the Disputed Shares to an
    unaffiliated third party as a finders fee with respect to two transactions
    which were never consummated. In May 1995, Old Grace issued to its transfer
    agent a stop transfer order for all of the Disputed Shares. The Company has
    commenced litigation seeking a court order declaring that the Disputed
    Shares were not validly issued and are therefore not outstanding. Neither of
    the parties adverse to the Company responded to the Company's claims within
    the time period required by the court's rules, and the Company expects that
    it will receive a default judgement against each adverse party in the near
    future. The Company is treating the Disputed Shares as outstanding in this
    Form 10-K and the accompanying Consolidated Financial Statements, and will
    continue to so treat the Disputed Shares in all subsequent reports and
    financial statements until such time as a judicial order is issued declaring
    that the Disputed Shares were not validly issued.


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

     The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the consolidated
results of operations and financial condition of the Company.  The discussion
should be read in conjunction with the Company's Consolidated Financial
Statements for the twelve months ended December 31, 1999 and 1998.

     The predecessor to the Company, New Millennium, was formed on October 6,
1998, and merged with and into a subsidiary of Old Grace on September 28, 1999.
On May 5, 1999, New Millennium acquired Avana.  Although, as a result of the
Grace Merger, New Millennium became a wholly owned subsidiary of the Company,
the Grace Merger was accounted for as an acquisition of Old Grace by New
Millennium because, following the transaction, the former shareholders of New
Millennium owned a substantial majority of the Company's outstanding Common
Stock.  Accordingly, the Consolidated Financial Statements of the Company are
the financial statements of New Millennium adjusted for the assumed acquisition
of the net assets of Old Grace in exchange for the issuance of the Company's
Common Stock.  In accordance with

                                       37
<PAGE>

purchase accounting principles, the net assets of New Millennium were accounted
for at their historical cost, and the net assets of Old Grace were accounted for
at their fair value as of September 28, 1999. No goodwill was recorded as a
result of the Grace Merger.

     This section does not contain a year-to-year comparison of the Company's
1999 and 1998 financial information because the 1998 financial information only
reflects a partial year of operations and the Company did not have any
significant operations in 1998.

RESULTS OF OPERATIONS

     Revenues:  Revenues for the year ended December 31, 1999, were derived from
telecommunications sales and commissions, and from providing Internet and Web
hosting services.  Telecommunications revenues were $261,662 while Internet and
Web hosting revenues were $417,753.  Revenues for the twelve month period ended
December 31, 1999, totaled $679,415.  The acquisition of Avana Communications
Corporation was completed on May 5, 1999.  The acquisition was accounted for as
a purchase and the results of Avana's operations were included in the
consolidated statement of operations from the date of acquisition.

     Cost of Services:  Cost of services for providing Internet service includes
salaries and wages of those employed in customer service and sales and in the
technical support areas needed to maintain and upgrade the system.  Cost of
services for the year ended December 31, 1999, were $668,269.

     Sales and Marketing Expenses:  Sales and marketing expenses include the
cost of sales and marketing personnel, advertising costs for the Internet
operations and development of the promotional campaign for both
telecommunications sales and corporate branding.  For the year ended December
31, 1999, sales and marketing expenses were $323,830.  These expenses are
expected to increase as the Company pursues an aggressive sales effort.

     General and Administrative Expenses:  Included in General and
Administrative expenses are salaries and wages, professional fees, travel
expenses, office supplies and other general expenses. Expenses in these
categories increased due to growth in the number of employees, the closing of
the Grace Merger, increased costs related to potential acquisitions and related
financing activities. For the year ended December 31, 1999, General and
Administrative expenses were $2,313,825.

     Depreciation and Amortization:  Depreciation expenses are computed using
the straight-line method based upon estimated useful lives of the asset,
generally three to ten years. Goodwill and other intangible costs are amortized
over a 60-month period. For the twelve months ended December 31, 1999,
depreciation expense and amortization expense were $265,481 and $75,931,
respectively.

     Interest Expense:  The Company currently incurs interest expense on its
lines of credit and under capitalized leases.  For the twelve months ended
December 31, 1999, interest expense was $169,360.

                                       38
<PAGE>

     Interest Income:  The Company currently earns interest income on cash and
cash equivalents and investments.  For the twelve months ended December 31,
1999, interest income was $42,189.

LIQUIDITY AND CAPITAL RESOURCES

     For the twelve months ended December 31, 1999, the Company's operating
activities required net cash of $3,095,092.  Working capital increased by
$8,334,168 for the twelve months ended December 31, 1999.  Working capital was
increased by proceeds from the two private placements, as described in footnote
10 of the Consolidated Financial Statements, which increase was offset in part
by the current portion of leases capitalized during the twelve month period and
draws against the lines of credit used for the same period.  Changes in net cash
from operations resulted primarily from the loss for the period offset in part
by non-cash items of depreciation, amortization and compensation paid in the
form of stock.  The changes in net cash were also affected by an increase in
accounts receivable, prepaid expenses, other assets, advances to officers and
deferred revenue partially offset by an increase in accounts payable and accrued
liabilities.

     Cash used for investing activities was $5,046,392 for the twelve months
ended December 31, 1999.  The cash was used primarily to fund investments in
certificates of deposits totaling $3,700,000, which the Company has pledged as
collateral for its bank lines of credit.  Expenditures of cash for property and
equipment were made totaling $392,579 for the twelve months ended December 31,
1999.  Expenditures for acquisitions of businesses were net $519,314.

     The following is a summary of the financing activities occurring in 1999
and prior to the filing date of this Form 10-K in 2000:

First Private Placement

     During July 1999, New Millennium effected a private placement of 128 units
("Units") consisting of 2,000 shares of New Millennium common stock and a
warrant to purchase 1,333 shares of Grace Common Stock (the "First Private
Placement"). The Units were sold for $6,400 per Unit.  The warrants are
exercisable at $4.50 per share of Grace Common Stock and expire on July 29,
2001.  An aggregate of 251,000 shares of New Millennium common stock were issued
(which later converted into 16,641,628 shares of the Company's Common Stock in
the Grace Merger) and warrants to purchase 167,290 shares of Grace Common Stock
were granted for net proceeds of $777,600.  The net proceeds were used for
reorganization expenses related to the Grace Merger and for working capital
requirements.

     It was contemplated that warrant agreements setting forth the terms and
conditions of the warrants granted in the First Private Placement would be
executed.  Such warrant agreements have yet to be executed.  Grace believes that
such Warrant agreements will be executed in the near future.

     At the time of the First Private Placement, New Millennium determined the
fair market value of shares of New Millennium common stock to be $3.20 per share
(or .05 per share of Company Common Stock, based on the exchange ratio in the
Grace Merger).  At the time of the

                                       39
<PAGE>

First Private Placement, New Millennium determined the fair market value of the
warrants for shares of Grace Common Stock to be $0.0 per warrant.

     All of the shares of New Millennium common stock issued in the First
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) and the shares of Grace Common
Stock issuable upon the exercise of the warrants are "restricted securities"
under Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").  Such securities may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule 144.  See "Item 1.
Business--Restricted Securities and Registration Rights" above for a summary of
the exemptions available under Rule 144.

     All of the shares of New Millennium common stock issued in the First
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) and the shares of Grace Common
Stock issuable upon the exercise of the warrants were granted certain
"piggyback" registration rights.  A registration rights agreement, setting forth
all of the specific terms and conditions of such piggyback registration rights,
was contemplated in the First Private Placement, but has yet to be executed.
Grace believes that such a registration rights agreement will be executed in the
near future.  Subject to certain conditions that may be set forth in such a
registration rights agreement, the piggyback registration rights permit the
holders of such shares to include their shares in a registration by the Company
of its Common Stock under the Securities Act for sale to the public on Form S-1
or Form SB-2.

Second Private Placement

     During September 1999, New Millennium effected another private placement of
shares of its common stock (the "Second Private Placement").  An aggregate of
150,356 shares of New Millennium common stock were issued for net proceeds of
$3,459,319. The net proceeds were used for reorganization expenses related to
the Grace Merger and for working capital requirements.  The 150,356 shares of
New Millennium common stock were converted into 9,968,798 shares of the
Company's Common Stock in the Grace Merger.

     At the time of the Second Private Placement, New Millennium determined the
fair market value of shares of New Millennium common stock to be $23.34 per
share.

     All of the shares of New Millennium common stock issued in the Second
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) are "restricted securities" under
Rule 144 promulgated under the Securities Act.  Such securities may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144.  See
"Item 1. Business--Restricted Securities and Registration Rights" below for a
summary of the exemptions available under Rule 144.

     All of the shares of New Millennium common stock issued in the Second
Private Placement (and the shares of the Company's Common Stock subsequently
exchanged for such shares in the Grace Merger) were granted certain "piggyback"
registration rights.  Subject to certain conditions set forth in registration
rights agreements executed at the closing of the Second

                                       40
<PAGE>

Private Placement, the piggyback registration rights permit the holders of such
shares to include their shares in a registration by the Company of its Common
Stock under the Securities Act for sale to the public (except with respect to
registrations on Forms S-4 or S-8 or another form not available for registering
such shares for sale to the public).

Third Private Placement

     On March 1, 2000, the Company entered into a private placement agreement
with C&S Private Equity Fund, LP ("C&S"), pursuant to which the Company issued
to C&S 14 units ("C&S Units") for $100,000 per C&S Unit (the "Third Private
Placement").  Each C&S Unit consisted of (i) a $100,000 convertible senior
secured note of the Company and (ii) 150,000 shares of the Company's Common
Stock.  An aggregate of 2,100,000 shares of the Company's Common Stock were
issued along with a convertible senior secured note payable to C&S in the
principal amount of $1,400,000.  The net proceeds of $1,363,000, were used for
the purchase and working capital requirements of WebWizard and P.V. Tel.  The
note was due March 2, 2001, and bore interest at a rate of 12% per year,
payable quarterly. $1,420,000 of the net proceeds from the Fourth Private
Placement were used to repay all of the outstanding interest and principal on
the note issued in the Third Private Placement.

     Additionally, the private placement agreement provided that, if the Company
acquired Alpha Computer Services, Inc., C&S would have the option to purchase
from the Company, and the Company would have the option to sell to C&S, within
14 days after the Company's acquisition of Alpha Computers, a number of C&S
Units (not in excess of seven) as C&S should designate and as the Company may
require.  The purchase price of each C&S Unit was to be $100,000.  On March 31,
2000, the Company acquired Alpha Computer.  Both C&S and the Company declined to
exercise their options and accordingly the options will expire on April 14,
2000.

     The Company is currently in the process of obtaining an independent
appraisal of the valuation of the Common Stock and other securities issued in
the Third Private Placement.

     All of the shares of the Company's Common Stock issued in the Third Private
Placement, and the shares issuable upon the conversion of the notes, are
"restricted securities" under Rule 144 promulgated under the Securities Act.
Such securities may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including

                                       41
<PAGE>

the exemptions contained in Rule 144. See "Item 1. Business--Restricted
Securities and Registration Rights" below for a summary of the exemptions
available under Rule 144.

     Pursuant to the private placement purchase agreement, certain "demand"
registration rights were granted with respect to the shares issuable upon
conversion of the notes.  Subject to certain conditions set forth in the private
placement purchase agreement, the demand registration rights require that, on or
before November 1, 2000, the Company file a registration statement on Form S-3
(or such other form as may be available) with the SEC for the public sale by C&S
of the shares of Common Stock issuable upon conversion of the Notes, and that
the Company use its best efforts to cause such registration statement to become
effective not later than the maturity date of the notes.  Upon discharge of the
notes, the Company's obligation to file a registration statement and cause it to
become effective shall terminate.  For each day after the maturity date of the
notes that such registration statement is not effective, the Company shall pay
C&S $0.01 times the number of shares then required to be covered by such
registration statement.  Such amounts will be payable daily and will accrue
interest (payable daily) at the rate of 18% per year.

Fourth Private Placement

     On April 14, 2000, the Company entered into a Securities Purchase
Agreement (the "Fourth Private Placement") with Greenlight Capital, L.P. and
certain affiliates of Greenlight (the "Purchasers") pursuant to which the
Company agreed to issue for an aggregate purchase price of $6.5 million, (a)
3,000,000 shares of Common Stock, (b) the Company's 12% senior secured
convertible promissory notes with an original principal amount of $6,500,000
(the "Greenlight Notes") convertible into shares of Common Stock at a conversion
price of $1.00 per share, (c) stock purchase warrants (the "Greenlight
Warrants") to purchase 6,500,000 shares of Common Stock at an exercise price of
$1.00 per share, and (d)(1) options, exercisable on August 14, 2000 and December
14, 2000 to purchase for an aggregate purchase price of $4.5 million on each
date, (A) 1,575,000 shares of Common Stock, (B) Notes with an original principal
amount of $2,925,000 convertible into shares of Common Stock at a conversion
price of $1.00 per share, and (C) Warrants to purchase 2,925,000 shares of
Common Stock at an exercise price of $1.00 per share, and (2) an option,
exercisable on April 14, 2001, to purchase for an aggregate purchase price of
$4.5 million, (A) 1,050,000 shares of Common Stock, (B) Notes with an original
principal amount of $2,925,000 convertible into shares of Common Stock at a
conversion price of $1.50 per share, and (E) Warrants to purchase 1,950,000
shares of Common Stock at an exercise price of $1.50 per share.  The Greenlight
Note is guaranteed by the significant subsidiaries of the Company and is secured
by all of the issued and outstanding capital stock of the Company's significant
subsidiaries. $1,420,251.88 of the net proceeds were  used to repay all of the
outstanding principal and interest on the note issued in the Third Private
Placement, and the remainder of the net proceeds will be used for the Company's
working capital requirements.

     All of the shares of Common Stock issued pursuant to the Fourth Private
Placement, including any shares issued pursuant to the Greenlight Note, the
Greenlight Warrant and the Greenlight Option are "restricted securities" under
Rule 144 promulgated under the Securities Act.  Such securities may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144.  See
"Item 1. Business--Restricted Securities and Registration Rights" below for a
summary of the exemptions available under Rule 144.

                                       42
<PAGE>

     Pursuant to a registration rights agreement executed at the closing of the
Fourth Private Placement, all of the shares of Common Stock issued pursuant to
the Fourth Private Placement, including any shares issued pursuant to the
Greenlight Note, the Greenlight Warrant and the Greenlight Option were granted
"demand" and "piggyback" registration rights.  Subject to certain conditions set
forth in the registration rights agreement, the demand registration rights
require that, 30 days following the date on which the Company becomes eligible
to use Form S-3, the company use its reasonable best efforts to register the
applicable shares as soon as practicable.  Subject to certain conditions set
forth in the registration rights agreement, the piggyback registration rights
permit the holders of the covered shares to include such shares in a
registration by the Company when and if the Company proposes to register any
Common Stock under the Securities Act for sale to the public on a form that
would also permit the registration of the covered shares (other that
registrations on Form S-8 or S-4).

     Louis Friedman, former Chairman of the Company, is entitled to a finders
fee of 500,500 shares of Common Stock in connection with the Fourth Private
Placement.

Lines of Credit

     The Company has a $650,000 line of credit with the BankTennessee, which it
uses for working capital purposes. The interest rate is 7.25% per annum, payable
monthly. The balance on the line of credit was $649,900 as of March 31, 1999.
The line of credit matures on July 29, 2000, and is secured by a Certificate of
Deposit in the amount of $700,000.

     The Company has a $2,000,000 line of credit with Regions Bank, which it
uses for working capital.  The interest rate is 5.998% per annum, payable
monthly.  The balance on the line of credit was $1,990,000 as of March 31, 1999.
The line of credit was due to mature on March 24, 2000, and was extended to
September 24, 2000.  The line of credit is secured by a Certificate of Deposit
in the amount of $2,000,000.

     The Company has a $1,000,000 line of credit with Regions Bank, which it
uses for working capital purposes. The interest rate is 6.189% per annum,
payable monthly. The balance on the line of credit was $730,000 as of March 31,
1999. The line of credit matures on June 15, 2000, and is secured by a
Certificate of Deposit in the amount of $1,000,000.

     On January 21, 2000, the Company obtained another line of credit from
Regions Bank in the amount of $1,000,000, and executed a note payable in that
amount.  The Company will use this line of credit for working capital purposes.
The interest rate is 9.0% per annum, payable monthly.  The balance on the line
of credit was $974,000 on March 31, 2000.  The line of credit matures on March
24, 2001, and is secured by 500,000 shares of the Company's Common Stock that
are owned by Signal Compression, Inc.

     Cash provided by financing activities was $6,932,511 for the twelve months
ended December 31, 1999.  Cash provided consisted primarily of proceeds from
private placements of $4,009,299 and proceeds from line of credit borrowing of
$3,074,339.  These amounts were partially offset by repayment on obligations
under capital leases of $151,127.  A working capital loan in the amount of
$450,000 was funded and repaid during this twelve-month period.

                                       43
<PAGE>

     As of December 31, 1999, the Company had $102,480 in cash and cash
equivalents.  The Company also had $3,700,000 in certificates of deposits less
offsetting related liabilities in the form of lines of credit of $3,074,339.
The net proceeds available from certificates of deposit less the corresponding
liability totaled $625,661.  Combined with $102,481 above, the Company had
$728,142 to meet its current obligations and fund its operations.  Management
believes this amount is not sufficient to enable the Company to expand its
business as currently planned.  The Company will therefore require additional
capital to fund its anticipated operating losses and planned capital expenditure
requirements.

     In order to fund these requirements, the Company anticipates that it will
be required to raise additional financing from public or private equity or debt
sources.  Additionally, if the Company's plans or assumptions change (including
those with respect to the development of the network, the level of its
operations and its operating cash flow), if its assumptions prove inaccurate, if
it consummates additional investments or acquisitions, if it experiences
unexpected costs or competitive pressures, or if existing cash and any other
borrowings otherwise prove to be insufficient, the Company may be required to
seek additional capital sooner than expected.  In the event that the Company is
unable to obtain such additional capital or is unable to obtain such additional
capital on acceptable terms, it may be required to reduce the scope of its
expansion, which could adversely affect its business prospects and its ability
to compete.  There can be no assurances that the Company will be able to raise
equity capital, obtain capital leases or bank financing or incur other
borrowings on commercially reasonable terms, if at all, to fund any such
expansion.

     To accelerate its growth rate and to finance the launch or build-out of
additional markets, the Company will consider obtaining financing from various
sources, including additional vendor financing provided by equipment suppliers,
project financing from commercial banks, bank lines of credit and the sale of
equity and debt securities.  To the extent that the Company or any of its
subsidiaries issues debt, its leverage and debt service obligations will
increase.

     As part of its business strategy, the Company intends to continue to
evaluate potential acquisitions; joint ventures and strategic alliances in
companies that own existing networks or companies that provide services that
complement the Company's existing businesses.  The Company continues to consider
potential acquisitions from time to time.  New sources of capital such as credit
facilities and other borrowings, and additional debt and equity investments in
the Company will be necessary to fund any material acquisitions and similar
strategic investments.

YEAR 2000 COMPLIANCE

     The Company dedicated resources over the past several years to address the
potential hardware, software, and other computer and technology issues and
related concerns associated with the transition to the Year 2000 and to confirm
that its service providers took similar measures.  As a result of these efforts,
the Company has not experienced any material disruptions in its operations in
connection with, or following, the transition to the Year 2000.  Given that the
majority of the Company's telecommunications network infrastructure and critical
back office systems were acquired after 1997, Year 2000

                                       44
<PAGE>

compliance was substantially ensured at the time of acquisition. The total cost
to complete the Company's Year 2000 compliance efforts was negligible. While the
Company tested its own mission-critical systems for Year 2000 compliance, the
Company does not control the systems of its suppliers, strategic partners and
customers. The Company received assurances prior to December 31, 1999, from its
suppliers and strategic partners regarding the Year 2000 readiness of their
systems.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company has not invested in financial instruments that subject the
Company to material market risk.  Financial instruments which the Company holds
are disclosed in Note 3 to the Company's Consolidated Financial Statements on
page F-12 herein.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by Item 8 is set forth on pages F-1 to F-8.

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

     On July 10, 1999, the Company's board of directors appointed Dohan and
Company, P.A. ("Dohan") as certifying accountant of the Company. Dohan was
retained to audit the Company's financial records and provide audited financial
statements for the Company's fiscal years ended December 31, 1994, 1995, 1996,
1997 and 1998. From February 27, 1995 until the Company retained Dohan on July
10, 1999, the Company did not employ any independent accountants. Dohan was
dismissed by the Company on October 29, 1999. On November 2, 1999, the Company
engaged Habif, Arogeti & Wynne, LLP ("HAW") as the Company's certifying
accountant to audit the Company's financial statements for 1999. The information
contained in the Company's (1) Current Report on Form 8-K dated July 16, 1999,
as amended, and (2) Current Report on Form 8-K dated October 29, 1999, is
incorporated herein by reference.

                                       45
<PAGE>

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information presented under the caption "Information Concerning
Nominees," "Directors Continuing in Office," and "Section 16(a) Beneficial
Ownership Reporting Compliance" of the Company's definitive Proxy Statement for
the 2000 Annual Meeting of Stockholders (the "Year 2000 Proxy Statement") is
incorporated herein by reference.  The Year 2000 Proxy Statement is expected to
be filed with the Securities and Exchange Commission no later than 120 days
after December 31, 1999.  The information presented under the caption "Item 1.
Business -- Directors and Executive Officers of the Company" in Part I of this
Form 10-K, is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

     The information presented under the captions "Compensation of Directors"
and "Executive Compensation" of the 2000 Proxy Statement (excluding, however,
the information presented under the subheadings "Compensation Committee Report
on Executive Compensation" and "Performance Graph") is incorporated herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information presented under the caption "Security Ownership of Certain
Beneficial Owners and Management" of the 2000 Proxy is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information presented under the caption "Certain Relationships and
Related Transactions" of the 2000 Proxy Statement is incorporated herein by
reference.

                                       46
<PAGE>

                                    PART IV

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

(a)  Documents filed as part of this report.

     1.   Financial Statements. The following consolidated financial statements
          of the Company are set forth herein, beginning on page F-1:

          (i)   Report of Management.

          (ii)  Report of Independent Accountants.

          (iii) Consolidated Balance Sheets.

          (iv)  Consolidated Statements of Operations.

          (v)   Consolidated Statements of Cash Flows.

          (vi)  Consolidated Statements of Shareholders' Equity.

          (vii) Notes to the Consolidated Financial Statements.

     2.   Financial Statement Schedules.

          None required.

     3.   Exhibits.

          The exhibits that are required to be filed or incorporated by
          reference herein are listed in the Exhibit Index.  Exhibits 10.[4] to
          10.[20] hereto constitute management contracts or compensatory plans
          or arrangements required to be filed as exhibits hereto.

(b)  Reports on Form 8-K.

     1.   Current Report on Form 8-K, dated September 28, 1999, filed October
          13, 1999, disclosing the Grace Merger.

     2.   Current Report on Form 8-K, dated November 1, 1999, filed November 5,
          1999, disclosing a change in the Company's certifying accountant from
          Dohan and Company PA to Habif, Arogeti & Wynne, LLP.

     3.   Amendment No. 1, filed November 16, 1999, to the Current Report on
          Form 8-K, dated September 28, 1999, amending the Company's disclosure
          with respect to the Grace Merger.

                                       47
<PAGE>

     4.   Amendment No. 2, filed December 8, 1999, to the Current Report on Form
          8-K, dated September 28, 1999, amending the Company's disclosure with
          respect to the Grace Merger.

     5.   Current Report on Form 8-K, dated December 21, 1999, filed December
          21, 1999, disclosing the resignation of Louis Friedman as Chairman of
          the Company's board of directors and the Company's continuing search
          for a new Chairman and Chief Executive Officer.

     6.   Amendment No. 3, filed December 28, 1999, to the Current Report on
          Form 8-K, dated September 28, 1999, amending the Company's disclosure
          with respect to the Grace Merger.

                                       48
<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.

                              GRACE DEVELOPMENT, INC.
                              (Registrant)


Date:  April 14, 2000    By: /s/ Benjamin F. Holcomb
                            ------------------------
                             Benjamin F. Holcomb
                             Chairman and Chief Executive Officer

          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 indicated.

By: /s/ Benjamin F. Holcomb                 By: /s/ Peter A. Tierney
    ------------------------                    --------------------
    Benjamin F. Holcomb                         Peter A. Tierney
    Chairman and Chief Executive Officer        Director

By: /s/ James M. Blanchard                  By: /s/ James C. Foregger
    ----------------------                      ---------------------
    James M. Blanchard                          James C. Foregger
    Director; President                         Director of Finance
                                                (principal financial officer)

By: /s/ Dr. Lee H. Silverstein              By: /s/ Wendy L. Squires
    --------------------------                  --------------------
    Dr. Lee H. Silverstein                      Wendy L. Squires
    Director                                    Controller
                                                (principal accounting officer)


                                       49
<PAGE>

                            GRACE DEVELOPMENT, INC.
                               AND SUBSIDIARIES

                        Consolidated Financial Statements

                           December 31, 1999 and 1998

                                      F-1
<PAGE>

                   GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
                  INDEX OF CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Item                                                                                                  Page
----                                                                                                  ----
<S>                                                                                                   <C>
1. Report of Management.............................................................................   F-3

2. Report of Independent Accountants................................................................   F-4

3. Consolidated Balance Sheets......................................................................   F-5

4. Consolidated Statements of Operations............................................................   F-7

5. Consolidated Financial Statements of Cash Flows..................................................   F-8

6. Consolidated Statements of Stockholders' Equity..................................................   F-9

7. Notes to the Consolidated Financial Statements...................................................   F-10
</TABLE>

                                      F-2
<PAGE>

                   GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
                             REPORT OF MANAGEMENT

         Grace Development, Inc. is responsible for the preparation, integrity,
and fair presentation of its published financial statements. The financial
statements have been prepared in accordance with generally accepted accounting
principles and include amounts based on informed judgments and estimates made by
management.

         To fulfill its responsibilities, Grace maintains and continues to
refine a system of internal accounting controls. This system provides
reasonable, but not absolute, assurance at appropriate cost that the Company's
assets are safeguarded, transactions are executed in accordance with proper
management authorization, and the financial records are reliable for the
preparation of financial statements. The concept of reasonable assurance is
based on the recognition that the cost of maintaining a system of internal
accounting controls should not exceed related benefits. Grace's internal
controls system is supported by written policies and procedures, the Company's
internal audit function, and the selection and training of qualified personnel.
Grace's financial managers are responsible for implementing effective internal
control systems and monitoring their effectiveness.

         As indicated in the report from our independent accountants, Habif,
Arogeti & Wynne, LLP performed an audit of Grace's consolidated financial
statements for the purpose of determining that the statements are presented
fairly, in all material respects, in conformity with generally accepted
accounting principles. The independent accountants are appointed annually by
Grace's board of directors based upon a recommendation by the board of
directors.

         The board of directors, on behalf of the Company's stockholders,
oversees management's financial reporting responsibilities. The board of
directors meets periodically with the Company's management, internal auditors
and independent accountants to review internal accounting controls and financial
reporting practices and the nature, extent, and results of audit efforts. The
independent accountants and the internal auditors have direct and independent
access to the board of directors and senior management.

/s/ Benjamin F. Holcomb                         /s/ James M. Blanchard
-----------------------                         ----------------------
    Benjamin F. Holcomb                             James M. Blanchard
    Chairman & Chief Executive Officer              President


/s/ James C. Foregger                           /s/ Wendy L. Squires
---------------------------                     --------------------
    James C. Foregger                               Wendy L. Squires
    Director of Finance                             Controller

                                      F-3
<PAGE>

                   GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of GRACE DEVELOPMENT, INC. AND SUBSIDIARIES

         We have audited the balance sheet of GRACE DEVELOPMENT, INC. AND
SUBSIDIARIES a Colorado Corporation as of December 31, 1999, and the related
statements of income, retained earnings, 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 financial statements based
on our audit. The financial statements of NEW MILLENNIUM MULTIMEDIA, INC. (the
"Predecessor") as of December 31, 1998, were audited by other auditors whose
report dated June 24, 1999, expressed an unqualified opinion on those
statements.

         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 financial statements referred to above present
fairly, in all material respects, the financial position of GRACE DEVELOPMENT,
INC. AND SUBSIDIARIES as of December 31, 1999 and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.

Atlanta, Georgia

         March 10, 2000 except with respect to the matters discussed in Note 18,
as to which the date is April 14, 2000.

                                     F-4
<PAGE>

                   GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                                 DECEMBER 31,

<TABLE>
<CAPTION>
                                                                                                        Predecessor
                                                                                                           Entity
                                                                                          1999              1998
                                                                                  ----------------------------------
<S>                                                                               <C>                   <C>
ASSETS:
     Cash and cash equivalents                                                         $   102,481       $ 3,719
     Investment in certificates of deposit                                               3,700,000             -
     Accounts receivable, net of $ 10,500 allowance for doubtful                            56,458             -
       accounts at December 31, 1999
     Prepaid expenses                                                                      156,599             -
     Officer advances                                                                       25,012           820
                                                                                  ------------------------------
                  Total current assets                                                   4,040,550         4,539
     Property and equipment, at cost
     Leasehold improvements                                                                 45,468             -
     Furniture and fixtures                                                                 84,949             -
     Equipment and software                                                              2,530,895        13,117
                                                                                  ------------------------------
                                                                                         2,661,312        13,117
     Accumulated depreciation and amortization                                            (263,423)         (506)
                                                                                  ------------------------------
                                                                                         2,397,889        12,611
                                                                                  ------------------------------
     Other assets:
         Goodwill, net of accumulated amortization of $75,931 at
           December 31, 1999                                                               600,547             -
         Notes receivable - related party                                                  434,500             -
         Related Party Receivables                                                          50,000             -
         Other non-current assets                                                           75,329             -
                                                                                  ------------------------------
                                                                                       $ 7,598,815      $ 17,150
                                                                                  ==============================
LIABILITIES AND STOCKHOLDERS' EQUITY:
     Accounts payable                                                                      360,532         5,391
     Deferred revenues                                                                     141,930             -
     Accrued compensation - officers and directors                                         676,666
     Accrued liabilities                                                                   218,182             -
     Lines of credit                                                                     3,074,339             -
     Current portion of obligations under capital lease                                    735,170             -
                                                                                  ------------------------------
                  Total current liabilities                                              5,206,819         5,391
                                                                                  ------------------------------
     Obligations under capital leases, net of current portion                            1,237,634             -
                                                                                  ------------------------------
                                                                                         6,444,453             -
                                                                                  ------------------------------
     Stockholders' equity
         Grace Common stock; no par value;  800,000,000 shares                           4,270,195             -
              authorized;  73,871,895 issued and outstanding at
              December 31, 1999.
         NMM Common Stock; $1.00 par value; 1,000,000 shares                                     -        32,500
              authorized; 32,500 shares issued and outstanding at
              December 31, 1998
         Accumulated deficit                                                            (3,115,833)      (20,741)
                                                                                  ------------------------------
                  Total stockholders' equity                                             1,154,362        11,759
                                                                                  ------------------------------
                                                                                       $ 7,598,815      $ 17,150
                                                                                  ==============================
</TABLE>

                                      F-5
<PAGE>

      See auditors' report and notes to consolidated financial statements

                                      F-6
<PAGE>

                   GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                                 Predecessor Company

                                                                                                 For the Period from
                                                                                                   October 6, 1998
                                                                           For the Year          (date of inception)
                                                                              Ended              Through December 31,
                                                                        December 31, 1999               1998
                                                                       ---------------------    ----------------------
<S>                                                                    <C>                       <C>
Revenues                                                                 $      679,415                        -

Operating expenses
    Cost of services                                                             668,269
    Sales and marketing expenses                                                 323,830                  13,203
    General and administrative expenses                                        2,313,825                   7,146
    Depreciation and Amortization                                                341,412                     506
                                                                       -----------------        ----------------
         Total operating expenses                                              3,647,336                  20,855
                                                                       -----------------        ----------------
         Loss from operations                                                 (2,967,921)                (20,855)
                                                                       -----------------        ----------------
Other income (expense)
     Interest income                                                              42,189                     114
     Interest expense                                                           (169,360)                      -
                                                                       -----------------        ----------------
         Total other income (expense)                                           (127,171)                    114
                                                                       -----------------        ----------------
         Loss before income taxes                                             (3,095,092)                (20,741)
Income tax expense                                                                     -                       -
                                                                       -----------------        ----------------
         Net loss                                                       $     (3,095,092)                (20,741)
                                                                       =================        ================
         Basic and diluted net loss per common share                    $         (0.07)
                                                                       =================
         Weighted average common shares outstanding                           44,367,250
                                                                       =================
</TABLE>

      See auditors' report and notes to consolidated financial statements

                                      F-7
<PAGE>

                   GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
                CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                                                       Predecessor
                                                                                                         Company

                                                                                                      For the Period
                                                                                                     from October 6,
                                                                                    For the Year      1998 (date of
                                                                                   Ended December       inception)
                                                                                      31, 1999       Through December
                                                                                                         31, 1998
                                                                                  ----------------- -------------------
   <S>                                                                            <C>                <C>
   Cash flows from operating activities
   Net loss                                                                          $ (3,095,092)          $ (20,741)
   Adjustments to reconcile net loss to net cash used in
       operating activities                                                                     -
          Depreciation                                                                    265,481                 506
          Amortization of Goodwill                                                         75,931                   -
          Allowance for doubtful accounts                                                  10,500                   -
          Issuance of common stock for compensation                                       174,375                   -
          Changes in assets and liabilities from operations
                 Accounts receivable                                                      (66,757)                  -
                 Prepaid expenses                                                        (155,779)               (820)
                 Officer advances                                                         (25,012)                  -
                 Other non-current assets                                                 (67,712)                  -
                 Related party receivables                                                (50,000)                  -
                 Accounts payable                                                         284,743               5,391
                 Deferred revenues                                                        (32,882)                  -
                 Accrued compensation - officers and directors                            676,666                   -
                 Accrued liabilities                                                      218,182                   -
                                                                                  ----------------- -------------------
                 Net cash used in operating activities                                 (1,787,356)            (15,664)
                                                                                  ----------------- -------------------
   Cash flows from investing activities
          Acquisition of property and equipment                                          (392,579)            (13,117)
          Investments in certificates of deposits                                      (3,700,000)                  -
          Acquisition of business units                                                  (519,314)                  -
          Issuance of notes receivable - related party                                   (434,500)                  -
                                                                                  ----------------- -------------------
                 Net cash used in investing activities                                 (5,046,393)            (13,117)
                                                                                  ----------------- -------------------
   Cash flows from financing activities
          Net proceeds from lines of credit                                             3,074,339                   -
          Proceeds from note payable                                                      450,000                   -
          Repayment of note payable                                                      (450,000)                  -
          Repayment on obligations under capital leases                                  (151,127)                  -
          Net proceeds from issuance of common stock                                    4,009,299              32,500
                                                                                  ----------------- -------------------
                 Net cash provided by financing activities                              6,932,511              32,500
                                                                                  ----------------- -------------------
   Increase in cash and cash equivalents                                                   98,762               3,719
   Cash and cash equivalents at beginning of period                                         3,719                   -
                                                                                  ----------------- -------------------
   Cash and cash equivalents at end of period                                        $    102,481           $   3,719
                                                                                  ================= ===================
   Supplemental disclosure of cash flow information
   ---------------------------------------------------------------
          Cash paid for interest                                                     $    61,049            $    -0-
                                                                                  ================= ===================

   Supplemental activities of Non-Cash Transactions:
   ---------------------------------------------------------------
       During the year of 1999 the Company acquired equipment
       under several capital lease obligations totaling $2,123,930

   Acquisition of business units:                                     Total             NWGA               Avana
   --------------------------------------------------             --------------- ----------------- -------------------
                 Goodwill                                             $  676,478        $  143,494          $  532,984
                 Assets acquired                                         142,067            26,506             115,561
                 Liabilities acquired                                   (245,210)                             (245,210)
                 Stock issued                                            (54,021)          (10,000)            (44,021)
                                                                  --------------- ----------------- -------------------
                 Net cash                                             $  519,314        $  160,000          $  359,314
                                                                  =============== ================= ===================
</TABLE>

      See auditors' report and notes to consolidated financial statements

                                      F-8
<PAGE>

                   GRACE DEVELOPMENT, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
           AND FOR THE PERIOD OF OCTOBER 6, 1998 (DATE OF INCEPTION)
                 THROUGH DECEMBER 31, 1998, OF THE PREDECESSOR

<TABLE>
<CAPTION>

                                                     Common Stock          Additional
                                              ----------------------------  Paid-In      Accumulated
                                                  Shares        Amount      Capital        Deficit         Total
----------------------------------------------------------------------------------------------------------------------
      <S>                                        <C>           <C>          <C>          <C>              <C>
      Issuance of New Millennium Common stock                                 $ 32,500                    $   32,500

      Net loss for the period from October
        6, 1998 (date of inception) through
        December 31, 1998                                                                     (20,741)       (20,741)

                                                                          --------------------------------------------
Predecessor balance at December 31, 1998                                        32,500        (20,741)        11,759
                                                                          --------------------------------------------

      Shares issued in repayment of
          Shareholder debt                                                      31,000                        31,000

      Shares issued as compensation
          to New Millennium shareholders                                       174,375                       174,375

      Shares issued for Avana acquisition                                       44,021                        44,021

      Private Placement of New
         Millennium shares                                                     777,600                       777,600

      Private Placement of New
         Millennium shares                                                   3,459,319                     3,459,319

      Warrants exercised                                                       147,000                       147,000

      Warrant cancellation fees                                               (395,620)                     (395,620)

      Assumed purchase of net assets of
         Grace at Predecessor cost                66,246,933   $4,270,195   (4,270,195)
                                                                                                                   -

      Reverse acquisition of Grace
         by New Millennium                         7,599,962      (10,000)                                   (10,000)

      Shares issued for NWGA acquisition              25,000       10,000                                     10,000

      Shares issued as compensation

      Net loss for the twelve months ended
      December 31, 1999                                                                    (3,095,092)    (3,095,092)


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

Balance at December 31, 1999                      73,871,895   $4,270,195     $      -    $(3,115,833)    $1,154,362
                                              ========================================================================
</TABLE>

    See auditors' report and notes to the Consolidated Financial Statements

                                      F-9
<PAGE>

                   GRACE DEVELOPMENT, INC. And Subsidiaries
                Notes to the Consolidated Financial Statements
                For the Years Ended December 31, 1999 and 1998

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Description of the Company and Basis of Presentation:

Grace Development, Inc. ("Grace"), is an Integrated Communications Provider
("ICP") offering Telecommunication and Internet services ("ISP") to business and
residential customers located primarily in the Southeastern United States.
Telecommunication services currently offered are local and long distance, frame
relay, ATM, data private lines and calling cards.

The ISP operation focuses on serving individuals and small business. The
Company's service offerings include dial-up Internet access and business
services which are offered in various price and usage plans designed to meet the
needs of our subscribers. Business services include web hosting, which entails
maintaining a customer's web site; high speed, dedicated Internet access; web
page design; domain name registration and customer web server co-location.

Principles of consolidation and basis of financial reporting:

The consolidated financial statements include the accounts of Grace Development,
Inc. and its wholly owned subsidiaries (collectively the "Company"). All
significant inter-company accounts and transactions have been eliminated. The
financial statements of the Predecessor are the accounts of New Millennium
Multimedia, Inc., a Georgia corporation ("NMM").

Cash and Cash Equivalents:

Cash and cash equivalents consist of cash and other highly liquid debt
instruments with an original maturity of three months or less.

Property and Equipment:

Property and equipment is carried at cost. Depreciation is computed using the
straight-line method based on estimated useful lives of the assets, generally
two to ten years. Asset classifications and estimated useful lives are as
follows:

         Leasehold Improvements             Life of lease
         Furniture & Fixtures               10 years
         Equipment & Software               2 - 7 years

Goodwill:

The Company amortizes goodwill on a straight-line basis over a period of five
years.

Revenue Recognition:

The Company recognizes revenues for internet services as they are earned. Some
customers pay an annual fee for Internet services and the revenues are
recognized on a straight-line basis over

                                      F-10
<PAGE>

the service period. Deferred revenue represents the portion of unearned Internet
Service Fees. The Company recognized revenue for telecommunications services
based upon minutes of traffic processed and contracted fees.

Income Taxes:

Income taxes are based on the loss for financial reporting purposes and reflect
a current asset for the estimated taxes recoverable in the current year tax
return and changes in deferred taxes. Deferred tax liabilities and assets are
recognized for the estimated tax effects of temporary differences between
financial reporting and taxable income (loss) for the loss carry-forwards based
on currently enacted tax laws and rates. A valuation allowance is used to reduce
deferred tax assets to the amount that is more likely than not to be realized.

Use of Estimates:

The preparation of financial statements in conformity with Generally Accepted
Accounting Principles ("GAAP") requires management to make estimates and
assumptions that affect the reported amounts of certain assets, liabilities, and
disclosures including the allowance for doubtful accounts, useful lives and
recoverability of long-term assets. Actual amounts could differ from those
estimates. Any adjustments applied to estimates are recognized in the year in
which such adjustments are determined.

Advertising:

The Company expenses advertising as incurred. The advertising costs for the year
ended December 31, 1999 and 1998, respectively, were $141,113 and $3,073.

2.   MERGER AND REORGANIZATION:

Avana Acquisition:

On May 5, 1999, NMM completed its acquisition of Avana Communications
Corporation ("Avana"). The acquisition was accounted for as a purchase pursuant
to Accounting Principles Board Statement No.16, "Business Combinations" ("APB
16") and the result of Avana's operations were included in the Company's 1999
consolidated statements of operation from the date of acquisition. Total
consideration included the issuance of 6,485,858 shares of Grace stock (97,824
shares of NMM stock later converted to Grace stock at a 66.3013:1 ratio), and
cash of $364,000. The stock was valued at $0.45 per share based upon an
independent valuation. As a result of the merger, the Company recorded goodwill
of approximately $533,000. Goodwill is being amortized on a straight-line basis
over five years. Additionally, NMM agreed to pay contingent consideration of up
to $100,000, based upon Avana maintaining 95% of the acquired customer base for
one year following closing. The Company will record a liability when the
contingency is resolved and consideration is issued or becomes issuable.

New Millennium Multimedia, Inc.:

On September 28, 1999 a wholly owned subsidiary of the Company merged with NMM.
The shareholders of NMM exchanged 100% of the outstanding stock of NMM in
exchange for shares of Grace stock. Each share of NMM common stock was exchanged
for 66.3013 shares of Grace

                                      F-11
<PAGE>

common stock and a total of 66,246,933 shares of Grace common stock were issued
to NMM stockholders. The merger is intended to qualify as a tax-deferred
reorganization under Section 368(a) of the Internal Revenue Code.

The acquisition set out in the preceding paragraph was accounted for as the
reverse acquisition of Grace by an "accounting entity" consisting of NMM and its
wholly-owned subsidiary; Avana, because following the transaction the former
shareholders of NMM were in control of the Company. Accordingly, the financial
statements of the Company are the financial statements of the "accounting
entity" adjusted for the assumed acquisition of the net assets of Grace in
exchange for the issuance of Grace common stock outstanding before the
transaction. The net assets of the Predecessor are accounted for at their
historical cost. In accordance with purchase accounting principles pursuant to
APB 16, the Company accounted for the net assets of Grace, acquired at the fair
value of such net assets as of September 28, 1999. No goodwill was recorded as a
result of this transaction.

Pro forma Financial Statements (unaudited):

The following unaudited pro-forma statement of operations of Grace Development,
Inc. gives retroactive effect to the merger with Avana Communications, Inc. as
if it had occurred on January 1, 1999. This statement was prepared by management
based on historical financial information and may not be indicative of actual
results of operations that would have been achieved had the transaction taken
place at the date indicated.

For the Year Ended December 31, 1999:

<TABLE>
<CAPTION>
                                          As Reported   Adjustments     Pro Forma
                                         -------------  -----------   -------------
<S>                                      <C>            <C>           <C>
Revenues                                 $    679,415   $  313,908    $    993,323
Net Loss                                 $ (3,095,092)  $  (77,781)   $ (3,172,873)
Earnings per Share                       $       (.07)  $    (0.00)   $       (.07)

For the Year Ended December 31, 1998:

Revenues                                 $         -0-  $  833,509    $    833,509
Net loss                                 $    (20,741)  $ (218,345)   $   (239,086)
</TABLE>

Acquisitions:

On November 8, 1999 the Company acquired substantially all the business assets
of Rob Ballard and Sabrina Ballard d/b/a Northwest Georgia Internet for $160,000
in cash and 25,000 shares of the Company's common stock. The transaction was
accounted for as a purchase under APB 16. Goodwill of approximately $143,500 was
recorded as a result of this transaction. Goodwill is being amortized on a
straight-line basis over five years. Northwest Georgia Internet provides
Internet access, web hosting and web design to businesses and individuals
located in areas northwest of Atlanta, Georgia.

                                      F-12
<PAGE>

3.   INVESTMENTS IN CERTIFICATES OF DEPOSIT:

The Company accounts for its investments under Financial Accounting Standards
Board ("FASB") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities". As of December 31, 1999 investments consisted of the following:

                                 Maturity Date    Interest Rate       Amount
                                --------------    -------------     -----------


Certificate of Deposit          March 24, 2000       4.4980%        $ 2,000,000
Certificate of Deposit           June 15, 2000       4.6890%          1,000,000
Certificate of Deposit           July 29, 2000       5.2500%            700,000

                                                                    -----------
                                                                    $ 3,700,000
                                                                    ===========

These certificates of deposit are pledged against lines of credit (see Note 7).

4.   ACCOUNTS RECEIVABLE:

The Company does not have a secured interest in its accounts receivable; however
it does have legal recourse for defaulted amounts. The maximum accounting loss
from the credit risk associated with accounts receivable is the face amount of
the receivable recorded, less any allowance for doubtful accounts.

5.   NOTES RECEIVABLE:

On October 14, 1999, the Company executed a letter of intent to acquire 100% of
the outstanding stock of The Telephone Company of Central Florida ("TCCF") from
TCCF's parent company; Phoenix International Industries, Incorporated
("Phoenix"). During negotiations, the Company advanced $100,000 to TCCF, which
is guaranteed by the Chief Executive Officer of Phoenix. The Company has since
abandoned its efforts to acquire TCCF, and has commenced collection efforts. The
Company is uncertain that these efforts will be successful, therefore the
advance has been charged to operations as of December 31, 1999.

In December 1999, the Company advanced $250,000 to PVTelcom Enterprises,
Incorporated, for working capital purposes (the "Working Capital Advances") in
connection with negotiations to acquire the company. In December 1999, the
Company advanced an additional $184,500. The first advance is evidenced by a
note receivable dated November 1, 1999, and bears interest at 9% due annually.
At the closing of the acquisition, (see Subsequent Events Note 17) the
promissory note evidencing the Working Capital Advances was canceled and two
shareholders of P.V. Tel. delivered to the Company, promissory notes totaling
$450,000, in substitution therefore together with accrued interest. The
indebtedness, represented by these substituted promissory notes, is secured by
150,000 shares of Grace common stock owned by the two noteholders.

                                      F-13
<PAGE>

6.   COMMITMENTS AND CONTINGENCIES:

Concentrations of Credit Risk:

The Company maintains the majority of its cash deposits and investments at three
financial depository institutions. The amount of the accounting loss due to
credit risk the Company would incur if the financial depository institutions
failed would be the cash deposits in excess of the $100,000 amount per depositor
that is federally insured. The amount at risk totaled $3,500,000 at December 31,
1999.

Operating Leases:

The Company leases office space and equipment under several operating lease
agreements. Rent expense for the office space and equipment totaled $79,650 and
$ 0, for the years ended December 31, 1999 and 1998, respectively. At December
31, 1999 future minimum lease payments under non-cancelable leases having
remaining terms in excess of one year are as follows:

                     2000       $ 199,615
                     2001         188,712
                     2002         188,712
                     2003         188,712
                     2004          94,356
                                ---------
                                $ 860,107
                                =========

Obligations Under Capital Lease:

The Company leases equipment under various capital lease obligations. $2,123,931
of the equipment is included in the property and equipment section of the
balance sheet. All of the equipment was acquired in 1999, and amortization was
$213,683 for the year ended December 31, 1999. The capitalized cost and
accumulated amortization at December 31, 1999 were as follows:

                                                 1999
                                              -----------

Total Equipment Placed in Service             $ 2,123,931
Accumulated amortization                         (201,603)
                                              -----------
Book Value                                    $ 1,922,328
                                              ===========

The future minimum lease payments under the capital leases at December 31, 1999:

                     2000                     $ 1,055,599

                                      F-14
<PAGE>

                     2001                         946,424
                     2002                         508,663
                                              -----------

                                                2,510,686

Less amount representing interest                (537,882)
                                              -----------

                                                1,972,804

Less current portion                             (735,170)
                                              -----------

                                              $ 1,237,634
                                              ===========

Note Payable:

On April 26, 1999, the Company signed a $600,000 promissory note with Lucent
Technologies, Inc. ("Lucent"). Lucent advanced the Company $450,000 and made
available an additional $150,000 based on the Company's customer list. The note
bore interest at a rate of 10% per annum, payable monthly. The note was secured
with fixed assets of the Company. The Company repaid the note in total on
September 29, 1999.

7.   LINES OF CREDIT:

The Company has a line of credit with the Bank of Tennessee to provide working
capital of up to $650,000. The interest rate is 7.25% per annum payable monthly.
The balance on the line of credit was $649,900 on December 31, 1999. The line of
credit is secured by a Certificate of Deposit and the line of credit matures on
July 29, 2000.

The Company has a line of credit with Regions Bank to provide working capital of
up to $2,000,000. The interest rate is 5.998% per annum payable monthly. The
balance on the line of credit was $1,999,659 on December 31, 1999. The line of
credit is secured by a Certificate of Deposit and the line of credit matures on
March 24, 2000.

The Company has a second line of credit with Regions Bank to provide working
capital of up to $1,000,000. The interest rate is 6.189% per annum payable
monthly. The balance on the line of credit was $424,780 on December 31, 1999.
The line of credit is secured by a Certificate of Deposit and the line of credit
matures on June 15, 2000.

8.   PREFERRED STOCK:

The Company is authorized to issue 10,000,000 shares of preferred stock with no
par value. The preferred stock may be issued, by the Board of Directors, in one
or more series. The Board of Directors shall determine the distinguishing
features of each series including preferences, rights and restrictions, by
resolution upon the establishment of such series. No shares of preferred stock
had been issued as of December 31, 1999.

                                      F-15
<PAGE>

9.   INCOME TAXES:

The Company did not provide any current or deferred federal or state income tax
provision or benefit for any of the periods presented because it has experienced
operating losses since inception. The Company has provided a full valuation
allowance on the deferred tax asset, consisting primarily of net operating loss
carryforwards, because of uncertainty regarding its realizability. At December
31, 1999, the Company had net operating loss carryforwards of approximately
$6,400,000 related to federal, and state jurisdictions. Substantially all of
these carryforwards will begin to expire at various times starting in 2004.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets are approximately as follows:

<TABLE>
<CAPTION>
                                                             December 31,
                                                             ------------
                                                                           Predecessor
                                                       1999                   1998
                                                    ----------------------------------
     <S>                                            <C>                     <C>
     Net operating loss carryforwards               $ 1,820,000             $ 7,000
     Allowance for doubtful account                       4,000                   -
     Accumulated depreciation and amortization          (92,000)                  -
                                                    -----------             --------
     Accrued officer compensation                       255,000                7,000
                                                    ===========             ========
                                                      1,987,000                   -
                                                    ===========             ========
     Valuation allowance                             (1,987,000)              (7,000)
                                                    ===========             ========
     Net deferred tax asset                         $      -0-              $    -0-
                                                    ===========             ========
</TABLE>

10.  SEGMENT REPORTING:

The Company operates two business segments: Telecommunications sales and
services and Internet service including dial-up accounts, web hosting and web
design services.

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

Revenues:
     Telecommunications                  $    261,662                $       -
     Internet Services                        417,753                        -
                                         ------------                ---------

                                         $    679,415                $       -
Loss
     Telecommunications                  $ (2,660,231)               $ (20,741)
     Internet Services                       (434,861)                       -
                                         ------------                ---------

                                      F-16
<PAGE>

                                         $ (3,095,092)               $ (20,741)


Depreciation and Amortization:
     Telecommunications                  $    204,730                $     506
     Internet Services                   $    136,682                        -
                                         ------------                ---------

                                         $    341,412                $     506

Identifiable Net Assets:
     Telecommunications                  $  1,438,733                $  13,117
     Internet Services                        959,156
                                         ------------                ---------

                                         $  2,397,889                $  13,117

11.  PRIVATE PLACEMENTS:

During July 1999, NMM effected a private placement of shares of its common
stock. The shares were sold at $3.20 per share. For every three shares of NMM
common stock sold, warrants were issued to the purchaser, which gives the
purchaser the right to purchase two shares of Grace common stock at $4.50 per
share. In aggregate, 251,000 shares of NMM common stock and 167,292 warrants for
Grace common stock were issued for net proceeds of $777,600. All warrants expire
July 29, 2001. The shares of NMM common stock were converted to Grace common
stock at a ratio of 66.3013:1.

During September 1999, NMM effected a private placement of shares of its common
stock. The shares were sold at $23.34 per share. In aggregate, 150,356 shares of
NMM common stock were issued for net proceeds of $3,459,319. The shares were
converted to Grace stock at a ratio of 6.3013:1.

12.  STOCK COMPENSATION:

NMM issued 387,500 shares of its common stock in consideration for services
rendered prior to the merger with Avana. The shares were valued at $174,375 and
a non-cash expense was recorded to the statement of operations. The shares were
converted to Grace common stock at a ratio of 66.3013:1.

13.  STOCK WARRANTS:

On April 26, 1999, NMM entered into several capital lease agreements (Note 4)
and a secured note payable agreement (Note 5) with Lucent. As part of these
financing agreements, NMM issued a warrant to purchase a maximum of 200,000
shares of NMM stock at a price of $3 per share. In September 1999, Lucent
exercised the warrant and purchased 49,000 shares of NMM

                                      F-17
<PAGE>

stock (later converted to 3,248,764 shares of Grace stock) for $147,000. The
warrants were valued at $0 based on the following assumptions:

       Risk free interest rate 5.5%
       Life 7 years
       FMV of stock on date of grant $.45 per share
       Volatility not applicable

On September 27, 1999, NMM paid Lucent $395,620 to cancel the remaining 151,000
warrants issued.

14.  RELATED PARTY TRANSACTIONS:

The Company entered into an agreement with Falcon Consulting Company ("Falcon")
for consulting services and paid the company $200,000 for the year ended
December 31, 1999. Andrew Worden, President of Falcon, is a shareholder of
Grace.

Richard S. Granville, former Chairman of the Company, has personally guaranteed
certain debt of the Company.

[Consulting Agreement with Louis Friedman and fees for past transactions.]

15.  STOCK OPTIONS:

The Company has not yet adopted a stock option plan but has awarded stock
options to directors, officers, and employees. The options vest over 2 years and
expire 120 days after vesting. At December 31, 1999, zero options were vested.

                                                Weighted Average
                         Number of Options      Exercise Price
Outstanding
December 31, 1998        0                      n/a
Awarded                  1,592,540              $1.00
                         ---------              -----
Outstanding
December 31, 1999        1,592,540              $1.00
                         =========              =====

The Company follows Accounting Principles Board Opinion 25, Accounting for Stock
Issued to Employees, to account for stock option and employee stock purchase
plans.

An alternative method of accounting for stock options is SFAS 123, Accounting
for Stock-Based Compensation. Under SFAS 123, employee stock options are valued
at grant date using the Black-Scholes valuation model, and compensation cost is
recognized ratably over the vesting period. Had compensation cost for the
Company's stock option and employee stock purchase plans been determined based
on the Black-Scholes value at the grant dates for awards, pro forma income
statements for 1999 would have been as follows:

                         As reported            Adjustments           Pro Forma
                         -----------            -----------           ---------
Net Loss                 (3,095,092)              (637,016)          (3,732,108)
                                                      (.01)                (.08)

                                      F-18
<PAGE>

Earnings per share           (.07)

The fair value of cash options are estimated on the date of the grant under the
following assumptions:

     Risk free interest rate:                     6.5%
     Life:                                        4 years
     Dividends:                                   none
     Volatility:                                  41%
     Weighted average grant debt fair value:      $0.40

16.  ECONOMIC DEPENDENCY:

Commissions received from ICG Telecom Group, Inc. for leasing ICG's high speed
data and communications lines to the Company's customers were approximately
$222,000 and accounted for 33% of revenues for the year ended December 31, 1999.

17.  SUBSEQUENT EVENTS:

Web Wizard, Inc. Acquisition:

In January 2000, a wholly owned subsidiary of Grace completed its acquisition of
Web Wizard, Inc. ("Web Wizard"). The acquisition will be accounted for as a
purchase pursuant to Accounting Principles Board Statement No.16, "Business
Combinations" ("APB 16") and the result of Web Wizard's operations will be
included in the Company's 2000 consolidated statements of operation from the
date of acquisition. Total consideration for the acquisition was the issuance of
1,287,554 shares of Grace stock. 257,510 of these shares will be held in escrow
until June 30, 2001, to benefit Grace in the event of any adverse claims arising
out of the purchase of Web Wizard.

As a result of the merger, the Company will record goodwill of approximately
$1,000,000. Goodwill will be amortized on a straight-line basis over five years.

Additionally, Grace issued 475,000 shares to former shareholders of Web Wizard
to extinguish certain pre-acquisition debt of Web Wizard to its shareholders.

P. V. Tel, Inc. Acquisition:

In February 2000, a wholly owned subsidiary of Grace completed its acquisition
of P.V. Tel, Inc. ("PVTel"). The acquisition will be accounted for as a purchase
pursuant to APB 16, and as a result, PVTel's operations will be included in the
Company's 2000 consolidated statements of operation from the date of
acquisition. Total consideration for the acquisition was the issuance of
2,150,000 shares of Grace stock. 750,000 of these shares will be held in escrow
until July 31, 2001, to benefit Grace in the event of any adverse claims arising
out of the purchase of PVTel.

Prior to the consummation of the P.V. Tel. Acquisition, the Company advanced to
P.V. Tel. approximately $450,000 for working capital purposes (the "Working
Capital Advances"), which advances were evidenced by a promissory note given by
P.V. Tel. to the Company. At the closing of the Acquisition, the promissory note
evidencing the Working Capital Advances were canceled and two shareholders of
P.V. Tel. delivered to the Company promissory notes in substitution thereof. The
indebtedness, represented by these substituted promissory notes, is secured by
150,000 shares of Grace common stock owned by the two noteholders.

Repayment of the notes is contingent upon the makers being afforded the right to
register their stock in any subsequent registration by the Company during the
term of the note, and as further defined in the Registration Rights Agreement.
The notes bear interest at the rate of 9% per annum payable upon maturity. In
the event that the makers are not afforded the opportunity to

                                      F-19
<PAGE>

register their stock within the prescribed period, then the notes and all
obligations under the notes shall be cancelled and all secured interests will be
released.

The Company has not determined the amount of Goodwill that will be recorded as a
result of this transaction. Goodwill will be amortized on a straight-line basis
over five years.

Third Private Placement:

On March 1, 2000, the Company entered into a private placement agreement with
C&S Private Equity Fund, LP ("C&S)", pursuant to which the Company issued to C&S
14 units ("C&S Units") for $100,00 per C&S Unit (the "Third Private Placement").
Each C&S Unit consisted of (i) a $100,000 convertible senior secured note of the
Company and (ii) 150,000 shares of the Company's Common Stock. An aggregate of
2,100,000 shares of the Company's Common Stock were issued along with a
convertible senior secured note payable to C&S in the principal amount of
$1,400,000. The net proceeds of $1,363,000, were used for the purchase and
working capital requirements of WebWizard and P.V. Tel. The note is due March 2,
2001, and bears interest at a rate of 12% per year, payable quarterly. If the
note is not paid at maturity, interest will accrue on the unpaid principal and
interest at a rate of 18% per year, and C&S will have the right to convert the
unpaid principal and interest into shares of the Company's Common Stock at a
conversion price equal to the lesser of $1.00 per share or 50% of the average
closing price of a share of Common Stock during the last three trading days
prior to such conversion. The note is secured by: (i) all of the shares of
capital stock of WebWizard and P.V. Tel. owned by the Company; (ii) all of the
assets and properties of WebWizard and P.V. Tel.; and all of the Company's
right, title and interest in the accounts, contract rights and receivables of
WebWizard and P.V. Tel. Until the notes are paid in full or converted, the
Company may not, without written consent of C&S, (i) incur any indebtedness for
borrowed money that would obligate the Company to pay any portion of the
principal of such borrowings before the principal and interest on the notes have
been paid in full, and (ii) prepay or repurchase any indebtedness for borrowed
money. $1,420,000 of the net proceeds from the Fourth Private Placement were
used to repay all of the outstanding interest and principal on the note issued
in the Third Private Placement.

Additionally, the private placement agreement provides that, if the Company
acquires Alpha Computer Services, Inc., C&S shall have the option to purchase
from the Company, and the Company shall have the option to sell to C&S, within
14 days after the Company's acquisition of Alpha Computers, such number of C&S
&Units (not in excess of seven) as C&S shall designate and as the Company may
require. The purchase price of each such C&S Unit will be $100,000. On March 30,
2000, the Company acquired Alpha Computer. Neither the Company nor C&S exercised
its option with respect to seven C&S units for proceeds of $700,000.

All of the shares of the Company's Common Stock issued in the Third Private
Placement, and the shares issuable upon the conversion of the notes, as
"restricted securities" under Rule 144 promulgated under the Securities Act.
Such securities may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemptions contained in Rule 144. See "Item 1. Business--Restricted Securities
and Registration Rights" below for a summary of the exemptions available under
Rule 144.

Pursuant to the private placement purchase agreement, certain "demand"
registration rights were granted with respect to the shares issuable upon
conversion of the notes. Subject to certain conditions set forth in the private
placement purchase agreement, the demand registration rights require that, on or
before November 1, 2000, the Company file a registration statement on Form

                                      F-20
<PAGE>

S-3 (or such other form as may be available) with the SEC for the public sale by
C&S of the shares of Common Stock issuable upon conversion of the Notes, and
that the Company use its best efforts to cause such registration statement to
become effective not later than the maturity date of the notes. Upon discharge
of the notes, the Company's obligation to file a registration statement and
cause it to become effective shall terminate. For each day after the maturity
date of the notes that such registration statement is not effective, the Company
shall pay C&S $0.01 times the number of shares then required to be covered by
such registration statement. Such amounts will be payable daily and will accrue
interest (payable daily) at the rate of 18% per year.

Stock Options:

On February 1, 2000, pursuant to a new two year Executive Employment Agreement,
the Company awarded Benjamin F. Holcomb options to purchase 4,500,000 shares of
the Company's Common Stock at $0.35 per share. As a result, the Company will
record a non-cash charge to operations in the first quarter of 2000.

Additionally the Company awarded 3,387,880 options to purchase the Company's
Common Stock to employees. The options are exercisable at prices ranging from
$1.00 to $3.25. The options vest over periods ranging from two to five years.
These options have not been ratified by the Board of Directors of the Company.

Line of Credit:

On January 21, 2000, the Company obtained a $1,000,000 line of credit from
Regions Bank. The interest rate is 9.0% per annum, payable monthly. The line of
credit originally matured on April 21, 2000, however, has been extended to March
24, 2001, and is secured by 500,000 shares of the Company's Common Stock that is
owned by Signal Compression, Inc. The line of credit is personally guaranteed by
Richard S. Granville.

Stock Compensation

On April 14, 2000 the Company amended and restated an employment agreement with
the President of the Company. The original agreement was ratified by the board
of directors on February 16, 2000. The amended agreement awarded a stock grant
of 1,000,000 shares of the Company's Common Stock as compensation for prior
services rendered, and 1,000,000 shares of restricted stock, which vests on
December 1, 2000, for future services to be rendered. Additionally the Company
accepted a promissory note in the amount of $141,800 from the President of the
Company to cover the income taxes associated with the stock grant.

On February 16, 2000 pursuant to a separation agreement the Company awarded
Louis Friedman 650,000 shares of the Company's common stock for prior services
rendered during 1999. The shares were valued at $260,000 and a non-cash expense
was recorded to the statement of operations for the year ended December 31,
1999. Additionally, the Company agreed to pay up to $150,000 to cover the taxes
associated with the stock grant.

                                      F-21
<PAGE>

18.  ADDITIONAL SUBSEQUENT EVENTS

Equipment Lease:

In March 2000, the Company entered into a lease with General Electric Capital
Corporation for approximately $3,500,000 of equipment and software that it has
acquired from Lucent Technologies, Inc. The lease term is for 36 months and has
a graduated payment schedule over the first six months. The lease has an
effective rate of 12.59% and will be treated as a Capital Lease in accordance
with Financial Accounting Standards Board Statement No. 13 ("SFAS #13"). The
lease contains a bargain purchase option at the end of the lease.

Fourth Private Placement

      On April 14, 2000, the Company entered into a Securities Purchase
Agreement (the "Fourth Private Placement") with Greenlight Capital, L.P. and
certain affiliates of Greenlight (the "Purchasers") pursuant to which the
Company agreed to issue for an aggregate purchase price of $6.5 million, (a)
3,000,000 shares of Common Stock, (b) the Company's 12% senior secured
convertible promissory notes with an original principal amount of $6,500,000
(the "Greenlight Notes") convertible into shares of Common Stock at a conversion
price of $1.00 per share, (c) stock purchase warrants (the "Greenlight
Warrants") to purchase 6,500,000 shares of Common Stock at an exercise price of
$1.00 per share, and (d)(1) options, exercisable on August 14, 2000 and December
14, 2000 to purchase for an aggregate purchase price of $4.5 million on each
date, (A) 1,575,000 shares of Common Stock, (B) Notes with an original principal
amount of $2,925,000 convertible into shares of Common Stock at a conversion
price of $1.00 per share, and (C) Warrants to purchase 2,925,000 shares of
Common Stock at an exercise price of $1.00 per share, and (2) an option,
exercisable on April 14, 2001, to purchase for an aggregate purchase price of
$4.5 million, (A) 1,050,000 shares of Common Stock, (B) Notes with an original
principal amount of $2,925,000 convertible into shares of Common Stock at a
conversion price of $1.50 per share, and (C) Warrants to purchase 1,950,000
shares of Common Stock at an exercise price of $1.50 per share. The Greenlight
Note is guaranteed by all of the subsidiaries of the Company and is secured by
all of the issued and outstanding capital stock of all of the Company's
subsidiaries. $1,420,000 of the net proceeds were used to repay all of the
outstanding principal and interest on the note issued in the Third Private
Placement, and the remainder of the net proceeds will be used for the Company's
working capital requirements.

      All of the shares of Common Stock issued pursuant to the Fourth Private
Placement, including any shares issued pursuant to the Greenlight Note, the
Greenlight Warrant and the Greenlight Option are "restricted securities" under
Rule 144 promulgated under the Securities Act. Such securities may not be sold
in the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemptions contained in Rule 144. See
"Item 1. Business--Restricted Securities and Registration Rights" below for a
summary of the exemptions available under Rule 144.

      Pursuant to a registration rights agreement executed at the closing of
the Fourth Private Placement, all of the shares of Common Stock issued pursuant
to the Fourth Private Placement, including any shares issued pursuant to the
Greenlight Note, the Greenlight Warrant and the Greenlight Option were granted
"demand" and "piggyback" registration rights. Subject to certain conditions set
forth in the registration rights agreement, the demand registration rights
require that, 30 days following the date on which the Company becomes eligible
to use Form S-3, the company use its reasonable best efforts to register the
applicable shares as soon as

                                      F-22
<PAGE>

practicable. Subject to certain conditions set forth in the registration rights
agreement, the piggyback registration rights permit the holders of the covered
shares to include such shares in a registration by the Company when and if the
Company proposes to register any Common Stock under the Securities Act for sale
to the public on a form that would also permit the registration of the covered
shares (other that registrations on Form S-8 or S-4).

Alpha Computer Acquisition:

On March 30, 2000, the Company entered into an agreement and plan of merger for
the merger of Alpha Computer Services, Inc. ("Alpha Computer"), a Florida
corporation, with and into an indirect wholly owned subsidiary of the Company
(the "Alpha Computer Acquisition"). The Alpha Acquisition closed on March 31,
2000, with Alpha Computer becoming an indirect wholly owned subsidiary of the
Company. The acquisition will be accounted for as a purchase pursuant to
Accounting Principles Board Statement No.16, "Business Combinations" ("APB 16")
and the result of Alpha Computer operations will be included in the Company's
2000 consolidated statements of operation from the date of acquisition. Total
consideration for the acquisition was the issuance of 3,100,000 shares of Grace
stock. An additional 620,000 shares will be held in escrow until March 30, 2001,
to benefit Grace in the event of any adverse claims arising out of the purchase
of Alpha Computer

The Company has not determined how much goodwill will be recorded as a result of
this transaction. Goodwill will be amortized on a straight-line basis over five
years.

Line of Credit

The Company has a $2,000,000 line of credit with Regions Bank which matured on
March 24, 2000. The line of credit was extended to September 24, 2000.

                                      F-23

<PAGE>

                                 EXHIBIT INDEX

Exhibit
-------
Number    Exhibit Title
------    -------------
2.1       Stock Purchase Agreement, dated May 5, 1999, by and among New
          Millennium Multimedia, Inc., Linda Key, John Youstin, Jr., Doug Corner
          and Eric Rannye.

2.2       Agreement and Plan of Merger, dated August 20, 1999, by and among New
          Millennium Multimedia, Inc., Grace Development, Inc., Grace Newco,
          Inc., Signal Compression, Inc. and the Individual Shareholders of New
          Millennium Multimedia, Inc. (filed as exhibit 2.1 to the Registrant's
          Current Report on Form 8-K dated September 28, 1999, and incorporated
          herein by reference).

2.3       Asset Purchase Agreement, dated November 8, 1999, by and among Rob
          Ballard and Sabrina Ballard d/b/a Northwest Georgia Internet, New
          Millennium Multimedia, Inc.

2.4       Agreement and Plan of Merger, dated January 20, 2000, by and among
          Avana Acquisition Sub, Inc., Grace Development, Inc., Web Wizard,
          Inc., O.E. "Randy" Ray and John Cavenaugh (filed as exhibit 2.2 to the
          Registrant's Current Report on Form 8-K dated January 31, 2000, and
          incorporated herein by reference).

2.5       Stock Exchange Agreement, dated as of February 15, 2000, by and among
          Grace Development, Inc., Avana Telecommunications Group, Inc., P.V.
          Tel. Inc. and the Shareholders of P.V. Tel. Inc. (filed as exhibit 2.2
          to the Registrant's Current Report on Form 8-K dated February 24,
          2000, and incorporated herein by reference).

2.6       Agreement and Plan of Merger, dated March 28, 2000, by and between
          Avana Acquisition Sub II, Inc., Grace Development, Inc., Alpha
          Computer Services, Inc., O.E. "Randy" Ray, Wendy Lewis and Richard
          Warren (filed as exhibit 2.3 to the Registrant's Current Report on
          Form 8-K dated March 30, 2000).

3.1       Articles of Incorporation of the Company.

3.2       Bylaws of the Company (filed as exhibit 3(ii) to the Registrant's
          Quarterly Report on Form 10-QSB for the quarter ended September 30,
          1999, and incorporated herein by reference).

10.1      Master Lease Agreement, dated as of May 21, 1999, between New
          Millennium Multimedia, Inc. and Ascend Credit Corporation (filed as
          exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for
          the quarter ended September 30, 1999, and incorporated herein by
          reference).

10.2      Wholesale Services Agreement, dated as of September 21, 1999, between
          New Millennium Multimedia, Inc. and Qwest Communications Corporation
          (filed as exhibit 10.2 to the Registrant's Quarterly Report on Form
          10-QSB for the quarter ended September 30, 1999, and incorporated
          herein by reference).

                                      E-1
<PAGE>

10.3      ICG Authorized Distributor Agreement, dated September 28, 1999, by and
          between ICG Telecom Group, Inc. and New Millennium Multimedia, Inc.
          (filed as exhibit 10.3 to the Registrant's Quarterly Report on Form
          10-QSB for the quarter ended September 30, 1999, and incorporated
          herein by reference).

10.4      Executive Employment Agreement, dated as of December 1, 1999, between
          Grace Development, Inc. and James Blanchard.

10.5      Employment Agreement, dated as of January 28, 2000, between and among
          Sharon S. Quaintance and Grace Development, Inc.

10.6      Employment Agreement, dated as of January 31, 2000, between and among
          O.E. "Randy" Ray and Avana Development Group, Inc.

10.7      Employment Agreement, dated as of January 31, 2000, between and among
          Wendy Lewis and Avana Development Group, Inc.

10.8      Employment Agreement, dated as of January 31, 2000, between and among
          R. Kenneth Merkey and Grace Development, Inc.

10.9      Employment Agreement, dated as of February 7, 2000, between and among
          Paul Reynolds and Grace Development, Inc.

10.10     Employment Agreement, dated as of February 7, 2000, between and among
          Joseph Buck and Grace Development, Inc.

10.11     Executive Employment Agreement, dated as of February 1, 2000, between
          Grace Development, Inc. and Benjamin Franklin Holcomb.

10.12     Executive Employment Agreement, dated as of March 1, 2000, between
          Grace Development, Inc. and with Dennis P. Werner.

10.13     Executive Employment Agreement, dated as of March 1, 2000, between
          Grace Development, Inc. and Scott H. Barber.

10.14     Separation Agreement, dated as of December 8, 1999, by and between
          Louis Friedman and Grace Development, Inc.

10.15     Separation Agreement, dated as of February 1, 2000, by and between
          Richard S. Granville, III and Grace Development, Inc.

10.16     Separation Agreement, dated March 23, 2000, by and between R. Kenneth
          Merkey and Grace Development, Inc.

10.17     Letter, dated April 3, 2000, amending the Employment Agreement, dated
          January 31, 2000, between and among O.E. "Randy" Ray and Avana
          Development Group, Inc.

10.18     Letter, dated April 3, 2000, amending the Employment Agreement, dated
          January 31, 2000, between and among Wendy Lewis and Avana Development
          Group, Inc.

10.19     Amended and Restated Executive Employment Agreement, dated April 14,
          2000, between James M. Blanchard and Grace Development, Inc.

                                      E-2
<PAGE>

10.20     Atlanta Commercial Board of Realtors Standard Commercial Lease
          Agreement September 1997.
23.1      Consent of Smith & Radigan, Certified Public Accountants, LLC
27.1      Financial Data Schedule.

                                      E-3